SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended March 31, 1996 Commission file no. 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 No.)
P.O. Box 59015, 341 Troy Circle, Knoxville, Tennessee 37950-9015
- ----------------------------------------------------- -----------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (423) 588-8511
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
NONE NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $1.00 Par Value
(Title of class)
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. X
------
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, and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
---- -----
Indicate by check mark whether registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a
plan confirmed by a court. Yes X No
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As of May 31, 1996, 935,220 shares of Common Stock were outstanding, and
the aggregate market value of the shares of Common Stock (based upon the
average bid and asked price of such stock on May 31, 1996) held by
nonaffiliates of the Company was approximately $10,312,000.
Documents Incorporated by Reference
The Company's definitive proxy statement for the Annual Meeting of
Stockholders scheduled for August 27, 1996 is incorporated by reference
in Part III hereof.
TABLE OF CONTENTS
PART I
Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
PART II
Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial
Condition and results of Operations
Item 8. Financial Statements and Supplementary Data
Item 9. Disagreements on Accounting and Financial
Disclosure
PART III
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners
and Management
Item 13. Certain Relationships and Related Transactions
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports of Form 8-K
PART I
ITEM 1. BUSINESS
Blue Diamond Coal Company ("Blue Diamond" or "Company" or "Registrant")
was incorporated on November 8, 1922 under the laws of the state of
Delaware. The principal offices are located at 341 Troy Circle,
Knoxville, Tennessee 37919. At March 31, 1996, Blue Diamond was engaged,
together with its wholly owned subsidiary, Blue Diamond Coal Export
Company, in the leasing of coal properties and the purchasing, processing
and selling of bituminous coal. Eolia Resources, a wholly owned
subsidiary, owns certain mineral rights for sand, clay and mica in
Swain and Jackson Counties, North Carolina.
The principal product of the Registrant is low-sulfur coal suitable for
industrial and utility uses. The Company purchases coal produced by
independent operators from underground and surface mines on properties
owned or leased by it in southeastern Kentucky. Blue Diamond also purchases
a limited amount of coal for processing from other properties. The
processing and loading for shipment to the customer of coal purchased from
said operators is performed by employees of the Company. The Company's
operations accounted for less than 1% of the nation's 1995 coal
production.
The following table sets forth Blue Diamond's production and contractor
produced coal on a clean coal basis for each of the last five fiscal
years:
<TABLE>
<CAPTION>
Fiscal Year Total Blue Diamond Contract
Ended March 31 Production Production Production
- -------------- ----------- ------------ ----------
<S> <C> <C> <C>
1992 1,600,935 239,807 1,361,128
1993 2,014,631 -0- 2,014,631
1994 1,953,044 -0- 1,953,044
1995 2,479,487 -0- 2,479,487
1996 2,934,798 -0- 2,934,798
</TABLE>
Blue Diamond also acts as Sales Agent for other producers whose tonnages
are produced and shipped from properties and locations other than Blue
Diamond's and are not included in the above table. The Company's coal,
both purchased and brokered, is sold primarily to utility companies and
industrial users. The coal is transported by rail and truck, except for
destinations in the Great Lakes area and on inland waterways where rail
or truck to barge is utilized.
Blue Diamond's steam coal competes with hydroelectric and nuclear power
as well as other fossil fuels in the production of electricity. The
Company competes in markets located in the southeastern and midwestern
United States.
The following table sets forth on a per ton basis, the selling price,
cost of sales and depreciation expense for each of the last five fiscal
years.
<TABLE>
<CAPTION>
Fiscal Year Average Selling Cost of Sales Depreciation
Ended March 31 Price Per Ton Per Ton Expense Per Ton
-------------- ---------------- -------------- ---------------
<S> <C> <C> <C>
1992 $29.36 $30.16 $1.91
1993 $29.03 $27.62 $1.47
1994 $29.27 $29.73 $1.20
1995 $29.15 $26.26 $1.26
1996 $29.74 $27.76 $1.34
</TABLE>
Sales are primarily through the Registrant's sales department which has
offices in Knoxville, Tennessee, and Cincinnati, Ohio. During the fiscal
year ending March 31, 1996, the total dollar sales were divided as
follows: Steam Coal, 89.0% and Industrial and Domestic Coal, 11.0%.
These figures compare with 90.1% and 9.9%, respectively, in the previous
fiscal year and with 87.8% and 12.2%, respectively, in the fiscal year
ending March 31, 1994. There have been no export sales on a direct
basis since the year ended March 31, 1991, although Blue Diamond shipped
coal for export through three brokers.
During the fiscal year ended 1996, two customers each accounted for
more than 10% of total coal sales. Georgia Power Company and Orlando
Utilities Commission accounted for 31.0% and 31.3%, respectively, of
consolidated revenue from coal sales. The coal supply agreement with
Central Illinois Light Company, the third largest customer with just
under 10% of total coal sales, expired in December 1995.
Blue Diamond is subject to substantial environmental regulation,
primarily as a result of the Surface Mining Control and Reclamation Act
of 1977 and Amendments. The Act and regulations thereunder set forth
requirements for surface mining operations and for the surface effects
of deep mining operations. The provisions of the Act are enforced by
the state of Kentucky through its Department of Natural Resources and
Environmental Protection (DNREP) and by the federal government through
the Office of Surface Mining (OSM). The Company is also subject to the
Federal Water Pollution Control Act and the Federal Clean Air Act, which
are enforced by the Environmental Protection Agency (EPA) and other
federal and state agencies.
The Company believes the mining operations covered by the permits it holds
are in substantial compliance with applicable laws and regulations
regarding the environment. During the past fiscal year, only one (1)
Notice of Noncompliance was issued Company-wide by the Commonwealth of
Kentucky. It was finalized without any penalty being imposed. No
violations were issued to Blue Diamond by the Division of Water during
the past fiscal year.
The Company has made, and continues to make, substantial capital
expenditures in the construction of dams, sedimentation ponds, diversion
ditches, piping, culverting and sump ponds. For the fiscal year ended
March 31, 1996, capital expenditures related to environmental projects
totaled $372,444 for all mines with approximately one-fifth being spent
at the refuse areas. Similar capital expenditures for the fiscal years
ending March 31, 1997 and March 31, 1998 are estimated to amount to
$350,000 and $300,000, respectively. These amounts may change as a
result of new regulations or unforeseeable conditions and would be
significantly higher if operations of the Company were permanently
discontinued.
On May 17, 1991, Blue Diamond Coal Company filed for protection under
the provisions of Chapter 11 of the United States Bankruptcy Code. The
Plan of Reorganization was confirmed on December 11, 1992 and a Final
Decree closing the Bankruptcy Case was issued on April 6, 1995. The
reader is directed to Note 2 to the Consolidated Financial Statements for
a discussion of the treatment of the remaining liabilities under the Plan.
As of March 31, 1996, Blue Diamond employed 52 people, including
management personnel.
ITEM 2. PROPERTIES
Blue Diamond controls various coal seams through ownership or long-term
leases at its coal mining complex at the Beech Fork/Leatherwood
Operation at Slemp, Kentucky. Underground production is derived from
the Alma, Hazard #4 and Leatherwood (Hazard #5A) coal seams. Surface
production consists primarily of the Leatherwood Seam and the Hazard #10
- - #12 Seams. Several other seams of mineable thickness are located on
the Company's properties.
Independent producers currently operate ten deep and four surface mines
producing coal from the Company's reserves. In addition, the Company
procures limited amounts of production from mines not on the Company's
property. The Company and/or its contractors are continually in the
process of permitting additional mines on Company reserves.
The Jasper K. Cornett Preparation Plant at Beech Fork can process up
to 1,250 tons per hour of raw coal and can handle production from all
the contractor operations. The plant utilizes heavy medium vessels for
the coarse coal circuit and Deister tables and spiral classifiers for
the fine coal circuit. It is located on leased property and was completed
in 1990 at a cost of approximately $34 million.
The reserves for the properties described above are located in Harlan,
Leslie, Letcher and Perry Counties, Kentucky. Approximately 6,270 acres
are owned by the Company in either fee or mineral rights only, while
another 59,500 acres are held under leases which generally remain in
effect until exhaustion of mineable and merchantable coal. The owned
coal properties were purchased at various times in the 1970's and 1980's
for a total cost of $889,000.
The registrant owns approximately 500 acres of non-coal land in Knox
County, Kentucky. This land is recorded on the Company's books at a
value of $328,500.
For a summary of all the Company's property, plant and equipment,
including depreciation and depletion, the reader is directed to the
Consolidated Balance Sheet at Page 19.
The John T. Boyd Company (Boyd), Pittsburgh, Pennsylvania, estimated
the Company's recoverable reserves in 1989 on the Leatherwood/Beech
Fork properties. Adjusting this report to reflect production,
additional exploration and leases, the reserves at March 31, 1996
which have been determined to be both economically and legally
extractable at this time are as follows:
<TABLE>
<CAPTION>
Summary of Clean Recoverable Coal Reserves
(In Thousands of Clean Tons)
Measured Indicated Total (1) (2)
-------- --------- -------
<S> <C> <C>
38,793 22,718 61,511
</TABLE>
(1) Of this total, 59.9 million tons are deep mine reserves.
(2) The average recovery on extraction of surface mine reserves is
calculated using an 85% and a 90% factor on tons in-place for contour
strip and mountaintop reserves, respectively. The deep mine reserves
are mined using continuous miner equipment with a 50% mining recovery.
A washer loss of 10% is used for deep mine tonnage which allows for
spillage, displaced coal and plant efficiency.
ITEM 3. LEGAL PROCEEDINGS
The Coal Industry Retiree Health Benefit Act of 1992 ("Coal Act") was
enacted by Congress to fund deficits which exist in certain United
Mine Workers of America (UMWA) Welfare Funds. Although Blue Diamond
employees were last covered by a UMWA Wage Agreement which expired in
1964, the Company was assessed significant annual premiums under this
legislation to fund a portion of said deficits. Adversary Proceeding
No. 93-3065 styled Blue Diamond Coal Company vs. Donna Shalala,
Secretary of Health and Human Services, and Joseph P. Connors, Sr.,
Marty D. Hudson, Thomas O.S. Rand, Elliott A. Segal, Carlton R. Sickles,
Gail R. Wilensky, Trustees of the United Mine Workers' of America
Combined Benefit Fund was filed in the United States Bankruptcy Court
for the Eastern District of Tennessee on May 24, 1993 and was subsequently
moved to Federal District Court. The case, seeking a Declaratory Judgment
declaring the Coal Act to be in violation of the Company's fundamental
rights under the United States Constitution, was dismissed by the
District Court by the Opinion entered November 9, 1994. An appeal was
filed with the United States Court of Appeals for the Sixth Circuit at
Cincinnati, Ohio, and a three judge panel filed a Decision on
March 21, 1996 which upheld the Order of the District Court. A Petition
for Rehearing and Suggestion for Rehearing En Banc was filed by the
Company's attorneys in late April.
The Company, in addition to the lawsuit above, is seeking administrative
relief in regard to the beneficiary assignments it received from the
Social Security Administration (SSA). Evidence supporting Blue Diamond's
position has been transmitted to the SSA Service Centers. The reader is
referred to Note 8 to the Consolidated Financial Statements for a
discussion of the Company's recognition on its balance sheet of the
present value of the future post-retirement premiums brought about by
The Coal Act. In recording the liability, no reductions for
administrative relief or for the lawsuit were recognized due to the
uncertainty of the outcome of these events.
A number of administrative actions are pending against the Company
involving claims for compensation of employees who have allegedly
contracted "Black Lung" disease or who were injured in the course of
their employment. In March 1975, Blue Diamond established a trust,
approved by the Internal Revenue Service, which made the actual payments
to individuals qualifying for Workers' Compensation Benefits, including
Black Lung benefits. On June 10, 1991, the Commonwealth of Kentucky's
Workers Compensation Commission withdrew the Company's self-insurance
certificate and called a $10.6 million letter of credit which was
secured, in part, by the assets of the Trust. First American Trust
Company subsequently liquidated the majority of the Trust assets and
applied the proceeds toward the obligation of the Company to the Bank.
Certain obligations for state and federal workers' compensation remain
due to actions by the Commonwealth of Kentucky and the assumption of
obligation for payment of federal claims by the United States Department
of Labor. In conjunction with its' confirmed Plan of Reorganization,
Blue Diamond entered into settlement agreements with the Commonwealth
of Kentucky for state workers' compensation claims and the United States
Department of Labor for federal claims. The Commonwealth agreed to
recognize Blue Diamond's self-insurance through June 18, 1991, and in
return, Blue Diamond agreed that to the extent that the $10.6 million
was insufficient to satisfy claims filed for employees terminated prior
to June 19, 1991, the shortfall would be assumed and paid by Blue
Diamond. Payments resulting from this shortfall commenced in July 1995.
