SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2000
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or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 333-59073
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P&L COAL HOLDINGS CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 13-4004153
----------------------------------- -------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
701 Market Street, St. Louis, Missouri 63101-1826
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(Address of principal executive offices) (Zip Code)
(314) 342-3400
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(Registrant's telephone number, including area code)
N/A
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(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
X Yes No
----- ------
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
P&L COAL HOLDINGS CORPORATION
UNAUDITED STATEMENTS OF CONDENSED CONSOLIDATED OPERATIONS
(In thousands)
Quarter Ended June 30,
2000 1999
--------------- ---------------
<S> <C> <C>
REVENUES
Sales $ 658,653 $ 641,572
Other revenues 14,368 22,828
--------------- ---------------
Total revenues 673,021 664,400
OPERATING COSTS AND EXPENSES
Operating costs and expenses 550,558 535,544
Depreciation, depletion and amortization 60,467 65,583
Selling and administrative expenses 22,803 21,457
Net gain on property and equipment disposals (1,764) (151)
--------------- ---------------
OPERATING PROFIT 40,957 41,967
Interest expense 51,470 50,622
Interest income (4,560) (993)
--------------- ---------------
LOSS BEFORE INCOME TAXES AND MINORITY INTERESTS (5,953) (7,662)
Income tax provision (benefit) 336 (1,133)
Minority interests 2,181 2,898
--------------- ---------------
LOSS FROM CONTINUING OPERATIONS (8,470) (9,427)
Discontinued operations:
Loss from discontinued operations, net of income tax benefit of $1,151 - (3,453)
Gain from disposal of discontinued operations, net of
income tax provision of $3,180 8,820 -
--------------- ---------------
NET INCOME (LOSS) $ 350 $ (12,880)
=============== ===============
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
<PAGE>
<TABLE>
P&L COAL HOLDINGS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
June 30, 2000 March 31, 2000
--------------- ---------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 46,994 $ 65,618
Accounts receivable, less allowance for doubtful accounts of $1,233 157,258 153,021
Materials and supplies 50,139 48,809
Coal inventory 179,620 193,341
Assets from coal and emission allowance trading activities 77,387 78,695
Deferred income taxes 49,869 49,869
Other current assets 42,390 43,192
--------------- ---------------
Total current assets 603,657 632,545
Property, plant, equipment and mine development, net of accumulated depreciation,
depletion and amortization of $459,070 and $411,270 respectively 4,757,050 4,815,510
Net assets of discontinued operations 102,000 90,000
Investments and other assets 294,984 288,794
--------------- ---------------
Total assets $ 5,757,691 $ 5,826,849
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term borrowings and current maturities of long-term debt $ 48,126 $ 57,977
Income taxes payable 16,307 13,594
Liabilities from coal and emission allowance trading activities 74,944 75,883
Accounts payable and accrued expenses 526,095 573,137
--------------- ---------------
Total current liabilities 665,472 720,591
Long-term debt, less current maturities 2,006,628 2,018,189
Deferred income taxes 623,340 625,124
Accrued reclamation and other environmental liabilities 497,259 502,092
Workers' compensation obligations 212,891 212,260
Accrued postretirement benefit costs 974,979 971,186
Obligation to industry fund 64,767 64,737
Other noncurrent liabilities 165,686 162,979
--------------- ---------------
Total liabilities 5,211,022 5,277,158
Minority interests 42,602 41,265
Stockholders' equity:
Preferred Stock - $0.01 per share par value; 10,000,000 shares authorized,
5,000,000 shares issued and outstanding 50 50
Common Stock - Class A, $0.01 per share par value; 30,000,000 shares
authorized, 19,000,000 shares issued and outstanding 190 190
Common Stock - Class B, $0.01 per share par value; 3,000,000 shares
authorized, 746,329 shares issued and 684,473 outstanding 7 7
Additional paid-in capital 485,037 485,037
Employee stock loans (2,446) (2,391)
Accumulated other comprehensive loss (17,321) (12,667)
Retained earnings 38,769 38,419
Treasury shares, at cost: 61,856 Class B shares (219) (219)
--------------- ---------------
Total stockholders' equity 504,067 508,426
--------------- ---------------
Total liabilities and stockholders' equity $ 5,757,691 $ 5,826,849
=============== ===============
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
<PAGE>
<TABLE>
P&L COAL HOLDINGS CORPORATION
UNAUDITED STATEMENTS OF CONDENSED CONSOLIDATED CASH FLOWS
(In thousands)
Quarter Ended June 30,
2000 1999
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 350 $ (12,880)
Loss from discontinued operations - 3,453
Gain from disposal of discontinued operations (8,820) -
--------------- ---------------
Loss from continuing operations (8,470) (9,427)
Adjustments to reconcile loss from continuing operations to net cash provided by
(used in) continuing operations:
