<PAGE>
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 June 30, 1996 Commission File Number 0-10610
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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 June 30, 1996.
Class Outstanding at June 30, 1996
- ------------------------------------ ----------------------------
Common Stock, $1 Par Value 935,220 Shares
<PAGE>
BLUE DIAMOND COAL COMPANY
INDEX
Page
PART I. FINANCIAL INFORMATION Number
------
Item 1. Financial Statements
Consolidated Condensed Balance Sheet
June 30, 1996 (Unaudited) and
March 31, 1996 (Audited)......................................3
Consolidated Condensed Statement of
Income (Unaudited) - Three-Months
Ended June 30, 1996 and 1995..................................5
Consolidated Condensed Statements of
Changes in Cash Flows (Unaudited)
Three Months Ended June 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.................,......11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.............................12
<PAGE>
PART I. FINANCIAL INFORMATION
BLUE DIAMOND COAL COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
June 30, March 31
1996 1996
------------ -----------
<S> (Unaudited)
ASSETS
CURRENT ASSETS <C> <C>
Cash $ 11,011 $ 304,815
Short Term Investments -0- 83,126
Accounts and Notes Receivable 10,811,524 10,854,635
Inventories - Coal 3,824,698 1,967,780
Inventories - Supplies 1,918,436 1,814,562
Other Current Assets 519,990 575,330
----------- -----------
TOTAL CURRENT ASSETS $ 17,085,659 $ 15,600,248
PROPERTY, PLANT AND EQUIPMENT 115,360,061 115,162,832
Less: Accumulated Depreciation & Depletion 47,405,603 46,343,339
----------- -----------
NET PROPERTY, PLANT & EQUIPMENT 67,954,458 68,819,493
Investments 515,966 515,966
Other Assets 1,729,630 1,909,854
----------- -----------
TOTAL ASSETS $ 87,285,713 $ 86,845,561
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes Payable $ 458,604 $ 1,201,630
Current Notes Payable and Capital Leases 2,853,171 2,878,279
Accounts Payable and Accrued Expenses 10,973,204 9,354,901
Current Portion of Reorganization Liabilities 456,837 463,174
----------- -----------
TOTAL CURRENT LIABILITIES 14,741,816 13,897,984
LONG-TERM LIABILITIES
Long-term Debt 10,370,065 11,080,585
Reserve for Health Care & Workers' Compensation 25,808,564 26,335,770
Reorganization Liabilities 2,753,924 2,856,287
Deferred Income Taxes 1,569,500 1,569,500
Other Liabilities 787,623 780,481
----------- -----------
TOTAL LONG-TERM LIABILITIES 41,289,676 42,622,623
<PAGE>
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 6/30 & 3/31 (2,197,420) (2,197,420)
Retained Earnings 8,185,029 7,255,762
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 31,254,221 30,324,954
----------- -----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 87,285,713 $ 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>
BLUE DIAMOND COAL COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF INCOME
UNAUDITED
<TABLE>
<CAPTION>
Three Months Ended June 30
--------------------------
1996 1995
------------ -----------
<S> <C> <C>
REVENUES
Net Product Sales $21,511,740 $17,816,023
Interest Income 3,891 3,706
Gain (Loss) on Sale
of Fixed Assets 0 20,982
---------- ----------
TOTAL REVENUES 21,515,631 17,840,711
COSTS AND EXPENSES
Operating Expenses
and Purchased Products 15,188,532 12,160,470
Other Operating Charges 4,001,791 2,865,135
Administrative, Selling &
Transportation Expenses 479,896 450,000
Interest Expense 862,933 1,049,753
Other Expense 53,211 62,388
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TOTAL COSTS AND EXPENSES 20,586,363 16,587,746
Income Before
Income Tax Expense 929,268 1,252,965
Income Tax Expense 000 000
---------- ----------
NET INCOME $ 929,268 $ 1,252,965
========== ==========
Average Number of
Common Shares Outstanding 935,220 935,220
======= =======
PER SHARE OF COMMON STOCK:
Net Income Based on
Average Shares Outstanding $0.99 $1.34
==== ====
Cash Dividends Declared
and Paid $0.00 $0.00
==== ====
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
<PAGE>
BLUE DIAMOND COAL COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN CASH FLOWS
UNAUDITED
<TABLE>
<CAPTION>
Three Months Ended June 30
-----------------------------
1996 1995
<S> ----------- ----------
OPERATING ACTIVITIES <C> <C>
Funds Provided (Used) from Operations,
Adjusted for Depreciation and Gain on
Sale of Fixed Assets $1,991,531 $2,225,981
(Increase) Decrease in Accounts Receivables 43,111 (701,987)
(Increase) Decrease in Inventories (1,960,792) (1,565,532)
(Increase) Decrease in Prepaid Assets 318,690 66,138
(Decrease) Increase in Accounts Payable 989,539 (186,851)
Other Changes from Operations 0 (31,500)
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NET CASH FLOW PROVIDED (USED)
BY OPERATING ACTIVITIES $1,382,079 (193,751)
FINANCING ACTIVITIES
Issuance (Reduction) of Short-Term Debt-Net (743,026) 873,753
Issuance (Reduction) of Long-Term Debt-Net (677,758) (855,207)
Addition (Reduction) in Capital Lease-Net (57,870) (53,969)
--------- ----------
CASH PROCEEDS USED BY FINANCING ACTIVITIES (1,478,654) (35,423)
INVESTMENT ACTIVITIES
Expenditures for Property, Plant
and Equipment (197,229) (214,966)
(Increase) Reduction of
Employee Notes Receivable 0 9,980
--------- ---------
NET CASH USED BY INVESTING ACTIVITIES (197,229) (204,986)
--------- ---------
NET INCREASE (DECREASE) IN CASH
& CASH EQUIVALENTS (293,804) (434,160)
--------- ----------
Cash and Cash Equivalents
at Beginning of Period 304,815 694,811
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 11,011 $ 260,651
========= ==========
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
<PAGE>
BLUE DIAMOND COAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
June 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 the financial position as of June 30, 1996 and
March 31, 1996, the results of operations for the three-month periods
ended June 30, 1996 and 1995 and cash flows for the three-month
periods ended June 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>
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 $9,015,633 at June 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
$19,204,105 at June 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 is under preparation by the Company's
attorneys for filing 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.
