Arch Coal, Inc. Reports Fourth Quarter and Full Year 2012 Results

      Arch Coal, Inc. Reports Fourth Quarter and Full Year 2012 Results

Bolstered cash and liquidity position to $1.4 billion as of Dec. 31, 2012

Western Bituminous Region delivered record operating performance last year

Expects metallurgical sales volume growth in 2013 versus 2012

PR Newswire

ST. LOUIS, Feb. 5, 2013

ST. LOUIS, Feb. 5, 2013 /PRNewswire/ --

Earnings Highlights
                                 Quarter Ended             Year Ended
In $ millions, except per        12/31/12    12/31/11      12/31/12   12/31/11
share data
Revenues                         $968.2      $1,228.8      $4,159.0   $4,285.9
Income (Loss) from Operations    (282.6)     139.7         (681.6)    413.6
Net Income (Loss) ^1             (295.4)     70.9          (684.0)    141.7
Diluted EPS (LPS)                (1.39)      0.33          (3.24)     0.74
Adjusted Net Income (Loss) ^1,   (88.7)      61.5          (76.7)     205.2
2
Adjusted Diluted EPS (LPS) ^2    (0.42)      0.29          (0.36)     1.07
Adjusted EBITDA ^2               $71.2       $270.4        $688.5     $921.1
1/- Net income attributable to
ACI.
2/- Defined and reconciled under "Reconciliation of non-GAAP
measures" in the release.

Arch Coal, Inc. (NYSE: ACI) today reported a net loss of $295 million, or
$1.39 per diluted share, for the fourth quarter of 2012. Excluding acquired
sales contract amortization, goodwill and intangible asset impairment charges,
other non-operating expenses and the related tax impacts of these items,
Arch's fourth quarter 2012 adjusted net loss was $89 million, or $0.42 per
diluted share. In the fourth quarter of 2011, Arch reported adjusted net
income of $62 million, or $0.29 per diluted share.

(Logo: http://photos.prnewswire.com/prnh/20120727/CG47668LOGO)

Revenues totaled $968 million and adjusted earnings before interest, taxes,
depreciation, depletion and amortization ("EBITDA") was $71 million for the
three months ended Dec. 31, 2012. Excluding a one-time $58 million charge
related to a customer contract obligation, fourth quarter 2012 adjusted EBITDA
would have been $130 million.

"Arch continued to successfully execute its operational strategy and made
progress on a number of fronts in the fourth quarter while weathering
challenging coal market conditions," said John W. Eaves, Arch's president and
chief executive officer. "Our Western Bituminous Region delivered a record
cash margin performance, and our other regions generated positive cash flow
even while running at significantly reduced volume levels. In addition, we
shipped 3 million tons overseas in the fourth quarter, capping a record year
for company exports."

Annual Highlights

For full year 2012, Arch reported an adjusted net loss of $77 million, or
$0.36 per share. Revenues totaled $4.2 billion on coal sales of 141 million
tons in 2012 compared with $4.3 billion in revenues on coal sales of 155
million tons in the prior year. Adjusted EBITDA was $688 million in 2012
versus $921 million in 2011.

"Arch achieved several notable milestones while managing through a tough
2012," said Eaves. "First, we delivered another strong performance in our core
values of employee safety and environmental stewardship. Second, the
company's exports rose to a record 13.6 million tons in 2012, demonstrating
its growing presence in the seaborne coal trade. Third, we further improved
our operational efficiency through the consolidation of operations, strong
cost control at active operations and significant reductions in capital
spending. Lastly, we further bolstered our liquidity to $1.4 billion,
positioning Arch to weather near-term market headwinds and emerge from this
cycle as an even stronger producer."

"Looking ahead, we are seeing signs that a coal market rebound is possible in
the second half of 2013," added Eaves. "At Arch, we are running our
operations in a manner that will enable us to capitalize on the rebound as it
occurs. We are proactively responding to increased interest for Western
Bituminous coal after several years of weakness. We are also making progress
in realigning our asset portfolio in Appalachia – and expect our competitive
position to be further enhanced as the Leer longwall starts up in the third
quarter of 2013. In the Powder River Basin, we are continuing to focus on
controlling costs as we manage our operations at significantly reduced
production levels."

