<PAGE>
<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1996 Commission File Number 0-10610
------------------ -------
BLUE DIAMOND COAL COMPANY
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 62-0133200
- ------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
P. O. Box 59015, 341 Troy Circle, Knoxville, TN 37950-9015
- ----------------------------------------------- ----------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (423) 588-8511
----------------------
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.
YES X NO
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of September 30, 1996.
Class Outstanding at September 30, 1996
- ------------------------------------ ---------------------------------
Common Stock, $1 Par Value 935,220 Shares
<PAGE>
<PAGE> 2
BLUE DIAMOND COAL COMPANY
INDEX
Page
PART I. FINANCIAL INFORMATION Number
------
Item 1. Financial Statements
Consolidated Condensed Balance Sheet
September 30, 1996 (Unaudited) and
March 31, 1996 (Audited)......................................3
Consolidated Condensed Statement of
Income (Unaudited) - Three-Months and Six-Months
Ended September 30, 1996 and 1995.............................5
Consolidated Condensed Statements of
Changes in Cash Flows (Unaudited)
Six-Months Ended September 30, 1996 and 1995..................6
Notes to Consolidated Condensed
Financial Statements..........................................7
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition.........................9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.............................10
<PAGE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
BLUE DIAMOND COAL COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
September 30 March 31
1996 1996
------------ -----------
<S> (Unaudited)
ASSETS
CURRENT ASSETS <C> <C>
Cash $ 282,787 $ 304,815
Short Term Investments 810,000 83,126
Accounts and Notes Receivable 9,152,603 10,854,635
Inventories - Coal 1,996,529 1,967,780
Inventories - Supplies 1,887,221 1,814,562
Other Current Assets 521,208 575,330
----------- -----------
TOTAL CURRENT ASSETS 14,650,348 15,600,248
PROPERTY, PLANT AND EQUIPMENT 115,666,966 115,162,832
Less: Accumulated Depreciation & Depletion 48,306,471 46,343,339
----------- -----------
NET PROPERTY, PLANT & EQUIPMENT 67,360,495 68,819,493
Investments 515,966 515,966
Other Assets 1,560,759 1,909,854
----------- -----------
TOTAL ASSETS $84,087,568 $86,845,561
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes Payable $ 0 $ 1,201,630
Current Notes Payable and Capital Leases 2,943,106 2,878,279
Accounts Payable and Accrued Expenses 10,076,266 9,354,901
Current Portion of Reorganization Liabilities 436,774 463,174
----------- -----------
TOTAL CURRENT LIABILITIES 13,456,146 13,897,984
LONG-TERM LIABILITIES
Long-term Debt 8,235,367 11,080,585
Reserve for Health Care & Workers' Compensation 25,310,132 26,335,770
Reorganization Liabilities 2,638,518 2,856,287
Deferred Income Taxes 1,569,500 1,569,500
Other Liabilities 757,071 780,481
---------- ----------
TOTAL LONG-TERM LIABILITIES 38,510,588 42,622,623
<PAGE>
<PAGE> 4
STOCKHOLDERS' EQUITY
Common Stock - $1 Par Value, 1,000,000 Shares
961,132 Issued (Including Treasury Stock) 961,132 961,132
Additional Paid-In-Capital 24,305,480 24,305,480
Treasury Stock - 25,912 Shares at 9/30 & 3/31 (2,197,420) (2,197,420)
Retained Earnings 9,051,642 7,255,762
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 32,120,834 30,324,954
---------- ----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $84,087,568 $86,845,561
========== ==========
</TABLE>
NOTE: The Balance Sheet at March 31, 1996 has been derived from the Audited
Financial Statements of that date.
See Notes to Consolidated Condensed Financial Statements.