Attention should be directed to Note 8 to the Consolidated Financial
Statements for further discussion.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during
the fourth quarter of the fiscal year reported on.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
An established public trading market does not exist for Blue Diamond's
common stock, but a few brokers make a market from time to time
over-the-counter. The following table sets forth the high and low bid
quotations for Blue Diamond common stock in the over-the-counter market
in each of the last two fiscal years.
<TABLE>
<CAPTION>
Year Ending March 31 High Low
-------------------- ------ -----
<S> <C> <C>
1995
1st Quarter $14 $11
2nd Quarter $20 $12 1/4
3rd Quarter $17 1/4 $14
4th Quarter $15 1/2 $13
1996
1st Quarter $19 1/2 $13
2nd Quarter $21 1/2 $16
3rd Quarter $22 $19
4th Quarter $23 $22
</TABLE>
The foregoing quotations were taken from the National Quotation
Bureau Report with quotes supplied by the National Association of
Securities Dealers through the NASD OTC Bulletin Board. They
represent inter-dealer prices without retail markup, markdown or
commission and may not necessarily represent actual transactions.
No dividends have been paid on the Company's stock since the year
ended March 31, 1990.
Under the terms and conditions of the Company's Loan Agreement with
PNC Bank, Kentucky, Inc. (formerly Citizens Fidelity Bank and Trust
Company), First Union National Bank of Virginia (formerly Dominion
Bank, National Association), and First American National Bank, no
dividends may be paid on the Company's capital stock or funds set
aside for such purpose without the prior written consent of the Bank
Group. In addition, the Company may not redeem or purchase any of its
capital stock without the prior written consent of the banks.
The Registrant had 442 stockholders of record on June 1, 1996.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
SELECTED FINANCIAL INFORMATION OF BLUE DIAMOND COAL COMPANY
(Amounts in Thousands Except Per Share Amounts)
1996 1995 1994 1993 1992
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Net Sales & Operating
Revenues $89,967 $77,254 $69,276 $65,029 $67,681
Net Income (Loss) 5,242 (b) 3,713 (28,409)(c) 851 (e) (10,739)(a)
Net Income (Loss)
Per Common Share 5.61 3.97 (30.38) 1.67 (28.71)
Total Assets 86,846 86,054 86,818 89,055 94.246
Long Term Debt &
Capital Leases 13,937 17,200 21,100 24,383(d) 130(d)
Cash Dividends Declared
Per Common Share .00 .00 .00 .00 .00
</TABLE>
Note (a) Includes a write-down of assets of $8,920,100.
(b) Includes credit for UMWA coal miners retiree health care
and charge for Workers Compensation benefits in the net
benefit amount of $484,900 before taxes.
(c) Includes provisions for UMWA coal miners retiree health care
and Kentucky workers' compensation benefits in the amount of
$35,722,300 before taxes.
(d) Virtually all 1992 debt was classified as short-term as the
Company's Loan Agreement had expired and was being extended
periodically through the Bankruptcy proceedings. The majority
of this debt was reclassified to long-term when the new Term
Loan Agreement was executed in December 1992.
(e) Includes price adjustments of $917,900 for common stock issued
in prior years in exchange for notes receivable secured by the
common stock.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of the Company's coal operations for the three years ended
March 31, 1996, 1995 and 1994 are summarized as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Net product sales $89,468,400 $76,785,600 $68,182,400
Operating expenses
and purchased products 64,208,600 57,658,300 51,311,800
Other operating expenses 17,062,200 9,809,800 16,181,100
Administrative, transportation,
and selling expenses 2,232,100 1,699,300 1,774,900
---------- ---------- ----------
Total Expenses 83,502,900 69,167,400 69,267,800
---------- ---------- ----------
Income (Loss) From
Coal Operations $ 5,965,500 $ 7,618,200 $(1,085,400)
========== ========== ==========
Tons Sold 3,008,400 2,634,200 2,329,700
Sales Per Ton $29.74 $29.15 $29.27
Expenses Per Ton 27.76 26.26 29.73
----- ----- -----
Income (Loss) Per Ton $ 1.98 $ 2.89 $( .46)
===== ===== =====
</TABLE>
(i) 1996 Vs. 1995 Operations. During the year ended March 31, 1996,
coal operations generated income of $5,965,500 ($1.98 per ton) compared
to $7,618,200 ($2.89 per ton) during the preceding year, a decrease of
$1,652,700 or $.91 per ton. Product sales dollars increased $12,682,800
(16.5%), reflecting an increase in tonnage sold of 374,200 (14.2%) and an
increase in the average selling price of $.59 per ton (2.0%). Total cost
of tonnage sold increased $14,335,500 or $1.50 per ton.
Per ton cost increases due to effective royalty and tax rate increases
and an additional accrual for the Company's future Kentucky workers'
compensation claim obligations ($2,015,200 or $.67 per ton) offset
reductions in operating expenses and purchased coal per ton costs.
The Company continues to adjust the mix of its underground and surface
production to accomplish more cost and marketing efficiencies. To
accomplish this, management continues to pursue the development of
underground mining capacity by the addition and expansion of mines.
Shipments of tonnage from the Company's properties increased by 447,600
tons, reflecting a full year's production from the Hazard #4 Seam
Development which commenced in the middle of last year. Shipments from
outside sources on behalf of the Company (brokered coal) decreased from
147,900 to 74,500. Surface coal mined by the Company's major stockholder
provided approximately 1,130,300 tons, a decrease of 260,000 tons from the
preceding year. Based on current and projected production, the Company
expects to realize the recorded value of its coal reserves and related
facilities.
Approximately 62% of the Company's shipments went to two major utility
customers with whom the Company has long-term contracts extending past
the year 2000. Intermediate terms and spot market shipments to utility,
stoker and export markets comprised the balance of the Company's current
business. The increase in average selling price per ton reflected
increased stoker sales, more BTU premiums on utility shipments and less
reliance on low quality spot business. Bad debt write-offs (in
administrative expense) increased $546,900, reflecting primarily the
write-off of a broker trade account receivable. Although the Company
has obtained a judgment for the delinquent account, the collection depends
on the existence of debtor assets. The Company is vigorously pursuing the
collection of this judgment.
Interest expense declined $336,400, reflecting primarily decreases
in interest accrued on coal miner retiree health care obligations
($106,400) and bank debt ($206,600).
As detailed in Note 8 to the Financial Statements, the Company had an
extraordinary credit for coal miners retired health care of $2,674,100
(net of tax) in 1996, reflecting primarily a reduction of claimants
assignable to the Company and a reduction of expected premiums. The
Company continues to await possible additional administrative relief
from the Social Security Administration's assignment of beneficiaries
and continues to appeal an adverse ruling on the Coal Act's
constitutionality to the Sixth Circuit Court of Appeals. The $2,015,200
charge to operations for Kentucky Workers' Compensation obligations
reflects actual claim experience for previously pending claims and
adjusts mortality for lifetime claims.
In 1996, alternative minimum tax not offset by net operating loss
carry forwards ($24,500) and a reduction of net deferred income tax
liabilities ($365,500) were recorded. In analyzing the valuation
allowance for deferred tax assets, no future taxable income has been
assumed. No income tax provision was required for 1995 due to taxable
losses generated by timing differences related to depreciation and Coal
Act premiums. No revision to the net deferred income tax liability was
required in 1995 in accordance with FAS 109, since additional deferred
tax liabilities were offset by a corresponding increase in deferred tax
assets, net of reserves. Note 7 to the Consolidated Financial Statements
provides additional information concerning the Company's Income Taxes.
(ii) 1995 Vs. 1994 Operations. During the year ended March 31, 1995,
coal operations generated income of $7,618,200 ($2.89 per ton) compared
to a loss of $1,085,400 ($.46 per ton) during the preceding year, an
increase of $8,703,600 or $3.35 per ton. Product sale dollars increased
$8,603,200 (12.6%), reflecting an increase in tonnage sold of 304,500
(13.1%) and a decrease in the average selling price of $.12 (less
than 1%). Total expenses for tonnage sold decreased $3.47 per ton,
reflecting primarily the $7,604,200 charge to 1994 Other Operating
Expenses for the Company's future Kentucky workers' compensation claim
obligations as described in Note 8 to the Consolidated Financial
Statements.
During the year the Company continued to expand production from its
own coal reserves to meet incremental coal shipment requirements as well
as to replace approximately 167,000 tons of brokered coal. Thus, contract
produced coal increased more than 500,000 tons over the previous year's
production of 1,953,000 tons. These production increases reflect an
entire year of mining in the Company's Royal Diamond Mine and
approximately six months' mining in the Company's new Hazard #4 Seam
development. Surface coal mined by the Company's major stockholder
under sublease from the Company provided approximately 1,300,000 tons.
Approximately 70% of the Company's shipments represent coal sold on two
long-term contracts with price adjustment provisions to cover increased
future production costs and terms extending past the year 2000. The
balance of the Company's business currently reflects intermediate term
and spot market shipments.
Interest expense increased approximately $2,366,600, reflecting the
recognition of $2,204,500 of interest expense on the Company's UMWA
coal miners retiree health care and Kentucky workers' compensation
liabilities.
Liabilities recognized in the prior year for UMWA coal miners retiree
health care premiums and Kentucky workers' compensation have been
reviewed and determined to be sufficient. The Company continues to
await possible administrative relief from the Social Security
Administration's assignment of Coal Act health care beneficiaries and
has appealed an adverse ruling on the Act's constitutionality to the
Sixth Circuit Court of Appeals.
No income tax provision is required for 1995 due to taxable losses
generated by timing differences related to depreciation and Coal Act
premiums. No revision to the net deferred income tax liability is
required in accordance with FAS 109 since additional deferred tax
liabilities are offset by a corresponding increase in deferred tax
assets, net of reserves. The 1994 provision for federal income taxes
represents the expense of recognizing a deferred income tax liability
under the liability method of recording income tax expense. The
cumulative effect of the change of method in accounting for incomes taxes
pursuant to Statement of Accounting Standards No. 109, "Accounting for
Income Taxes," which the Company adopted in 1994, resulted in a charge
to income of $410,300.
(iii) Liquidity and Capital Resources. 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 1.00 at March 31,
1995 to 1.12 at March 31, 1996. Trade accounts receivable increased
$4,366,800 to $9,892,500, reflecting increased sales activity and slow
paying accounts, which have been subsequently collected.
The Company anticipates the following fiscal 1997 cash requirements:
<TABLE>
<S> <C>
Liabilities under the Plan of Reorganization $ 463,200
Long-term debt and capital lease obligations 2,878,300
Workers' compensation benefits 954,400
Coal miners retiree health care 1,692,200
Capital expenditures 1,360,000
---------
Total $7,348,100
=========
</TABLE>
Operations are expected to fund these needs with a $7,500,000 bank line
of credit available to fund working capital requirements through
December 31, 1996 and extendible at the lender's discretion. The Company
anticipates said extension. No significant sale of assets is anticipated
during the coming year. A $1,500,000 overland conveyor system is
currently under study and, if constructed, would be funded with
independent financing related to the project.
The Company has received some relief from coal miner retiree health care
premiums and is hopeful of additional reduction of assigned beneficiaries.
Kentucky workers' compensation payments commenced during the year and
will continue for the foreseeable future. A commercial insurance
program has provided some relief from anticipated insurance premium rate
increases of the Company and certain of its operators. All of these items
combined continue to challenge the Company's liquidity. No dividends
were paid during 1996.
(iv) Inflationary Impact. General inflation of costs had no material
impact on the Company's operations during fiscal year 1996 and no
adverse effects from inflation are anticipated in 1997. Price adjustment
provisions of long-term sales contracts are designed to provide protection
from inflationary cost escalations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this item is submitted in a separate section of this
report beginning on page 19.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The members of Blue Diamond's Board of Directors and the executive
officers and their respective positions are listed below.
Name Age Position or Office
---- --- ------------------
Ted B. Helms 47 President and Director
Alexander A. Bonnyman* 39 Director
Thomas H. Dickenson* 42 Director
Leo Hamilton* 56 Director
Stephen Hamilton 42 Director
Thomas R. Hamilton 57 Director
Thomas O'Connell 53 Director
K. Roger Foster 56 Vice President & Secretary
John E. Way, Jr. 49 Administrative Vice President
William S. Lyon, III 44 Treasurer
*Members of Audit Committee
The aforementioned directors were elected pursuant to the bylaws of
Registrant and the Plan of Reorganization. The executive officers are
elected by the Board of Directors to serve one year terms. Leo Hamilton
and Stephen Hamilton are brothers and Thomas Hamilton is their cousin.
There is no other family relationship between any of the Directors or
Officers.
