<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, 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 December 31, 1997.
Class Outstanding at December 31, 1997
- ------------------------------------ --------------------------------
Common Stock, $1 Par Value 935,220 Shares
<PAGE>
<PAGE> 2
BLUE DIAMOND COAL COMPANY
INDEX
Page
PART I. FINANCIAL INFORMATION Number
------
Item 1. Financial Statements
Consolidated Condensed Balance Sheet
December 31, 1997 (Unaudited) and
March 31, 1997 (Audited)......................................3
Consolidated Condensed Statement of
Income (Unaudited) - Three-Months and Nine-Months
Ended December 31, 1997 and 1996..............................5
Consolidated Condensed Statements of
Changes in Cash Flows (Unaudited)
Nine-Months Ended December 31, 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>
<PAGE> 3
PART I. FINANCIAL INFORMATION
BLUE DIAMOND COAL COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
December 31 March 31
1997 1997
------------ -----------
<S> (Unaudited)
ASSETS
CURRENT ASSETS <C> <C>
Cash $ 17,092 $ 98,657
Short Term Investments 0 0
Accounts and Notes Receivable 8,664,339 7,991,264
Inventories - Coal 3,240,462 5,588,665
Inventories - Supplies 1,970,197 1,864,524
Other Current Assets 55,655 468,017
----------- -----------
TOTAL CURRENT ASSETS 13,947,745 16,011,127
PROPERTY, PLANT AND EQUIPMENT 114,166,229 112,509,247
Less: Accumulated Depreciation & Depletion 49,090,457 46,328,486
----------- -----------
NET PROPERTY, PLANT & EQUIPMENT 65,075,772 66,180,761
Investments 515,966 515,966
Other Assets 2,322,541 1,672,196
----------- -----------
TOTAL ASSETS $81,862,024 $84,380,050
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes Payable $ 0 $ 0
Current Notes Payable and Capital Leases 268,545 2,224,012
Accounts Payable and Accrued Expenses 9,037,388 9,678,440
Current Portion of Reorganization Liabilities 463,447 441,669
----------- -----------
TOTAL CURRENT LIABILITIES 9,769,380 12,344,121
LONG-TERM LIABILITIES
Long-term Debt 6,245,410 8,717,519
Reserve for Health Care & Workers' Compensation 23,487,557 24,103,997
Reorganization Liabilities 2,070,533 2,414,503
Deferred Income Taxes 1,569,500 1,569,500
Other Liabilities 825,474 738,244
---------- ----------
TOTAL LONG-TERM LIABILITIES 34,198,474 37,543,763
<PAGE>
<PAGE> 4
STOCKHOLDERS' EQUITY
Common Stock - $1 Par Value, 1,000,000
Shares Authorized, 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 12/31 & 3/31 (2,197,420) (2,197,420)
Retained Earnings 14,824,978 11,422,974
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 37,894,170 34,492,166
---------- ----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $81,862,024 $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>
<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
-------------------------- -------------------------
1997 1996 1997 1996
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES
Net Product Sales $23,031,562 $22,029,064 $70,490,202 $68,159,660
Interest Income 8,201 22,101 20,768 66,948
Gain (Loss) on Sale
of Fixed Assets 0 0 5,000 24,000
---------- ---------- ---------- ----------
TOTAL REVENUES 23,039,763 22,051,165 70,515,970 68,250,608
COSTS AND EXPENSES
Operating Expenses
and Purchased Products 16,816,758 16,317,487 53,198,179 50,176,949
Other Operating Charges 3,586,512 3,841,477 10,683,861 11,696,834
Administrative, Selling &
Transportation Expenses 395,000 377,803 1,260,000 1,307,699
Interest Expense 642,844 793,401 2,077,543 2,494,336
Other Expense (166,272) (47,941) (105,617) 9,972
---------- ---------- ---------- ----------
TOTAL COSTS AND EXPENSES 21,274,842 21,282,227 67,113,966 65,685,790
