<PAGE>
<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended December 31, 1996 Commission File Number 0-10610
----------------- -------
BLUE DIAMOND COAL COMPANY
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 62-0133200
- ------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
P. O. Box 59015, 341 Troy Circle, Knoxville, TN 37950-9015
- ----------------------------------------------- ----------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (423) 588-8511
----------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of December 31, 1996.
Class Outstanding at December 31, 1996
- ------------------------------------ --------------------------------
Common Stock, $1 Par Value 935,220 Shares
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BLUE DIAMOND COAL COMPANY
INDEX
Page
PART I. FINANCIAL INFORMATION Number
------
Item 1. Financial Statements
Consolidated Condensed Balance Sheet
December 31, 1996 (Unaudited) and
March 31, 1996 (Audited)......................................3
Consolidated Condensed Statement of
Income (Unaudited) - Three-Months and Nine-Months
Ended December 31, 1996 and 1995..............................5
Consolidated Condensed Statements of
Changes in Cash Flows (Unaudited)
Nine-Months Ended December 31, 1996 and 1995..................6
Notes to Consolidated Condensed
Financial Statements..........................................7
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition.........................9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.............................10
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PART I. FINANCIAL INFORMATION
BLUE DIAMOND COAL COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
December 31 March 31
1996 1996
------------ -----------
<S> (Unaudited)
ASSETS
CURRENT ASSETS <C> <C>
Cash $ 400,024 $ 304,815
Short Term Investments 0 83,126
Accounts and Notes Receivable 8,811,178 10,854,635
Inventories - Coal 2,626,239 1,967,780
Inventories - Supplies 1,910,184 1,814,562
Other Current Assets 355,344 575,330
----------- -----------
TOTAL CURRENT ASSETS 14,102,969 15,600,248
PROPERTY, PLANT AND EQUIPMENT 116,023,840 115,162,832
Less: Accumulated Depreciation & Depletion 49,372,197 46,343,339
----------- -----------
NET PROPERTY, PLANT & EQUIPMENT 66,651,643 68,819,493
Investments 515,966 515,966
Other Assets 1,646,306 1,909,854
----------- -----------
TOTAL ASSETS $82,916,884 $86,845,561
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes Payable $ 0 $ 1,201,630
Current Notes Payable and Capital Leases 2,234,696 2,878,279
Accounts Payable and Accrued Expenses 9,976,044 9,354,901
Current Portion of Reorganization Liabilities 428,183 463,174
----------- -----------
TOTAL CURRENT LIABILITIES 12,638,923 13,897,984
LONG-TERM LIABILITIES
Long-term Debt 8,545,144 11,080,585
Reserve for Health Care & Workers' Compensation 23,978,360 26,335,770
Reorganization Liabilities 2,547,981 2,856,287
Deferred Income Taxes 1,569,500 1,569,500
Other Liabilities 747,205 780,481
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TOTAL LONG-TERM LIABILITIES 37,388,190 42,622,623
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<PAGE> 4
STOCKHOLDERS' EQUITY
Common Stock - $1 Par Value, 1,000,000
Shares Authorized, 961,220 Issued
(Including Treasury Stock) 961,132 961,132
Additional Paid-In-Capital 24,305,480 24,305,480
Treasury Stock-25,912 Shares at 12/31 & 3/31 (2,197,420) (2,197,420)
Retained Earnings 9,820,579 7,255,762
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 32,889,771 30,324,954
---------- ----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $82,916,884 $86,845,561
========== ==========
</TABLE>
NOTE: The Balance Sheet at March 31, 1996 has been derived from the Audited
Financial Statements of that date.
See Notes to Consolidated Condensed Financial Statements.
