PR Newswire | Feb 9, 2021 06:30AM EST

02/09 05:30 CST

Arch Resources Reports Fourth Quarter 2020 ResultsMaintains operational excellence in core metallurgical segment despite virus-related impactsNears completion of world-class Leer South growth projectAdvances strategic plan for legacy thermal assets, accelerating pivot towards steel and metallurgical markets ST. LOUIS, Feb. 9, 2021

ST. LOUIS, Feb. 9, 2021 /PRNewswire/ -- Arch Resources, Inc. (NYSE: ARCH) today reported a net loss of $78.5 million, or $5.17 per diluted share, in the fourth quarter of 2020, compared with a net loss of $8.6 million, or $0.57 per diluted share, in the prior-year period. The net loss included a $45.0 million charge primarily related to the planned, accelerated closure of the Coal Creek mine in the Powder River Basin. Arch had adjusted earnings before interest, taxes, depreciation, depletion, amortization, accretion on asset retirement obligations (ARO), and non-operating expenses ("adjusted EBITDA") 1 of $4.1 million in the fourth quarter of 2020, which included a $2.0 million non-cash mark-to-market loss associated with the company's coal-hedging activities. This compares to $43.7 million of adjusted EBITDA recorded in the fourth quarter of 2019, which included a $1.3 million non-cash mark-to-market loss associated with the company's coal-hedging activities. Revenues totaled $360.6 million for the three months ended December 31, 2020, versus $549.5 million in the prior-year quarter.

Despite the challenges created by the pandemic, Arch made significant progress on a number of strategic objectives during 2020. Among the highlights, Arch:

* Maintained excellent momentum at the Leer South project, which remains on budget and on track to commence longwall production in the third quarter; * Buttressed liquidity in support of the ongoing buildout of Leer South with three successful financing efforts; * Maintained its first-quartile coking coal cost structure despite market-driven volume reductions; * Streamlined the organization via a voluntary separation program that reduced corporate staffing by 25 percent and lowered projected annual overhead costs by $10 million; * Drove further progress in the shift to metallurgical markets via the contribution of the Viper mine to Knight Hawk; and * Initiated an accelerated final reclamation and closure plan in the Powder River Basin.

"I am incredibly proud of how the Arch team persevered to execute at such a high level in the face of prolonged market headwinds and an increase in COVID-19 rates that mirrored the nationwide surge," said Paul A. Lang, Arch's CEO and president. "Through our team's significant efforts, we have laid the foundation for robust value creation as the world recovers from the pandemic, the economic rebound continues, and the global transition to a low-carbon economy advances."

"As we move forward in 2021, we are continuing to prioritize the safety and health of employees, taking all recommended precautions to limit the spread of infection, and preparing for the wider availability of the vaccine," Lang added. "At the same time, we expect to benefit from an ongoing resurgence in global steel output, rapidly improving metallurgical market dynamics and - most significantly - the third-quarter startup of the Leer South longwall mine."

Arch estimates that it incurred additional costs of $6 million during the fourth quarter - primarily at its underground metallurgical operations - due to virus-related quarantines and lost shifts in the latter part of the quarter, along with operational adjustments, intensive hygiene-driven protocols, and associated output and shipment level reductions.

Leadership on Key ESG Metrics

During 2020, Arch demonstrated operational excellence across a wide range of environmental, social and governance (ESG) metrics. Arch continued its industry leadership in safety, with a lost-time injury rate approximately three times better than its industry peers. Arch also again set the industry standard among large integrated producers for environmental compliance, matching its best year ever in this critical area of performance. In addition, the company recorded only one water quality exceedance during 2020 - against 168,000 parameters tested across more than 650 measuring points - equating to a 99.999 percent compliance rate.

During the year, Arch's subsidiary operations also claimed two Sentinels of Safety awards, the nation's highest distinction for mine safety; the Department of Interior's Good Neighbor Award, the nation's highest honor for community outreach and engagement; the Milestone Safety Award, the state of West Virginia's top safety honor; and the Greenlands Award, the state of West Virginia's top reclamation honor. Leer and Leer South - the company's flagship operations - set the company standard by claiming three of these major awards.

"Although we long ago established Arch as the industry leader in sustainability and social responsibility, we remain sharply focused on driving still further improvements in our ESG-related performance, which we regard as pivotal for long-term success," Lang said.

Leer South Update

During the fourth quarter, Arch maintained excellent momentum in the development of the Leer South longwall mine even as it navigated the impacts of the pandemic. During the quarter just ended, Arch invested a total of $57 million at Leer South. Excluding capitalized interest, Arch expended a total of $206 million on the project in 2020, and a total of $306 million since the project's launch in early 2019.