Ted B. Helms was elected President of the Company effective September 1,
1984. Mr. Helms was elected to the Board of Directors in August, 1983.
Alexander A. Bonnyman is currently the Principal in Pellissippi Marketing
Consultants, established in January, 1993 and a Director, since 1994, of
Powermetrix Corporation of Knoxville, Tennessee. He was Senior Sales
Engineer for Photon Kinetics of Beaverton, Oregon from 1989 to 1992.
Mr. Bonnyman was elected a Director of Blue Diamond in August, 1987.
Thomas H. Dickenson has been a Partner in the Knoxville law firm of
Hodges, Doughty and Carson since 1988. He is a member of the National
Association of Bankruptcy Trustees and the American, Tennessee and Knox
County Bar Associations. He represented Blue Diamond Coal Company in its
bankruptcy case which culminated in a confirmed plan of reorganization.
Mr. Dickenson was elected a Director in November, 1993.
Leo Hamilton has served as Vice President of Nally & Hamilton Enterprises
for more than five years. He is a minority stockholder in Nally &
Hamilton Enterprises, Inc. and Hamilton Holdings, Ltd. Mr. Hamilton is
a mechanical engineer with extensive experience in the surface mining of
coal, as well as manufacturing engineering. He was elected to Blue
Diamond's Board of Directors in January, 1993.
Stephen Hamilton has served as Secretary/Treasurer of Nally & Hamilton
Enterprises for more than five years. He is a minority stockholder in
Hamilton Holdings, Ltd. and Nally & Hamilton Enterprises, Inc. (Surface
contractor for Blue Diamond). He is a civil engineer with extensive
experience in the administrative and financial aspects of surface coal
mining. He was elected to the Board of Directors in August, 1995.
Thomas R. Hamilton is co-founder and the majority stockholder in Nally &
Hamilton Enterprises, Inc., a contract surface mining company. He has
served as President for more than five years. Mr. Hamilton also has
controlling interest in Hamilton Holdings, Ltd., the owner of over 40%
of the common stock of Blue Diamond Coal Company. He has extensive
experience in the surface mining of coal and in highway construction,
and was elected a Director of Blue Diamond in January, 1993.
Thomas L. O'Connell is Chairman of the Board and President of Drill Steel
Services, Inc. of Whitesburg, Kentucky and has served in that capacity
for more than five years. He was elected a Director of Blue Diamond in
March, 1993.
K. Roger Foster has held the office of Secretary since April, 1981.
In addition, he was elected to serve as Vice President effective
February 1, 1991.
John Edward Way, Jr. was elected to serve as Administrative Vice
President, effective February 1, 1991. He had previously served as
controller since 1981 and Assistant Treasurer from August 1975 to
November 1, 1984.
William S. Lyon, III was elected to serve as Treasurer effective
February 1, 1991. He had previously served as Assistant Treasurer
since November 1, 1984.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 is incorporated by reference to the
Company's definitive Proxy Statement to be filed with the Securities and
Exchange Commission within 120 days following the Company's fiscal year
ended March 31, 1996.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The information required by Item 12 is incorporated by reference to the
Company's definitive Proxy Statement to be filed with the Securities and
Exchange Commission within 120 days following the Company's fiscal year
ended March 31, 1996.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company's equity capital investor, Hamilton Holdings, Ltd, is a
Kentucky limited partnership and is affiliated with Nally and Hamilton
Enterprises, Inc. (Nally & Hamilton). Blue Diamond has had an on-going
relationship with Nally & Hamilton as contract miners since the Fall of
1990. For the fiscal year ended March 31, 1996, production by Nally &
Hamilton amounted to approximately 39% of all contractor coal purchased
by Blue Diamond. The funds necessary to purchase this tonnage are
reported in Note 13 to the Consolidated Financial Statements.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
The response to parts (a)(1) and (2) and (d) is submitted as a separate
section of this report at page 19.
EXHIBIT TABLE
Page Number or
Incorporation by
Exhibit No. Description Reference to
----------- ----------- ----------------
3 (a) Articles of Incorporation Exhibit 3(a) to
(As amended February 25, 1993) Annual Report on
Form 10-K filed
June, 1993
3 (b) Bylaws (as amended Exhibit 3(b) to
June 28, 1983, effective Annual Report on
August 30, 1983) Form 10-K Filed
June 29, 1984
10 Material Contracts Exhibit 10 to
Form 10
Registration
Filed
July 29, 1982
10 (a) Coal Supply Agreement with Exhibit 10(a) to
Georgia Power Company Annual Report on
Form 10(K) Filed June, 1988
10 (b) Coal Supply Agreement with Exhibit 10(d) to
Orlando Utilities Commission Annual Report on
Form 10-K Filed
June 29, 1984
10 (c) Form 11K, Annual Report for 42
Blue Diamond Savings Plan
22 Subsidiaries of Registrant 63
24 Consent of Independent 64
Certified Public Accountants
27 Financial Data Summary 65
A current report on Form 8-K was filed on March 26, 1996 disclosing the Opinion
filed on March 21, 1996 in which the United States Court of Appeals for the
Sixth Circuit affirmed the Decision of the District Court.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
Date: By: /s/ Ted B. Helms
----------------- -------------------------------
Ted B. Helms, President
SIGNATURES DATE
- ---------- ----
/s/ Ted B. Helms 6/25/96
- ------------------------------- ------------------------------
/s/ Alexander A. Bonnyman 6/25/96
- ------------------------------- ------------------------------
/s/ Thomas H. Dickenson 6/25/96
- ------------------------------- ------------------------------
/s/ Leo Hamilton 6/25/96
- ------------------------------- ------------------------------
/s/ Stephen Hamilton 6/25/96
- ------------------------------- ------------------------------
/s/ Thomas R. Hamilton 6/25/96
- ------------------------------- ------------------------------
/s/ Thomas L. O'Connell 6/25/96
- ------------------------------- ------------------------------
/s/ K. Roger Foster 6/25/96
- ------------------------------- ------------------------------
/s/ John E. Way, Jr. 6/25/96
- ------------------------------- ------------------------------
/s/ William S. Lyon,III 6/25/96
- --------------------------- --------------------------------
Annual Report on Form 10-K
Item 8, Item 14(a)(1) and (2), (c) and (d)
List of Financial Statements
Financial Statements and Supplementary Data
Year ended March 31, 1996
Blue Diamond Coal Company
Knoxville, Tennessee
Contents
Form 10-K--Item 14(a)(1) and (2)
Blue Diamond Coal Company and Subsidiaries
List of Financial Statements
The following consolidated financial statements of Blue Diamond
Coal Company and subsidiaries are included in Item 8:
Consolidated Balance Sheets--March 31, 1996 and 1995...............22
Consolidated Statements of Operations--Years ended
March 31, 1996, 1995 and 1994....................................24
Consolidated Statements of Shareholders' Equity--Years ended
March 31, 1996, 1995 and 1994....................................25
Consolidated Statements of Cash Flows--Years ended
March 31, 1996, 1995 and 1994....................................26
Notes to Consolidated Financial Statements.........................28
All consolidated financial statement schedules for which provision is
made in the applicable accounting regulation of the Securities and
Exchange Commission are not required under the related instructions
or are inapplicable, and therefore have been omitted.
Report of Independent Auditors
Board of Directors
Blue Diamond Coal Company
We have audited the accompanying consolidated balance sheets of Blue
Diamond Coal Company and subsidiaries as of March 31, 1996 and 1995,
and the related consolidated statements of operations, shareholders'
equity and cash flows for each of the three years in the period ended
March 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Blue
Diamond Coal Company and subsidiaries as of March 31, 1996 and 1995, and
the results of their operations and their cash flows for each of the three
years in the period ended March 31, 1996, in conformity with generally
accepted accounting principles.
As more fully described in Note 9, material uncertainties exist with
respect to potential contingent gains relating to United Mine Workers
of America retiree benefits. The ultimate effect of these uncertainties
on the consolidated financial statements cannot presently be determined.
As discussed in Note 7 to the financial statements, in 1994 the Company
changed its method of accounting for income taxes.
/s/ Coulter & Justus, P.C.
May 17, 1996
BLUE DIAMOND COAL COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31
--------------------------
1996 1995
<S> ------------ -----------
ASSETS
Current assets: <C> <C>
Cash and cash equivalents $ 304,815 $ 694,811
Short-term investments 83,126 1,112,100
Receivables:
Trade accounts (less allowance for doubtful
accounts of $524,854 in 1996) 9,892,470 5,525,714
Other accounts and notes (less allowance for
doubtful accounts of $80,000 in 1996
and $57,997 in 1995) 962,165 460,674
Coal inventories 1,967,780 1,938,886
Operating supplies 1,814,562 1,716,129
Prepaid expenses and other current assets 575,330 554,146
----------- ----------
Total current assets 15,600,248 12,002,460
Other assets:
Investments 515,966 15,966
Notes receivable, less current portion 672,418 505,658
Assets held for sale 89,972 634,067
Other miscellaneous assets 1,147,464 683,608
--------- ----------
Total other assets 2,425,820 1,839,299
Property, plant and equipment:
Land, mine development and property rights 28,713,125 29,018,027
Buildings and improvements 1,380,155 1,380,155
Plant and equipment 80,794,898 85,032,534
Construction in progress 285,373 133,297
----------- -----------
111,173,551 115,564,013
Less allowances for depreciation,
depletion and amortization 42,354,058 43,497,946
----------- -----------
68,819,493 72,066,067
Assets under capital leases (less accumulated
amortization of $3,989,281 in 1996 and
$6,139,787 in 1995) - 145,860
----------- -----------
Net property, plant and equipment 68,819,493 72,211,927
---------- ----------
Total assets $86,845,561 $86,053,686
========== ==========
</TABLE>
<TABLE>
<CAPTION>
March 31
--------------------------
1996 1995
<S> ----------- -----------
Liabilities and shareholders' equity
Current liabilities: <C> <C>
Note payable $ 1,201,630 $ -
Outstanding checks in excess of bank balance 3,133,239 2,324,780
Accounts payable 2,267,261 2,232,643
Accrued compensation and related liabilities 237,473 171,817
Income taxes payable 24,500 -
Other accrued liabilities 1,045,841 1,091,932
Current portion of long-term debt 2,640,611 2,177,207
Current portion of liabilities under
the Plan of Reorganization 463,174 1,478,147
Current portion of capital lease obligations 237,668 221,645
Current portion of reserve for coal miners
retiree health care 1,692,229 1,303,238
Current portion of reserve for workers'
compensation benefits 954,358 1,010,206
---------- ----------
Total current liabilities 13,897,984 12,011,615
Long-term liabilities:
Long-term debt, less current portion 7,200,230 10,323,968
Capital lease obligations,
less current portion 3,880,355 4,118,022
Liabilities under the Plan of Reorganization,
less current portion 2,856,287 2,762,124
Deferred income taxes 1,569,500 1,935,000
Reserve for coal miners retiree health care,
less current portion 17,963,702 22,043,636
Reserve for workers' compensation benefits 8,372,068 7,093,551
Other 780,481 698,469
---------- ----------
Total long-term liabilities 42,622,623 48,974,770
Shareholders' equity:
Common stock, par value $1 per share--1,000,000
shares authorized, 961,132 shares issued
(including shares in treasury) 961,132 961,132
Additional paid-in capital 24,305,480 24,305,480
Retained earnings 7,255,762 2,013,784
---------- ----------
32,522,374 27,280,396
Less cost of 25,912 shares of common stock
in treasury (2,197,420) (2,197,420)
Less notes receivable secured by common
stock of the Company - (15,675)
---------- ----------
Total shareholders' equity 30,324,954 25,067,301
---------- ----------
Total liabilities and shareholders' equity $86,845,561 $86,053,686
========== ==========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
BLUE DIAMOND COAL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended March 31
-----------------------------------------
<S> 1996 1995 1994
----------- ----------- -----------
Revenues: <C> <C> <C>
Net product sales $89,468,420 $76,785,601 $ 68,182,412
Interest 108,149 92,586 322,378
Gain (loss) on sale of assets 121,965 (54,805) 141,225
Other 268,305 430,207 630,447
---------- ---------- ----------
Total revenues 89,966,839 77,253,589 69,276,462
Costs and expenses:
Operating expenses and
purchased products 64,208,597 57,658,252 51,311,760
Other operating charges 15,047,013 9,809,829 8,576,925
Provision for workers'
compensation benefits 2,015,194 - 7,604,179
Administrative and selling
expenses 2,232,132 1,699,332 1,774,941
Interest expense--coal
miners retiree health care 1,598,564 1,704,920 -
Interest expense--workers'
compensation benefits 558,399 499,578 -
Interest expense--other 1,786,830 2,075,716 1,913,649
Other 119,243 92,880 247,019
---------- ---------- ----------
Total costs and expenses 87,565,972 73,540,507 71,428,473
---------- ---------- ----------
Income (loss) before income taxes,
