SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 16, 2004 (July 15, 2004)
Arch Coal, Inc.
(Exact name of registrant as specified in its charter)
Delaware 1-13105 43-0921172
----------------------------- --------------------------- ----------
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
One CityPlace Drive, Suite 300, St. Louis, Missouri 63141
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (314) 994-2700
Page 1 of 4 pages.
Exhibit Index begins on page 4.
Item 5. Other Events.
On July 15, 2004, Arch Coal, Inc. (the "Company"), announced via press
release that it had signed a definitive agreement to acquire Itochu
Corporation's 35% interest in Canyon Fuel Company, LLC for a purchase price of
approximately $112 million. A copy of the Company's press release is attached
hereto and incorporated herein by reference in its entirety.
Item 7. Exhibits.
(c) The following Exhibit is filed with this Current Report on Form
8-K:
Exhibit No. Description
99 Press Release dated as of July 15, 2004
Page 2 of 4 pages.
Exhibit Index begins on page 4.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: July 16, 2004 ARCH COAL, INC.
By: /s/ Janet L. Horgan
-----------------------------------
Janet L. Horgan
Assistant General Counsel and
Assistant Secretary
Page 3 of 4 pages.
Exhibit Index begins on page 4.
EXHIBIT INDEX
Exhibit No. Description
----------- ------------
99 Press Release dated as of July 15, 2004
Page 4 of 4 pages.
Exhibit 99
News from
Arch Coal, Inc.
-------------------------------------------------------------------------------
FOR FURTHER INFORMATION:
Deck Slone
Vice President, Investor
Relations and Public Affairs
(314) 994-2717
FOR IMMEDIATE RELEASE
July 15, 2004
Arch Acquires Remaining 35% Interest in Canyon Fuel Company
ST. LOUIS (July 15, 2004) - Arch Coal, Inc. announced today that it has
signed a definitive agreement to acquire Itochu Corporation's 35% interest in
Canyon Fuel Company, LLC for a contract price of $112 million. (Per the attached
schedule, the present value of the purchase price less cash received totals
approximately $98 million.) With the completion of this transaction, Canyon Fuel
will become a wholly owned subsidiary of Arch Coal.
"This acquisition will solidify our position as a leading producer of
high-Btu, low-sulfur western bituminous coal," said Steven F. Leer, Arch's
president and chief executive officer. "Demand for such coal has strengthened
significantly in recent months. Through the planned integration of the Canyon
Fuel operations and our West Elk mine in Colorado, we will further enhance our
ability to supply this growing segment of the marketplace."
Canyon Fuel owns and operates two longwall mines in Utah - Sufco in Sevier
County and Dugout Canyon in Carbon County. In addition, the company owns the
currently idle Skyline mine, which also is located in Carbon County. In total,
Canyon Fuel controls approximately 161 million tons of high-quality, low-sulfur
coal reserves in Utah. In 2003, Canyon Fuel produced approximately 13.0 million
tons of coal. Pro forma net income for 2003 - combining Arch's 65% interest and
Itochu's 35% interest and excluding the cumulative effect of accounting change -
would have totaled $26.4 million. Pro forma EBITDA totaled approximately $62.3
million in 2003. (EBITDA is defined as earnings before interest, taxes,
depreciation, amortization and the cumulative effect of accounting change.)
The acquisition is expected to be accretive to EBITDA immediately and
accretive to earnings within 12 months. The transaction is expected to have an
increasingly positive impact on earnings as existing sales contracts expire and
additional tons become available for sale into a much-improved market
environment.
"While Itochu has been an excellent partner, we believe that this
transaction will enable Arch to create still greater value with these strategic,
high-quality assets," Leer said. "Upon completion of the transaction, we will
act immediately to integrate our western bituminous operations under the
direction of a single management team, which should enhance our ability to
operate these mines in the most cost-effective manner, enable us to react
quickly to opportunities in the marketplace, and provide our customers with the
best possible service." The new structure should lead to reduced overhead costs
and other operating synergies, according to Leer.
"As the only company with a leading position in each of the nation's three
principal low-sulfur coal basins, Arch is uniquely equipped to serve the
nation's growing demand for the cleanest burning coals," Leer said. "Western
bituminous coal is becoming an increasingly important source of Btu's for many
U.S. power plants, and we view our production and strong reserve position in
this region as an excellent complement to our operations in the Powder River
Basin and Central Appalachia."
As a wholly owned subsidiary of Arch Coal, Canyon Fuel's results now will
be consolidated in Arch's financial statements. This simplification of the
reporting process should translate into a better appreciation for the true value
of the Canyon Fuel operations, Leer noted.
Consummation of the transaction is conditioned upon obtaining all necessary
governmental and regulatory consents and other customary conditions. The
transaction is expected to close during the third quarter.
St. Louis-based Arch Coal is one of the nation's largest coal producers and
mines low-sulfur coal exclusively. Through its subsidiary operations in West
Virginia, Kentucky, Virginia, Wyoming, Colorado and Utah, Arch provides the fuel
for approximately 6 percent of the electricity generated in the United States.
# # #
Forward-Looking Statements: Statements in this press release which are not
statements of historical fact are forward-looking statements within the "safe
harbor" provision of the Private Securities Litigation Reform Act of 1995. These
forward-looking statements are based on information currently available to, and
expectations and assumptions deemed reasonable by, the company. Because these
forward-looking statements are subject to various risks and uncertainties,
actual results may differ materially from those projected in the statements.
These expectations, assumptions and uncertainties include: the company's ability
to consummate the acquisition of the remaining interest in Canyon Fuel;
expectation of continued growth in the demand for electricity; belief that
legislation and regulations relating to the Clean Air Act and the relatively
higher costs of competing fuels will increase demand for its compliance and
low-sulfur coal; expectation of continued improved market conditions for the
price of coal; expectation that the company will continue to have adequate
liquidity from its cash flow from operations, together with available borrowings
under its credit facilities, to finance the company's working capital needs; a
variety of operational, geologic, permitting, labor and weather related factors;
and the other risks and uncertainties which are described from time to time in
the company's reports filed with the Securities and Exchange Commission.
Additional Financial Information
(in millions) Financed With
------------------------------
Cash Note Total
-----------------------------------------
-----------------------------------------
Contract price $90.0 $22.0 $112.0
Discount to bring non-interest
bearing note* to present value - (3.8) (3.8)
Cash acquired (9.8) - (9.8)
----------- ----------- ----------
Net purchase price $80.2 $18.2 $98.4
* $22 million note payable to seller over five years, discounted to present
value at 7%