Income Before Taxes 1,764,921 768,938 3,402,004 2,564,818
Income Tax Expense 0 0 0 0
---------- ---------- ---------- ----------
NET INCOME $ 1,764,921 $ 768,938 $ 3,402,004 $ 2,564,818
========== ========== ========== ==========
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 $1.89 $0.82 $3.64 $2.74
==== ==== ==== ====
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
-----------------------------
1997 1996
<S> ---------- ------------
OPERATING ACTIVITIES <C> <C>
Funds Provided (Used) from Operations,
Adjusted for Depreciation and Gain on
Sale of Fixed Assets $6,163,976 $5,724,018
(Increase) Decrease in Accounts Receivables (673,075) 2,043,457
(Increase) Decrease in Inventories 2,242,530 (754,081)
(Increase) Decrease in Prepaid Assets (237,983) 566,658
(Decrease) Increase in Accounts Payable (1,492,454) (2,112,840)
Other Changes from Operations 0 0
--------- ----------
NET CASH FLOW PROVIDED (USED)
BY OPERATIONS ACTIVITIES $6,002,994 $5,467,212
FINANCING ACTIVITIES
Issuance (Reduction) of Short-Term Debt-Net (37,512) (1,201,630)
Issuance (Reduction) of Long-Term Debt-Net (4,200,606) (3,002,337)
Addition (Reduction) in Capital Lease-Net (189,459) (176,686)
--------- ----------
CASH PROVIDED (USED)
BY FINANCING ACTIVITIES (4,427,577) (4,380,653)
INVESTMENT ACTIVITIES
Expenditures for Property, Plant
and Equipment (1,656,982) (991,350)
(Increase) Reduction of
Employee Notes Receivable 0 0
--------- ----------
NET CASH USED BY INVESTING ACTIVITIES (1,656,982) (991,350)
--------- ----------
NET INCREASE (DECREASE) IN CASH
& CASH EQUIVALENTS (81,565) 95,209
--------- ----------
Cash and Cash Equivalents
at Beginning of Period 98,657 304,815
--------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 17,092 $ 400,024
========= ==========
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
<PAGE>
<PAGE> 7
BLUE DIAMOND COAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
December 31, 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 December 31, 1997 and
March 31, 1997, the results of operations for the three-month and
nine-month periods ended December 31, 1997 and 1996 and cash flows for
the nine-month periods ended December 31, 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.
<PAGE> 8
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.
NOTE G: POTENTIAL SALE OF COMPANY
On December 16, 1997, Hamilton Holdings, Ltd. (Hamilton), the current
owner of 50.2% of the outstanding shares of the Company, and James
River Coal Company (James River) announced the execution of a Proxy
and Option Agreement whereby Hamilton granted James River an option to
purchase all its shares for $60.413 in cash. James River has also
announced its intent to purchase the entire Company for $60.413 per
share in cash.
<PAGE>
<PAGE> 9
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, 1997 and 1996 are summarized as
follows:
<TABLE>
<CAPTION>
Three-Months Ended Dec. 30 Nine-Months Ended
Dec. 30
--------------------------
- -------------------------
1997 1996 1997 1996
----------- ---------- -----------
- -----------
<S> <C> <C> <C> <C>
Net Product sales $23,031,562 $22,029,064 $70,490,202
$68,159,660
Operating expenses and
purchased products 16,816,758 16,317,487 53,198,179
50,176,949
Other operating expense 3,586,512 3,841,477 10,683,861
11,696,834
Adm. Selling and
Transportation expenses 395,000 377,803 1,260,000
1,307,699
---------- ---------- ----------
- ----------
Total Expenses 20,798,270 20,536,767 65,142,040
63,181,482
---------- ---------- ----------
- ----------
INCOME FROM COAL
OPERATIONS $ 2,233,292 $ 1,492,297 $ 5,348,162 $
4,978,178
========== ========== ==========
==========
Tons sold 783,681 778,287 2,385,099
2,345,388
Sales per ton $29.39 $28.31 $29.55