extraordinary item and cumulative
effect of a change in
accounting principle 2,400,867 3,713,082 (2,152,011)
Provision for federal
income taxes (benefit) (167,047) - (777,737)
---------- ---------- ----------
Income (loss) before
extraordinary item and
cumulative effect of a change in
accounting principle 2,567,914 3,713,082 (1,374,274)
Extraordinary item--benefit
(provision) for coal miners
retiree health care, net of
tax benefit of $173,953 in
1996 & $1,493,366 in 1994 2,674,064 - (26,624,737)
---------- ---------- ----------
Income (loss) before the
cumulative effect of a change
in accounting principle 5,241,978 3,713,082 (27,999,011)
Cumulative effect of change
in method of accounting for
income taxes - - (410,316)
---------- --------- -----------
Net income (loss) $ 5,241,978 $ 3,713,082 $(28,409,327)
========== ========== ===========
Income (loss) before extraordinary
item and cumulative effect of a
change in accounting principle $2.75 $3.97 $ (1.47)
Extraordinary item-benefit
(provision) for coal miners retiree
health care, net of tax 2.86 - (28.47)
---- ---- -----
Income (loss) per share before the
cumulative effect of a change in
accounting principle 5.61 3.97 (29.94)
Cumulative effect of change in
method of accounting for income taxes - - (0.44)
---- ---- -----
Net Income (loss) per share $5.61 $3.97 $(30.38)
==== ==== =====
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
BLUE DIAMOND COAL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Notes
Receivable
Additional Retained Cost of Secured By
Common Paid-in Earnings Common Stock Company
Stock Capital (Deficit) in Treasury Common Stock
-------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Balance at
April 1, 1993 $961,132 $24,305,480 $26,710,029 $(2,197,420) $(120,068)
Net Loss - - (28,409,327) - -
Payments received
on notes receivable
secured by Company
common stock - - - - 72,588
------- ---------- ---------- ---------- -------
Balance at
March 31, 1994 961,132 24,305,480 (1,699,298) (2,197,420) (47,480)
Net income - - 3,713,082 - -
Payments received
on notes receivable
secured by Company
common stock - - - - 31,805
------- ---------- ---------- --------- -------
Balance at
March 31, 1995 961,132 24,305,480 2,013,784 (2,197,420) (15,675)
Net income - - 5,241,978 - -
Payments
received
on notes
receivable
secured by
Company common
stock - - - - 15,675
------- --------- ---------- -------- -------
Balance at
March 31, 1996 $961,132 $24,305,480 $ 7,255,762 $(2,197,420) $ -
======= ========== ========== ========== =======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
BLUE DIAMOND COAL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended March 31
----------------------------------------
1996 1995 1994
<S> ---------- ---------- ------------
Operating activities <C> <C> <C>
Net income (loss) $5,241,978 $3,713,082 $(28,409,327)
Adjustments to reconcile net
income (loss) to net cash
provided by operating activities:
Depreciation and amortization 4,028,093 3,314,271 2,793,431
Deferred income tax benefit (365,500) - (1,860,787)
Provision for bad debts 546,857 - -
(Benefit) provision for coal
miners retiree health care (2,500,111) - 28,118,103
(Gain) loss on sale of assets (121,965) 54,805 (141,225)
Changes in operating assets and
liabilities:
Accounts receivable (5,150,579) (1,538,997) 481,334
Inventories (127,327) 118,486 1,132,071
Other assets (234,833) (245,889) 236,667
Reserve for workers'
compensation benefits 1,222,669 499,578 7,604,179
Accounts payable and other
liabilities 160,695 (1,191,352) (353,366)
--------- ---------- ----------
Net cash provided by operating
activities 2,699,977 4,723,984 9,601,080
Financing activities:
Net change in note payable to banks 1,201,630 - (684,737)
Principal payments on long-term debt
and capital lease obligations (2,881,978) (2,562,735) (2,259,976)
Change in outstanding checks in excess
of bank balance 808,459 1,167,539 298,188
Principal payments on liabilities under
the Plan of Reorganization (920,810) (374,645) (2,278,967)
Principal payments for coal miners
retiree health care (1,190,832) (2,287,977) (2,483,252)
--------- ---------- ----------
Net cash used in financing
activities (2,983,531) (4,057,818) (7,408,744)
Investing activities:
Purchases of property,
plant and equipment (1,026,040) (1,250,828) (1,698,439)
Purchases of assets held for sale (132,800) (393,567) -
Proceeds from sales of assets 198,880 70,650 3,584
Purchases of investments (5,737) (31,045) (12,235)
Proceeds from sales of investments 534,711 - 200,500
Issuance of notes receivable - (49,179) -
Payments received on
notes receivable 324,544 229,058 271,263
--------- --------- ---------
Net cash used in investing
activities (106,442) (1,424,911) (1,235,327)
--------- --------- ---------
Net increase (decrease) in cash
and cash equivalents (389,996) (758,745) 957,009
Cash and cash equivalents at beginning
of year 694,811 1,453,556 496,547
--------- ---------- -----------
Cash and cash equivalents
at end of year $ 304,815 $ 694,811 $ 1,453,556
========= ========== ===========
</TABLE>
Supplemental Schedule of Noncash Activities
During 1996, 1995 and 1994, the Company sold property, plant and equipment
and assets held for sale through the issuance of notes receivable
totaling $740,154, $39,000 and $473,277, respectively.
During 1996, the Company made a royalty payment to a lessor through the
transfer of land with a carrying value of $250,207.
During 1995, the Company purchased assets held for sale through the
issuance of long-term debt totaling $240,500.
See accompanying Notes to Consolidated Financial Statements.
BLUE DIAMOND COAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
1. SIGNIFICANT ACCOUNTING POLICIES
FISCAL YEAR-END
The Company operates on a fiscal year ending March 31. All references
in these notes refer to the fiscal year-end unless otherwise specified.
INDUSTRY
The Company operates in the coal mining industry. Collateral is
generally not required from customers, which are comprised primarily
of utility companies, manufacturers engaged in steel and other metal
production, and other types of industrial users in the Southeastern
United States. However, bad debts have historically not been significant
to the Company's operations. The Company does not have any derivative
financial instruments or use hedging transactions for long-term contracts.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its subsidiaries, each of which is wholly-owned. All significant
intercompany accounts and transactions have been eliminated in
consolidation.
INVESTMENT TAX CREDIT
The Company accounts for investment tax credit by the flow-through method.
INVENTORIES
Coal inventories are stated principally at lower of last-in, first-out
cost or market. Operating supplies are stated at lower of first-in,
first-out cost or market.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Maintenance and
repairs are expensed as incurred. Depreciation, depletion and
amortization are based on the estimated useful lives of the assets and
are computed principally by the straight-line and units of production
methods.
In March 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of." The
Company will be required to adopt this Statement, which is not expected
to have a significant impact on the Company's financial position, in 1997.
INCOME (LOSS) PER SHARE
Income (loss) per share is computed based on the weighted average number
of shares of common stock outstanding during the year.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
RECLASSIFICATIONS
Certain amounts in prior years have been reclassified to conform with
1996 classifications.
2. CHAPTER 11 REORGANIZATION
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 was preceded
by a merger of all significant wholly-owned subsidiaries into the Company.
This filing was precipitated by cash flow problems from extensive capital
expenditures for new coal processing facilities coupled with
unanticipated operating losses at existing mines.
As Debtor-in-Possession, the Company continued to operate its business
and manage its properties. The Company 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.
In accordance with AICPA SOP 90-7, the Company reported liabilities
payable under the Plan of Reorganization at the present value of amounts
to be paid, determined at appropriate current interest rates (7%). A
summary of liabilities payable under the Plan of Reorganization is as
follows:
<TABLE>
<CAPTION>
March 31
---------------------------
1996 1995
---------- ---------
<S> <C> <C>
Class 6A - due in monthly installments
of $3,500 through January 1997, including
interest $ 32,521 $ 68,485
Class 8 - due in quarterly installments of
$75,000 through December 1999, plus an
additional payment of $575,000 when
certificates of deposit held in escrow are
released (see Note 11), including interest 1,539,313 2,206,385
Class 9 - due in quarterly installments
of $75,000 through January 2003,
including interest 1,649,021 1,825,789
Taxes - due in various installments, including
interest, through various dates (from
April 1997 to January 1999) 98,606 139,612
--------- ---------
3,319,461 4,240,271
Current portion 463,174 1,478,147
--------- ---------
Long-term portion $2,856,287 $2,762,124
========= =========
</TABLE>
Maturities of liabilities under the Plan of Reorganization as of
March 31, 1996 (assuming certificates of deposit held in escrow will
be released in December 1999), are as follows:
<TABLE>
<S> <C>
1997 $ 463,174
1998 441,674
1999 472,028
2000 1,137,007
2001 250,086
Thereafter 555,492
---------
$3,319,461
=========
</TABLE>
3. NOTES PAYABLE AND LONG-TERM DEBT
Long-term debt is summarized as follows as of March 31:
<TABLE>
<CAPTION>
1996 1995
---------- -----------
<S> <C> <C>
Reducing revolving credit loan agreement $9,693,540 $12,260,675
Note payable in monthly installments of
$10,000, including interest at prime
plus 2% (10.25% at March 31, 1996), through
July 1997, collateralized by certain property,
plant and equipment 147,301 240,500
--------- ----------
9,840,841 12,501,175
Less current portion 2,640,611 2,177,207
--------- ----------
Long-term portion $7,200,230 $10,323,968
========= ==========
</TABLE>
As outlined in the Plan of Reorganization, the Company entered a term
loan agreement during 1993 for repayment of amounts outstanding under
a prior loan agreement. This agreement was amended during 1996 to
provide a reducing revolving credit loan, whereby the amount available
will be reduced by $216,936 per month through December 1999. The
Company may borrow, repay and reborrow amounts up to the amount available
($9,762,139 at March 31, 1996) at any time. Interest is payable monthly
based on either the bank prime rate plus 0.5% (8.75% at March 31, 1996)
or the bank libor rate plus 3% (8.35% at March 31, 1996). This rate may
be reduced by up to 0.5% if certain financial ratios are met in the
previous quarter.
Substantially all of the Company's assets, including sales contracts and
leases for coal and/or mining rights, are security under the term loan
agreement. Under the terms of the agreement, dividend payments by the
Company are subject to certain restrictions; no dividends were eligible
for payment at March 31, 1996. The agreement also requires the Company
to maintain certain financial covenants.
Maturities of long-term debt as of March 31, 1996, are as follows:
<TABLE>
<S> <C>
1997 $2,640,611
1998 2,644,565
1999 2,603,237
2000 1,952,428
---------
$9,840,841
=========
</TABLE>
The Company also has a bank revolving credit agreement for up to
$7,500,000 which expires in December 1996. The agreement may be
extended at the lender's discretion. Advances are limited to the sum
of 85% of the Company's eligible accounts receivable plus 75% of eligible
coal inventories (up to a maximum of $15 per ton or $1,500,000). The
entire $7,500,000 was available at March 31, 1996, of which $1,201,630
was outstanding. Interest is payable monthly on any used portion at the
bank prime rate plus 0.5% (8.75% at March 31, 1996) and commitment
fees are payable quarterly based on 0.5% of the average daily amount
unused. The interest rate may be reduced by up to 0.5% if certain
financial ratios are met. This agreement is secured by the Company's
accounts receivable, cash proceeds and inventories.
4. INTEREST COSTS
A summary of interest costs, excluding amounts relating to workers'
compensation and UMWA retiree benefits (see Note 8), is as follows
for the years ended March 31:
<TABLE>
<CAPTION>
Total Interest Interest Interest Interest
Costs Incurred Capitalized Expensed Paid
-------------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
1996 $1,808,963 $20,979 $1,787,984 $1,770,211
1995 2,084,203 8,487 2,075,716 2,085,313
1994 1,982,135 68,486 1,913,649 1,960,589
</TABLE>
5. LEASES
The Company leases certain plant and equipment under long-term capital
leases. The remaining leases outstanding are to be repaid in monthly
installments of $43,200 through December 1999 and $75,700 from January
2000 through December 2003.
As of March 31, 1996, future minimum payments under the agreement are
as follows:
<TABLE>
<S> <C>
1997 $ 518,400
1998 518,400
1999 518,400
2000 615,900
2001 908,400
Thereafter 2,498,100
---------
Total minimum lease payments 5,577,600
Amounts representing interest 1,459,577
---------
Present value of minimum lease payments
(including $237,668 classified as current) $4,118,023
=========
</TABLE>
6. EMPLOYEE BENEFIT PLANS
At March 31, 1996, the Company and its subsidiaries have a defined
benefit pension plan covering substantially all full-time employees.