Financial Items

In the fourth quarter of 2012, Arch recorded a non-cash impairment charge of
$231 million related to the company's goodwill and intangible assets,
primarily due to the decline in benchmark metallurgical coal prices versus
2011. These charges have no impact on Arch's liquidity and cash flow from
operations and do not impact the company's ongoing business operations. Arch
also recorded a $58 million charge in the fourth quarter to reflect the
rejection of a customer supply contract by the U.S. Bankruptcy Court and the
assumption of the contract obligation by Arch. Accordingly, Arch accrued for
the full present value of the contract in 2012.

Also in the fourth quarter, Arch issued a $375 million senior unsecured note
and an incremental $250 million secured term loan. The company also maintains
borrowing capacity under a $350 million revolving credit facility and a $250
million asset securitization program. As of Dec. 31, 2012, Arch had total
available liquidity of $1.4 billion, of which $1.0 billion was in cash and
short-term interest-bearing securities. Debt outstanding at the end of 2012,
net of cash and investments, totaled $4.1 billion, and the company's net
debt-to-capital ratio was 59 percent.

"Arch proactively completed several financing initiatives last year that
fortified our cash position, relaxed restrictive financial covenants until
late 2015 and eliminated debt maturities until 2016," said John T. Drexler,
Arch's senior vice president and chief financial officer. "This strategy has
provided Arch with ample financial flexibility to overcome market headwinds."

Core Values

Arch maintained its leading position in the U.S. coal industry for safety
performance and environmental compliance during 2012. Arch's 2012 lost-time
safety rate was three times better than the national coal industry average,
ranking the company first among its major diversified U.S. coal industry peers
for the seventh consecutive year. In addition, Arch received a total of 17
national and state safety awards and honors in 2012, including the prestigious
Sentinels of Safety award.

Arch also excelled in environmental stewardship in 2012, earning a total of
seven environmental awards at the national, state and regional levels for its
efforts in reclaiming land and safeguarding wildlife. Included among these
honors, Arch became the first mining company to receive the Conservation
Legacy Award from the National Museum of Forest Service History last year.
The company's 2012 environmental compliance rate again ranked among the best
of its major U.S. coal industry peers. Furthermore, five of Arch's operations
and facilities attained A Perfect Zero – that is, operating with zero
reportable injuries and zero environmental violations – during 2012.

"I'm extremely proud of our employees for remaining keenly focused on living
our core values as well as garnering two dozen external awards and honors in
2012," said Paul A. Lang, Arch's executive vice president and chief operating
officer.

Operational Results

"Arch continued to execute solid cost control – with fourth quarter 2012
consolidated cash costs declining versus the third quarter and reaching their
lowest level of the year," said Lang. "In particular, our Western Bituminous
Region finished 2012 with a record fourth quarter performance, which helped
offset anticipated cost increases in the Powder River Basin. For the full
year, our operations met – and in some cases exceeded – our expectations,
despite the challenging coal market environment that prevailed during 2012."

                           Arch Coal, Inc.
                           4Q12                3Q12          FY12      FY11
Tons sold (in              36.1                37.5          140.7     155.3
millions)
Average sales price        $24.21              $25.57        $25.90    $25.34
per ton
Cash cost per ton          $19.44              $20.16        $20.49    $18.71
Cash margin per ton        $4.77               $5.41         $5.41     $6.63
Total operating cost       $22.88              $23.50        $24.17    $21.68
per ton
Operating margin per       $1.33               $2.07         $1.73     $3.66
ton
Consolidated results may not tie to regional breakout due to exclusion of
other assets, rounding.
Operating cost per ton includes depreciation, depletion and
amortization per ton.
Amounts reflected in this table have been adjusted for certain transactions.
For a description of adjustments, refer to the regional schedule at
http://investor.archcoal.com

Arch earned $4.77 per ton in consolidated cash margin in the fourth quarter of
2012 compared with $5.41 per ton in the third quarter. Consolidated sales
price per ton in the fourth quarter decreased 5 percent versus the third
quarter, primarily reflecting lower prices on export and market-based domestic
sales. Consolidated cash costs per ton declined nearly 4 percent over the
same time period, due to lower costs in several operating regions and a larger
percentage of lower-cost tons in the company's overall volume mix.

