SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1997 Commission File Number 0-10610
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BLUE DIAMOND COAL COMPANY
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(Exact name of registrant as specified in its charter)
Delaware 62-0133200
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(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
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (423) 588-8511
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of June 30, 1997.
Class Outstanding at June 30, 1997
- ------------------------------------ ----------------------------
Common Stock, $1 Par Value 935,220 Shares
BLUE DIAMOND COAL COMPANY
INDEX
Page
PART I. FINANCIAL INFORMATION Number
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Item 1. Financial Statements
Consolidated Condensed Balance Sheet
June 30, 1997 (Unaudited) and
March 31, 1997 (Audited)......................................3
Consolidated Condensed Statement of
Income (Unaudited) - Three-Months
Ended June 30, 1997 and 1996..................................5
Consolidated Condensed Statements of
Changes in Cash Flows (Unaudited)
Three Months Ended June 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
PART I. FINANCIAL INFORMATION
BLUE DIAMOND COAL COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
June 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 8,592,191 7,991,264
Inventories - Coal 6,715,398 5,588,665
Inventories - Supplies 1,947,404 1,864,524
Other Current Assets 465,615 468,017
----------- -----------
TOTAL CURRENT ASSETS $ 17,741,657 $ 16,011,127
PROPERTY, PLANT AND EQUIPMENT 113,090,476 112,509,247
Less: Accumulated Depreciation & Depletion 47,460,836 46,328,486
----------- -----------
NET PROPERTY, PLANT & EQUIPMENT 65,629,640 66,180,761
Investments 515,966 515,966
Other Assets 1,522,817 1,672,196
----------- -----------
TOTAL ASSETS $ 85,410,080 $ 84,380,050
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes Payable $ -0- -0-
Current Notes Payable and Capital Leases 2,198,498 2,224,012
Accounts Payable and Accrued Expenses 10,029,386 9,678,440
Current Portion of Reorganization Liabilities 447,650 441,669
----------- -----------
TOTAL CURRENT LIABILITIES 12,675,534 12,344,121
LONG-TERM LIABILITIES
Long-term Debt 8,088,066 8,717,519
Reserve for Health Care & Workers' Compensation 24,291,175 24,103,997
Reorganization Liabilities 2,306,337 2,414,503
Deferred Income Taxes 1,569,500 1,569,500
Other Liabilities 765,474 738,244
----------- -----------
TOTAL LONG-TERM LIABILITIES 37,020,552 37,543,763
STOCKHOLDERS' EQUITY
Common Stock - $1 Par Value, 1,000,000 Shares
961,132 Issued (Including Treasury Stock) 961,132 961,132
Additional Paid-In-Capital 24,305,480 24,305,480
Treasury Stock-25,912 Shares at 6/30 & 3/31 (2,197,420) (2,197,420)
Retained Earnings 12,644,802 11,422,974
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TOTAL STOCKHOLDERS' EQUITY 35,713,994 34,492,166
----------- -----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 85,410,080 $ 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.
BLUE DIAMOND COAL COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF INCOME
UNAUDITED
<TABLE>
<CAPTION>
Three Months Ended June 30
--------------------------
1997 1996
------------ ------------
<S> <C> <C>
REVENUES
Net Product Sales $22,293,433 $21,511,740
Interest Income 4,741 3,891
Gain (Loss) on Sale
of Fixed Assets 0 0
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TOTAL REVENUES 22,298,174 21,515,631
COSTS AND EXPENSES
Operating Expenses
and Purchased Products 15,816,838 15,188,532
Other Operating Charges 4,012,132 4,001,791
Administrative, Selling &
Transportation Expenses 460,000 479,896
Interest Expense 740,362 862,933
Other Expense 47,014 53,211
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TOTAL COSTS AND EXPENSES 21,076,346 20,586,363
Income Before
Income Tax Expense 1,221,828 929,268
Income Tax Expense 000 000
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NET INCOME $ 1,221,828 929,268
========== ==========
Average Number of
Common Shares Outstanding 935,220 935,220
======= =======
PER SHARE OF COMMON STOCK:
Net Income Based on
Average Shares Outstanding $1.31 $0.99
==== ====
Cash Dividends Declared
and Paid $0.00 $0.00
==== ====
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
BLUE DIAMOND COAL COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN CASH FLOWS
UNAUDITED
<TABLE>
<CAPTION>
Three Months Ended June 30
-----------------------------
1997 1996
<S> ----------- -----------
OPERATING ACTIVITIES <C> <C>
Funds Provided (Used) from Operations,
Adjusted for Depreciation and Gain on
Sale of Fixed Assets $2,354,178 $1,991,531
(Increase) Decrease in Accounts Receivables (600,927) 43,111
(Increase) Decrease in Inventories (1,209,613) (1,960,792)
(Increase) Decrease in Prepaid Assets 151,781 318,690
(Decrease) Increase in Accounts Payable 463,169 989,539
Other Changes from Operations 0 0
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NET CASH FLOW PROVIDED (USED)
BY OPERATING ACTIVITIES $1,158,588 1,382,079
FINANCING ACTIVITIES
Issuance (Reduction) of Short-Term Debt-Net (30,000) (743,026)
Issuance (Reduction) of Long-Term Debt-Net (562,912) (677,758)
Addition (Reduction) in Capital Lease-Net (62,055) (57,870)
--------- ----------
CASH PROCEEDS USED BY FINANCING ACTIVITIES (654,967) (1,478,654)
INVESTMENT ACTIVITIES
Expenditures for Property, Plant
and Equipment (581,229) (197,229)
(Increase) Reduction of
--------- ---------
NET CASH USED BY INVESTING ACTIVITIES (581,229) (197,229)
--------- ---------
NET INCREASE (DECREASE) IN CASH
& CASH EQUIVALENTS (77,608) (293,804)
--------- ----------
Cash and Cash Equivalents
at Beginning of Period 98,657 304,815
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 21,049 $ 11,011
========= ==========
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
BLUE DIAMOND COAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
June 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 the financial position as of June 30, 1997 and
March 31, 1997, the results of operations for the three-month periods
ended June 30, 1997 and 1996 and cash flows for the three-month
periods ended June 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, 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"). As Debtor-in-
Possession, the Company continued to operate its business and manage
its properties.