The Company's funding policy is to contribute amounts deductible for
federal income taxes. Benefits under the Plan are based on average
compensation and/or years of service. The following table sets forth
the Plans' funded status and the amounts recognized in the Company's
Consolidated Balance Sheets:
<TABLE>
<CAPTION>
March 31
-------------------------
1996 1995
---------- ----------
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation:
Vested benefits $ 585,395 $ 173,668
Nonvested benefits 1,251 227
--------- ---------
$ 586,646 $ 173,895
========= =========
Plan assets at fair value $1,400,925 $1,077,070
Projected benefit obligation for service
rendered to date 986,737 465,820
--------- ---------
Plan assets in excess of projected
benefit obligation 414,188 611,250
Unrecognized net gain (175,385) (120,367)
Prior service cost not yet recognized
in net periodic pension cost 324,220 71,529
Unrecognized net asset at January 1, 1985,
recognized over 15 years (89,701) (112,126)
--------- ----------
Prepaid pension cost recognized in the
Consolidated Balance Sheet $ 473,322 $ 450,286
========= =========
</TABLE>
Plan assets at March 31, 1996, consist of corporate bonds (34%), equity
securities (65%) and cash equivalents (1%). The Plan's benefit
provisions were amended during 1996 which increased the projected
benefit obligation by $256,575; this difference will be amortized
over 13 years.
Net pension cost includes the following components:
<TABLE>
<CAPTION>
Year ended March 31
--------------------------------
1996 1995 1994
------- ------- --------
<S> <C> <C> <C>
Service cost-benefits earned during
the period $ 60,113 $72,200 $ 58,121
Interest cost on projected benefit
obligation 39,595 36,134 42,714
Actual return on plan assets (324,127) 81,934 (76,126)
Net amortization and deferral 201,383 (198,833) (40,766)
------- ------- -------
Net periodic pension credit $(23,036) $(8,565) $(16,057)
======= ====== =======
</TABLE>
The weighted average discount rates and rates of increase in future
compensation levels used in determining the actuarial present value
of the projected benefits obligation were 7% and 4%, respectively,
in 1996 and 8.5% and 4%, respectively, in 1995. The change in the
weighted average discount rate did not significantly impact the
valuation. The expected long-term rate of return on assets was 9%
for 1996 and 1995.
The Company also sponsors a defined contribution plan (the Blue
Diamond Savings Plan) which covers all full-time employees. Employee
contributions to the Plan are optional, and Company contributions are
at the discretion of management. The net expense, including trustee
fees, for 1996, 1995 and 1994 was $22,203, $3,566 and $16,113,
respectively.
7. INCOME TAXES
Effective April 1, 1993, the Company changed its method of accounting
for income taxes from the deferred method to the liability method
required by FASB Statement No. 109, "Accounting for Income Taxes".
As permitted under the new rules, prior years' financial statements
have not been restated. The cumulative effect of adopting Statement
109 was to increase deferred income tax liabilities by $410,316.
For tax purposes, at March 31, 1996, the Company has net operating
loss carryovers, investment tax credit and alternative minimum tax
credit carryovers available to offset future income taxes. These
carryovers expire as follows:
<TABLE>
<CAPTION>
NET OPERATING LOSS CARRYOVER
----------------------- Alternative
Alternative Investment Minimum
Year Year of Regular Minimum Tax Credit Tax Credit
Generated Expiration Tax Tax Carryover Carryover
- --------- ---------- --------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
1982 1997 $ - $ - $ 736,505 $ -
1983 1998 - - 431,387 -
1984 1999 6,674,763 - 556,018 -
1985 2000 4,660,902 - 386,272 -
1986 2001 5,622,806 2,335,241 549,323 -
1987 2002 1,749,092 1,540,320 - -
1988 N/A - - - 341,921
1989 2004 6,787,003 6,694,639 - -
1990 2005 7,713,074 7,004,526 - -
1991 2006 6,722,460 6,404,335 - -
1992 2007 7,756,546 7,756,546 - -
1993 N/A - - - 2,155
1994 2009 2,423,037 2,369,447 - -
1995 2010 1,314,483 730,994 - -
1996 N/A - - - 24,500
---------- ---------- -------- -------
$51,424,166 $34,836,048 $2,659,505 $368,576
========== ========== ========= =======
</TABLE>
These carryovers provide a potential future income tax benefit of
$20,512,283. For financial statement purposes, a valuation allowance
of $17,861,610 has been recognized to offset the deferred tax assets
related to these carryovers.
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income tax
purposes. Significant components of the Company's deferred tax assets
and liabilities as of March 31, 1996 and 1995, are as follows:
<TABLE>
<CAPTION>
1996 1995
<S> ----------- ----------
Deferred tax liabilities: <C> <C>
Tax over book depreciation $10,490,626 $ 9,952,437
Prepaid expenses deducted for tax purposes 158,052 148,170
---------- ----------
Total deferred tax liabilities 10,648,678 10,100,607
Deferred tax assets:
Capitalized leases 1,400,127 1,425,895
Inventory market reserve 53,320 94,907
Reclamation reserve 265,205 237,479
Reserve for coal miners retiree health care 6,683,016 7,937,937
Reserve for workers' compensation benefits 3,170,985 2,755,278
Net operating loss carryovers 17,484,216 17,570,910
Tax credit carryovers 3,028,067 3,536,461
Allowance for doubtful accounts 205,650 20,059
Other 2,457 2,270
---------- ----------
Total deferred tax assets 32,293,043 33,581,196
Valuation allowance for deferred tax assets (23,213,865) (25,415,589)
---------- ----------
Net deferred tax assets 9,079,178 8,165,607
---------- ---------
Net deferred tax liabilities $ 1,569,500 $ 1,935,000
========== ==========
</TABLE>
These temporary differences are expected to reverse in various years
through 2028. The valuation allowance for deferred tax assets was
decreased by $2,201,724 during 1996 and $1,670,559 in 1995.
Significant components of the provision for income tax expense (benefit)
attributable to continuing operations are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------- ------ ---------
<S> <C> <C> <C>
Current federal $ 24,500 $ - $ -
Deferred:
Federal (156,165) - (731,684)
State (35,382) - (46,053)
------- ----- -------
Total deferred (191,547) - (777,737)
------- ----- -------
Net income tax ben $(167,047) $ - $(777,737)
======= ===== =======
</TABLE>
The reconciliation of income taxes attributable to continuing
operations computed at the U.S. federal statutory tax rates to the
income tax benefit is:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- -------
<S> <C> <C> <C>
Tax at U.S. statutory rates $ 816,295 $1,262,448 $(731,684)
Benefit of net operating loss
carryovers recognized in the
current year (947,960) (1,262,448) -
State income taxes,
net of federal tax benefit (35,382) - (46,053)
-------- --------- -------
$(167,047) $ - $(777,737)
======== ========= =======
</TABLE>
8. WORKERS' COMPENSATION AND UMWA RETIREE BENEFITS
The Company is required under Federal and State legislation to pay
injury-related and pneumoconiosis (black lung) benefits to eligible
employees, certain former employees and dependents. Effective
June 19, 1991, the Company obtained commercial insurance to cover
these benefits. Prior to that time, the Company was self-insured
and maintained a Workers' Compensation Benefit Trust (the "Trust")
through which the Company's portion of the ultimate payment of claims
was funded. The Company's liability to the Trust was determined on
the basis of annual actuarial valuations and actual experience.
The Company had letters of credit with a bank totaling $11,642,389 to
satisfy the statutory requirement of securing the payment of workers'
compensation benefits to employees. As a result of the Company's
bankruptcy filing, the State of Kentucky revoked the Company's
self-insurance certificate and assumed responsibility for state workers'
compensation benefits related to claimants last employed by the Company
on and before June 18, 1991. The State called a $10,642,389 letter
of credit, deposited the funds in an account of the State and proceeded
to pay benefits and defense costs of the benefit claims assumed. An
insurance company also called a $1,000,000 letter of credit due to the
bank's refusal to renew the letter of credit securing its bond.
$500,000 of the proceeds were paid to the U.S. Department of Labor
(DOL) during 1996, and the remaining proceeds are being held in escrow
on behalf of the Company (see Note 2 and 11). The bank liquidated the
assets of the Trust and required the Company to sell other collateral
to recover its payments under these letters of credit.
With the liquidation of the Trust, the Office of Workers' Compensation
Programs of the DOL assumed responsibility for the payment of approved
federal claims of the Company. During 1993, a settlement agreement
was reached with the DOL in connection with the Company's Plan of
Reorganization (see Notes 2 and 11).
As a condition of a settlement agreement reached during 1993 between
the Company and the State of Kentucky, the Company became responsible
for payment of claims during August 1995 when the funds available from
the letters of credit were exhausted. During 1994, the Company performed
an internal valuation of the future liability based on claims settled,
filed or expected to be filed and recorded a provision of $7,604,179,
which was the estimated present value of future payments which will
be made by the Company. During 1995, the valuation was updated and
the reserve increased by $499,578 for interest expense during the year.
During 1996, the valuation was again updated and the reserve increased
$1,222,669. This net increase is due to $558,399 in interest expense
for the year and an increase in the reserve of $2,015,194 based on
additional information on claims offset by benefit payments made by
the Company of $1,350,924. The discount rate used in determining the
reserve was 7% in 1996 and 1995.
As of March 31, 1996, estimated future undiscounted payments for
workers' compensation claims which will be made by the Company are
summarized as follows:
<TABLE>
<S> <C>
1997 $ 1,575,000
1998 1,275,000
1999 1,020,000
2000 960,000
2001 960,000
Thereafter 8,229,110
----------
Total estimated future
undiscounted payments 14,019,110
Amounts representing interest 4,692,684
----------
Present value of estimated future
payments (including $954,358
classified as current) $ 9,326,426
==========
</TABLE>
During 1994, the Company received notice from the Social Security
Administration 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 under the newly-effective Coal Industry Retiree Health
Benefit Act of 1992 (the Act). The premiums are assessed annually
and relate to retired miners who are said to have worked for the Company.
These payments should tend to diminish over time, but could continue
as long as there are eligible participants.
Based on information received from various sources and initial actuarial
assumptions and analysis, an extraordinary provision of $26,624,737
(net of tax benefits totaling $1,493,366) was recorded in 1994 to reflect
payments made during 1994 ($989,886) and the present value of the
estimated future payments ($25,634,851) related to this legislation,
in accordance with the conclusions of the Financial Accounting Standards
Board's Emerging Issues Task Force. The tax benefit related to this
provision will be realized as these cash payments are made.
The weighted average annual assumed rate of increase in the per
capita cost of covered benefits (i.e., health care cost trend rate)
is 6% for 1997 and is assumed to decrease gradually to 5% for 1999
and remain at that level thereafter. The health care cost trend
rate assumption has a significant effect on the amounts reported.
For example, increasing the assumed health care cost trend rate by 1%
in each year would increase the reserve for coal miners retiree health
care by $482,767, $1,115,636 and $1,223,000 as of March 31, 1996, 1995
and 1994, respectively. The discount rate used in determining the
reserve for coal miners retiree health care was 7% at March 31, 1996
and 1995.
The reserve for coal miners retiree health care decreased from
$25,634,851 at March 31, 1994, to $23,346,874 at March 31, 1995, due
to payments made exceeding interest expense during the year. During
1996, the reserve decreased $3,690,943 due to payments made exceeding
interest expense during the year along with a reduction in the reserve
of $2,500,110. This extraordinary reduction, which is shown net of
tax benefits totaling $173,953 in the Consolidated Statement of
Operations, was due primarily to the Company's successful efforts to
have certain of the original assigned beneficiaries reassigned to other
coal companies (Note 9) and a reduction in the monthly premiums.
As of March 31, 1995, estimated future undiscounted payments for coal
miners retiree health care are summarized as follows:
<TABLE>
<S> <C>
1997 $ 2,962,668
1998 2,811,236
1999 2,643,236
2000 2,394,926
2001 1,950,000
Thereafter 16,966,987
----------
Total estimated future undiscounted payments 29,729,053
Amounts representing interest 10,073,122
----------
Present value of estimated future payments
(including $1,692,229 classified as current) $19,655,931
==========
</TABLE>
Additional information becoming available for workers' compensation
and UMWA retiree benefits may result in revisions to the recorded
reserves that are recorded in the period in which the revisions are
determined. Because of inherent uncertainties associated with these
benefits, it is at least reasonably possible that the estimates used
will change within the near term.
9. 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 Note 8. During 1995,
this lawsuit was dismissed by the Federal District Court; however,
an appeal was filed. During 1996, the United States Court of Appeals
upheld the Federal District Court decision; however, a petition for
rehearing has been filed. If the Company prevails in this lawsuit,
its obligation under the 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 Act to be reduced significantly.
The ultimate outcome of each of these proceedings is uncertain at the
present time.