For full year 2012, Arch recorded a consolidated cash margin of $5.41 per ton
versus $6.63 per ton in the prior year. Sales volume in 2012 fell by nearly
15 million tons compared with 2011, as the company elected to reduce
production and close mines in response to weak coal market conditions.
Consolidated sales price per ton rose slightly over the same time period, but
was offset by an increase in per-ton cash costs due to operating at reduced
volume levels.

                           Powder River Basin
                           4Q12              3Q12           FY12       FY11
Tons sold (in              27.6              27.7           104.4      117.8
millions)
Average sales price        $13.12            $13.79         $13.61     $13.62
per ton
Cash cost per ton          $11.58            $10.92         $11.19     $10.49
Cash margin per ton        $1.54             $2.87          $2.42      $3.13
Total operating cost       $13.18            $12.51         $12.79     $11.95
per ton
Operating margin per       ($0.06)           $1.28          $0.82      $1.67
ton
Operating cost per ton includes depreciation, depletion and
amortization per ton.
Amounts reflected in this table have been adjusted for certain transactions.

In the Powder River Basin, Arch recorded a cash margin of $1.54 per ton in the
fourth quarter of 2012 compared with $2.87 per ton in the third quarter.
Fourth quarter sales price declined $0.67 per ton versus the third quarter, in
part due to lower prices on export sales. Cash costs increased $0.66 per ton
over the same time period, mainly reflecting anticipated higher maintenance
expense.

For full year 2012, Arch earned a cash margin of $2.42 per ton in the Powder
River Basin versus $3.13 per ton in 2011. While sales price per ton was flat
in 2012 versus the prior year, sales volume declined 11 percent as the company
idled equipment until coal market fundamentals improve. Cash costs per ton
increased 6.7 percent over the same time period, as the impact of operating at
reduced volume levels was somewhat offset by successful efforts to control
costs in the region.

                             Appalachia
                             4Q12              3Q12          FY12      FY11
Tons sold (in millions)      4.2               4.7           18.6      19.3
Average sales price per      $83.50            $83.84        $85.06    $87.12
ton
Cash cost per ton            $70.23            $69.19        $69.46    $63.40
Cash margin per ton          $13.27            $14.65        $15.60    $23.72
Total operating cost per     $84.78            $82.41        $84.09    $73.97
ton
Operating margin per ton     ($1.28)           $1.43         $0.97     $13.15
Operating cost per ton includes depreciation, depletion and
amortization per ton.
Amounts reflected in this table have been adjusted for certain transactions.

In Appalachia, fourth quarter 2012 cash margin per ton decreased 9 percent
compared with the third quarter. Sales volumes in the fourth quarter fell
nearly 11 percent versus the third quarter, as Arch elected to idle
incremental higher-cost production at the Cumberland River and Vindex mining
complexes. Sales price per ton declined slightly over the same time period,
due to lower pricing on thermal coal sales. As anticipated, fourth quarter
2012 cash costs per ton increased slightly versus the third quarter,
reflecting the company's ongoing realignment of its portfolio in the region
toward metallurgical assets.

For full year 2012, Arch earned a cash margin of $15.60 per ton in Appalachia
versus $23.72 per ton in 2011. Thermal sales volumes declined nearly 7
percent in 2012 compared with 2011, while metallurgical sales were flat at 7.5
million tons. Sales price per ton decreased 2 percent over the same time
period, driven by lower pricing on metallurgical sales. Cash costs per ton in
2012 increased 9.5 percent versus 2011, due to the impact of lower volume
levels and mine closures, as well as a larger percentage of metallurgical coal
in the company's regional volume mix.

                        Western Bituminous Region
                        4Q12              3Q12              FY12       FY11
Tons sold (in           3.8               4.6               15.6       17.0
millions)
Average sales price     $37.37            $35.50            $35.67     $35.72
per ton*
Cash cost per ton*      $18.69            $23.94            $22.20     $24.00
Cash margin per ton     $18.68            $11.56            $13.47     $11.72
Total operating         $23.15            $27.84            $26.80     $28.77
cost per ton*
Operating margin        $14.22            $7.66             $8.87      $6.95
per ton
*Sales prices and costs in the region are presented f.o.b. point for
domestic customers.
Operating cost per ton includes depreciation, depletion and
amortization per ton.
Amounts reflected in this table have been adjusted for certain transactions.