"We are in the stretch run in the Leer South buildout, and the project team continues to do an exceptional job of managing capital spending and staying on schedule for a third-quarter 2021 start-up of the longwall," said John T. Drexler, Arch's chief operating officer. "Importantly, we remain comfortable with our original projection of a total capital spend of $360 million to $390 million to complete the project, although the impact of COVID-19-related shift losses and quarantining efforts on our capitalized development costs are now likely to push us towards the upper end of that range." As noted previously, the total capital spend guidance for Leer South excludes approximately $23.5 million associated with the replacement of the shields that were lost at Mountain Laurel and for which Arch received a comparable insurance recovery in 2020.

With the addition of Leer South, Arch expects to expand its High-Vol A metallurgical output by an incremental 3 million tons annually; enhance its already advantageous position on the global cost curve; strengthen its coking coal profit margins across a wide range of market conditions; and cement its position as the leading supplier of High-Vol A coking coal globally.

Leer South has started to take delivery of the longwall equipment, and expects to have the full longwall system on site by the end of the first quarter. In the second quarter, the team will be tying in the mine's conveyance systems to the new preparation plant during a 30-day period in which development mining will pause but longwall setup and final mine reconfiguration will continue.

Strategic Plan for Legacy Thermal Assets

During the fourth quarter, Arch took another step in its ongoing transition towards steel and metallurgical markets by contributing its Viper thermal mine in Illinois to Knight Hawk Coal, which will operate the mine going forward. As part of the transaction, Arch's equity stake in Knight Hawk increased to 49.5 percent from 48.0 percent, and Knight Hawk assumed long-term undiscounted mine closure liabilities totaling $21.0 million.

"We view the Viper transaction as a highly positive outcome in our ongoing efforts to identify and execute on strategic alternatives for our thermal assets," Lang said. "Significantly, Knight Hawk shares Arch's deep commitment to safety, environmental stewardship and social responsibility, and recognizes and values the essential contributions of the Viper workforce in the mine's ongoing success."

Arch is also pressing forward with its plans to reduce its operational footprint in the Powder River Basin, even as it explores strategic alternatives for those assets. As a next step in this effort, Arch is proceeding with the accelerated closure and final reclamation of the Coal Creek mine, with a concerted focus on reducing highly inflated, state-calculated surety bond requirements. The company plans to ship on its existing contracts at Coal Creek during 2021 before beginning final closure of the mine's active pit in 2022.

Through these accelerated efforts, Arch expects to reduce the total asset retirement obligation (ARO) at Coal Creek by an estimated $40 million, or 80 percent of the ARO at the mine, over the course of the next 18 months. Simultaneously, Arch is laying the groundwork for systematically reducing the operational footprint at its Black Thunder mine.

"We are driving ahead with our strategic pivot with a strong sense of urgency," Lang said. "Our objective is to continue to harvest value and cash from our legacy thermal assets, even as we execute on reducing our long-term closure obligations in a measured, systematic and sustained way."

"We are tremendously proud of the accomplishments of our talented, dedicated and resilient thermal operating teams, who have shown their mettle again and again in a difficult and declining demand environment," Lang added. "We value and appreciate their staunch commitment to operating at the highest level while adjusting effectively and nimbly to the realities of the current market environment."

Operational Update

"Our core metallurgical segment maintained its focus on tight, disciplined cost control even while navigating a dramatic increase in infection rates during the fourth quarter," Drexler said. "For the full year, the team achieved metallurgical segment cash costs of $61.13 per ton despite lower-than-anticipated volumes and other COVID-19-related costs. With widespread availability of the vaccine just around the corner and the startup of Leer South imminent, we are targeting a marked improvement in our unit costs over the course of the next two years."

After relatively modest impacts from the pandemic during the first three quarters of the year, Arch's operations experienced a surge in infection rates that accelerated in the latter half of the fourth quarter. Arch estimates that the virus increased the metallurgical segment's per-ton costs by approximately $3 per ton, while reducing production and shipment levels by more than 200,000 tons during the quarter.

Metallurgical

4Q20 3Q20 4Q19

Tons sold (in millions) 1.8 2.0 2.0

Coking 1.4 1.7 1.8

Thermal 0.3 0.3 0.2

Coal sales per ton sold $72.18 $67.04 $90.51

Coking $83.97 $75.18 $97.39

Thermal $19.31 $18.09 $33.25

Cash cost per ton sold $63.59 $60.78 $70.02

Cash margin per ton $8.59 $6.26 $20.49

Coal sales per ton sold and cash cost per ton sold are defined and reconciledunder "Reconciliation of non-GAAP measures."