10. MAJOR CUSTOMERS
The Company had sales to individual customers in excess of 10% of total
sales as follows for the years ended March 31:
Percentage of Total Sales
To Individual Customers
-------------------------
1996 31% and 31%
1995 38%, 32% and 10%
1994 42%, 32% and 11%
Accounts receivable from these customers totaled $5,589,173 in 1996 and
$4,045,404 in 1995.
11. INVESTMENTS
Investments are stated at cost, which approximates market value, and
consist of the following at March 31:
<TABLE>
<CAPTION>
1996 1995
------- ---------
<S> <C> <C>
Common stock $ 15,966 $ 15,966
Certificates of deposit held in escrow 500,000 1,000,000
Other certificates of deposit 83,126 112,100
------- ---------
$599,092 $1,128,066
======= =========
</TABLE>
Proceeds from the release of the certificates of deposit held in escrow
will be paid to the DOL (see Notes 2 and 8).
12. INCENTIVE STOCK OPTION PLAN
The Company has established an incentive stock option plan under which
options for up to 20,000 shares of the Company's common stock may be
granted to certain key employees. At March 31, 1996, no options are
outstanding under this Plan.
13. RELATED PARTY TRANSACTIONS
A shareholder of the Company is affiliated with one of the Company's
major contract mining suppliers. The Company made coal purchases of
$25,558,421, $26,907,355 and $22,011,364 from this supplier during 1996,
1995 and 1994, respectively. Also, included in accounts payable are
amounts due to this supplier totaling $598,427 and $1,034,259 at March 31,
1996 and 1995, respectively.
14. RECLAMATION RESERVES
As of March 31, 1996, the Company has reserves totaling $780,015
(included in other long-term liabilities in the Consolidated Balance
Sheet) for future reclamation costs. These reserves are primarily
associated with the reclamation of mine openings for underground deep
mines, sediment control structures, the site of a closed preparation
and processing facility and preparation plant disposal areas. Over the
past five fiscal years, the Company has incurred costs of $780,406
relating to these reclamation projects. The Company feels the remaining
reserves, as determined by Company engineers, are adequate to reclaim all
existing sites other than the present coal preparation and processing
facility for which no reserves have yet been established because it
is expected to continue operating in excess of 20 years. No reserves
have been established for reclamation of properties, mines or businesses
previously sold by the Company, because the purchasers were required
to assume responsibility for this reclamation as a condition of the sale.
15. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount in the Consolidated Balance Sheet of all financial
instruments approximates estimated fair value. Considerable judgment is
necessarily required in interpreting market data to develop estimates of
fair value and accordingly, the estimates are not necessarily indicative
of the amounts the Company could realize in a current market exchange.
16. SUPPLEMENTAL QUANTITY RESERVE INFORMATION (UNAUDITED)
Information concerning the Company's coal reserves is as follows:
<TABLE>
<CAPTION>
Year ended March 31
1996 1995 1994
----------------------------------
(In thousands except per ton data)
<S> <C> <C> <C>
Estimated proven recoverable tons 38,793 40,323 41,254
Estimated probable recoverable tons 22,718 24,090 24,939
------ ------ ------
Total proven and probable tons 61,511 64,413 66,193
====== ====== ======
Tons produced 2,902 1,780 1,807
Average selling price per ton $29.74 $29.15 $29.27
</TABLE>
Certain amortization is based on the proven recoverable reserves to
which the facilities are related.
EXHIBIT 10 (c)
FORM 11K, ANNUAL REPORT FOR
BLUE DIAMOND COAL COMPANY
SAVINGS PLAN
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
ANNUAL REPORT
Pursuant to Section 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended March 31, 1996
A. Full title of the plan and the address of the plan, if different
from that of the issuer named below:
Blue Diamond Savings Plan
P.O. Box 59015
Knoxville, TN 37950-9015
B. Names of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
Blue Diamond Coal Company
P.O. Box 59015
Knoxville, TN 37950-9015
ITEM 1. CHANGES IN THE PLAN
Effective April 1, 1995, First American Trust Company, Knoxville,
Tennessee, was replaced as Trustee of the Plan. The four members of
the Advisory Committee of the Plan now serve as Trustees of the Plan.
This change was made as a result of administrative difficulties
encountered with the previous Trustee, its investment funds and its
record-keeper. Future record-keeping functions will be performed by
Blue Diamond Coal Company personnel and the assets will be invested in
the Fidelity Family of Funds as directed by the participants. New funds
to be offered include the Fidelity Retirement Money Market Fund, the
Fidelity Intermediate Bond Fund, the Fidelity Blue Chip Growth Fund and
the Fidelity Puritan Fund.
ITEM 2. CHANGES IN INVESTMENT POLICY
In connection with the change in Trustees, the Plan has been amended
to allow investment in one or more of the funds offered and to provide
more flexibility for the participant to transfer assets among selected
funds.
ITEM 3. CONTRIBUTIONS UNDER THE PLAN
Not applicable
ITEM 4. PARTICIPATING EMPLOYEES
Fifty-one employees were eligible to participate in the Plan at
March 31, 1996, of which forty-four had elected to be active participants.
ITEM 5. ADMINISTRATION OF THE PLAN
(a) The Advisory Committee, whose members also serve as Plan Trustees,
is responsible for authorizing remittance of contributions to the fund
custodian and disbursement of benefits by the fund custodian; for making
necessary rules and regulations; for establishing and maintaining
appropriate records; for preparing and filing required reports and
documents; for computation of benefits; for interpretation of the Plan
and related matters; and, for employment of necessary actuaries,
accountants and counsel.
The Advisory Committee is composed of four members, all employees
of Blue Diamond Coal Company, who are appointed by and serve at
the pleasure of the Board of Directors of Blue Diamond Coal
Company. The present members of the Committee are:
John E. Way, Jr., Administrative Vice President of the Company,
Ted B. Helms, President of the Company, K. Roger Foster,
Secretary and Vice President of the Company and William S. Lyon,
III, Treasurer of the Company. The address of the members of
the Committee is Blue Diamond Coal Company, P.O. Box 59015,
Knoxville, Tennessee 37950-9015.
(b) The members of the Advisory Committee serve without any
compensation and no other compensation was paid by the Plan.
ITEM 6. CUSTODIAN OF INVESTMENTS
(a) Members of the Plan's Advisory Committee also serve as its
Trustees effective April 1, 1995. Plan Assets invested in mutual
funds are held by Fidelity Investment Institutional Service Company,
Inc. (Fidelity), 400 E. Las Colinas Blvd., Irving, Texas. Plan assets
invested in Blue Diamond Coal Company Common Stock are maintained by
J.J.B. Hilliard, W.L. Lyons, Inc. (Hilliard Lyon), 106 W. Vine Street,
Lexington, Kentucky.
(b) The total amount of compensation received by the Advisory Committee
in its capacity as Trustee and Fidelity and Hilliard Lyons in their
capacity as Custodians of Plan Assets was $0.00.
(c) The Plan Trustees are covered by a Pension Trust Fiduciary Liability
Insurance policy in the amount of $1,000,000.
ITEM 7. REPORTS MADE TO PARTICIPATING EMPLOYEES RELATING TO PLAN
OPERATIONS AND THE STATUS OF EMPLOYEES' ACCOUNTS
Blue Diamond Coal Company Annual Report
Quarterly Investment Summary
Blue Diamond Savings Plan Annual Report
ITEM 8. INVESTMENT OF FUNDS
The Plan buys and sells company stock on a net basis for which the
broker's commission approximates three (3) percent of the market
value of the transaction. No broker through which the Trustee executed
trades for this period on behalf of the Plan is an affiliated person
(as contemplated by the Investment Act of 1949) of the Trustee.
Neither the Plan nor the Trustee, pursuant to an agreement or
understanding with a broker or otherwise through an internal allocation
procedure, has directed the Plan's brokerage transactions to a broker
because of research services provided by said broker.
ITEM 9. FINANCIAL STATEMENTS AND EXHIBITS
Page No.
(a) Financial Statements:
Report of Independent Auditors.............................45
Statement of Net Assets Available for Benefits
March 31, 1996...........................................46
Statement of Net Assets Available for Benefits
March 31, 1995...........................................47
Statement of Changes in Net Assets Available
for Benefits-Year ended March 31, 1996...................48
Statement of Changes in Net Assets Available
for Benefits-Year ended March 31, 1995...................49
Statement of Changes in Net Assets Available
for Benefits-Year ended March 31, 1994...................50
Notes to Financial Statements............................. 51
Schedules:
Schedules I, II and III have been omitted because the required
information is shown in the financial statements.
(b) Exhibits: None
REPORT OF INDEPENDENT AUDITORS
Advisory Committee
Blue Diamond Savings Plan
We have audited the accompanying statements of net assets available for
benefits of the Blue Diamond Savings Plan as of March 31, 1996 and 1995,
and the related statements of changes in net assets available for
benefits for each of the three years in the period ended March 31, 1996.
These financial statements are the responsibility of the Plan's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the net assets available for
benefits of the Plan at March 31, 1996 and 1995, and the changes
in its net assets available for benefits for each of the three years
in the period ended March 31, 1996, in conformity with generally
accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the
financial statements taken as a whole. The accompanying supplemental
schedule of transactions or series of transactions in excess of 5 percent
of the current value of plan assets for the year ended March 31, 1996, is
presented for purposes of complying with the Department of Labor's Rules
and Regulations for Reporting and Disclosure under the Employee Retirement
Income Security Act of 1974, and is not a required part of the financial
statements. The supplemental schedule has been subjected to the auditing
procedures applied in our audit of the financial statements and, in our
opinion, is fairly stated in all material respects in relation to the
financial statements taken as a whole.
/s/ Coulter & Justus, P.C.
May 14, 1996
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
BLUE DIAMOND SAVINGS PLAN
March 31, 1996
<TABLE>
<CAPTION>
Mutual Blue Diamond
Funds Stock Fund Loan Fund Total
----------- ------------ --------- ----------
<S> <C> <C> <C> <C>
Cash $ 51.68 $ 10.09 $ .00 $ 61.77
Participant Loan
Receivables .00 .00 44,677.42 44,677.42
INVESTMENTS, AT MARKET:
Blue Diamond Coal Co.
common stock
(cost $302,103.13) .00 489,491.87 .00 489,491.87
OTHER UNAFFILIATED INVESTMENTS:
Equity Mutual
Funds 417,083.75 .00 .00 417,083.75
Fixed Income
Mutual Funds 60,114.29 .00 .00 60,114.29
Short-term Investment
Mutual Funds 177,400.18 6.12 .00 177,406.30
---------- ---------- --------- ----------
Total other
unaffiliated
investments 654,598.22 6.12 .00 654,604.34
---------- ---------- --------- ------------
Total investments 654,598.22 489,497.99 .00 1,144,096.21
NET ASSETS AVAILABLE
FOR BENEFITS $654,649.90 $489,508.08 $44,677.42 $1,188,835.40
========== ========== ========= ============
</TABLE>
See notes to financial statements.
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
BLUE DIAMOND SAVINGS PLAN
March 31, 1995
<TABLE>
<CAPTION>
Blue
SEI Diamond
Models Stock Loan
Fund Fund Fund Total
----------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
ASSETS
Receivables:
Employee
contributions $ 4,727.71 $ 1,179.94 $ .00 $ 5,907.65
Participant loans .00 .00 51,134.90 51,134.90
Other 1,442.18 4.04 .00 1,446.22
---------- ---------- --------- ----------
Total receivables 6,169.89 1,183.98 51,134.90 58,488.77
INVESTMENTS, AT MARKET:
Blue Diamond Coal Co.
common stock
(cost $239,644.07) .00 290,078.13 .00 290,078.13
OTHER UNAFFILIATED INVESTMENTS:
Equity Mutual Funds
(cost
$203,309.84) 207,963.34 .00 .00 207,963.34
Fixed Income Mutual Funds
(cost
$384,261.71) 388,766.32 .00 .00 388,766.32
Short-term Investment
Mutual Funds
(cost $4,092.16) 2,638.00 1,454.16 .00 4,092.16
---------- ---------- --------- ----------
Total other unaffiliated
investments 599,367.66 1,454.16 .00 600,821.82
---------- ---------- --------- ----------
Total investments 599,367.66 291,532.29 .00 890,899.95
---------- ---------- --------- ----------
NET ASSETS AVAILABLE
FOR BENEFITS $605,537.55 $292,716.27 $51,134.90 $949,388.72
========== ========== ========= ==========
</TABLE>
See notes to financial statements.