<PAGE>
<PAGE> 5
BLUE DIAMOND COAL COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF INCOME
UNAUDITED
<TABLE>
<CAPTION>
Three Months Ended Sept 30 Six Months Ended Sept 30
-------------------------- ------------------------
1996 1995 1996 1995
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES
Net Product Sales $24,618,856 $23,799,821 $46,130,596 $41,615,844
Interest Income 40,956 20,832 44,847 24,538
Gain (Loss) on Sale
of Fixed Assets 24,000 0 24,000 20,982
---------- ---------- ---------- ----------
TOTAL REVENUES 24,683,812 23,820,653 46,199,443 41,661,364
COSTS AND EXPENSES
Operating Expenses
and Purchased Products 18,670,930 16,894,233 33,859,462 29,054,703
Other Operating Charges 3,853,566 3,973,798 7,855,357 6,838,933
Administrative, Selling &
Transportation Expenses 450,000 505,000 929,896 955,000
Interest Expense 838,002 1,010,538 1,700,935 2,060,291
Other Expense 4,702 (35,977) 57,913 26,411
---------- ---------- ---------- ----------
TOTAL COSTS AND EXPENSES 23,817,200 22,347,592 44,403,563 38,935,338
Income Before Taxes 866,612 1,473,061 1,795,880 2,726,026
Income Tax Expense 0 0 0 0
---------- ---------- ---------- ----------
NET INCOME $ 866,612 $ 1,473,061 $ 1,795,880 $ 2,726,026
========== ========== ========== ==========
Average Number of
Common Shares Outstanding 935,220 935,220 935,220 935,220
======= ======= ======= =======
PER SHARE OF COMMON STOCK:
Net Income Based on
Average Shares Outstanding $0.93 $1.58 $1.92 $2.91
==== ==== ==== ====
Cash Dividends Declared
and Paid $0.00 $0.00 $0.00 $0.00
==== ==== ==== ====
</TABLE>
See Notes to Consolidated Condensed Financial Statements.<PAGE>
<PAGE> 6
BLUE DIAMOND COAL COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CHANGE IN CASH FLOWS
UNAUDITED
<TABLE>
<CAPTION>
Six-Months Ended September 30
-----------------------------
1996 1995
<S> ---------- ------------
OPERATING ACTIVITIES <C> <C>
Funds Provided (Used) from Operations,
Adjusted for Depreciation and Gain on
Sale of Fixed Assets $3,889,354 $4,786,043
(Increase) Decrease in Accounts Receivables 1,702,032 (4,150,175)
(Increase) Decrease in Inventories (101,408) (2,207,422)
(Increase) Decrease in Prepaid Assets (323,658) 239,197
(Decrease) Increase in Accounts Payable (571,852) 135,619
Other Changes from Operations 0 465,980
--------- ----------
NET CASH FLOW PROVIDED (USED)
BY OPERATIONS ACTIVITIES $4,594,468 (730,758)
FINANCING ACTIVITIES
Issuance (Reduction) of Short-Term Debt-Net (1,201,630) 2,341,162
Issuance (Reduction) of Long-Term Debt-Net (2,663,630) (1,484,016)
Addition (Reduction) in Capital Lease-Net (116,760) (108,889)
--------- ----------
CASH PROCEEDS PROVIDED (USED)
BY FINANCING ACTIVITIES (3,982,020) 748,257
INVESTMENT ACTIVITIES
Expenditures for Property, Plant
and Equipment (634,476) (442,501)
(Increase) Reduction of
Employee Notes Receivable 0 14,171
--------- ----------
NET CASH USED BY INVESTING ACTIVITIES (634,476) (428,330)
--------- ----------
NET INCREASE (DECREASE) IN CASH
& CASH EQUIVALENTS (22,028) (410,831)
--------- ----------
Cash and Cash Equivalents
at Beginning of Period 304,815 694,811
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 282,787 $ 283,980
========= ==========
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
<PAGE>
<PAGE> 7
BLUE DIAMOND COAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
September 30, 1996
NOTE A -- FINANCIAL STATEMENTS
In the opinion of the Company, the accompanying unaudited consolidated
condensed financial statements contain all adjustments necessary to
present fairly its financial position as of September 30, 1996 and
March 31, 1996, the results of operations for the three month and
six-month periods ended September 30, 1996 and 1995 and cash flows for
the six-month periods ended September 30, 1996 and 1995.
While the Company believes that the disclosures presented are adequate
to make the information not misleading, it is suggested that these
condensed financial statements be read in conjunction with the
financial statements and related notes included in the Company's
March 31, 1996 Annual Report on Form 10-K.
