<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1997 Commission File Number 0-10610
------------------ -------
BLUE DIAMOND COAL COMPANY
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 62-0133200
- ------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
P. O. Box 59015, 341 Troy Circle, Knoxville, TN 37950-9015
- ----------------------------------------------- ----------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (423) 588-8511
----------------------
Indicate by check mark whether the registrant (1) has filed all reports
required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of September 30, 1997.
Class Outstanding at September 30, 1997
- ------------------------------------ ---------------------------------
Common Stock, $1 Par Value 935,220 Shares
<PAGE>
BLUE DIAMOND COAL COMPANY
INDEX
Page
PART I. FINANCIAL INFORMATION Number
------
Item 1. Financial Statements
Consolidated Condensed Balance Sheet
September 30, 1997 (Unaudited) and
March 31, 1997 (Audited)......................................3
Consolidated Condensed Statement of
Income (Unaudited) - Three-Months and Six-Months
Ended September 30, 1997 and 1996.............................5
Consolidated Condensed Statements of
Changes in Cash Flows (Unaudited)
Six-Months Ended September 30, 1997 and 1996..................6
Notes to Consolidated Condensed
Financial Statements..........................................7
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition.........................9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.............................10
<PAGE>
PART I. FINANCIAL INFORMATION
BLUE DIAMOND COAL COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
September 30 March 31
1997 1997
------------ -----------
<S> (Unaudited)
ASSETS
CURRENT ASSETS <C> <C>
Cash $ 21,049 $ 98,657
Short Term Investments 0 0
Accounts and Notes Receivable 9,263,352 7,991,264
Inventories - Coal 2,171,342 5,588,665
Inventories - Supplies 1,955,573 1,864,524
Other Current Assets 114,003 468,017
----------- -----------
TOTAL CURRENT ASSETS 13,525,319 16,011,127
PROPERTY, PLANT AND EQUIPMENT 113,589,823 112,509,247
Less: Accumulated Depreciation & Depletion 48,368,999 46,328,486
----------- -----------
NET PROPERTY, PLANT & EQUIPMENT 65,220,824 66,180,761
Investments 515,966 515,966
Other Assets 2,562,503 1,672,196
----------- -----------
TOTAL ASSETS $81,824,612 $84,380,050
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes Payable $ 0 $ 0
Current Notes Payable and Capital Leases 263,899 2,224,012
Accounts Payable and Accrued Expenses 10,477,017 9,678,440
Current Portion of Reorganization Liabilities 455,937 441,669
----------- -----------
TOTAL CURRENT LIABILITIES 11,196,853 12,344,121
LONG-TERM LIABILITIES
Long-term Debt 6,130,284 8,717,519
Reserve for Health Care & Workers' Compensation 23,820,543 24,103,997
Reorganization Liabilities 2,182,709 2,414,503
Deferred Income Taxes 1,569,500 1,569,500
Other Liabilities 795,474 738,244
---------- ----------
TOTAL LONG-TERM LIABILITIES 34,498,510 37,543,763
<PAGE>
STOCKHOLDERS' EQUITY
Common Stock - $1 Par Value, 1,000,000 Shares
961,132 Issued (Including Treasury Stock) 961,132 961,132
Additional Paid-In-Capital 24,305,480 24,305,480
Treasury Stock - 25,912 Shares at 9/30 & 3/31 (2,197,420) (2,197,420)
Retained Earnings 13,060,057 11,422,974
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 36,129,249 34,492,166
---------- ----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $81,824,612 $84,380,050
========== ==========
</TABLE>
NOTE: The Balance Sheet at March 31, 1997 has been derived from the Audited
Financial Statements of that date.
See Notes to Consolidated Condensed Financial Statements.