<PAGE>
<PAGE> 5
BLUE DIAMOND COAL COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF INCOME
UNAUDITED
<TABLE>
<CAPTION>
Three Months Ended Dec. 31 Nine Months Ended Dec. 31
-------------------------- -------------------------
1996 1995 1996 1995
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES
Net Product Sales $22,029,064 $24,171,052 $68,159,660 $65,786,896
Interest Income 22,101 31,567 66,948 56,105
Gain (Loss) on Sale
of Fixed Assets 0 12,030 24,000 33,012
---------- ---------- ---------- ----------
TOTAL REVENUES 22,051,165 24,214,649 68,250,608 65,876,013
COSTS AND EXPENSES
Operating Expenses
and Purchased Products 16,317,487 17,670,256 50,176,949 46,724,959
Other Operating Charges 3,841,477 4,024,404 11,696,834 10,863,337
Administrative, Selling &
Transportation Expenses 377,803 400,000 1,307,699 1,355,000
Interest Expense 793,401 972,526 2,494,336 3,032,817
Other Expense (47,941) 18,309 9,972 44,720
---------- ---------- ---------- ----------
TOTAL COSTS AND EXPENSES 21,282,227 23,085,495 65,685,790 62,020,833
Income Before Taxes 768,938 1,129,154 2,564,818 3,855,180
Income Tax Expense 0 0 0 0
---------- ---------- ---------- ----------
NET INCOME $ 768,938 $ 1,129,154 $ 2,564,818 $ 3,855,180
========== ========== ========== ==========
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 $0.82 $1.21 $2.74 $4.12
==== ==== ==== ====
Cash Dividends Declared
and Paid $0.00 $0.00 $0.00 $0.00
==== ==== ==== ====
</TABLE>
See Notes to Consolidated Condensed Financial Statements.<PAGE>
<PAGE> 6
BLUE DIAMOND COAL COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CHANGE IN CASH FLOWS
UNAUDITED
<TABLE>
<CAPTION>
Nine-Months Ended December 31
-----------------------------
1996 1995
<S> ---------- ------------
OPERATING ACTIVITIES <C> <C>
Funds Provided (Used) from Operations,
Adjusted for Depreciation and Gain on
Sale of Fixed Assets $5,724,018 $7,059,006
(Increase) Decrease in Accounts Receivables 2,043,457 (4,204,793)
(Increase) Decrease in Inventories (754,081) (1,282,897)
(Increase) Decrease in Prepaid Assets 566,658 (8,544)
(Decrease) Increase in Accounts Payable (2,112,840) (320,912)
Other Changes from Operations 0 476,331
--------- ----------
NET CASH FLOW PROVIDED (USED)
BY OPERATIONS ACTIVITIES $5,467,212 1,718,191
FINANCING ACTIVITIES
Issuance (Reduction) of Short-Term Debt-Net (1,201,630) 320,025
Issuance (Reduction) of Long-Term Debt-Net (3,002,337) (1,974,326)
Addition (Reduction) in Capital Lease-Net (176,686) (164,775)
--------- ----------
CASH PROVIDED (USED)
BY FINANCING ACTIVITIES (4,380,653) (1,819,076)
INVESTMENT ACTIVITIES
Expenditures for Property, Plant
and Equipment (991,350) (600,548)
(Increase) Reduction of
Employee Notes Receivable 0 15,675
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NET CASH USED BY INVESTING ACTIVITIES (991,350) (584,873)
--------- ----------
NET INCREASE (DECREASE) IN CASH
& CASH EQUIVALENTS 95,209 (685,758)
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Cash and Cash Equivalents
at Beginning of Period 304,815 694,811
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 400,024 $ 9,053
========= ==========
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
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<PAGE> 7
BLUE DIAMOND COAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
December 31, 1996
NOTE A -- FINANCIAL STATEMENTS
In the opinion of the Company, the accompanying unaudited consolidated
condensed financial statements contain all adjustments necessary to
present fairly its financial position as of December 31, 1996 and
March 31, 1996, the results of operations for the three-month and
nine-month periods ended December 31, 1996 and 1995 and cash flows for
the nine-month periods ended December 31, 1996 and 1995.
While the Company believes that the disclosures presented are adequate
to make the information not misleading, it is suggested that these
condensed financial statements be read in conjunction with the
financial statements and related notes included in the Company's
March 31, 1996 Annual Report on Form 10-K.