Depreciation, depletion and amortization 60,467 65,583
Deferred income taxes (4,717) (6,839)
Amortization of debt discount and debt issuance costs 4,216 4,382
Net gain on property and equipment disposals (1,764) (151)
Minority interests 2,181 2,898
Changes in current assets and liabilities:
Sale of accounts receivable 25,000 -
Accounts receivable, net of sale (29,479) (4,006)
Materials and supplies (1,384) 239
Coal inventory 3,571 (1,001)
Net assets from coal and emission allowance trading activities 369 -
Other current assets 494 (717)
Accounts payable and accrued expenses (45,892) (80,574)
Income taxes payable 3,490 1,672
Accrued reclamation and related liabilities (4,425) (6,401)
Workers' compensation obligations 631 1,695
Accrued postretirement benefit costs 3,793 5,080
Obligation to industry fund 30 (530)
Other, net 5,147 1,702
--------------- ---------------
Net cash provided by (used in) continuing operations 13,258 (26,395)
Net cash used in discontinued operations - (7,965)
--------------- ---------------
Net cash provided by (used in) operating activities 13,258 (34,360)
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant, equipment and mine development (29,338) (43,839)
Additions to advance mining royalties (6,252) (6,083)
Proceeds from property and equipment disposals 4,243 6,088
Proceeds from sale-leaseback transactions 23,787 -
--------------- ---------------
Net cash used in continuing operations (7,560) (43,834)
Net cash used in discontinued operations - (37)
--------------- ---------------
Net cash used in investing activities (7,560) (43,871)
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES
Change in short-term borrowings (9,499) (15,896)
Proceeds from long-term debt 3,702 5,543
Payments of long-term debt (17,451) (2,408)
Distributions to minority interests (844) (1,962)
--------------- ---------------
Net cash used in continuing operations (24,092) (14,723)
Net cash used in discontinued operations - (6,015)
--------------- ---------------
Net cash used in financing activities (24,092) (20,738)
Effect of exchange rate changes on cash and cash equivalents (230) 286
--------------- ---------------
Net decrease in cash and cash equivalents (18,624) (98,683)
Cash and cash equivalents at beginning of period 65,618 194,078
--------------- ---------------
Cash and cash equivalents at end of period $ 46,994 $ 95,395
=============== ===============
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
<PAGE>
P&L COAL HOLDINGS CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation
The accompanying condensed consolidated financial statements include the
consolidated operations and balance sheets of P&L Coal Holdings Corporation (the
"Company"), also known as Peabody Group. These financial statements include the
subsidiaries of Peabody Holding Company, Inc. ("Peabody Holding Company"), Gold
Fields Mining Corporation ("Gold Fields") which owns Lee Ranch Coal Company
("Lee Ranch"), Citizens Power LLC ("Citizens Power") and Peabody Resources
Holdings Pty Ltd. ("Peabody Resources"), an Australian company.
The accompanying condensed consolidated financial statements as of and for the
quarters ended June 30, 2000 and 1999, and the notes thereto, are unaudited.
However, in the opinion of management, these financial statements reflect all
adjustments necessary for a fair presentation of the results of the periods
presented. The results of operations for the quarter ended June 30, 2000 are not
necessarily indicative of the results to be expected for the full year.
(2) Comprehensive Income
The following table sets forth the components of comprehensive loss for the
quarters ended June 30, 2000 and 1999 (in thousands):
<TABLE>
Quarter Ended June 30,
2000 1999
--------------- ---------------
<S> <C> <C>
Net income (loss) $ 350 $ (12,880)
Foreign currency translation adjustment (4,654) 12,468
--------------- ---------------
Comprehensive loss $ (4,304) $ (412)
=============== ===============
</TABLE>
(3) Business Segments
The Company's industry and geographic data for continuing operations are as
follows (in thousands):
<TABLE>
Quarter Ended June 30,
2000 1999
--------------- ---------------
<S> <C> <C>
Revenues:
U.S. Mining $ 603,503 $ 622,736
Non U.S. Mining 69,312 41,600
Other 206 64
--------------- ---------------
$ 673,021 $ 664,400
=============== ===============
Operating profit (loss):
U.S. Mining $ 28,123 $ 31,987
Non U.S. Mining 12,649 10,338
Other 185 (358)
--------------- ---------------
$ 40,957 $ 41,967
=============== ===============
Revenues:
United States $ 603,709 $ 622,800
Non U.S. 69,312 41,600
--------------- ---------------
$ 673,021 $ 664,400
=============== ===============
Operating profit:
United States $ 28,308 $ 31,629
Non U.S. 12,649 10,338
--------------- ---------------
$ 40,957 $ 41,967
=============== ===============
</TABLE>
(4) Commitments and Contingencies
Environmental Claims
Environmental claims have been asserted against a subsidiary of the Company at
19 sites in the United States. Some of these claims are based on the
Comprehensive Environmental Response Compensation and Liability Act of 1980, as
amended, and on similar state statutes. The majority of these sites are related
to activities of former subsidiaries of the Company.