$29.06
Cost of sales per ton 26.54 26.39 27.31
26.94
----- ----- -----
- -----
Margin per ton $ 2.85 $ 1.92 $ 2.24 $
2.12
===== ===== =====
=====
</TABLE>
The Company's coal operations have consistently generated quarterly
income as shown below:
<TABLE>
<CAPTION>
FISCAL YEARS ENDED MARCH 31
----------------------------------------
1996 1997 1998
---------- ---------- ----------
<S> <C> <C> <C>
April to June $2,340,400 $ 929,300 $2,004,500
July to September 2,426,800 1,644,400 1,110,400
October to December 2,076,400 1,492,300 2,233,300
January to March (878,100) 2,487,400
--------- --------- ---------
Fiscal Year's Total $5,965,500 $6,553,400 $5,348,200
========= ========= =========
Tons Sold 3,008,400 3,075,300 2,385,100
Margin per ton $1.98 $2.13 $2.24
/TABLE
<PAGE>
<PAGE> 10
Interest expense accrued has been incurred as shown below:
<TABLE>
<CAPTION>
Fiscal Years Ended
March 31st 1998
-----------------------
- ----------------------
1997 1996 9 Months
Annualized
---------- ---------- --------
- ----------
<S> <C> <C> <C> <C>
Bank Debt $1,786,800 $1,281,000 $ 716,000 $
954,700
Coal Act Healthcare 1,598,600 1,269,200 935,200
1,247,000
Kentucky Workers' Compensation 558,400 619,600 426,300
568,400
--------- --------- -------
- ---------
$3,943,800 $3,169,800 $2,077,500
$2,770,100
========= ========= =========
=========
</TABLE>
Management anticipates similar future results; however, a proposal to
merge the Company with James River Coal Company is being considered by
the Company's Board of Directors. Such a merger could significantly
affect operations as well as interest expense. Management anticipates
a deregistration of the Company with the Securities and Exchange
Commission and hopefully awaits the elimination of filing requirements
for annual and quarterly reports under Section 13 or 15(d) of the
Securities Exchange Act of 1934.
FINANCIAL CONDITION AND LIQUIDITY
The Company's working capital ratio was 1.43 at December 31st,
compared to 1.30 at the preceding March 31st. Capital expenditures of
$1,657,000 for nine months compare to a $2,600,000 projected total for
the year.
Pre-petition Kentucky Workers' Compensation payments declined to less
than $300,000 for the current quarter, compared to a quarterly average
of $353,700, $346,600 and $432,200 for the six-month periods ended
9/30/97, 3/31/97 and 9/30/96, respectively. Coal Act payments
amounted to $619,000 for the current quarter compared to a quarterly
average of $385,900, $417,200 and $793,200 for the above six-month
periods, respectively.
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 December 31, 1997.
<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 10, 1998 Ted B. Helms
---------------------------
Ted B. Helms
President
Date: February 10, 1998 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, 1997
(UNAUDITED) AND THE CONSOLIDATED CONDENSED STATEMENT OF INCOME FOR THE
NINE MONTHS ENDED DECEMBER 31, 1997 (UNAUDITED) AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 17,092
<SECURITIES> 0
<RECEIVABLES> 8,664,339
<ALLOWANCES> 0
<INVENTORY> 5,210,659
<CURRENT-ASSETS> 13,947,745
<PP&E> 114,166,229
<DEPRECIATION> 49,090,457
<TOTAL-ASSETS> 81,862,024
<CURRENT-LIABILITIES> 9,769,380
<BONDS> 6,245,410
<COMMON> 961,132
0
0
<OTHER-SE> 36,933,038
<TOTAL-LIABILITY-AND-EQUITY> 81,862,024
<SALES> 70,490,202
<TOTAL-REVENUES> 70,515,970
<CGS> 63,882,040
<TOTAL-COSTS> 63,382,040
<OTHER-EXPENSES> 1,154,383
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,077,543
<INCOME-PRETAX> 3,402,004
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,402,004
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,402,004
<EPS-PRIMARY> 3.64
<EPS-DILUTED> 3.64
</TABLE>