NOTE B -- INCOME TAXES
Due to the Company's net operating loss and investment tax credit
carry-forward position, no provision for federal income tax is
required for the current fiscal year.
NOTE C -- CHAPTER 11 REORGANIZATION PROCEEDINGS
On May 17, 1991, Blue Diamond Coal Company (the "Company") filed a
voluntary petition for reorganization under Chapter 11 of the Federal
Bankruptcy Code in the United States Bankruptcy Court for the Eastern
District of Tennessee (the "Bankruptcy Court"). The filing had been
preceded by a merger of all significant wholly-owned subsidiaries into
the Company. This filing was precipitated by cash flow problems
resulting from extensive capital expenditures for new coal processing
facilities coupled with operating losses at existing mines.
As Debtor-in-Possession, the Company continued to operate its business
and formulated a business plan for future operations. This plan
formed the basis for the Company's proposed plan of reorganization
that was intended to enable the Company to satisfy its pre-petition
obligations and emerge from Chapter 11. This proposed plan of
reorganization developed into the Fourth Amended Plan of
Reorganization dated December 10, 1992 (as implemented and approved by
the Confirmation Order, the "Plan of Reorganization"). On December
11, 1992, the Bankruptcy Court entered an order confirming the Plan of
Reorganization. On April 6, 1995, the Bankruptcy Court entered a
final decree that the Company's bankruptcy case was closed.
<PAGE>
<PAGE> 8
NOTE D -- WORKERS' COMPENSATION LIABILITY
In conjunction with the Company's Reorganization Plan, the Office of
Workers' Compensation Programs of the United States Department of
Labor (DOL) has assumed responsibility for the Company's pre-June,
1991 federal black lung claims. The Company is responsible for
payment of claims and expenses related to pre-petition Kentucky
Workers' compensation liabilities. The amount reserved for future
Kentucky Workers' Compensation claims is $8,779,800 at September 30,
1996. Effective June 19, 1991, the Company obtained and continues to
carry commercial insurance to cover its current State and Federal
workers' compensation liabilities.
NOTE E -- UMWA RETIREE HEALTHCARE BENEFITS LIABILITY
During 1994, the Company received notice from the Social Security
Administration (SSA) claiming the Company is responsible for health
care and death benefit premiums for certain retired coal miners who
were members of the United Mine Workers of America (UMWA) and their
beneficiaries pursuant to the Coal Industry Retiree Health Benefit Act
of 1992 (the Coal Act). The recorded reserve for payments was
$18,015,600 at September 30, 1996.
NOTE F -- CONTINGENT GAINS
Since the Company has not had a contractual relationship with the UMWA
since 1964 and never bargained for nor guaranteed any health care or
death benefits, a lawsuit was filed which challenges the
constitutionality of the Act discussed in the preceding note. During
1996, the United States Court of Appeals upheld the Federal District
Court decision. A petition for rehearing was filed and denied. A
Petition for Writ of Certiorari was filed in September by the
Company's attorneys with the Supreme Court of the United States.
If the Company prevails in this lawsuit, its obligation under the Coal
Act would be eliminated.
The Company has also made a request to the Social Security
Administration for relief based on an administrative review of
approximately one-third of the assigned individuals. This matter
could cause future payments under the Coal Act to be reduced
significantly, although subsequent assignments of individuals to the
Company may offset this relief.
The ultimate outcome of these proceedings is uncertain at the present
time.