The Company's policy is to accrue environmental cleanup-related costs of a
noncapital nature when those costs are believed to be probable and can be
reasonably estimated. The quantification of environmental exposures requires an
assessment of many factors, including changing laws and regulations,
advancements in environmental technologies, the quality of information available
related to specific sites, the assessment stage of each site investigation,
preliminary findings and the length of time involved in remediation or
settlement. For certain sites, the Company also assesses the financial
capability of other potentially responsible parties and, where allegations are
based on tentative findings, the reasonableness of the Company's apportionment.
The Company has not anticipated any recoveries from insurance carriers or other
potentially responsible third parties in its Consolidated Balance Sheets. The
liabilities for environmental cleanup-related costs recorded in the Consolidated
Balance Sheet at June 30, 2000 were $57.2 million. This amount represents those
costs that the Company believes are probable and reasonably estimable. In the
event that future remediation expenditures are in excess of amounts accrued,
management does not anticipate that they will have a material adverse effect on
the financial position, results of operations or liquidity of the Company.
Other
In addition, the Company at times becomes a party to claims, lawsuits,
arbitration proceedings and administrative procedures in the ordinary course of
business. Management believes that the ultimate resolution of pending or
threatened proceedings will not have a material effect on the financial
position, results of operations or liquidity of the Company.
(5) Supplemental Guarantor/Non-Guarantor Financial Information
In accordance with the indentures governing the Senior Notes and Senior
Subordinated Notes, certain wholly owned U.S. subsidiaries of the Company have
fully and unconditionally guaranteed the debt associated with the purchase on a
joint and several basis. Separate financial statements and other disclosures
concerning the Guarantor Subsidiaries are not presented because management
believes that such information is not material to investors. The following
condensed historical financial statement information is provided for such
Guarantor/Non-Guarantor Subsidiaries.
<TABLE>
P&L Coal Holdings Corporation
Unaudited Supplemental Condensed Statements of Consolidated Operations
For the Quarter Ended June 30, 2000
(In thousands)
Parent Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Total revenues $ - $ 480,964 $ 202,338 $ (10,281) $ 673,021
Costs and expenses:
Operating costs and expenses - 406,124 154,715 (10,281) 550,558
Depreciation, depletion and amortization - 42,928 17,539 - 60,467
Selling and administrative expenses 108 17,376 5,319 - 22,803
Net gain on property and equipment disposals - (1,236) (528) - (1,764)
Interest expense 42,034 22,255 4,281 (17,100) 51,470
Interest income (17,111) (4,384) (165) 17,100 (4,560)
--------------- --------------- --------------- --------------- ---------------
Income (loss) before income taxes and
minority interests (25,031) (2,099) 21,177 - (5,953)
Income tax provision (benefit) (6,283) (526) 7,145 - 336
Minority interests - - 2,181 - 2,181
--------------- --------------- --------------- --------------- ---------------
Income (loss) from continuing operations (18,748) (1,573) 11,851 - (8,470)
Discontinued operations:
Gain from disposal of discontinued
operations, net of income taxes 88 8,732 - - 8,820
--------------- --------------- --------------- --------------- ---------------
Net income (loss) $ (18,660) $ 7,159 $ 11,851 $ - $ 350
=============== =============== =============== =============== ===============
</TABLE>
<PAGE>
<TABLE>
P&L Coal Holdings Corporation
Unaudited Supplemental Condensed Statements of Consolidated Operations
For the Quarter Ended June 30, 1999
(In thousands)
Parent Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Total revenues $ - $ 504,229 $ 161,677 $ (1,506) $ 664,400
Costs and expenses:
Operating costs and expenses - 420,315 116,735 (1,506) 535,544
Depreciation, depletion and amortization - 50,053 15,530 - 65,583
Selling and administrative expenses 38 16,708 4,711 - 21,457
Net (gain) loss on property and equipment
disposals - (161) 10 - (151)
Interest expense 44,194 2,316 4,112 - 50,622
Interest income - (911) (82) - (993)
--------------- --------------- --------------- --------------- ---------------
Income (loss) before income taxes and
minority interests (44,232) 15,909 20,661 - (7,662)
Income tax provision (benefit) (11,012) 3,225 6,654 - (1,133)
Minority interests - - 2,898 - 2,898
--------------- --------------- --------------- --------------- ---------------
Income (loss) from continuing operations (33,220) 12,684 11,109 - (9,427)
