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This excerpt taken from the ACI 10-K filed Mar 1, 2010. Items Affecting
Comparability of Reported Results
The comparability of our operating results for the years ended
December 31, 2009, 2008 and 2007 is affected by the
following significant items:
Equity and Debt Offerings — During the third
quarter of 2009, we sold 19.55 million shares of our common
stock at a price of $17.50 per share and issued
$600.0 million in aggregate principal amount,
8.75% senior unsecured notes due 2016 at an initial issue
price of 97.464%. The net proceeds received from the issuance of
common stock were $326.5 million and the net proceeds
received from the issuance of the 8.75% senior unsecured
notes were $570.3 million. See further discussion of these
transactions in “Liquidity and Capital Resources”. We
used the net proceeds from these transactions primarily to
finance the purchase of the Jacobs Ranch mining complex, as
discussed below.
Purchase of Jacobs Ranch mining operations — On
October 1, 2009, we consummated the purchase of the Jacobs
Ranch mining operations for a purchase price of
$768.8 million. The acquired operations included
approximately 345 million tons of coal reserves located
adjacent to our Black Thunder mining complex. We expect to
achieve significant operating efficiencies by combining the two
operations. Roughly one half of our estimated synergies
represent operational cost savings, while others relate to
administrative cost reductions as well as enhanced coal-blending
optimization opportunities. We are also using one of the idled
Black Thunder draglines on the new property.
Sale of Mingo Logan-Ben Creek mining complex —
On June 29, 2007, we sold selected assets and related
liabilities associated with our Mingo Logan-Ben Creek mining
complex in West Virginia to a subsidiary of Alpha Natural
Resources, Inc. for $43.5 million. During the period from
January 1, 2007 until June 29, 2007, these operations
contributed coal sales of 1.2 million tons, revenues of
$75.1 million and income from operations of
$9.1 million. We recognized a net gain of $8.9 million
in the year ended December 31, 2007 resulting from this
transaction, net of accrued losses of $12.5 million on firm
commitments to purchase coal through 2008 to supply below-market
sales contracts that could no longer be sourced from our
operations and $4.9 million of employee-related payments.
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These excerpts taken from the ACI 10-K filed Feb 27, 2009. Items Affecting
Comparability of Reported Results
The comparability of our operating results for the years ended
December 31, 2008, 2007 and 2006 is affected by the
following significant items:
Sale of Mingo Logan-Ben Creek mining complex —
On June 29, 2007, we sold selected assets and related
liabilities associated with our Mingo Logan-Ben Creek mining
complex in West Virginia to a subsidiary of Alpha Natural
Resources, Inc. for $43.5 million. During the period from
January 1, 2007 until June 29, 2007, these operations
contributed coal sales of 1.2 million tons, revenues of
$75.1 million and income from operations of
$9.1 million. During the year ended December 31, 2006,
these operations contributed coal sales of 4.0 million
tons, revenues of $243.8 million and income from operations
of $19.5 million. We recognized a net gain of
$8.9 million in the year ended December 31, 2007
resulting from this transaction, net of accrued losses of
$12.5 million on firm commitments to purchase coal through
2008 to supply below-market sales contracts that can no longer
be sourced from our operations and $4.9 million of
employee-related payments.
Sale of select Central Appalachia operations —
On December 31, 2005, we sold the stock of three
subsidiaries and their four associated mining operations and
coal reserves in Central Appalachia to Magnum. In 2006, we
recognized expenses of $8.7 million related to the
finalization of working capital adjustments to the purchase
price, adjustments to estimated volumes associated with sales
contracts acquired by Magnum and settlement accounting for
pension plan withdrawals. In accordance with the terms of the
transaction, we paid $50.2 million to Magnum in 2006 to
purchase coal and to offset certain ongoing operating expenses
of Magnum.
West Elk combustion event — We idled our West
Elk mine in Colorado in the first quarter of 2006 as a result of
a combustion-related event that occurred in October 2005. We
estimate that the idling resulted in $30.0 million in lost
profits during the first quarter of 2006. We also recognized
insurance recoveries related to the event of $41.9 million
during the year ended December 31, 2006.