The ultimate outcome of each of these proceedings is uncertain at the
present time.
<PAGE>
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 periods
ended June 30, 1996 and 1995 are summarized as follows:
<TABLE>
<CAPTION>
Three-Months Ended June 30
--------------------------
1996 1995
----------- ------------
<S> <C> <C>
Net Product sales $21,511,740 $17,816,023
Operating expenses and
purchased products 15,188,532 12,160,470
Other operating expense 4,001,791 2,865,135
Adm. Selling and
Transportation expenses 479,896 450,000
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Total Expenses 19,670,219 15,475,605
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INCOME FROM COAL
OPERATIONS $ 1,841,521 $ 2,340,418
========== ==========
Tons sold 733,686 580,208
Sales per ton $29.32 $30.70
Cost of sales per ton 26.81 26.67
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Margin per ton $ 2.51 $ 4.03
===== =====
</TABLE>
For the comparable first quarters of the fiscal years ending 1997 and
1996, the Company's margin on coal processing declined $498,897,
reflecting lower unit selling prices (declined $1.38 or 4.5%) and
higher unit costs (increased $0.14 or .5%). Lower per ton purchased
coal and reduced processing and administrative costs from increased
volume were offset primarily by higher unit royalty, wheelage and
production tax expense. The renegotiated long-term supply contract
price of a major customer decreased the per ton selling price. The
sale of higher unit priced specialty coals was limited by the
Company's mix of production. Increased capacity for high quality deep
mined coal continues to be a major objective for the Company's
operations. An increase in brokered tonnage subsidized the Company's
unit costs to a limited degree.
No assets were sold during the quarter ended June 30, 1996. Interest
expense by major liabilities included:
<TABLE>
<CAPTION>
1996 1995
------- ---------
<S> <C> <C>
Kentucky Workers Compensation $161,489 $ 142,644
Coal Act 328,965 406,552
Bank Debt 372,479 500,557
------- ---------
TOTAL $862,933 $1,049,753
======= =========
</TABLE>
Less debt and lower interest rates reduced bank debt interest, reduced
reserves lowered Coal Act interest, and increased reserves increased
Workers' Compensation interest.
FINANCIAL CONDITION AND LIQUIDITY
The Company continued to make all pre-petition debt payments as
required by its confirmed Reorganization Plan. The Company's working
capital ratio improved from 1.12 at March 31, 1996 to 1.16 at June 30,
1996. Accounts and notes receivable remained virtually unchanged for
the same two dates while coal inventory value increased by $1,857,000.
The increase in coal inventory reflects an accumulation of tonnage in
anticipation of mine vacations and has since been lowered to minimum
working levels. Capital expenditures amounted to $197,200 while net
reduction in debt and leases was $1,479,000. Coal Act premiums
amounted to $793,200 and Kentucky Workers' Compensation costs amounted
to $472,300. The feasibility of an overland conveyor continues to be
studied. No dividends were paid or declared during the quarter.
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits - None
(b) Reports on Form 8-K - No current reports were filed
during the quarter ended June 30, 1996.
<PAGE>
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: 8-8-96 Ted B. Helms
----------------------- --------------------------
Ted B. Helms
President
Date: 8-8-96 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 AND THE CONSOLIDATED
CONDENSED STATEMENT OF INCOME FOR THE THREE MONTHS ENDED JUNE 30, 1996
(UNAUDITED) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-04-1996
<PERIOD-END> JUN-30-1996
<CASH> 11,011
<SECURITIES> 0
<RECEIVABLES> 10,811,524
<ALLOWANCES> 0
<INVENTORY> 5,743,134
<CURRENT-ASSETS> 17,085,659
<PP&E> 115,360,061
<DEPRECIATION> 47,405,603
<TOTAL-ASSETS> 87,285,713
<CURRENT-LIABILITIES> 14,741,816
<BONDS> 10,370,065
<COMMON> 961,132
0
0
<OTHER-SE> 30,293,089
<TOTAL-LIABILITY-AND-EQUITY> 87,285,713
<SALES> 21,511,740
<TOTAL-REVENUES> 21,515,631
<CGS> 19,190,323
<TOTAL-COSTS> 19,190,323
<OTHER-EXPENSES> 533,107
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 862,933
<INCOME-PRETAX> 929,268
<INCOME-TAX> 0
<INCOME-CONTINUING> 929,268
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 929,268
<EPS-PRIMARY> 0.99
<EPS-DILUTED> 0.99
</TABLE>