Discontinued operations:
Loss from discontinued operations,
net of income taxes - - (3,453) - (3,453)
--------------- --------------- --------------- --------------- ---------------
Net income (loss) $ (33,220) $ 12,684 $ 7,656 $ - $ (12,880)
=============== =============== =============== =============== ===============
</TABLE>
<TABLE>
P&L Coal Holdings Corporation
Unaudited Supplemental Condensed Consolidated Balance Sheets
As of June 30, 2000
(in thousands)
Parent Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 14 $ 27,882 $ 19,098 $ - $ 46,994
Accounts receivable 1,905 81,932 123,361 (49,940) 157,258
Inventories - 186,227 43,532 - 229,759
Assets from coal and emission allowance
trading activities - 77,387 - - 77,387
Deferred income taxes - 49,869 - - 49,869
Other current assets 1,385 10,068 30,937 - 42,390
--------------- --------------- --------------- --------------- ---------------
Total current assets 3,304 433,365 216,928 (49,940) 603,657
Property, plant, equipment and mine
development - at cost - 4,349,214 866,906 - 5,216,120
Less accumulated depreciation,
depletion and amortization - (361,346) (97,724) - (459,070)
--------------- --------------- --------------- --------------- ---------------
- 3,987,868 769,182 - 4,757,050
Net assets of discontinued operations 1,020 100,980 - - 102,000
Investments and other assets 2,087,124 1,265,752 208,507 (3,266,399) 294,984
--------------- --------------- --------------- --------------- ---------------
Total assets $ 2,091,448 $ 5,787,965 $ 1,194,617 $ (3,316,339) $ 5,757,691
=============== =============== =============== =============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term borrowings and current
maturities of long-term debt $ - $ 20,920 $ 27,206 $ - $ 48,126
Payable to affiliates, net (59,264) 83,989 (24,725) - -
Income taxes payable - 568 15,739 - 16,307
Liabilities from coal and emission allowance
trading activities - 74,944 - - 74,944
Accounts payable and accrued expenses 68,879 392,479 114,677 (49,940) 526,095
--------------- --------------- --------------- --------------- ---------------
Total current liabilities 9,615 572,900 132,897 (49,940) 665,472
Long-term debt, less current maturities 1,577,765 164,096 264,767 - 2,006,628
Deferred income taxes - 567,429 55,911 - 623,340
Other noncurrent liabilities 1 1,871,376 44,205 - 1,915,582
--------------- --------------- --------------- --------------- ---------------
Total liabilities 1,587,381 3,175,801 497,780 (49,940) 5,211,022
Minority interests - - 42,602 - 42,602
Stockholders' equity 504,067 2,612,164 654,235 (3,266,399) 504,067
--------------- --------------- --------------- --------------- ---------------
Total liabilities and stockholders'
equity $ 2,091,448 $ 5,787,965 $ 1,194,617 $ (3,316,339) $ 5,757,691
=============== =============== =============== =============== ===============
</TABLE>
<PAGE>
<TABLE>
P&L Coal Holdings Corporation
Unaudited Supplemental Condensed Consolidated Balance Sheets
As of March 31, 2000
(in thousands)
Parent Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 347 $ 45,931 $ 19,340 $ - $ 65,618
Accounts receivable 1,605 95,055 92,083 (35,722) 153,021
Inventories - 187,965 54,185 - 242,150
Assets from coal and emission allowance
trading activities - 78,695 - - 78,695
Deferred income taxes - 49,869 - - 49,869
Other current assets 1,282 14,351 27,559 - 43,192
--------------- --------------- --------------- --------------- ---------------
Total current assets 3,234 471,866 193,167 (35,722) 632,545
Property, plant, equipment and mine
development - at cost - 4,360,648 866,132 - 5,226,780
Less accumulated depreciation,
depletion and amortization - (323,870) (87,400) - (411,270)
--------------- --------------- --------------- --------------- ---------------
- 4,036,778 778,732 - 4,815,510
Net assets of discontinued operations 900 89,100 - - 90,000
Investments and other assets 1,883,781 1,444,307 208,095 (3,247,389) 288,794
--------------- --------------- --------------- --------------- ---------------
Total assets $ 1,887,915 $ 6,042,051 $ 1,179,994 $ (3,283,111) $ 5,826,849
=============== =============== =============== =============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term borrowings and current
maturities of long-term debt $ - $ 21,122 $ 36,855 $ - $ 57,977
Payable to affiliates, net (284,294) 319,473 (35,179) - -
Income taxes payable - 521 13,073 - 13,594
Liabilities from coal and emission allowance
trading activities - 75,883 - - 75,883
Accounts payable and accrued expenses 76,066 416,505 116,288 (35,722) 573,137
--------------- --------------- --------------- --------------- ---------------
Total current liabilities (208,228) 833,504 131,037 (35,722) 720,591
Long-term debt, less current maturities 1,587,717 162,116 268,356 - 2,018,189
Deferred income taxes - 567,918 57,206 - 625,124