Items Affecting Comparability of Reported Results The comparability of our operating results for the years ended December 31, 2008, 2007 and 2006 is affected by the following significant items: Sale of Mingo Logan-Ben Creek mining complex — On June 29, 2007, we sold selected assets and related liabilities associated with our Mingo Logan-Ben Creek mining complex in West Virginia to a subsidiary of Alpha Natural Resources, Inc. for $43.5 million. During the period from January 1, 2007 until June 29, 2007, these operations contributed coal sales of 1.2 million tons, revenues of $75.1 million and income from operations of $9.1 million. During the year ended December 31, 2006, these operations contributed coal sales of 4.0 million tons, revenues of $243.8 million and income from operations of $19.5 million. We recognized a net gain of $8.9 million in the year ended December 31, 2007 resulting from this transaction, net of accrued losses of $12.5 million on firm commitments to purchase coal through 2008 to supply below-market sales contracts that can no longer be sourced from our operations and $4.9 million of employee-related payments. Sale of select Central Appalachia operations — On December 31, 2005, we sold the stock of three subsidiaries and their four associated mining operations and coal reserves in Central Appalachia to Magnum. In 2006, we recognized expenses of $8.7 million related to the finalization of working capital adjustments to the purchase price, adjustments to estimated volumes associated with sales contracts acquired by Magnum and settlement accounting for pension plan withdrawals. In accordance with the terms of the transaction, we paid $50.2 million to Magnum in 2006 to purchase coal and to offset certain ongoing operating expenses of Magnum. West Elk combustion event — We idled our West Elk mine in Colorado in the first quarter of 2006 as a result of a combustion-related event that occurred in October 2005. We estimate that the idling resulted in $30.0 million in lost profits during the first quarter of 2006. We also recognized insurance recoveries related to the event of $41.9 million during the year ended December 31, 2006. These excerpts taken from the ACI 10-K filed Feb 29, 2008. Items Affecting
Comparability of Reported Results
The comparability of our operating results for the years ended
December 31, 2007, 2006 and 2005 is affected by the
following significant items:
Sale of Mingo Logan-Ben Creek mining complex —
On June 29, 2007, we sold selected assets and related
liabilities associated with our Mingo Logan-Ben Creek mining
complex in West Virginia to a subsidiary of Alpha Natural
Resources, Inc. for $43.5 million. During the year ended
December 31, 2007, our Ben Creek operations contributed
coal sales of 1.2 million tons, revenues of
$75.1 million and income from operations of
$9.1 million. During the year ended December 31, 2006,
our Ben Creek operations contributed coal sales of
4.0 million tons, revenues of $243.8 million and
income from operations of $19.5 million. During the year
ended December 31, 2005, our Ben Creek operations
contributed coal sales of 4.7 million tons, revenues of
$261.5 million, and income from operations of
$15.2 million. We recognized a net gain of
$8.9 million in the year ended December 31, 2007
resulting from this transaction, net of accrued losses of
$12.5 million on firm commitments to purchase coal through
2008 to supply below-market sales contracts that can no longer
be sourced from our operations and $4.9 million of
employee-related payments. We recorded the gain as a component
of other operating income, net.
Sale of select Central Appalachia operations —
On December 31, 2005, we sold the stock of three
subsidiaries and their four associated mining operations and
coal reserves in Central Appalachia to Magnum. The three
subsidiaries were Hobet Mining, Inc., Apogee Coal Company and
Catenary Coal Company, which included the Hobet 21, Arch of West
Virginia, Samples and Campbells Creek mining complexes. For the
year ended December 31, 2005, these complexes sold
12.7 million tons of coal, had revenues of
$509.8 million and incurred a loss from operations of
$8.3 million. We recognized a net gain of $7.5 million
in the fourth quarter of 2005 in conjunction with this
transaction. The gain we recorded included accrued losses of
$65.4 million on firm commitments to purchase coal in 2006
to supply below-market sales contracts, which could no longer be
sourced from our operations as a result of the transaction. In
addition, we recognized expenses of $8.7 million
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during 2006 related to the finalization of working capital
adjustments to the purchase price, adjustments to estimated
volumes associated with sales contracts acquired by Magnum and
settlement accounting for pension plan withdrawals. In
accordance with the terms of the transaction, we paid
$50.2 million to Magnum in 2006 to purchase coal and to
offset certain ongoing operating expenses of Magnum.
Peabody reserve swap and asset sale — On
December 30, 2005, we completed a reserve swap with Peabody
Energy Corp. and sold to Peabody a rail spur, rail loadout and
an idle office complex located in the Powder River Basin for a
purchase price of $84.6 million. In the reserve swap, we
exchanged 60.0 million tons of coal reserves for a similar
block of 60.0 million tons of coal reserves in order to
facilitate more efficient mine plans for both companies. In
conjunction with the transactions, we will continue to lease the
rail spur and loadout and office facilities through September
2008 while we mine adjacent reserves. We recognized a gain of
$46.5 million on the transaction, after the deferral of
$7.0 million of the gain, equal to the present value of the
lease payments. We are recognizing the deferred gain over the
term of the lease.
West Elk combustion event — A
combustion-related event at our West Elk mine in Colorado in
October 2005 caused the idling of the mine into the first
quarter of 2006. We estimate that the idling resulted in
$30.0 million in lost profits during the first quarter of
2006, in addition to the effect of the idling and fire-fighting
costs incurred during the fourth quarter of 2005 of
$33.3 million. We recognized insurance recoveries related
to the event of $41.9 million during the year ended
December 31, 2006. We have reflected these insurance
recoveries as a reduction of our cost of coal sales for the year
ended December 31, 2006.
Accounting for pit inventory — On
January 1, 2006, we adopted the provisions of Emerging
Issues Task Force Issue
No. 04-6,
Accounting for Stripping Costs in the Mining Industry.