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
BLUE DIAMOND SAVINGS PLAN
Year ended March 31, 1996
Blue
SEI Diamond
Mutual Model Stock Loan
Funds Fund Fund Fund Total
---------- --------- ---------- --------- --------
[S]
Additions:
Employee cash
contributions $ 70,144.71 $ .00 $ 16,033.72 $ .00 $ 86,178.43
Employer cash
contributions 10,972.69 .00 3,302.02 .00 14,274.71
Investment income:
Dividends 39,377.78 2,146.80 .00 .00 41,524.58
Interest 51.68 .00 38.35 4,840.04 4,930.07
Net realized and
unrealized
appreciation
of invests. 39,549.47 2,451.36 146,534.22 .00 188,535.05
---------- ---------- ---------- --------- ------------
Total additions 160,096.33 4,598.16 165,908.31 4,840.04 335,442.84
Deductions:
Benefit
payments (88,264.95) .00 (7,731.21) .00 (95,996.16)
Inter-fund
transfers 582,818.52 (610,135.71) 38,614.71 (11,297.52) .00
---------- ---------- ---------- --------- ----------
NET ADDITIONS
(DEDUCTIONS) 654,649.90 (605,537.55) 196,791.81 (6,457.48) 239,446.68
Net assets available
for benefits at
beginning of
year .00 605,537.55 292,716.27 51,134.90 949,388.72
----------- ---------- ---------- --------- ------------
NET ASSETS AVAILABLE
FOR BENEFITS
AT END OF
YEAR $654,649.90 $ .00 $489,508.08 $44,677.42 $1,188,835.40
========== ========== ========== ========= ============
See notes to financial statements.
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
BLUE DIAMOND SAVINGS PLAN
Year ended March 31, 1995
<TABLE>
<CAPTION>
Blue
PNC SEI Diamond
STIF Models Stock Loan
Fund Fund Fund Fund Total
---- ------- -------- ---- -----
<S> <C> <C> <C> <C> <C>
Additions:
Employee cash
contrbs. $ .00 $ 63,546.11 $ 17,869.53 $ .00 $ 81,415.64
Transfers from other
qualified
plans .00 2,047.76 .00 .00 2,047.76
Investment income:
Dividends .00 22,617.89 .00 .00 22,617.89
Interest 174.16 7,850.41 57.67 3,543.21 11,625.45
Net realized
and unrealized
appreciation
(depreciation)
of investments .00 12,733.57 (34.87) .00 12,698.70
-------- ---------- ---------- -------- ----------
Total additions 174.16 108,795.74 17,892.33 3,543.21 130,405.44
Deductions:
Benefit payments .00 (97,246.06) .00 .00 (97,246.06)
Inter-fund
transfers (624,818.64) 593,987.87 78,121.98 (47,291.21) .00
---------- ---------- --------- --------- ----------
NET ADDITIONS
(DEDUCTIONS) (624,644.48) 605,537.55 96,014.31 (43,748.00) 33,159.38
Net assets available
for benefits at
beginning
of year 624,644.48 .00 196,701.96 94,882.90 916,229.34
---------- ---------- ---------- --------- ----------
NET ASSETS AVAILABLE
FOR BENEFITS AT
END OF YEAR $ .00 $605,537.55 $292,716.27 $51,134.90 $949,388.72
========== ========== ========== ========= ==========
</TABLE>
See notes to financial statements.
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
BLUE DIAMOND SAVINGS PLAN
Year ended March 31, 1994
<TABLE>
<CAPTION>
Blue
Money Diversified Diamond Government
Market Equity Stock Securities Loan
Fund Fund Fund Fund Fund Total
------ ----------- -------- ---------- ---- ------
<S> <C> <C> <C> <C> <C> <C>
Additions:
Employee cash
Contrbs. $ 54,574.71 6,824.66 397.10 10,028.42 .00 71,824.89
Employer cash
contrbs. 8,869.75 1,516.63 563.00 1,184.74 .00 12,134.12
Investment income:
Dividends 10,175.02 2,240.35 .00 2,032.60 .00 14,447.97
Interest 264.27 28.11 387.44 1.08 5,928.72 6,609.62
Net realized and
unrealized
appreciation of
investments .00 .00 64,208.87 .00 .00 64,208.87
Funds received
from merger
of plans 5,438.46 1,290.87 12,068.06 416.17 5.66 19,219.22
---------- --------- --------- --------- -------- ---------
Total
additions 79,322.21 11,900.62 77,624.47 13,663.01 5,934.38 188,444.69
Deductions:
Benefit
payments (50,573.37) (8.71) (1,075.43) (4.53) (16,256.85)(67,918.89)
Inter-fund
transfers (197,364.75) 46,282.85 116,348.11 33,572.30 1,161.49 .00
---------- ---------- ---------- --------- --------- ---------
NET ADDITIONS
(DEDUCTS) (168,615.91) 58,174.76 192,897.15 47,230.78 (9,160.98)120,525.80
Net assets available
for benefits at
beginning
of year 553,642.74 52,245.40 3,804.81 81,966.71 104,043.88 795,703.54
---------- --------- --------- --------- ---------- ----------
NET ASSETS AVAILABLE
FOR BENEFITS
AT END OF
YEAR 385,026.83 110,420.16 196,701.96 129,197.49 94,882.90 916,229.34
========== ========== ========== ========== ========= ==========
</TABLE>
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
BLUE DIAMOND SAVINGS PLAN
March 31, 1996
NOTE A--SIGNIFICANT ACCOUNT POLICIES
The accounting records of the Plan are maintained on an accrual basis.
Investments are stated at current value measured by quoted prices in
an active market. Gains or losses on sales of securities are based on
the specific identification method. Net appreciation or depreciation
in fair value of investments is reflected in the statement of changes
in net assets available for benefits. The Plan's investments are not
collateralized.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
Contributions by Blue Diamond Coal Company, if any, are based on
percentages of compensation elected by Plan participants.
NOTE B--DESCRIPTION OF PLAN
The Blue Diamond Savings Plan is a defined contribution plan covering
full-time employees of Blue Diamond Coal Company. The Plan is subject
to the provisions of the Employment Retirement Income Security Act of
1974 (ERISA). The Plan became effective January 1, 1985.
Each year, participants may contribute up to 12% of regular salary or
wages. Contributions by Blue Diamond Coal Company are at the discretion
of management. Members employed by Blue Diamond Coal Company contributed
$86,178.43, $81,415.64 and $71,824.89 during the years ended March 31,
1996, 1995 and 1994, respectively. Blue Diamond Coal Company contributed
$14,274.71 of matching funds during the year ended March 31, 1996, none
during the year ended March 31, 1995, and $12,134.12 during the year
ended March 31, 1994.
Member contributions and employer contributions may be invested in
various Investment Options offered by the Plan. Each participant's
account is credited with the participant's contribution, any Company
matching contribution and an allocation of Plan earnings. Allocation
of earnings are based on participant contributions and account balances.
The benefit to which a participant is entitled is the benefit that can
be provided from the participant's account.
Participants may request a loan from the Plan to be repaid through
payroll deductions over a maximum of five years. The amount of the
individual loans may range from $1,000.00 to the lesser of $50,000.00
or 50% of the total vested value of the participant's Plan account.
Loans to participants are secured by the participants' Plan accounts.
Interest rates range from 7% to 9.75% on loans outstanding as of
March 31, 1996.
Participants are immediately vested in their voluntary contributions
and Company matching contributions plus actual earnings thereon.
On termination of service, a participant may elect to receive a
lump sum amount equal to the value of his or her account at any time
prior to attaining the age of 62, at which time a distribution is
mandatory if required by the Advisory Committee.
The Company has the right under the Plan to discontinue its
contributions at any time and, although it has not expressed any
intent to do so, to terminate the Plan subject to the provisions of ERISA.
Fees for legal, accounting and other administrative expenses are paid
by the Company.
Additional information related to the Plan can be found in the booklet,
BLUE DIAMOND SAVINGS PLAN SUMMARY PLAN DESCRIPTION.
NOTE C--DESCRIPTION OF FUNDS AND INVESTMENTS
During the Plan year ended March 31, 1996, the Plan offered five
investment choices to the participants. A money market fund, fixed
income fund, two equity funds and Blue Diamond Coal Company common stock
were offered to provide investment choices compatible with the
participants' risk and return preferences. The Fidelity Retirement
Money Market Fund seeks as high a level of current income as is consistent
with the preservation of capital and liquidity by investing in
high-quality, U. S. dollar-denominated money market instruments of
U. S. and foreign issuers. The Fidelity Intermediate Bond Fund seeks
high current income by investing in fixed-income obligations with a
dollar-weighted portfolio maturity ranging between 3 and 10 years.
The Fidelity Puritan Fund invests primarily in high-yielding common
stocks and bonds of any quality to earn as much income as possible while
preserving capital. The Fidelity Blue Chip Growth Fund is an equity
growth fund which seeks long-term capital appreciation. This Fund is
invested in a broadly diversified portfolio of common stocks of
well-known and established companies believed to have above-average
growth potential. The Blue Diamond Stock Fund invests entirely in the
common stock of Blue Diamond Coal Company except for fund liquidity
requirements. At March 31, 1996, the Money Market Fund had 29
participants, the Intermediate Bond Fund had 7 participants, the
Puritan Fund had 15 participants, the Blue Chip Growth Fund had 35
participants and the Blue Diamond Stock Fund had 18 participants.
Fidelity Investments Institutional Services, Inc. held the Plan's Mutual
Funds and J.J.B. Hilliard, W.L. Lyons, Inc. held the Plan's Blue Diamond
Coal Company Stock. The members of the Plan's Advisory Committee also
serve as Trustees of the Plan's Assets.
Investments at March 31, 1996, were as follows:
<TABLE>
<CAPTION>
Percentage
of
Market Net
Issuer Investment Cost Value Assets
- ------ ---------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
BLUE DIAMOND COAL
COMPANY COMMON STOCK 21,635 shares $302,103.13 $ 489,491.87 42.78%
UNAFFILIATED INVESTMENTS
MUTUAL FUNDS
Fixed Income Mutual Fund
Fidelity Intermediate Bond (1) 60,114.29 5.25%
Equity Mutual Funds
Fidelity Puritan (1) 120,874.91
Fidelity Blue Chip Growth (1) 296,208.84
------------
Total Equity Mutual Funds 417,083.75 36.46%
Money Market Funds
Fidelity Retirement
Money Market (1) 177,400.18
Valuestar Prime Money Market
Fund 6.12 6.12
------------
Total Money Market Funds 177,406.30 15.51%
------------ ------
TOTAL UNAFFILIATED INVESTMENTS 654,604.34 57.22%
------------ ------
TOTAL INVESTMENTS $1,144,096.21 100.00%
============ ======
</TABLE>
(1) Cost information is not available from Fidelity Investments
Institutional Services, Inc.
Investments at March 31, 1995, were as follows:
<TABLE>
<CAPTION>
Percentage
Market of Net
Issuer Investment Cost Value Assets
- ------ ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
BLUE DIAMOND COAL
COMPANY COMMON STOCK 18,386 shares $239,644.07 $290,078.13 32.56%
UNAFFILIATED INVESTMENTS
MUTUAL FUNDS
Fixed Income Mutual Funds
SEI Institutional Trust Core
Fixed Income Fund #64 66,854.81 68,872.22
SEI Institutional Managed
Trust Bond Portfolio #6 23,827.59 24,550.19
SEI Daily Income Trust GNMA
Portfolio #47 67,233.60 69,070.86
SEI Daily Income Trust Short
Term Government #45 6,635.71 6,562.43
SEI Daily Income Trust
Intermediate Term
Government #46 247.96 248.58
SEI Stable Asset Fund #2036 219,462.04 219,462.04
---------- ----------
Total Fixed Income Mutual Fund 384,261.71 388,766.32 43.64%
EQUITY MUTUAL FUNDS
SEI Institutional Managed
Trust Value Portfolio #60 42,228.44 44,430.67
SEI Institutional Managed Trust
Capital Appreciation
Portfolio #62 75,110.36 73,454.40
SEI Institutional Managed
Trust Equity Income
Portfolio #63 35,187.90 36,141.62
SEI Institutional Managed
Trust Mid Cap Growth
Portfolio Class A #68 26,458.03 27,106.61
SEI Institutional Managed
Trust Small Cap Growth
Portfolio Class A #67 24,325.11 26,830.04
---------- ----------
Total Equity Mutual Funds 203,309.84 207,963.34 23.34%
---------- ---------- ------
TOTAL MUTUAL FUNDS 587,571.55 596,729.66 66.98%
MONEY MARKET FUNDS
SEI Liquid Asset Trust Prime
Obligation Portfolio #12 2,638.00 2,638.00
Valuestar Prime Money Market
Fund 1,454.16 1,454.16
---------- ----------
TOTAL MONEY MARKET FUNDS 4,092.16 4,092.16 0.46%
---------- ---------- ------
TOTAL UNAFFILIATED INVESTMENTS 591,663.71 600,821.82 67.44%
---------- ---------- ------
TOTAL INVESTMENTS $831,307.78 $890,899.95 100.00%
========== ========== ======
</TABLE>
During the years ended March 31, 1996, 1995 and 1994, the Plan's
investments (including investments bought, sold, as well as held
during the year) experienced a net appreciation in fair market
value of $188,535.05, $12,698.70 and $64,208.87, respectively.