Other noncurrent liabilities - 1,873,508 39,746 - 1,913,254
--------------- --------------- --------------- --------------- ---------------
Total liabilities 1,379,489 3,437,046 496,345 (35,722) 5,277,158
Minority interests - - 41,265 - 41,265
Stockholders' equity 508,426 2,605,005 642,384 (3,247,389) 508,426
--------------- --------------- --------------- --------------- ---------------
Total liabilities and stockholders'
equity $ 1,887,915 $ 6,042,051 $ 1,179,994 $ (3,283,111) $ 5,826,849
=============== =============== =============== =============== ===============
</TABLE>
<PAGE>
<TABLE>
P&L Coal Holdings Corporation
Unaudited Supplemental Condensed Statements of Consolidated Cash Flows
For the Quarter Ended June 30, 2000
(In thousands)
Parent Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Consolidated
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net cash provided by operating activities $ 1,920 $ 10,866 $ 472 $ 13,258
--------------- --------------- --------------- ---------------
Additions to property, plant, equipment and mine development - (8,572) (20,766) (29,338)
Additions to advance mining royalties - (2,566) (3,686) (6,252)
Proceeds from property and equipment disposals - 1,390 2,853 4,243
Proceeds from sale-leaseback transactions - 17,500 6,287 23,787
--------------- --------------- --------------- ---------------
Net cash provided by (used in) investing activities - 7,752 (15,312) (7,560)
Change in short-term borrowings - - (9,499) (9,499)
Proceeds from long-term debt - - 3,702 3,702
Payments of long-term debt (10,000) (433) (7,018) (17,451)
Distributions to minority interests - - (844) (844)
Net change in due to/from affiliates 7,747 (36,234) 28,487 -
--------------- --------------- --------------- ---------------
Net cash provided by (used in) financing activities (2,253) (36,667) 14,828 (24,092)
Effect of exchange rate changes on cash and equivalents - - (230) (230)
--------------- --------------- --------------- ---------------
Net decrease in cash and cash equivalents (333) (18,049) (242) (18,624)
Cash and cash equivalents at beginning of period 347 45,931 19,340 65,618
--------------- --------------- --------------- ---------------
Cash and cash equivalents at end of period $ 14 $ 27,882 $ 19,098 $ 46,994
=============== =============== =============== ===============
</TABLE>
<PAGE>
<TABLE>
P&L Coal Holdings Corporation
Unaudited Supplemental Condensed Statements of Consolidated Cash Flows
For the Quarter Ended June 30, 1999
(In thousands)
Parent Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Consolidated
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net cash provided by (used in) continuing operations $ (56,863) $ (899) $ 31,367 $ (26,395)
Net cash used in discontinued operations - - (7,965) (7,965)
--------------- --------------- --------------- ---------------
Net cash provided by (used in) operating activities (56,863) (899) 23,402 (34,360)
--------------- --------------- --------------- ---------------
Additions to property, plant, equipment and mine development - (31,032) (12,807) (43,839)
Additions to advance mining royalties - (2,553) (3,530) (6,083)
Proceeds from property and equipment disposals - 5,877 211 6,088
--------------- --------------- --------------- ---------------
Net cash used in continuing operations - (27,708) (16,126) (43,834)
Net cash used in discontinued operations - - (37) (37)
--------------- --------------- --------------- ---------------
Net cash used in investing activities - (27,708) (16,163) (43,871)
--------------- --------------- --------------- ---------------
Change in short-term borrowings - - (15,896) (15,896)
Proceeds from long-term debt - - 5,543 5,543
Payments of long-term debt - (471) (1,937) (2,408)
Distributions to minority interests - - (1,962) (1,962)
Net change in due to/from affiliates 56,883 (58,406) 1,523 -
--------------- --------------- --------------- ---------------
Net cash provided by (used in) continuing operations 56,883 (58,877) (12,729) (14,723)
Net cash used in discontinued operations - - (6,015) (6,015)
--------------- --------------- --------------- ---------------
Net cash provided by (used in) financing activities 56,883 (58,877) (18,744) (20,738)
Effect of exchange rate changes on cash and equivalents - - 286 286
--------------- --------------- --------------- ---------------
Net increase (decrease) in cash and cash equivalents 20 (87,484) (11,219) (98,683)
Cash and cash equivalents at beginning of period - 130,861 63,217 194,078
--------------- --------------- --------------- ---------------
Cash and cash equivalents at end of period $ 20 $ 43,377 $ 51,998 $ 95,395
=============== =============== =============== ===============
</TABLE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
<TABLE>
Quarter Ended June 30,
2000 1999