Mining complexes included in this segment are Beckley, Leer, Mountain Laureland Leer South/Sentinel.

While COVID-19-related precautions and restrictions are expected to continue to hamper the metallurgical segment's performance, Arch expects gradually improving production and shipment levels in the first half of 2021, followed by further progress spurred by the start-up of the Leer South longwall in the year's back half.

Powder River Basin

4Q20 3Q20 4Q19

Tons sold (in millions) 13.3 14.3 18.1

Coal sales per ton sold $12.46 $12.41 $12.07

Cash cost per ton sold $10.88 $10.03 $10.70

Cash margin per ton $1.58 $2.38 $1.37

Coal sales per ton sold and cash cost per ton sold are defined and reconciledunder "Reconciliation of non-GAAP measures."

Mining complexes included in this segment are Black Thunder and Coal Creek.

Arch's legacy Powder River Basin segment continued to generate significant levels of cash in excess of capital expended during the fourth quarter of 2020, despite thermal demand weakness.

Other Thermal

4Q20 3Q20 4Q19

Tons sold (in millions) 0.8 0.8 2.1

Coal sales per ton sold $31.16 $32.06 $35.41

Cash cost per ton sold $40.37 $35.02 $31.81

Cash margin per ton ($9.21) ($2.96) $3.60

Coal sales per ton sold and cash cost per ton sold are defined and reconciledunder "Reconciliation of non-GAAP measures."

Mining complexes included in this segment are Coal-Mac, Viper and West Elk.Coal-Mac is included through December 13, 2019, the date of divestiture.

Arch is projecting modest improvements in the performance of the West Elk mine - the only remaining operation in the segment post the Viper transaction - due to an improving outlook for export sales associated with the recent step-up in seaborne pricing.

Financial and Liquidity Update

Arch ended the fourth quarter with $284.3 million of cash and cash equivalents and short-term investments on the balance sheet, and total available liquidity of $314.9 million.

During the fourth quarter, Arch successfully completed a previously disclosed and oversubscribed $155.3 million convertible debt issuance that carries a 5.25 percent interest rate, with a portion of the proceeds used to purchase a capped call to increase the effective conversion price to $52.26 per share. Net of the capped call, the proceeds totaled $137.7 million, bringing the total raised during 2020 to $244 million - at an average carrying cost of 6 percent - via the convertible debt offering and previously announced equipment financing and tax-exempt bond issuances conducted in prior quarters.

"Our continued ability to secure external financing at a very low carrying cost enabled us to drive forward with the Leer South buildout even in the unique and challenging macro environment that prevailed during most of 2020," said Matthew C. Giljum, Arch's chief financial officer. "As a result of these efforts, we remain on track to reap the benefits of a significant step-up in Arch's overall cash-generating capabilities when the Leer South longwall starts up in the third quarter of 2021, and to deliver still greater value for our shareholders as the market recovers."

During the fourth quarter, Arch continued to work closely with its surety bond providers on the long-term plans for final reclamation and closure of its thermal operations.

"We are pleased with our ongoing discussions with our surety bond providers, who recognize and support the steps we have taken - and are continuing to take - to strengthen our balance sheet, enhance our future cash-generating capabilities, and systematically address our bonding requirements and asset retirement obligations," Giljum said. "We expect our thermal mines to continue to generate sufficient levels of free cash to fund their own final reclamation and closure costs. We will put some of that cash to work immediately - through the accelerated closure of Coal Creek and other efforts - while directing the remainder to initiatives such as sinking funds to pre-fund future mine remediation costs."

Market Update

Global steel markets appear on course for a strong and sustained recovery. Global steel output was up by approximately 6 percent in December, and steel prices in key producing regions have increased by between 50 percent and 150 percent versus pandemic-driven lows. In fact, as a result of surging production across all global theaters in the back half of the year, 2020 global steel production is estimated to have recovered to nearly flat versus 2019 levels. In North America, blast furnace utilization rates currently stand at 76 percent - 25 percentage points higher than the recent low-water mark in early May - and that progress is emblematic of the strengthening under way in the rest of the world as well.

Global metallurgical markets have rebounded markedly, too, even with the continuing uncertainty surrounding Chinese import policies and Australian-mined coal. In fact, China's seaborne coking coal imports were up nearly 20 percent in 2020, and India's coking coal imports have risen in each of the past four months versus year-ago levels. As for pricing, the U.S. East Coast High-Vol A metallurgical price assessment has increased nearly 50 percent when compared to last summer's pandemic-driven lows.

