"The December start-up of longwall operations at the Leer mine in Appalachia helped to counterbalance the impact of rail service disruptions and adverse geologic issues we faced in the fourth quarter of 2013," said John W. Eaves, Arch's president and chief executive officer. "Looking ahead, we expect the new Leer mine to deliver a strong return on our $400 million investment given its high quality and strategic access to seaborne markets." 

During the fourth quarter of 2013, Arch reported a net loss of $371.2 million, or $1.75 per diluted share. The fourth quarter results include a non-cash goodwill impairment charge of $265.4 million, which has no impact on the company's liquidity, operating cash flow and ongoing business operations. Excluding the charge for goodwill impairment, early debt retirement, other one-time costs, non-cash accretion of acquired coal supply agreements and the related tax impacts of these items, Arch's adjusted net loss was $95.1 million, or $0.45 per diluted share, in the fourth quarter of 2013. In the prior-year quarter, Arch reported an adjusted net loss of $88.7 million, or $0.42 per diluted share.

Additionally, Arch recorded a $12.0 million charge in the fourth quarter of 2013 to reflect the settlement of legal claims brought by the United Mine Workers of America ("UMWA") against Arch subsequent to Patriot Coal's bankruptcy. As previously announced, Arch also completed the acquisition of the Guffey metallurgical coal reserves from Patriot Coal in December 2013 for $16.0 million. These reserves will extend the life of the Leer mine by nearly three years.

2013 Highlights

"Arch achieved measurable success in 2013 by extending its strong safety track record, containing costs in key operating regions, reducing capital spending across the organization, exercising disciplined liquidity management, monetizing non-strategic thermal coal mines and completing a new metallurgical coal mine in West Virginia," said Eaves. "However, due to a soft market environment particularly for metallurgical coal, Arch's earnings decreased in 2013 compared to a year ago."  

For full year 2013, revenues totaled $3.0 billion on coal sales of 140 million tons. The company generated adjusted EBITDA of $426.0 million in 2013 compared with $688.5 million in 2012. Arch also reported an adjusted net loss of $229.2 million, or $1.08 per share, in 2013.  

Of particular note, Arch divested its Canyon Fuel subsidiary for $422.7 million in cash in August 2013. The company recorded a total gain of $120.3 million on the sale, and anticipates cumulative capital and administrative cost savings of more than $200 million during the next four years due to the divestiture of those assets.

"Arch's achievements during 2013 helped advance the company's long-term strategy of re-aligning the portfolio to focus on core assets with the best return potential," said Eaves. "One such core asset is the Leer mine, which will upgrade and expand our Appalachian metallurgical coal platform. That platform, combined with our strong Powder River Basin franchise, creates a compelling long-term value proposition for shareholders – one that provides diversity to manage the volatility in the industry as well as significant growth potential as coal markets correct."

Financial Items

In December of 2013, Arch completed the tender of its $600 million senior unsecured notes due 2016. To redeem the notes, Arch successfully issued $350 million in senior secured second lien notes due 2019 and increased its secured first lien term loan due 2018 by $300 million. Arch also amended its senior secured revolving credit facility to relax certain financial covenants and eliminate others while providing the company with further flexibility during the term of that facility. As of Dec. 31, 2013, Arch had total available liquidity of $1.4 billion, of which $1.2 billion was in cash and short-term interest-bearing securities.

"The financing transactions completed during the fourth quarter enhanced Arch's liquidity and eliminated debt maturities until 2018 without increasing our cost of capital," said John T. Drexler, Arch's senior vice president and chief financial officer. "At the same time, we have maintained a significant portion of our capital structure in pre-payable debt financing, which will allow Arch to de-lever as coal markets correct."

Core Values

Arch delivered its second-best safety performance in company history with a 2013 total incident rate that was nearly 20 percent lower than its 2012 rate. The company's 2013 lost-time incident rate also outperformed the national coal industry average by more than three times. In addition, Arch achieved its second-best environmental performance in 2013, with a 30 percent improvement compared with its 2012 rate.

Arch subsidiaries attained numerous awards for excellence, and achieved several notable milestones, in pursuit of the company's core values. Arch earned more than 30 safety and environmental honors in 2013, including two prestigious national Sentinels of Safety awards. Major safety milestones were achieved by the West Elk mine in Colorado, which operated 2 million employee hours without a lost-time incident, as well as the Coal Creek mine in Wyoming and the Hazard complex in Kentucky, which each completed 1 million employee hours without a lost-time incident.

"I would like to congratulate our employees for achieving strong safety and environmental performances in 2013," said Paul A. Lang, Arch's executive vice president and chief operating officer. "We made measured progress in driving down incident rates, and our efforts to achieve the ultimate goal of operating without an environmental violation or reportable safety incident will continue."

Operational Results

"Arch successfully delivered on its cost containment and capital constraint goals for 2013, despite a challenging fourth quarter operating environment," said Lang. "Specifically, we reduced costs per ton in our key regions, the Powder River Basin and Appalachia, and significantly lowered our capital expenditures by close to $100 million from 2012 levels."