In the Western Bituminous Region, Arch earned a record cash margin of $18.68
per ton in the fourth quarter of 2012 versus $11.56 per ton in the third
quarter. Volumes in the fourth quarter declined moderately compared with the
third quarter. Of note, the longwall at Skyline resumed operation in late
October, while the longwall at Dugout Canyon was idled after completing its
final panel in the Gilson seam. Sales price per ton increased 5 percent over
the same time period, reflecting a favorable mix of customer shipments. Cash
costs per ton in the fourth quarter declined more than 20 percent, partially
driven by incremental production from Dugout Canyon's longwall when compared
with the third quarter.

For full year 2012, cash margin per ton in the Western Bituminous Region
improved 15 percent versus 2011. Sales volumes in 2012 declined 8 percent
year over year, while sales price per ton remained flat versus 2011. Cash
costs per ton declined 7.5 percent over the same time period, benefiting from
solid cost control at the company's operations in the region.

Market Trends

While coal markets remain under pressure, there are positive indications of a
potential recovery in demand and pricing over the course of 2013. Among them:

  oIn 2013, Arch expects U.S. power producers to increase output at
    coal-fueled power plants – as higher natural gas prices relative to last
    year make western U.S. coals an increasingly competitive resource for
    electricity generation. Internal forecasts suggest U.S. coal consumption
    in 2013 will rise by as much as 50 million tons versus last year.

  oImproved performance in China's manufacturing sector, resilient steel
    utilization rates in North America and economic stabilization in eastern
    and, in some cases, western Europe all point to higher steel output, and
    stronger metallurgical coal demand, in 2013. At the same time, global
    metallurgical production curtailments have reached nearly 35 million
    metric tonnes annualized. These supply and demand trends should lead to
    better balance in metallurgical markets as the year progresses.

  oColder winter temperatures in major coal-burning regions of Asia, as well
    as coal's competitive advantage versus other power generation fuels in
    Europe, should help support U.S. coal exports in 2013. Seaborne coal
    demand remains strong, and the company continues to field interest from
    overseas customers for both metallurgical and thermal coals. Arch
    believes 2013 U.S. coal exports should remain at elevated levels, albeit
    likely lower than in 2012.

  oContinued rationalization of high-cost domestic supply, coupled with
    improved U.S. coal burn, will result in further liquidation of coal
    stockpiles at U.S. power generators in 2013. According to government
    data, U.S. coal production declined nearly 80 million tons in 2012, with
    the rate of decline accelerating in the fourth quarter. Production from
    Central Appalachia declined 36 million tons in 2012, and ended the year
    below 150 million tons.

"We are beginning to see signs of a recovery in coal markets after a very
challenging 2012," said Eaves. "Assuming normal weather trends prevail – and
economic activity continues to accelerate – we see global coal supply and
demand balancing over the course of 2013, setting the stage for improved
market fundamentals."

Company Outlook

Arch has established production targets for 2013, and expects sales from
company-controlled operations of between 133 million and 144 million tons for
the full year. Included in this range are projected sales of 8 million to 9
million tons of metallurgical coal. At expected volume levels, Arch is nearly
90 percent committed on thermal sales for 2013. Given the below-capacity
production levels set for 2013, Arch currently anticipates that cash costs per
ton in each of its operating regions will be similar to 2012 levels.

"On the thermal side of our business, we have layered in some sales to run our
mines efficiently in 2013, but have elected to continue operating at reduced
volume levels at this time," said Lang. "We have also maintained some sales
leverage where we believe opportunities will present themselves over the
course of 2013. On the metallurgical side, we have strong commitments from
our North American customer base, and we have some of our higher-quality coals
still available to capture potential upside in an improving seaborne
marketplace."

Capital expenditures totaled $395 million in 2012, which was $145 million less
than in 2011 and $25 million less than the company's projected spend. For
2013, Arch expects capital spending to be at or below $350 million, which
includes $100 million for the completion of the Leer metallurgical mine in
Appalachia and $80 million for reserve additions. The remaining capital
expenditures will pertain to maintenance and efficiency projects.

"We expect 2013 to be a rebalancing year for global and domestic coal markets,
and our current guidance range reflects this assumption," said Eaves. "Coal
price increases are likely to follow what we expect will be improving coal
supply and demand trends. As such, we believe our performance in the second
half of 2013 is likely to be stronger than in the first half."