In addition to resurgent demand, an extended round of supply cuts have also served to bring global coking coal markets back into healthier balance. Arch believes that well over 30 million tons of coking coal supply has been taken out of the market since the start of the downturn in mid-2019, with a significant percentage of those cuts expected to be permanent.

During the fourth quarter, Arch committed an additional 2.6 million tons of coking coal for 2021 delivery, principally at market-based pricing, and signed its first-ever term business with a Chinese producer. Arch continues to expand the breadth and depth of its High-Vol A customer base in preparation for the start-up of Leer South, and has found it necessary to ration sales of its Leer-brand product until the expected start-up of Leer South in the third quarter of 2021.

Looking Ahead

"As the world transitions to a post-pandemic future, we plan to capitalize on our carefully cultivated strengths and competencies, including our low-cost metallurgical assets, high-quality product slate, industry-leading ESG performance, top-tier marketing and logistics expertise and best-in-class growth project," Lang said. "We are confident in our ability to continue to drive operational excellence across all facets of the business while executing on our simple and clear plan for long-term value creation."

2021

Tons $ per ton

Sales Volume (in millions of tons)

Coking 7.4 - 8.2

Thermal 50.0 - 54.0

Total 57.4 62.2

Metallurgical (in millions of tons)

Committed, Priced Coking North American 1.8 $91.00

Committed, Unpriced Coking North American -

Committed, Priced Coking Seaborne 0.6 $81.48

Committed, Unpriced Coking Seaborne 3.9

Total Committed Coking 6.3

Committed, Priced Thermal Byproduct 0.5 $20.84

Committed, Unpriced Thermal Byproduct 0.2

Total Committed Thermal Byproduct 0.7

Average Metallurgical Cash Cost $57.00 - $60.00

Thermal (in millions of tons)

Committed, Priced 46.8 $12.80

Committed, Unpriced 3.0

Total Committed Thermal 49.8

Average Thermal Cash Cost $11.50 - $12.00

Corporate (in $ millions)

D,D&A $115.0 - $120.0

ARO Accretion $18.0 - $20.0

S,G&A - cash $58.0 - $66.0

S,G&A - non-cash $16.0 - $18.0

Net Interest Expense $23.0 - $25.0

Capital Expenditures $200.0 - $220.0

Tax Provision (%) Approximately 0%

Arch Resources is a premier producer of high-quality metallurgical products for the global steel industry. The company operates large, modern and highly efficient mines that consistently set the industry standard for both mine safety and environmental stewardship. Arch Resources from time to time utilizes its website - www.archrsc.com - as a channel of distribution for material company information. To learn more about us and our premium metallurgical products, go to www.archrsc.com.

Forward-Looking Statements: This press release contains "forward-looking statements" - that is, statements related to future, not past, events. In this context, forward-looking statements often address our expected future business and financial performance, and often contain words such as "should," "appears," "expects," "anticipates," "intends," "plans," "believes," "seeks," or "will." Forward-looking statements by their nature address matters that are, to different degrees, uncertain. For us, particular uncertainties arise from the COVID-19 pandemic, including its adverse effects on businesses, economies, and financial markets worldwide; from the impact of COVID-19 on efficiency, costs and production; from changes in the demand for our coal by the global steel industries and electric generation; from our ability to access the capital markets on acceptable terms and conditions; from legislation and regulations relating to the Clean Air Act and other environmental initiatives; from competition within our industry and with producers of competing energy sources; from our ability to successfully acquire or develop coal reserves; from operational, geological, permit, labor, transportation, and weather-related factors; from the effects of foreign and domestic trade policies, actions or disputes; from fluctuations in the amount of cash we generate from operations, which could impact, among other things, our ability to service our outstanding indebtedness and fund capital expenditures; from our ability to successfully integrate the operations that we acquire; from our ability to generate significant revenue to make payments required by, and to comply with restrictions related to, our indebtedness; from additional demands for credit support by third parties; and from numerous other matters of national, regional and global scale, including those of a political, economic, business, competitive or regulatory nature. These uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements. We do not undertake to update our forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. For a description of some of the risks and uncertainties that may affect our future results, you should see the risk factors described from time to time in the reports we file with the Securities and Exchange Commission.

1Adjusted EBITDA is defined and reconciled in the "Reconciliation of Non-GAAP measures" in this release.