<PAGE>
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
Results of the Company's coal operations for the three-month and
six-month periods ended September 30, 1996 and 1995 are summarized as
follows:
<TABLE>
<CAPTION>
Three-Months Ended Sept 30 Six-Months Ended Sept 30
------------------------- --------------------------
1996 1995 1996 1995
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Net Product sales $24,618,856 $23,799,821 $46,130,596 $41,615,844
Operating expenses and
purchased products 18,670,930 16,894,233 33,859,462 29,054,703
Other operating expense 3,853,566 3,973,798 7,855,357 6,838,933
Adm. Selling and
Transportation expenses 450,000 505,000 929,896 955,000
---------- ---------- ---------- ----------
Total Expenses 22,974,496 21,373,031 42,644,715 36,848,636
---------- ---------- ---------- ----------
INCOME FROM COAL
OPERATIONS $ 1,644,360 $ 2,426,790 $ 3,485,881 $ 4,767,208
========== ========== ========== ==========
Tons sold 833,415 789,813 1,567,101 1,370,021
Sales per ton $29.54 $30.13 $29.43 $30.38
Cost of sales per ton 27.57 27.06 27.21 26.90
----- ----- ----- -----
Margin per ton $ 1.97 $ 3.07 $ 2.22 $ 3.48
===== ===== ===== =====
</TABLE>
The Company's income from coal operations for the six-month period ended
September 30, 1996, amounted to $3,485,900 of which $1,644,400 (47%) was
generated in the second fiscal quarter. Fifty-three (53%) percent of the
current fiscal year's tonnage was shipped in the second quarter. Per ton
coal prices for the year have decreased approximately $0.95 (3%) from the
preceding year, reflecting reduction in price of coal contracted for the
long term. Per ton costs have also increased about one (1%) percent over
the preceding year's costs due primarily to royalty and property tax
costs. Production from the Company's reserves provided about 94% of
total coal shipped. Management anticipates shipments will continue at
current levels for the remainder of the fiscal year.
<PAGE>
<PAGE> 10
The current year's six-month earnings from coal operations were offset by
interest expense including:
<TABLE>
<CAPTION>
Increase
1996 1995 (Decrease)
--------- ---------- --------
<S> <C> <C> <C>
Kentucky Workers' Compensation $ 317,800 $ 286,800 $ 31,000
Coal Act Healthcare 649,800 807,000 (157,200)
Bank and Reorganization Liabilities 733,400 966,500 (213,100)
--------- --------- -------
$1,701,000 $2,060,300 $(359,300)
========= ========= =======
</TABLE>
Continuing the trend from the first quarter, less debt and lower interest
rates reduced bank debt interest, reduced reserves lowered Coal Act
interest and increased reserves increased Workers' Compensation interest.
Gain on sale of fixed assets amounted to $24,000 in the second quarter.
FINANCIAL CONDITION AND LIQUIDITY
The Company's working capital ratio was 1.09 at September 30th, compared
to 1.12 at March 31st. Capital expenditures of $634,500 were in line
with projections. Long-term debt has been reduced by $4,000,000 during
the first six months of this year. A tentative renegotiation of the
Company's bank debt has resulted in improved terms and interest rates.
Coal Act premium payments ($1,586,400) and Kentucky Workers' Compensation
payments ($864,400) continue to challenge the Company's liquidity.
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits - Exhibit 27, Financial Data Schedule
(b) Reports on Form 8-K - No current reports were filed during the
quarter ended September 30, 1996.
<PAGE>
<PAGE> 11
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 thereunto duly authorized.
BLUE DIAMOND COAL COMPANY
-----------------------------
Registrant
Date: November 11, 1996 Ted B. Helms
-----------------------------
Ted B. Helms
President
Date: November 11, 1996 W. S. Lyon, III
-----------------------------
W. S. Lyon, III
Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED BALANCE SHEET AT SEPTEMBER 30, 1996 (UNAUDITED)
AND THE CONSOLIDATED CONDENSED STATEMENT OF INCOME FOR THE SIX MONTHS
ENDED SEPTEMBER 30, 1996 (UNAUDITED) AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 282,787
<SECURITIES> 810,000
<RECEIVABLES> 9,152,603
<ALLOWANCES> 0
<INVENTORY> 3,883,750
<CURRENT-ASSETS> 14,650,348
<PP&E> 115,666,966
<DEPRECIATION> 48,306,471
<TOTAL-ASSETS> 84,087,568
<CURRENT-LIABILITIES> 13,456,146
<BONDS> 8,235,367
<COMMON> 961,132
0
0
<OTHER-SE> 31,159,702
<TOTAL-LIABILITY-AND-EQUITY> 84,087,568
<SALES> 46,130,596
<TOTAL-REVENUES> 46,199,443
<CGS> 41,714,819
<TOTAL-COSTS> 41,714,819
<OTHER-EXPENSES> 987,809
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,700,935
<INCOME-PRETAX> 1,795,880
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,795,880
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,795,880
<EPS-PRIMARY> 1.92
<EPS-DILUTED> 1.92
</TABLE>