"Looking ahead, we will focus on what we can control – costs, capital spending
and sales commitments," added Eaves. "While we can't predict exactly when
demand will accelerate, we are well positioned to deliver improved results
when it does. As market fundamentals strengthen, we expect a favorable impact
on sales volumes and pricing in future periods."

                                2013                        2014
                                Tons     $ per ton      Tons $ per ton
Sales Volume (in millions
tons)
Thermal                         125 - 135
Met                              8 - 9
Total                           133 - 144
Powder River Basin
Committed, Priced               86.3       $13.37           51.1   $14.22
Committed, Unpriced             9.1                         13.6
Average Cash Cost                          $10.75 - $11.50
Western Bituminous
Committed, Priced               11.4       $38.74           7.4    $40.86
Committed, Unpriced             1.7                         0.2
Average Cash Cost                          $24.00 - $27.00
Appalachia
Committed, Priced Thermal       5.2        $64.72           1.7    $53.98
Committed, Unpriced Thermal     0.4                         0.3
Committed, Priced               3.9        $93.37           -
Metallurgical
Committed, Unpriced             0.2                         -
Metallurgical
Average Cash Cost                          $66.00 - $72.00
Illinois Basin
Committed, Priced               2.1        $42.50           1.7    $42.33
Average Cash Cost                          $34.00 - $36.00
Corporate (in $ millions)
D,D&A                           $510 - $540
S,G&A                           $130 - $140
Interest Expense               $360 - $370
Capital Expenditures            $330 - $360

A conference call regarding Arch Coal's fourth quarter and full year 2012
financial results will be webcast live today at 11 a.m. Eastern time. The
conference call can be accessed via the "investor" section of the Arch Coal
website (http://investor.archcoal.com).

U.S.-based Arch Coal, Inc. is one of the world's top coal producers for the
global steel and power generation industries, serving customers in 25
countries on five continents. Its network of mining complexes is the most
diversified in the United States, spanning every major coal basin in the
nation. The company controls a 5.5-billion-ton reserve base of high-quality
metallurgical and thermal coals, with access to all major railroads, inland
waterways and a growing number of seaborne trade channels. For more
information, visit www.archcoal.com.

Forward-Looking Statements: This press release contains "forward-looking
statements" – that is, statements related to future, not past, events. In
this context, forward-looking statements often address our expected future
business and financial performance, and often contain words such as "expects,"
"anticipates," "intends," "plans," "believes," "seeks," or "will."
Forward-looking statements by their nature address matters that are, to
different degrees, uncertain. For us, particular uncertainties arise from
changes in the demand for our coal by the domestic electric generation
industry; from legislation and regulations relating to the Clean Air Act and
other environmental initiatives; from operational, geological, permit, labor
and weather-related factors; from fluctuations in the amount of cash we
generate from operations; from future integration of acquired businesses; and
from numerous other matters of national, regional and global scale, including
those of a political, economic, business, competitive or regulatory nature.
These uncertainties may cause our actual future results to be materially
different than those expressed in our forward-looking statements. We do not
undertake to update our forward-looking statements, whether as a result of new
information, future events or otherwise, except as may be required by law.
For a description of some of the risks and uncertainties that may affect our
future results, you should see the risk factors described from time to time in
the reports we file with the Securities and Exchange Commission.