--------------- ---------------
<S> <C> <C>
(In thousands)
Revenues:
Sales $ 658,653 $ 641,572
Other revenues 14,368 22,828
--------------- ---------------
Total revenues 673,021 664,400
Operating costs and expenses 632,064 622,433
--------------- ---------------
Operating profit 40,957 41,967
Interest expense 51,470 50,622
Interest income (4,560) (993)
--------------- ---------------
Loss before income taxes (5,953) (7,662)
Income tax provision (benefit) 336 (1,133)
Minority interests 2,181 2,898
--------------- ---------------
Loss from continuing operations (8,470) (9,427)
Income (loss) from discontinued operations, net of income taxes 8,820 (3,453)
--------------- ---------------
Net income (loss) $ 350 $ (12,880)
=============== ===============
Other Data:
Tons sold (In millions) 47.1 46.8
=============== ===============
EBITDA<F1> $ 101,424 $ 107,550
Cash provided by (used in):
Operating activities $ 13,258 $ (34,360)
Investing activities (7,560) (43,871)
Financing activities (24,092) (20,738)
</TABLE>
[FN]
<F1> EBITDA is defined as income from continuing operations before deducting net
interest expense, income taxes, minority interests and depreciation,
depletion and amortization. EBITDA has been reduced by costs associated
with reclamation, retiree health care and workers' compensation. EBITDA is
not a substitute for operating income, net income and cash flow from
operating activities as determined in accordance with generally accepted
accounting principles as a measure of profitability or liquidity. EBITDA is
presented as additional information because management believes it to be a
useful indicator of the Company's ability to meet debt service and capital
expenditure requirements. Because EBITDA is not calculated identically by
all companies, the presentation herein may not be comparable to other
similarly titled measures of other companies.
</FN>
Sales. Sales for the quarter ended March 31, 2000 were $658.7 million, an
increase of $17.1 million, or 2.7%. Sales in Australia increased $26.0 million
over the prior year, due to the contribution of the Moura Mine ($17.9 million)
acquired in August 1999, the Bengalla mine ($5.5 million) that began production
in April 1999 and continued strong demand for steam and metallurgical coal in
the Asia Pacific region. Sales from Black Beauty increased $12.9 million, due to
the transition of new contracts from other Peabody mines to the 81.7%-owned
joint venture, partially offsetting the sales decrease in the Midwest of $51.0
million from the closure and suspension of three mines during the third quarter
of the prior fiscal year.
Sales in Appalachia improved $8.1 million, mainly due to higher production over
prior year results that were adversely impacted by longwall production
difficulties. The Southwest region's sales improved $7.7 million, due to strong
customer demand as a result of decreased availability of hydroelectric power in
the region, while continued price improvements increased sales in Powder River
by $6.3 million. Finally, sales from broker and trading activities increased
$7.1 million, due to a continued increase in trading and brokerage volumes of
0.7 million tons.
Overall sales volumes were 47.1 million tons for the current year, vs. 46.8
million tons for the prior year quarter.
Other Revenues. Other revenues decreased $8.4 million as compared to the first
quarter of fiscal year 2000, due mainly to a decrease in coal royalty income. In
the prior year, the Company recognized $6.0 million of revenue under a coal
royalty agreement that included a non-refundable advance royalty payment in June
1999.
Operating Profit. Operating profit was $41.0 million for the quarter ended June
30, 2000, a decrease of $1.0 million compared to the prior year. Operating
profit in Australia increased $2.3 million, mainly due to higher volumes in the
current year, partially offset by $1.3 million due to lower exchange rates.
Operating profit in the Midwest declined $11.0 million as compared to the prior
year, due to the closure and suspension of three mines in the prior year, and
lower reclamation costs in the prior year due to a change in reclamation
permitting requirements. Appalachia's operating profit declined $3.4 million, as
increased volumes from higher production in the current year were offset by
lower pricing due to the expiration of a high-priced contract and the residual
effect of the mild winter weather that increased customer coal stockpiles,
reducing demand. Black Beauty's operating profit was $2.0 million below the
prior year, due mainly to production difficulties at two underground mines and
lower demand caused by customer plant outages. Offsetting these declines was a
decrease in costs from the recognition of $13.7 million in tax refund credits
for excise taxes on export shipments from January 1, 1994 to March 31, 1998.