This issue applies to stripping costs incurred in the production
phase of a mine for the removal of overburden or waste materials
for the purpose of obtaining access to coal that will be
extracted. Under the issue, stripping costs incurred during the
production phase of the mine are variable production costs that
are included in the cost of inventory produced and extracted
during the period the stripping costs are incurred. Prior to
2006, we recorded stripping costs associated with the tons of
coal uncovered and not yet extracted (pit inventory) at our
surface mining operations as coal inventory. The cumulative
effect of adoption was to reduce inventory by $40.7 million
and deferred development cost by $2.0 million with a
corresponding decrease to retained earnings, net of tax, of
$26.1 million. This accounting change creates volatility in
our results of operations, as cost increases or decreases
related to fluctuations in pit inventory can only be attributed
to tons extracted from the pit.
Items Affecting Comparability of Reported Results The comparability of our operating results for the years ended December 31, 2007, 2006 and 2005 is affected by the following significant items: Sale of Mingo Logan-Ben Creek mining complex — On June 29, 2007, we sold selected assets and related liabilities associated with our Mingo Logan-Ben Creek mining complex in West Virginia to a subsidiary of Alpha Natural Resources, Inc. for $43.5 million. During the year ended December 31, 2007, our Ben Creek operations contributed coal sales of 1.2 million tons, revenues of $75.1 million and income from operations of $9.1 million. During the year ended December 31, 2006, our Ben Creek operations contributed coal sales of 4.0 million tons, revenues of $243.8 million and income from operations of $19.5 million. During the year ended December 31, 2005, our Ben Creek operations contributed coal sales of 4.7 million tons, revenues of $261.5 million, and income from operations of $15.2 million. We recognized a net gain of $8.9 million in the year ended December 31, 2007 resulting from this transaction, net of accrued losses of $12.5 million on firm commitments to purchase coal through 2008 to supply below-market sales contracts that can no longer be sourced from our operations and $4.9 million of employee-related payments. We recorded the gain as a component of other operating income, net. Sale of select Central Appalachia operations — On December 31, 2005, we sold the stock of three subsidiaries and their four associated mining operations and coal reserves in Central Appalachia to Magnum. The three subsidiaries were Hobet Mining, Inc., Apogee Coal Company and Catenary Coal Company, which included the Hobet 21, Arch of West Virginia, Samples and Campbells Creek mining complexes. For the year ended December 31, 2005, these complexes sold 12.7 million tons of coal, had revenues of $509.8 million and incurred a loss from operations of $8.3 million. We recognized a net gain of $7.5 million in the fourth quarter of 2005 in conjunction with this transaction. The gain we recorded included accrued losses of $65.4 million on firm commitments to purchase coal in 2006 to supply below-market sales contracts, which could no longer be sourced from our operations as a result of the transaction. In addition, we recognized expenses of $8.7 million
Table of Contentsduring 2006 related to the finalization of working capital adjustments to the purchase price, adjustments to estimated volumes associated with sales contracts acquired by Magnum and settlement accounting for pension plan withdrawals. In accordance with the terms of the transaction, we paid $50.2 million to Magnum in 2006 to purchase coal and to offset certain ongoing operating expenses of Magnum. Peabody reserve swap and asset sale — On December 30, 2005, we completed a reserve swap with Peabody Energy Corp. and sold to Peabody a rail spur, rail loadout and an idle office complex located in the Powder River Basin for a purchase price of $84.6 million. In the reserve swap, we exchanged 60.0 million tons of coal reserves for a similar block of 60.0 million tons of coal reserves in order to facilitate more efficient mine plans for both companies. In conjunction with the transactions, we will continue to lease the rail spur and loadout and office facilities through September 2008 while we mine adjacent reserves. We recognized a gain of $46.5 million on the transaction, after the deferral of $7.0 million of the gain, equal to the present value of the lease payments. We are recognizing the deferred gain over the term of the lease. West Elk combustion event — A combustion-related event at our West Elk mine in Colorado in October 2005 caused the idling of the mine into the first quarter of 2006. We estimate that the idling resulted in $30.0 million in lost profits during the first quarter of 2006, in addition to the effect of the idling and fire-fighting costs incurred during the fourth quarter of 2005 of $33.3 million. We recognized insurance recoveries related to the event of $41.9 million during the year ended December 31, 2006. We have reflected these insurance recoveries as a reduction of our cost of coal sales for the year ended December 31, 2006. Accounting for pit inventory — On January 1, 2006, we adopted the provisions of Emerging Issues Task Force Issue No. 04-6, Accounting for Stripping Costs in the Mining Industry. This issue applies to stripping costs incurred in the production phase of a mine for the removal of overburden or waste materials for the purpose of obtaining access to coal that will be extracted. Under the issue, stripping costs incurred during the production phase of the mine are variable production costs that are included in the cost of inventory produced and extracted during the period the stripping costs are incurred. Prior to 2006, we recorded stripping costs associated with the tons of coal uncovered and not yet extracted (pit inventory) at our surface mining operations as coal inventory. The cumulative effect of adoption was to reduce inventory by $40.7 million and deferred development cost by $2.0 million with a corresponding decrease to retained earnings, net of tax, of $26.1 million. This accounting change creates volatility in our results of operations, as cost increases or decreases related to fluctuations in pit inventory can only be attributed to tons extracted from the pit. | EXCERPTS ON THIS PAGE:
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