NOTE B -- INCOME TAXES
Due to the Company's net operating loss and investment tax credit
carry-forward position, no provision for federal income tax is
required for the current fiscal year.
NOTE C -- CHAPTER 11 REORGANIZATION PROCEEDINGS
On May 17, 1991, Blue Diamond Coal Company (the "Company") filed a
voluntary petition for reorganization under Chapter 11 of the Federal
Bankruptcy Code in the United States Bankruptcy Court for the Eastern
District of Tennessee (the "Bankruptcy Court"). The filing had been
preceded by a merger of all significant wholly-owned subsidiaries into
the Company. This filing was precipitated by cash flow problems
resulting from extensive capital expenditures for new coal processing
facilities coupled with operating losses at existing mines.
As Debtor-in-Possession, the Company continued to operate its business
and formulated a business plan for future operations. This plan
formed the basis for the Company's proposed plan of reorganization
that was intended to enable the Company to satisfy its pre-petition
obligations and emerge from Chapter 11. This proposed plan of
reorganization developed into the Fourth Amended Plan of
Reorganization dated December 10, 1992 (as implemented and approved by
the Confirmation Order, the "Plan of Reorganization"). On December
11, 1992, the Bankruptcy Court entered an order confirming the Plan of
Reorganization. On April 6, 1995, the Bankruptcy Court entered a
final decree that the Company's bankruptcy case was closed.
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<PAGE> 8
NOTE D -- WORKERS' COMPENSATION LIABILITY
In conjunction with the Company's Reorganization Plan, the Office of
Workers' Compensation Programs of the United States Department of
Labor (DOL) has assumed responsibility for the Company's pre-June,
1991 federal black lung claims. The Company is responsible for
payment of claims and expenses related to pre-petition Kentucky
Workers' compensation liabilities. The amount reserved for future
Kentucky Workers' Compensation claims is $8,561,400 at December 31,
1996. Effective June 19, 1991, the Company obtained and continues to
carry commercial insurance to cover its current State and Federal
workers' compensation liabilities.
NOTE E -- UMWA RETIREE HEALTHCARE BENEFITS LIABILITY
During 1994, the Company received notice from the Social Security
Administration (SSA) claiming the Company is responsible for health
care and death benefit premiums for certain retired coal miners who
were members of the United Mine Workers of America (UMWA) and their
beneficiaries pursuant to the Coal Industry Retiree Health Benefit Act
of 1992 (the Coal Act). The recorded reserve for payments was
$17,502,200 at December 31, 1996.
NOTE F -- CONTINGENT GAINS
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 Coal Act, but the Federal District Court ruled against the
Company. During 1996, the United States Court of Appeals upheld the
Federal District Court decision. A petition for rehearing was filed
and denied. A Petition for Writ of Certiorari, filed in September
with the Supreme Court of the United States, was denied on January 6,
1997. This denial ended the Company's challenge to the
constitutionality of the Coal Act.
The Company has also made a request to the Social Security
Administration for relief based on an administrative review of
approximately one-third of the assigned individuals. This matter
could cause future payments under the Coal Act to be reduced
significantly, although subsequent assignments of individuals to the
Company may offset this relief. The ultimate outcome of these review
proceedings is uncertain.