Arch Coal, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
                      Three Months Ended         Year Ended
                      December 31,               December 31,
                      2012          2011         2012            2011
                      (Unaudited)
Revenues              $  968,231  $ 1,228,756  $ 4,159,038    $ 4,285,895
Costs, expenses and
other operating
Cost of sales         809,074       945,786      3,438,013       3,267,910
Depreciation,
depletion and         125,836       146,267      525,508         466,587
amortization
Amortization of
acquired sales        (2,628)       (16,577)     (25,189)        (22,069)
contracts, net
Change in fair value
of coal derivatives   13,237        (12,155)     (16,590)        (2,907)
and coal trading
activities, net
Selling, general and
administrative        34,994        26,307       134,299         119,056
expenses
Contract settlement
resulting from        58,335        —            58,335          —
Patriot Coal
bankruptcy
Legal contingencies   —             —            (79,532)        —
Mine closure and
asset impairment      —             —            523,568         7,316
costs
Goodwill and other
intangible asset      230,632       —            346,423         —
impairment
Acquisition and       —             1,316        —               47,360
transition costs
Other operating       (18,604)      (1,916)      (64,209)        (10,934)
income, net
                      1,250,876     1,089,028    4,840,626       3,872,319
Income (loss) from    (282,645)     139,728      (681,588)       413,576
operations
Interest expense,
net:
Interest expense      (88,416)      (75,663)     (317,626)       (230,186)
Interest and          1,910         968          5,478           3,309
investment income
                      (86,506)      (74,695)     (312,148)       (226,877)
Other nonoperating
expenses
Net loss resulting
from early retirement (4,626)       —            (23,668)        (1,958)
and refinancing of
debt
Bridge financing      —             —            —               (49,490)
costs related to ICG
                      (4,626)       —            (23,668)        (51,448)
Income (loss) before  (373,777)     65,033       (1,017,404)     135,251
income taxes
Benefit from income   (78,354)      (6,182)      (333,717)       (7,589)
taxes
Net income (loss)     (295,423)     71,215       (683,687)       142,840
Less: Net income
attributable to       —             (335)        (268)           (1,157)
noncontrolling
interest
Net income (loss)     $            $  
attributable to Arch  (295,423)     70,880       $  (683,955)  $   141,683
Coal, Inc.
Earnings (loss) per
common share
Basic earnings (loss) $          $        $           $    
per common share      (1.39)       0.34         (3.24)          0.75
Diluted earnings      $          $        $           $    
(loss) per common     (1.39)       0.33         (3.24)          0.74
share
Weighted average
shares outstanding
Basic                 212,048       211,416      211,381         190,086
Diluted               212,048       211,840      211,381         190,905
Dividends declared    $         $        $           $    
per common share      0.03          0.11         0.20           0.43
Adjusted EBITDA (A)   $           $           $   688,454   $   921,138
                      71,195       270,399

(A) Adjusted EBITDA is defined and reconciled under "Reconciliation of
Non-GAAP Measures" later in this release.



Arch Coal, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands)
                                                    December 31,
                                                    2012          2011
                                                    (Unaudited)
Assets
Current assets
Cash and cash equivalents                           $  784,622  $  138,149
Restricted cash                                     3,453         10,322
Short term investments                              234,305       —
Trade accounts receivable                           247,539       380,595
Other receivables                                   84,541        88,584
Inventories                                         365,424       377,490
Prepaid royalties                                   11,416        21,944
Deferred income taxes                               67,360        42,051
Coal derivative assets                              22,975        13,335
Other                                               92,469        110,304
Total current assets                                1,914,104     1,182,774
Property, plant and equipment, net                  7,337,098     7,949,150
Other assets
Prepaid royalties                                   87,773        86,626
Goodwill                                            265,423       596,103
Equity investments                                  242,215       225,605
Other                                               160,164       173,701
Total other assets                                  755,575       1,082,035
Total assets                                        $10,006,777   $10,213,959
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable                                    $  224,418  $  383,782
Coal derivative liabilities                         1,737         7,828
Accrued expenses and other current liabilities      318,018       348,207
Current maturities of debt and short-term           32,896        280,851
borrowings
Total current liabilities                           577,069       1,020,668
Long-term debt                                      5,085,879     3,762,297
Asset retirement obligations                        409,705       446,784
Accrued pension benefits                            67,630        48,244
Accrued postretirement benefits other than pension  45,086        42,309
Accrued workers' compensation                       81,629        71,948
Deferred income taxes                               664,182       976,753
Other noncurrent liabilities                        221,030       255,382
Total liabilities                                   7,152,210     6,624,385
Redeemable noncontrolling interest                  —             11,534
Stockholders' Equity
Common stock                                        2,141         2,136
Paid-in capital                                     3,026,823     3,015,349
Treasury stock, at cost                             (53,848)      (53,848)
Retained earnings (accumulated deficit)             (104,042)     622,353
Accumulated other comprehensive loss                (16,507)      (7,950)
Total stockholders' equity                          2,854,567     3,578,040
Total liabilities and stockholders' equity          $10,006,777   $10,213,959