Beginning in 1997, the Company filed for refund of these taxes on the basis that
the tax was unconstitutional. In May 2000, the Internal Revenue Service issued
guidelines for the refund of these taxes. The Company expects to receive the
refund during this fiscal year. Operating profit was also adversely impacted by
$5.3 million on a consolidated basis as a result of higher fuel costs, due to
the significant increase in the price of diesel fuel.
Interest Income. Interest income increased $3.6 million compared to the prior
year, due to interest recorded in the current year associated with the excise
tax refunds.
Income Taxes. For the quarter ended June 30, 2000, the company had income tax
expense of $0.3 million and a pretax loss of $6.0 million, compared to an income
tax benefit of $1.1 million and a pretax loss of $7.7 million in the prior year.
The Company's consolidated tax position is impacted by the percentage depletion
tax deduction utilized by the Company and its subsidiaries that creates an
alternative minimum tax situation, and the positive contribution of its
Australian operations that is taxed at a higher rate than the U.S. operations.
On a consolidated basis, the Australian income tax expense exceeded the income
tax benefit recorded on U.S. pretax losses in the current year.
Income (Loss) from Discontinued Operations. During the quarter ended June 30,
2000 the Company recorded an $8.8 million adjustment, net of income taxes, to
its estimated net loss from the sale of Citizens Power. This favorable
adjustment is due to a decrease in the estimated operating losses of Citizens
Power during the disposal period, based upon higher income from electricity
trading activities driven by increased volatility and prices for electricity in
the western U.S power markets during the quarter.
Liquidity and Capital Resources
Net cash provided by operating activities was $13.3 million for the quarter
ended June 30, 2000, an increase of $47.7 million. This increase is primarily
due to the securitization of an additional $25.0 million of trade accounts
receivable during the quarter, and a net decrease in working capital of $15.6
million compared to the prior year. As of June 30, 2000 the Company had
securitized $125.0 million of accounts receivable.
Net cash used in investing activities was $7.6 million, primarily consisting of
$29.3 million of capital expenditures partially offset by $23.8 million in
proceeds from sale-leaseback transactions. Net cash used in investing activities
declined $36.2 million compared to the prior year, mainly due to the timing of
capital expenditures and proceeds from sale-leaseback transactions in the
current year. The Company had $77.6 million of committed capital expenditures
(primarily related to coal reserves and mining equipment) at June 30, 2000. The
Company anticipates funding these capital expenditures through available cash
and credit facilities.
Net cash used in financing activities was $24.1 million, reflecting the
prepayment of $10.0 million of acquisition debt during the quarter, and the
repayment of working capital borrowings by Peabody Resources and Black Beauty.
As of June 30, 2000, the Company had total indebtedness of $2,054.8 million,
consisting of the following:
Term loans under Senior Credit Facility $ 680,000
9.625% Senior Subordinated Notes
("Senior Subordinated Notes") due 2008 498,772
8.875% Senior Notes ("Senior Notes") due 2008 398,993
5.0% Subordinated Note 181,809
Project finance facility 79,020
Unsecured revolving credit agreement 41,973
Capital lease obligations 24,602
Other 149,585
---------------
$ 2,054,754
===============
The Senior Credit Facility includes a Revolving Credit Facility that provides
for aggregate borrowings of up to $200.0 million and letters of credit of up to
$280.0 million. The Revolving Credit Facility commitment matures in fiscal year
2005. As of June 30, 2000, the Company had no borrowings outstanding under the
Revolving Credit Facility.
Interest rates on the revolving loans under the Revolving Credit Facility are
based on the Base Rate (as defined in the Senior Credit Facilities), or LIBOR
(as defined in the Senior Credit Facilities) at the Company's option. The
Company currently has in place two interest rate swaps on $500 million of term
loans outstanding under the Senior Credit Facility - a $200 million interest
rate swap that fixes LIBOR at approximately 4.7% and expires on October 5, 2000,
and a $300 million interest rate swap that fixes LIBOR at approximately 7.0% and
expires on October 5, 2001. As a result, approximately 74% of the term loans
outstanding under the Senior Credit Facility are fixed as of June 30, 2000.
The Revolving Credit Facility and related Term Loan Facility also contain
certain restrictions and limitations including but not limited to financial
covenants that will require the Company to maintain and achieve certain levels
of financial performance and limit the payment of cash dividends and similar
restricted payments. In addition, the Senior Credit Facility prohibits the
Company from allowing its Restricted Subsidiaries (which include all Guarantors)
to create or otherwise cause any encumbrance or restriction on the ability of
any such Restricted Subsidiary to pay any dividends or make certain other
upstream payments subject to certain exceptions. The Company was in compliance
with all of the restrictive covenants of its loan agreements as of June 30,
2000.