NOTE D--MUTUAL FUND ACTIVITY WITHIN THE SEI MODELS FUND
Effective April 1, 1994, the Plan offered investment options to
participants in the form of "Models" which provided allocations
of the participants' investments among various short-term investment,
fixed and equity mutual funds. Allocations among these mutual funds
were designated to meet predetermined risk and return criteria desired
by the participant. The "Models" were replaced by four (4) Fidelity
Mutual Funds in April, 1995. The allocation of net assets available
for benefits as of March 31, 1996, and March 31, 1995, and the related
changes in net assets available for benefits from April 1, 1995 to
March 31, 1996 and from April 1, 1994 to March 31, 1995 for the
various "Models" and Fidelity Mutual Funds are as follows:
<TABLE>
<CAPTION>
TOTAL
3/31/95 CONTRI- INVESTMENT WITH- 3/31/96
FUND DESCRIPTION BALANCE BUTIONS EARNINGS TRANSFERS DRAWALS BALANCE
- ---------------- ----------- ---------- ---------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Stable Asset
Fund 225,631.93 .00 1,346.87(226,978.80) .00 .00
Short Term
Gov't 6,562.43 .00 173.79 (6,736.22) .00 .00
Intermediate
Government 248.58 .00 2.03 (250.61) .00 .00
GNMA 69,070.86 .00 794.18 (69,865.04) .00 .00
Bond Fund 24,550.19 .00 207.46 (24,757.65) .00 .00
Core Fixed 68,872.22 .00 471.55 (69,343.77) .00 .00
Fidelity Inter-
mediate Bond
Fund .00 6,008.35 3,466.89 51,161.05 (522.00) 60,114.29
---------- --------- -------- ---------- --------- ----------
394,936.21 6,008.35 6,462.77(346,771.04) (522.00) 60,114.29
Small Cap
Growth 26,830.04 .00 81.59 (26,911.63) .00 .00
Cap Appre-
ciation 73,454.40 .00 333.30 (73,787.70) .00 .00
Value Fund 44,430.67 .00 152.94 (44,583.61) .00 .00
Equity
Income 36,141.62 .00 189.29 (36,330.91) .00 .00
Mid-Cap
Growth 27,106.61 .00 6.59 (27,113.20) .00 .00
Fidelity Puritan
Fund .00 17,169.51 19,008.75 87,454.65 (2,758.00) 120,874.91
Fidelity Blue
Chip Growth .00 37,804.17 45,536.56 213,334.11 (466.00) 296,208.84
---------- --------- --------- ---------- --------- ----------
Total 207,963.34 54,973.68 65,309.02 92,061.71 (3,224.00) 417,083.75
Prime
Obligation 2,638.00 .00 18.87 (2,656.87) .00 .00
Fidelity
Retirement
Money Market
Fund .00 20,135.37 11,786.43 230,049.01 (84,518.95) 177,451.86
---------- --------- --------- ---------- --------- ----------
2,638.00 20,135.37 11,805.30 227,392.14 (84,518.95) 177,451.86
---------- --------- --------- --------- --------- ----------
$605,537.55 81,117.40 83,577.09 (27,317.19)(88,264.95) $654,649.90
========== ========= ========= ========== ========= ==========
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT
FUND EARNINGS 3/31/95
DESCRIPTION CONTRIBUTIONS (LOSSES) TRANSFERS WITHDRAWALS BALANCE
- ----------- ------------- -------- ---------- ----------- --------
<S> <C> <C> <C> <C> <C>
Stable Asset Fund $11,061.62 $ 5,883.52 $209,577.35 $ (890.56) $225,631.93
Short Term Govt. 506.97 61.72 5,993.74 .00 6,562.43
Intermediate Govt. .00 .00 248.58 .00 248.58
GNMA 4,459.17 3,929.44 60,822.46 (140.21) 69,070.86
Bond Fund 1,079.37 1,790.66 21,820.37 (140.21) 24,550.19
Core Fixed 3,740.55 4,361.88 61,036.18 (266.39) 68,872.22
Blue Govt Fund .00 (58.89) 2,575.04 (2,516.15) .00
--------- --------- ---------- --------- ----------
20,847.68 15,968.33 362,073.72 (3,953.52) 394,936.21
Small Cap Growth 1,219.10 2,667.38 23,027.68 (84.12) 26,830.04
Cap Appreciation 3,288.78 2,582.38 67,891.68 (308.44) 73,454.40
Value Fund 1,974.67 3,433.59 39,204.68 (182.27) 44,430.67
Equity Income 1,615.80 2,800.68 31,879.37 (154.23) 36,141.62
Mid-Cap Growth 1,206.42 603.13 25,409.22 (112.16) 27,106.61
Blue Equity Fund .00 5,374.13 (5,374.13) .00 .00
--------- --------- --------- -------- ----------
9,304.77 17,461.29 182,038.50 (841.22) 207,963.34
Prime Obligation 192.90 1,159.86 8,047.52 (6,762.28) 2,638.00
Blue Money Marke 33,200.76 8,612.39 43,875.89 (85,689.04) .00
--------- --------- ---------- --------- ----------
33,393.66 9,772.25 51,923.41 (92,451.32) 2,638.00
--------- --------- ---------- --------- ----------
$63,546.11 $43,201.87 $596,035.63$(97,246.06) $605,537.55
========= ========= ========== ========= ==========
</TABLE>
NOTE E--INCOME TAX STATUS
The Plan received a determination letter dated July 18, 1985, in which
the Internal Revenue Service stated that the Plan, as then designed,
was in compliance with the applicable requirements of the Internal
Revenue Code (IRC). The Plan has been amended since receiving the
determination letter. The Plan administrator believes the Plan is
currently designed and being operated in compliance with the applicable
requirements of the IRC. Therefore, the Plan is considered qualified
and the related Trust is exempt from tax.
Company contributions made to the Plan on behalf of the participants
are not included in the employee's taxable income at the time of
contribution. All dividends, interest and gains in asset value are
non-taxable at the time realized by the Plan. When a distribution is
made from the Plan, the amount distributed is taxable in the year of
receipt by the participant.
NOTE F--TRANSACTIONS WITH PARTIES-IN-INTEREST
During the year ended March 31, 1996, the Plan purchased 4,533 shares
of Blue Diamond common stock for $77,795.56 and sold 1,284 shares of
Blue Diamond common stock for $15,336.50, resulting in gains totaling
$12,039.59. During the year ended March 31, 1995, the Plan purchased
4,556 shares of Blue Diamond common stock for $93,987.00. During the
year ended March 31, 1994, the Plan purchased 13,706 shares of Blue
Diamond Coal Company common stock for $130,283.13 and sold 158 shares
of Blue Diamond common stock for $2,054.00, resulting in losses
totaling $5,764.25.
During the year ended March 31, 1994, the Plan purchased $735,956.55
and sold $112,028.49 of investments of its Trustee, PNC Bank Kentucky,
Inc. Investment income of $2,230.41 was received from this trustee
during the year ended March 31, 1994.
NOTE G--MERGER OF SAVINGS PLANS
On September 30, 1993, the Company merged the Leatherwood Bargaining
Unit Savings Plan into the Blue Diamond Savings Plan. As a result,
eleven (11) participants with account balances totaling $19,219.22
were transferred to the Blue Diamond Savings Plan. Account activity
after September 30, 1993, is included in the Statement of Changes in
Net Assets Available for Benefits.
TRANSACTIONS OR SERIES OF TRANSACTIONS IN EXCESS OF 5 PERCENT OF THE CURRENT
VALUE OF PLAN ASSETS
BLUE DIAMOND SAVINGS PLAN
Year ended March 31, 1996
<TABLE>
<CAPTION>
Description of Asset
Identity of (Including Interest Rate and Purchase
Party Involved Maturity in Case of a Loan) Price
- --------------------- ---------------------------- -----------
<S> <C> <C>
SEI Stable Asset Fund Fixed Income Fund
2 Purchases $ 1,206.85
3 Redemptions
SEI Daily Income Trust Fixed Income Fund
GNMA Portfolio 3 Purchases 507.39
Portfolio 3 Redemptions
SEI Institutional Manager Fixed Income Fund
Trust Core Fixed Income Fund 3 Purchases 429.50
3 Redemptions
SEI Institutional Managed Trust
Cap Appreciation Portfolio Equity Fund
3 Purchases 187.01
3 Redemptions
FMMT Fidelity Retirement Money Market Fund
Money Market Fund 17 Purchases 599,621.78
12 Redemptions
Fidelity Intermediate Fixed Income Fund
Bond Fund 17 Purchases 57,869.40
2 Redemptions
Fidelity Puritan Fund Equity Fund
18 Purchases 115,759.49
3 Redemptions
Fidelity Blue Chip Growth Equity Fund
Fund 25 Purchases 256,311.77
2 Redemptions
Blue Diamond Coal Company Common Stock
11 Purchases 77,795.56
5 Sales
</TABLE>
<TABLE>
<CAPTION>
Current Value
of Asset on Net
Selling Price Cost of Asset Transaction Date Gain(Loss)
- ------------- ------------- ---------------- ----------
<S> <C> <C> <C>
$ 1,206.85 $ 1,206.85
$220,808.91 220,808.91 220,808.91 $ -0-
507.39 507.39
69,865.04 67,740.99 67,740.99 2,124.05
429.50 429.50
69,343.77 67,284.31 67,284.31 2,059.46
187.01 187.01
73,787.70 75,297.37 73,787.70 (1,509.67)
599,621.78 599,621.78
433,136.65 (1) 433,136.65 (1)
57,869.40 57,869.40
1,222.00 (1) 1,222.00 (1)
115,759.49 115,759.49
13,893.33 (1) 13,893.33 (1)
256,311.77 256,311.77
5,639.49 (1) 5,639.49 (1)
77,795.56 77,795.56
27,376.09 15,336.50 27,376.09 12,039.59
</TABLE>
(1) Cost information is not available from Fidelity Investments Institutional
Services, Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other person who administer the Plan), have duly caused
this Annual Report to be signed by the undersigned thereunto duly
authorized:
THE BLUE DIAMOND SAVINGS PLAN
Date: June 25, 1996 By: Savings Plan Advisory Committee
---------------------
By: /s/ John Edward Way, Jr.
---------------------------------
John Edward Way, Jr., Chairman
of the Advisory Committee
By: /s/ K. Roger Foster
---------------------------------
K. Roger Foster, a member
of the Advisory Committee
By: /s/ Ted B. Helms
---------------------------------
Ted B. Helms, a member
of the Advisory Committee
By: /s/ William S. Lyon, III
---------------------------------
William S. Lyon, III, a member
of the Advisory Committee
NAME OF CORPORATION STATE OF INCORPORATION
- ------------------- ----------------------
Blue Diamond Coal Export Company Delaware
Eolia Resources, Inc. North Carolina
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-8 Number 33-12517) pertaining to the Savings Plan of Blue Diamond
Coal Company of our report dated May 17, 1996, with respect to the
consolidated financial statements of Blue Diamond Coal Company and
subsidiaries included in the Annual Report (Form 10-K) for the year ended
March 31, 1996, and of our report dated May 14, 1996, with respect to the
financial statements and schedules of the Blue Diamond Savings Plan
included in the Annual Report (Form 11-K) for the year ended March 31,
1996.
/S/ Coulter & Justus, P.C.
June 24, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED
MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1995
<PERIOD-END> MAR-31-1996
<PERIOD-TYPE> YEAR
<CASH> 304,815
<SECURITIES> 15,966
<RECEIVABLES> 10,417,324
<ALLOWANCES> 604,854
<INVENTORY> 3,782,342
<CURRENT-ASSETS> 15,600,248
<PP&E> 111,173,551
<DEPRECIATION> 42,354,058
<TOTAL-ASSETS> 86,845,561
<CURRENT-LIABILITIES> 13,897,984
<BONDS> 11,080,585
<COMMON> 961,132
0
0
<OTHER-SE> 29,363,822
<TOTAL-LIABILITY-AND-EQUITY> 86,845,561
<SALES> 89,468,420
<TOTAL-REVENUES> 89,966,839
<CGS> 79,255,610
<TOTAL-COSTS> 81,487,742
<OTHER-EXPENSES> 2,134,437
<LOSS-PROVISION> 546,857
<INTEREST-EXPENSE> 3,943,793
<INCOME-PRETAX> 2,400,867
<INCOME-TAX> (167,047)
<INCOME-CONTINUING> 2,567,914
<DISCONTINUED> 0
<EXTRAORDINARY> 2,674,064
<CHANGES> 0
<NET-INCOME> 5,241,978
<EPS-PRIMARY> 5.61
<EPS-DILUTED> 5.61
</TABLE>