Arch Coal, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands)
                                         December 31,
                                         2012                2011
                                         (Unaudited)
Operating activities
Net income (loss)                        $    (683,687)  $     142,840
Adjustments to reconcile to cash
provided by operating activities:
Depreciation, depletion and amortization 525,508             466,587
Amortization of acquired sales           (25,189)            (22,069)
contracts, net
Noncash mine closure and asset           515,491             7,316
impairment costs
Goodwill and other intangible asset      330,680             —
impairment
Amortization relating to financing       20,238              14,067
activities
Net loss resulting from early retirement 23,668              1,958
of debt and refinancing activities
Bridge financing costs related to ICG    —                   49,490
Prepaid royalties expensed               22,650              34,842
Employee stock-based compensation        11,822              10,882
expense
Changes in:
Receivables                              113,531             (74,914)
Inventories                              9,468               (50,900)
Coal derivative assets and liabilities   (13,158)            6,079
Accounts payable, accrued expenses and   (171,580)           52,191
other current liabilities
Income taxes, net                        27,545              (21,759)
Deferred income taxes                    (336,036)           10,519
Asset retirement obligations             (42,531)            3,868
Other                                    4,384               11,245
Cash provided by operating activities    332,804             642,242
Investing activities
Acquisition of businesses, net of cash   —                   (2,894,339)
acquired
Capital expenditures                     (395,225)           (540,936)
Additions to prepaid royalties           (13,269)            (29,957)
Proceeds from dispositions of property,  22,825              25,887
plant and equipment
Purchases of short term investments      (236,862)           —
Proceeds from sales of short term        1,754               —
investments
Investments in and advances to           (17,758)            (61,909)
affiliates
Purchase of noncontrolling interest      (17,500)            —
Change in restricted cash                6,869               5,167
Consideration paid related to prior      —                   (829)
business acquisitions
Cash used in investing activities        (649,166)           (3,496,916)
Financing activities
Proceeds from the issuance of senior     359,753             2,000,000
notes
Proceeds from term note                  1,633,500           —
Proceeds from the issuance of common     —                   1,267,933
stock, net
Payments to retire debt                  (452,934)           (605,178)
Net increase (decrease) in borrowings
under lines of credit and commercial     (481,300)           424,396
paper program
Payments on term note                    (7,625)             —
Net payments on other debt               (682)               5,334
Debt financing costs                     (50,568)            (114,823)
Dividends paid                           (42,440)            (80,748)
Issuance of common stock under incentive 5,131               2,316
plans
Cash provided by financing activities    962,835             2,899,230
Increase in cash and cash equivalents    646,473             44,556
Cash and cash equivalents, beginning of  138,149             93,593
period
Cash and cash equivalents, end of period $     784,622   $     138,149



Arch Coal, Inc. and Subsidiaries
Schedule of Consolidated Debt
(In thousands)
                                            December 31,
                                            2012               2011
                                            (Unaudited)
Indebtedness to banks under credit          $        —  $    481,300
facilities
Term loan ($1.6 billion face value) due     1,627,383          —
2018
6.75% senior notes ($450.0 million face     —                  450,971
value) due 2013
8.75% senior notes ($600.0 million face     590,999            588,974
value) due 2016
7.00% senior notes due 2019 at par          1,000,000          1,000,000
9.875% senior notes ($375.0 million face    360,042            —
value) due 2019
7.25% senior notes due 2020 at par          500,000            500,000
7.25% senior notes due 2021 at par          1,000,000          1,000,000
Other                                       40,349             21,903
                                            5,118,773          4,043,148
Less: current maturities of debt and        32,896             280,851
short-term borrowings
Long-term debt                              $  5,085,877     $  3,762,297
Calculation of net debt
Total debt                                  $  5,118,773     $  4,043,148
Less liquid assets
Cash and cash equivalents                   784,622            138,149
Short term investments                      234,305            —
                                            1,018,927          138,149
Net debt                                    $  4,099,846     $  3,904,999