<PAGE>
BLUE DIAMOND COAL COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF INCOME
UNAUDITED
<TABLE>
<CAPTION>
Three Months Ended Sept 30 Six Months Ended Sept 30
-------------------------- ------------------------
1997 1996 1997 1996
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES
Net Product Sales $25,165,207 $24,618,856 $47,458,640 $46,130,596
Interest Income 7,826 40,956 12,567 44,847
Gain (Loss) on Sale
of Fixed Assets 5,000 24,000 5,000 24,000
---------- ---------- ---------- ----------
TOTAL REVENUES 25,178,033 24,683,812 47,476,207 46,199,443
COSTS AND EXPENSES
Operating Expenses
and Purchased Products 20,564,583 18,670,930 36,381,421 33,859,462
Other Operating Charges 3,085,217 3,853,566 7,097,349 7,855,357
Administrative, Selling &
Transportation Expenses 405,000 450,000 865,000 929,896
Interest Expense 694,337 838,002 1,434,699 1,700,935
Other Expense 13,641 4,702 60,655 57,913
---------- ---------- ---------- ----------
TOTAL COSTS AND EXPENSES 24,762,778 23,817,200 45,839,124 44,403,563
Income Before Taxes 415,255 866,612 1,637,083 1,795,880
Income Tax Expense 0 0 0 0
---------- ---------- ---------- ----------
NET INCOME $ 415,255 $ 866,612 $ 1,637,083 $ 1,795,880
========== ========== ========== ==========
Average Number of
Common Shares Outstanding 935,220 935,220 935,220 935,220
======= ======= ======= =======
PER SHARE OF COMMON STOCK:
Net Income Based on
Average Shares Outstanding $0.44 $0.93 $1.75 $1.92
==== ==== ==== ====
Cash Dividends Declared
and Paid $0.00 $0.00 $0.00 $0.00
==== ==== ==== ====
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
BLUE DIAMOND COAL COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CHANGE IN CASH FLOWS
UNAUDITED
<TABLE>
<CAPTION>
Six-Months Ended September 30
-----------------------------
1997 1996
<S> ---------- ------------
OPERATING ACTIVITIES <C> <C>
Funds Provided (Used) from Operations,
Adjusted for Depreciation and Gain on
Sale of Fixed Assets $3,677,596 $3,889,354
(Increase) Decrease in Accounts Receivables (1,272,088) 1,702,032
(Increase) Decrease in Inventories 3,326,274 (101,408)
(Increase) Decrease in Prepaid Assets (536,292) (323,658)
(Decrease) Increase in Accounts Payable 354,827 (571,852)
Other Changes from Operations 0 0
--------- ----------
NET CASH FLOW PROVIDED (USED)
BY OPERATIONS ACTIVITIES $5,550,317 4,594,468
FINANCING ACTIVITIES
Issuance (Reduction) of Short-Term Debt-Net (37,512) (1,201,630)
Issuance (Reduction) of Long-Term Debt-Net (4,384,636) (2,663,630)
Addition (Reduction) in Capital Lease-Net (125,201) (116,760)
--------- ----------
CASH PROCEEDS PROVIDED (USED)
BY FINANCING ACTIVITIES (4,547,349) (3,982,020)
INVESTMENT ACTIVITIES
Expenditures for Property, Plant
and Equipment (1,080,576) (634,476)
(Increase) Reduction of
Employee Notes Receivable 0 0
--------- ----------
NET CASH USED BY INVESTING ACTIVITIES (1,080,576) (634,476)
--------- ----------
NET INCREASE (DECREASE) IN CASH
& CASH EQUIVALENTS (77,608) (22,028)
--------- ----------
Cash and Cash Equivalents
at Beginning of Period 98,657 304,815
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 21,049 $ 282,787
========= ==========
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
<PAGE>
BLUE DIAMOND COAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
September 30, 1997
NOTE A -- FINANCIAL STATEMENTS
In the opinion of the Company, the accompanying unaudited consolidated
condensed financial statements contain all adjustments necessary to
present fairly its financial position as of September 30, 1997 and
March 31, 1997, the results of operations for the three month and
six-month periods ended September 30, 1997 and 1996 and cash flows for
the six-month periods ended September 30, 1997 and 1996.
While the Company believes that the disclosures presented are adequate
to make the information not misleading, it is suggested that these
condensed financial statements be read in conjunction with the
financial statements and related notes included in the Company's
March 31, 1997 Annual Report on Form 10-K.
NOTE B -- INCOME TAXES
Due to the Company's net operating loss and investment tax credit
carry-forward position, no provision for federal income tax is
required for the current fiscal year.
NOTE C -- CHAPTER 11 REORGANIZATION PROCEEDINGS
On May 17, 1991, the Company filed a voluntary petition for
reorganization under Chapter 11 of the Federal Bankruptcy Code.
On December 11, 1992, the Bankruptcy Court entered an order confirming
the Company's Plan of Reorganization and on April 6, 1995 entered a
final decree that the Company's bankruptcy case was closed. In
accordance with AICPA SOP 90-7, the Company reports liabilities
payable under the Plan of Reorganization at the present value of
amounts to be paid, using a 7% discount.
NOTE D -- WORKERS' COMPENSATION LIABILITY
In conjunction with the Company's Reorganization Plan, the Office of
Workers' Compensation Programs of the United States Department of
Labor (DOL) has assumed responsibility for the Company's pre-June,
1991 federal black lung claims. The Company is responsible for
payment of claims and expenses related to pre-petition Kentucky
Workers' compensation liabilities. The Company carries commercial
insurance to cover its current State and Federal workers' compensation
liabilities.
NOTE E -- UMWA RETIREE HEALTHCARE BENEFITS LIABILITY
During 1994, the Company received notice from the Social Security
Administration (SSA) claiming the Company is responsible for health
care and death benefit premiums for certain retired coal miners who
were members of the United Mine Workers of America (UMWA) and their
beneficiaries pursuant to the Coal Industry Retiree Health Benefit Act
of 1992 (the Coal Act).
NOTE F -- CONTINGENT GAINS
Since the Company has not had a contractual relationship with the UMWA
since 1964 and never bargained for nor guaranteed any health care or
death benefits, a lawsuit was filed which challenges the
constitutionality of the Act discussed in the preceding note. During
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 was then filed. During 1997, the petition was dismissed
by the United States Court of Appeals and the Company's petition to
the United States Supreme Court was rejected. Accordingly, all
appeals related to this lawsuit have been exhausted.