A 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 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 amount reserved for future
Kentucky workers' compensation claims is $8,174,985 at June 30, 1997.
Effective June 19, 1991, the Company obtained and continues to carry
commercial insurance to cover its current State and Federal workers'
compensation liabilities.
NOTE E -- UMWA RETIREE HEALTHCARE BENEFITS LIABILITY
During 1994, the Company received notice from the Social Security
Administration (SSA) claiming the Company is responsible for health
care and death benefit premiums for certain retired coal miners who
were members of the United Mine Workers of America (UMWA) and their
beneficiaries pursuant to the Coal Industry Retiree Health Benefit Act
of 1992 (the Coal Act). The recorded reserve for payments was
$18,111,559 at June 30, 1997.
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 challenged the
constitutionality of the Act discussed in the preceding note. The
lawsuit was dismissed and all appeals have been exhausted.
The Company has made a request to the Social Security Administration
for relief based on an administrative review of approximately one-
third of the assigned individuals. This matter could cause future
payments under the Coal Act to be reduced significantly.
The ultimate outcome of each of these proceedings is uncertain at the
present time.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
Results of the Company's coal operations for the three-month periods
ended June 30, 1997 and 1996 are summarized as follows:
<TABLE>
<CAPTION>
Three-Months Ended June 30
--------------------------
1997 1996
----------- ------------
<S> <C> <C>
Net Product sales $22,293,433 $21,511,740
Operating expenses and
purchased products 15,816,838 15,188,532
Other operating expense 4,012,132 4,001,791
Adm. Selling and
Transportation expenses 460,000 479,896
---------- ----------
Total Expenses 20,288,970 19,670,219
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INCOME FROM COAL
OPERATIONS $ 2,004,463 $ 1,841,521
========== ==========
Tons sold 739,418 733,686
Sales per ton $30.15 $29.32
Cost of sales per ton 27.44 26.81
----- -----
Margin per ton $ 2.71 $ 2.51
===== =====
</TABLE>
For the quarter ended June 30 compared to the same period of the
preceding year, maximization of premiums for coal sold on long term
contracts resulted in an $0.83 per ton (2.8%) increase in realization.
Cost increases of $0.63 per ton (2.3%) reflected higher costs of
supplies, coal valuation and purchased coal offset by lower royalty
costs. Soft market conditions resulted in higher coal inventory, the
sale of which represents the biggest challenge facing the Company.
Interest expense for comparable quarters:
1997 1996
-------- --------
Kentucky Workers' Compensation $145,723 $161,489
Coal Act Premiums 313,329 328,965
Bank and Other Interest 281,310 372,479
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$740,362 $862,933
======= =======
Less debt, lower reserves and lower interest rates resulted in a 14.2%
decrease in interest expense. This trend is expected to continue.
FINANCIAL CONDITION AND LIQUIDITY
The Company continued to make all payments pursuant to its 1992
Reorganization Plan, amounting to $102,200 for the quarter compared to
$108,700 for the previous year's quarter. The Company's working
capital ratio increased from 1.30 at March 31st to 1.40 at June 30th.
Trade accounts receivable and coal inventories increased from
$12,718,200 at March 31, 1997 to $14,220,200 at June 30, 1997 due to
higher inventories. Capital expenditures amounted to $581,200.
Because of credits taken for previous over-payments, Coal Act premiums
for the quarter amounted to $2,300 compared to $793,200 for the
quarter ended June 30, 1996. Kentucky Workers' Compensation payments
amounted to $359,200 versus $472,300 for the same prior year quarter,
reflecting the continuing final payout of claims.
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits - Ex-27 Financial Data Schedule, Page 12
(b) Reports on Form 8-K - No current reports were filed
during the quarter ended June 30, 1997.
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: Ted B. Helms
----------------------- --------------------------
Ted B. Helms
President
Date: W. S. Lyon, III
----------------------- --------------------------
W. S. Lyon, III
Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE CONSOLIDATED CONDENSED BALANCE SHEET AND THE CONSOLIDATED
CONDENSED STATEMENT OF INCOME FOR THE THREE MONTHS ENDED JUNE 30, 1997
(UNAUDITED) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 21,049
<SECURITIES> 0
<RECEIVABLES> 8,592,191
<ALLOWANCES> 0
<INVENTORY> 8,662,802
<CURRENT-ASSETS> 17,741,657
<PP&E> 113,090,476
<DEPRECIATION> 47,460,836
<TOTAL-ASSETS> 85,410,080
<CURRENT-LIABILITIES> 12,675,534
<BONDS> 8,088,066
<COMMON> 961,132
0
0
<OTHER-SE> 34,752,862
<TOTAL-LIABILITY-AND-EQUITY> 85,410,080
<SALES> 22,293,433
<TOTAL-REVENUES> 22,298,174
<CGS> 19,828,970
<TOTAL-COSTS> 19,828,970
<OTHER-EXPENSES> 507,014
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 740,362
<INCOME-PRETAX> 1,221,828
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,221,828
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,221,828
<EPS-PRIMARY> 1.31
<EPS-DILUTED> 1.31
</TABLE>