Arch Coal, Inc. and Subsidiaries
Reconciliation of Non-GAAP Measures
(In thousands)
Included in the accompanying release, we have disclosed certain non-GAAP
measures as defined by Regulation G.
The following reconciles these items to net income and cash flows as reported
under GAAP.
Adjusted EBITDA
Adjusted EBITDA is defined as net income attributable to the Company before
the effect of net interest expense, income taxes, depreciation, depletion and
amortization, and the amortization of acquired sales contracts. Adjusted
EBITDA may also be adjusted for items that may not reflect the trend of future
results.
Adjusted EBITDA is not a measure of financial performance in accordance with
generally accepted accounting principles, and items excluded from Adjusted
EBITDA are significant in understanding and assessing our financial condition.
Therefore, Adjusted EBITDA should not be considered in isolation, nor as an
alternative to net income, income from operations, cash flows from operations
or as a measure of our profitability, liquidity or performance under generally
accepted accounting principles. We believe that Adjusted EBITDA presents a
useful measure of our ability to incur and service debt based on ongoing
operations. Furthermore, analogous measures are used by industry analysts to
evaluate our operating performance. In addition, acquisition related expenses
are excluded to make results more comparable between periods. Investors should
be aware that our presentation of Adjusted EBITDA may not be comparable to
similarly titled measures used by other companies. The table below shows how
we calculate Adjusted EBITDA.
                      Three Months Ended            Year Ended
                      December 31,                  December 31,
                      2012           2011           2012            2011
                      (Unaudited)
Net income (loss)     $             $            $  (683,687)   $ 
                      (295,423)      71,215                        142,840
Income tax benefit    (78,354)       (6,182)        (333,717)       (7,589)
Interest expense, net 86,506         74,695         312,148         226,877
Depreciation,
depletion and         125,836        146,267        525,508         466,587
amortization
Amortization of
acquired sales        (2,628)        (16,577)       (25,189)        (22,069)
contracts, net
Mine closure and
asset impairment      —              —              523,568         7,316
costs
Goodwill and other
intangible asset      230,632        —              346,423         —
impairment
Acquisition and       —              1,316          —               56,885
transition costs
Other nonoperating    4,626          —              23,668          51,448
expenses
Net income
attributable to       —              (335)          (268)           (1,157)
noncontrolling
interest
Adjusted EBITDA       $            $             $  688,454    $ 
                      71,195        270,399                       921,138
Adjusted net income and adjusted diluted earnings per common share
Adjusted net income and adjusted diluted earnings per common share are
adjusted for the after-tax impact of acquisition related costs and are not
measures of financial performance in accordance with generally accepted
accounting principles. We believe that adjusted net income and adjusted
diluted earnings per common share better reflect the trend of our future
results by excluding items relating to significant transactions. The
adjustments made to arrive at these measures are significant in understanding
and assessing our financial condition. Therefore, adjusted net income and
adjusted diluted earnings per share should not be considered in isolation, nor
as an alternative to net income or diluted earnings per common share under
generally accepted accounting principles.
                      Three Months Ended            Year Ended
                      December 31,                  December 31,
                      2012           2011           2012            2011
                      (Unaudited)
Net income (loss)     $             $                            $ 
attributable to Arch  (295,423)      70,880        $  (683,955)   141,683
Coal
Amortization of
acquired sales        (2,628)        (16,577)       (25,189)        (22,069)
contracts, net
Mine closure and
asset impairment      —              —              523,568         7,316
costs
Goodwill and other
intangible asset      230,632        —              346,423         —
impairment
Acquisition and       —              1,316          —               56,885
transition costs
Other nonoperating    4,626          —              23,668          51,448
expenses
Tax impact of         (25,905)       5,890          (261,166)       (30,063)
adjustments
Adjusted net income   $            $                            $ 
(loss) attributable   (88,698)       61,509        $  (76,651)   205,200
to Arch Coal
Diluted weighted
average shares        212,048        211,840        211,381         190,905
outstanding
Diluted earnings      $           $          $            $    
(loss) per share      (1.39)        0.33           (3.24)         0.74
Amortization of
acquired sales        (0.01)         (0.08)         (0.12)          (0.12)
contracts, net
Mine closure and      
asset impairment                     —              2.48            0.04
costs                 —
Goodwill and other
intangible asset      1.09           —              1.64            —
impairment
Acquisition and       —              0.01           —               0.30
transition costs
Other nonoperating    0.02           —              0.11            0.27
expenses
Tax impact of         (0.13)         0.03           (1.23)          (0.16)
adjustments
Adjusted diluted      $           $          $            $    
earnings (loss) per   (0.42)        0.29           (0.36)         1.07
share

SOURCE Arch Coal, Inc.

Website: http://www.archcoal.com
Contact: Jennifer Beatty, Vice President, Investor Relations, +1-314-994-2781