Arch reported net income of US$9.6 million, or US25c per share, for its fourth quarter ended December 31, 2000. This compared favourably with the company’s net loss of US$348.4 million, for the 1999 quarter
Revenues for the quarter totaled US$347.4 million ($372.7 million in 1999) with coal sales of 26.1 million tons (28.4 million tons).
"During the fourth quarter, coal markets continued to strengthen in all regions, with prices in the eastern United States climbing to their highest levels in 20 years," said Steven Leer, Arch Coal's president and chief executive officer.
"While we entered the quarter with nearly all of our tonnage committed and priced through 2001, we expect these improved market conditions to translate into a stronger financial performance in 2002 and thereafter."
"Nearly every one of our mines operated well during the period," Leer continued. "The exception was West Elk, which encountered adverse roof conditions in the early part of the quarter but returned to normal levels of productivity in December."
In February, West Elk will complete the last longwall panel in the western section of the mine and permanently seal the area where the January 2000 fire occurred. At that time, the longwall mining system will be moved to a new reserve on the eastern side of the mine.
Fourth quarter results benefited overall from a third partial insurance recovery of US$7 million (pre-tax) related to a January fire at West Elk mine in Colorado; a US$13 million pre-tax gain associated with the settlement of certain workers' compensation liabilities; and a US$9.8 million pre-tax gain resulting from previously unrecognised post-retirement benefit changes. This was partially offset by the adverse roof conditions at West Elk and higher diesel fuel prices, which together had a negative impact of US$14 million for the quarter.
For the year ended December 31, 2000, Arch had a net loss of US$12.7 million (US$346.3 million in 1999). Revenues totaled US$1.4 billion and coal sales totaled 105.5 million tons for the year, versus US$1.6 billion and 111.2 million tons in 1999.
The biggest single factor in the company's year-end results was the fire at West Elk, which reduced after-tax income by US$4 million to US$6 million per month for a period in excess of six months. Arch said the fire and the ensuing adverse roof conditions contributed to a US$66.5 million year-over-year reduction in West Elk's contribution to Arch's adjusted EBITDA. Insurance recovery - which covers losses associated with the fire event only – had so far offset approximately 50% of that reduction.
During 2000, Arch reduced its overall leverage by US$71.6 million, paying down a total of $30.2 million in debt while reducing its equipment lease obligations by $41.4 million.
"While we continued to reduce our debt in 2000, we were constrained in this effort by the impact of the West Elk mine fire on overall cash flow," Leer said. "We still view debt reduction as our number one priority, and one of the best options available to us for increasing value for our shareholders. With improving market conditions and the resumption of normal operations at West Elk, we expect to continue an aggressive schedule of debt reduction in the future."
In describing current US coal market conditions Leer said Arch was very encouraged by recent trends.
"A number of positive developments, including strong electricity demand, record natural gas prices and cold winter weather, have contributed to very favorable conditions in US coal markets. Furthermore, utility stockpiles have fallen to their lowest levels in many years, and demand growth is outpacing production. The upshot should be a strong and sustainable pricing environment," Leer said.
Arch is the second largest coal producer in the US, with subsidiary operations in West Virginia, Kentucky, Virginia, Wyoming, Colorado and Utah. Through these operations, Arch provides the fuel for approximately 6% of the electricity generated in the US.