<PAGE>
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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
nine-month periods ended December 31, 1996 and 1995 are summarized as
follows:
<TABLE>
<CAPTION>
Three-Months Ended Dec. 30 Nine-Months Ended Dec. 30
-------------------------- -------------------------
1996 1995 1996 1995
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Net Product sales $22,029,064 $24,171,052 $68,159,660 $65,786,896
Operating expenses and
purchased products 16,317,487 17,670,256 50,176,949 46,724,959
Other operating expense 3,841,477 4,024,404 11,696,834 10,863,337
Adm. Selling and
Transportation expenses 377,803 400,000 1,307,699 1,355,000
---------- ---------- ---------- ----------
Total Expenses 20,536,767 22,094,660 63,181,482 58,943,296
---------- ---------- ---------- ----------
INCOME FROM COAL
OPERATIONS $ 1,492,297 $ 2,076,392 $ 4,978,178 $ 6,843,600
========== ========== ========== ==========
Tons sold 778,287 821,320 2,345,388 2,191,341
Sales per ton $28.31 $29.43 $29.06 $30.02
Cost of sales per ton 26.39 26.90 26.94 26.90
----- ----- ----- -----
Margin per ton $ 1.92 $ 2.53 $ 2.12 $ 3.12
===== ===== ===== =====
</TABLE>
The Company's coal operations have generated $929,268, $1,644,360 and
$1,492,300 during the first, second and third quarters, respectively, of
the current fiscal year. These results compare with $2,340,400,
$2,426,800 and $2,076,400 for the same quarters of the preceding fiscal
year. Annual shipped tons are anticipated to increase to approximately
3,109,000 from last year's shipments of 3,008,000. Reduced sales prices
per ton reflect lower long-term and spot market prices. The Company and
its contract producers have been able to obtain Workers' Compensation
coverage in the voluntary market at favorable rates. Recent Kentucky
Workers' Compensation Reform Legislation should further reduce these
costs.
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<PAGE> 10
Interest expense accrued for the nine months ended December 31, 1996 and
1995 was as follows:
<TABLE>
<CAPTION>
Increase
1996 1995 (Decrease)
--------- ---------- --------
<S> <C> <C> <C>
Kentucky Workers' Compensation $ 470,179 $ 426,500 $ 43,679
Coal Act Healthcare 962,053 1,204,800 (242,747)
Bank and Reorganization Liabilities 1,062,104 1,401,500 (339,396)
--------- --------- -------
$2,494,336 $3,032,800 $(538,464)
========= ========= =======
</TABLE>
Continuing the trend from the first two quarters, less debt and lower
interest rates reduced bank debt interest, reduced reserves lowered Coal
Act interest and increased reserves increased Workers' Compensation
interest.
FINANCIAL CONDITION AND LIQUIDITY
The Company's working capital ratio was 1.12 at December 31, 1996,
compared to 1.12 at March 31st. Capital expenditures of $991,400 were in
line with projections. Long-term debt has been reduced by $3,000,000
during the first nine months of this year. A renegotiation of the
Company's bank debt has resulted in improved terms and interest rates.
Coal Act premium payments ($2,412,000) and Kentucky Workers' Compensation
payments ($1,235,200) continue to challenge the Company's liquidity.
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits - Exhibit 27, Financial Data Schedule
(b) Reports on Form 8-K - No current reports were filed during the
quarter ended December 31, 1996.
<PAGE>
<PAGE> 11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BLUE DIAMOND COAL COMPANY
-----------------------------
Registrant
Date: February 12, 1997 Ted B. Helms
-----------------------------
Ted B. Helms
President
Date: February 12, 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 DECEMBER 31, 1996 (UNAUDITED)
AND THE CONSOLIDATED CONDENSED STATEMENT OF INCOME FOR THE NINE MONTHS
ENDED DECEMBER 31, 1996 (UNAUDITED) AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 400,024
<SECURITIES> 0
<RECEIVABLES> 8,811,178
<ALLOWANCES> 0
<INVENTORY> 4,536,423
<CURRENT-ASSETS> 14,102,969
<PP&E> 116,023,840
<DEPRECIATION> 49,372,197
<TOTAL-ASSETS> 82,916,884
<CURRENT-LIABILITIES> 12,638,923
<BONDS> 8,545,144
<COMMON> 961,132
0
0
<OTHER-SE> 31,928,639
<TOTAL-LIABILITY-AND-EQUITY> 82,916,884
<SALES> 68,159,660
<TOTAL-REVENUES> 68,250,608
<CGS> 61,873,783
<TOTAL-COSTS> 61,873,783
<OTHER-EXPENSES> 1,317,671
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,494,336
<INCOME-PRETAX> 2,564,818
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,564,818
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,564,818
<EPS-PRIMARY> 2.74
<EPS-DILUTED> 2.74
</TABLE>