The indentures governing the Senior Notes and Senior Subordinated Notes permit
the Company and its Restricted Subsidiaries to incur additional indebtedness,
including secured indebtedness, subject to certain limitations. In addition,
among other customary restrictive covenants, the indentures prohibit the Company
and its Restricted Subsidiaries from creating or otherwise causing any
encumbrance or restriction on the ability of any Restricted Subsidiary that is
not a Guarantor to pay dividends or to make certain other upstream payments to
the Company or any of its Restricted Subsidiaries (subject to certain
exceptions).
Certain of the Company's subsidiaries maintain short-term lines and other
working capital borrowing facilities. Total commitments under such subsidiary
facilities totaled approximately $160.0 million and borrowings thereunder
totaled approximately $42.0 million as of June 30, 2000. In addition, certain of
our subsidiaries have long-term debt outstanding under various agreements. These
agreements contain certain customary restrictive covenants, including
limitations on additional debt, dividends and investments.
As of June 30, 2000, the revolving and working capital borrowing facilities
referred to above totaled $360.0 million, and borrowings thereunder totaled
$42.0 million.
Other
Strategic Review of Australian Operations. On August 8, 2000, the Company
announced that it will engage outside advisors to conduct a review of strategic
alternatives to maximize the value of its Australian subsidiary, Peabody
Resources Limited. The Company expects the review will be completed by the end
of the fiscal year.
Recent Accounting Pronouncements. In June 1998, the Financial Accounting
Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities." SFAS No. 133 requires the recognition of all derivatives as
assets or liabilities within the balance sheet, and requires both the
derivatives and the underlying exposure to be recorded at fair value. Any gain
or loss resulting from changes in fair value will be recorded as part of the
results of operations, or as a component of comprehensive income or loss,
depending upon the intended use of the derivative. The Financial Accounting
Standards Board subsequently issued SFAS No. 137, which defers the effective
date of SFAS No. 133 to all fiscal quarters of fiscal years beginning after June
15, 2000 (effective April 1, 2001 for the Company). We are evaluating the
requirements of SFAS No. 133 and have not determined the impact of adoption on
the consolidated financial statements.
Forward Looking Statements
This quarterly report and certain press releases and statements the Company
makes from time to time include statements of the Company's and management's
expectations, intentions, plans and beliefs that constitute "forward looking
statements" within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934 and are intended to come
within the safe harbor protection provided by those sections. Forward looking
statements involve risks and uncertainties, and a variety of factors could cause
actual results to differ materially from the Company's current expectations,
including but not limited to: coal and power market conditions and fluctuations
in the demand for coal as an energy source, weather conditions, the continued
availability of long-term coal supply contracts, railroad performance, foreign
currency translation, changes in economic conditions, changes in mining costs
for labor and operational reasons, changes in the government regulation of the
mining industry, risks inherent to mining, changes in the Company's leverage
position, the ability to successfully implement operating strategies and other
factors discussed in the Company's filings with the Securities and Exchange
Commission.
Readers are cautioned not to place undue reliance on these forward looking
statements, which speak only as of the date hereof. The Company undertakes no
obligation to publicly release the results of any revisions to such forward
looking statements that may be made to reflect events or circumstances after the
date hereof, or thereof, as the case may be, or to reflect the occurrence of
anticipated events.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
See the Exhibit Index at page 18 of this report.
(b) Reports on Form 8-K.
None.
<PAGE>
SIGNATURE
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 thereunto duly authorized.
P&L COAL HOLDINGS CORPORATION
Date: August 11, 2000 By: /s/ RICHARD A. NAVARRE
--------------------------------------
Richard A. Navarre
Vice President and Chief Financial Officer
(Principal Financial Officer)
<PAGE>
EXHIBIT INDEX
The exhibits below are numbered in accordance with the Exhibit Table of Item 601
of Regulation S-K.
Exhibit
No. Description of Exhibit
------- ----------------------
3.1 Second Amended and Restated Certificate of Incorporation of P&L Coal
Holdings Corporation (Incorporated by reference to Exhibit 3.1 of the
Company's Form 10-Q for the third quarter ended December 31, 1998).
3.2 By-Laws of P&L Coal Holdings Corporation (Incorporated by reference to
Exhibit 3.2 of the Company's Form S-4 Registration Statement No.
333-59073).
27 Financial Data Schedule (filed electronically with the SEC only).