The Company has also made requests to the Social Security
Administration for relief based on an administrative review of the
assigned individuals. A number of review decisions have been received
with some being positive and some negative. The Company filed a
Complaint against the Social Security Administration in June 1997,
asking for judicial review of the agency's final decisions. This
matter could cause future payments under the Act to be reduced
significantly. The ultimate outcome is uncertain at the present time.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
Results of the Company's coal operations for the three-month and
six-month periods ended September 30, 1997 and 1996 are summarized as
follows:
<TABLE>
<CAPTION>
Three-Months Ended Sept 30 Six-Months Ended Sept 30
------------------------- --------------------------
1997 1996 1997 1996
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Net Product sales $25,165,207 $24,618,856 $47,458,640 $46,130,596
Operating expenses and
purchased products 20,564,583 18,670,930 36,381,421 33,859,462
Other operating expense 3,085,217 3,853,566 7,097,349 7,855,357
Adm. Selling and
Transportation expenses 405,000 450,000 865,000 929,896
---------- ---------- ---------- ----------
Total Expenses 24,054,800 22,974,496 44,343,770 42,644,715
---------- ---------- ---------- ----------
INCOME FROM COAL
OPERATIONS $ 1,110,407 $ 1,644,360 $ 3,114,870 $ 3,485,881
========== ========== ========== ==========
Tons sold 862,000 833,415 1,601,418 1,567,101
Sales per ton $29.19 $29.54 $29.63 $29.43
Cost of sales per ton 27.90 27.57 27.69 27.21
----- ----- ----- -----
Margin per ton $ 1.29 $ 1.97 $ 1.94 $ 2.22
===== ===== ===== =====
</TABLE>
The Company's coal operations generated $371,000 less earnings during
the six-month period ended September 30, 1997 than the same period of
last year. Higher coal production costs of $0.48 per ton exceeded the
$0.20 per ton revenue increase. A realignment of operations among
producers is expected to improve per ton coal costs. Price pressure
continues on the Company's spot market sales. Production from the
Company's reserves provided 95% of the total coals shipped. Shipments
are projected to remain at current levels for the last half of the
fiscal year.
<PAGE>
The current year's six-month interest expense offset coal earnings as
shown below compared to the preceding two years.
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Kentucky Workers' Compensation $ 287,700 $ 317,800 $ 286,800
Coal Act Healthcare 628,000 649,800 807,000
Bank and Reorganization Liabilities 519,000 733,400 966,500
--------- --------- ---------
$1,434,700 $1,701,000 $2,060,300
========= ========= =========
</TABLE>
FINANCIAL CONDITION AND LIQUIDITY
The Company's working capital ratio was 1.21 at September 30th,
compared to 1.30 at March 31st. Capital expenditures of $1,081,000
are somewhat behind projections at mid-year. Long-term debt has been
reduced by $4,400,000 during the first six months of this year.
Coal Act Premiums and Pre-petition Kentucky Workers' Compensation
payments have declined as noted below:
Kentucky Workers'
Six-Months Ended Coal Act Compensation
---------------- ---------- -------------
[S] [C] [C]
9-30-97 $ 771,800 $707,400
3-31-97 834,500 693,100
9-30-96 1,586,400 864,400
No dividends were paid or declared during the quarter.
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits - Exhibit 27, Financial Data Schedule
(b) Reports on Form 8-K - No current reports were filed during
the quarter ended September 30, 1997.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
BLUE DIAMOND COAL COMPANY
---------------------------
Registrant
Date: November 7, 1997 Ted B. Helms
---------------------------
Ted B. Helms
President
Date: November 7, 1997 W. S. Lyon, III
---------------------------
W. S. Lyon, III
Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE CONSOLIDATED CONDENSED BALANCE SHEET AT SEPTEMBER 30, 1997
(UNAUDITED) AND THE CONSOLIDATED CONDENSED STATEMENT OF INCOME FOR THE
SIX MONTHS ENDED SEPTEMBER 30, 1997 (UNAUDITED) AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 21,049
<SECURITIES> 0
<RECEIVABLES> 9,263,352
<ALLOWANCES> 0
<INVENTORY> 4,126,915
<CURRENT-ASSETS> 13,525,319
<PP&E> 113,589,823
<DEPRECIATION> 48,368,999
<TOTAL-ASSETS> 81,824,612
<CURRENT-LIABILITIES> 11,196,853
<BONDS> 6,130,284
<COMMON> 961,132
0
0
<OTHER-SE> 35,168,117
<TOTAL-LIABILITY-AND-EQUITY> 81,824,612
<SALES> 47,458,640
<TOTAL-REVENUES> 47,476,207
<CGS> 43,478,770
<TOTAL-COSTS> 43,478,770
<OTHER-EXPENSES> 925,655
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,434,699
<INCOME-PRETAX> 1,637,083
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,637,083
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,637,083
<EPS-PRIMARY> 1.75
<EPS-DILUTED> 1.75
</TABLE>