Arch Resources, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(In thousands, except per share data)

Three Months Ended December 31, Twelve Months Ended December 31,

2020 2019 2020 2019

(Unaudited) (Unaudited)

Revenues $ 360,578 $ 549,480 $ $ 1,467,592 2,294,352

Costs, expenses and other operating

Cost of sales (exclusive of items shown separately below) 341,593 492,454 1,378,479 1,873,017

Depreciation, depletion and amortization 27,447 29,499 121,552 111,621

Accretion on asset retirement obligations 4,948 5,137 19,887 20,548

Change in fair value of coal derivatives and coal trading activities, net 1,956 1,250 5,219 (18,601)

Selling, general and administrative expenses 18,373 21,917 82,397 95,781

Costs related to proposed joint venture with Peabody Energy 149 7,044 16,087 13,816

Asset impairment and restructuring 45,009 - 221,380 -

Gain on property insurance recovery related to Mountain Laurel longwall - - (23,518) -

(Gain) loss on divestitures (136) 9,008 (1,505) 13,312

Preference Rights Lease Application settlement income - - - (39,000)

Other operating income, net (5,478) (9,869) (22,246) (19,012)

433,861 556,440 1,797,732 2,051,482

Income (loss) from operations (73,283) (6,960) (330,140) 242,870

Interest expense, net

Interest expense (4,532) (3,629) (14,432) (16,485)

Interest and investment income 297 1,751 3,808 9,691

(4,235) (1,878) (10,624) (6,794)

Income (loss) before nonoperating expenses (77,518) (8,838) (340,764) 236,076

Nonoperating (expenses) income

Non-service related pension and postretirement benefit (costs) credits (808) 74 (3,884) (2,053)

Reorganization items, net - (47) 26 24

(808) 27 (3,858) (2,029)

Income (loss) before income taxes (78,326) (8,811) (344,622) 234,047

Provision for (benefit from) income taxes 199 (260) (7) 248

Net income (loss) $ (78,525) $ (8,551) $ $ (344,615) 233,799

Net income (loss) per common share

Basic earnings (loss) per share $ (5.17) $ (0.57) $ $ (22.74) 14.42

Diluted earnings (loss) per share $ (5.17) $ (0.57) $ $ (22.74) 13.52

Weighted average shares outstanding

Basic weighted average shares outstanding 15,181 15,097 15,153 16,218

Diluted weighted average shares outstanding 15,181 15,097 15,153 17,298

Dividends declared per common share $ - $ 0.45 $ $ 0.50 1.80

Adjusted EBITDA (A) $ 4,134 $ 43,728 $ $ 23,743 363,167

(A) Adjusted EBITDA is defined and reconciled under "Reconciliation of Non-GAAPMeasures" later in this release.

Arch Resources, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands)

December 31, December 31,

2020 2019

(Unaudited)

Assets

Current assets

Cash and cash equivalents $ $ 187,492 153,020

Short-term investments 96,765 135,667

Restricted cash 5,953 -

Trade accounts receivable 110,869 168,125

Other receivables 3,053 21,143

Inventories 126,008 130,898

Other current assets 58,000 97,894

Total current assets 588,140 706,747

Property, plant and equipment, net 1,007,303 984,509

Other assets

Equity investments 71,783 105,588

Other noncurrent assets 55,246 70,912

Total other assets 127,029 176,500

Total assets $ 1,722,472 $ 1,867,756

Liabilities and Stockholders' Equity

Current liabilities

Accounts payable $ $ 103,743 133,060

Accrued expenses and other current liabilities 155,256 157,167

Current maturities of debt 31,097 20,753

Total current liabilities 290,096 310,980

Long-term debt 477,215 290,066

Asset retirement obligations 230,732 242,432

Accrued pension benefits 2,879 5,476

Accrued postretirement benefits other than 94,388 80,567pension

Accrued workers' compensation 244,695 215,599

Other noncurrent liabilities 98,906 82,100

Total liabilities 1,438,911 1,227,220

Stockholders' equity

Common Stock 253 252

Paid-in capital 767,484 730,551

Retained earnings 378,906 731,425

Treasury stock, at cost (827,381) (827,381)

Accumulated other comprehensive income (loss) (35,701) 5,689

Total stockholders' equity 283,561 640,536

Total liabilities and stockholders' equity $ 1,722,472 $ 1,867,756

Arch Resources, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(In thousands)

Twelve Months Ended December 31,

2020 2019

(Unaudited)

Operating activities

Net income (loss) $ $ (344,615) 233,799

Adjustments to reconcile to cash from operating activities:

Depreciation, depletion and amortization 121,552 111,621

Accretion on asset retirement obligations 19,887 20,548

Deferred income taxes 14,430 13,501

Employee stock-based compensation expense 17,435 21,989

Amortization relating to financing activities 5,599 3,691

Gain on property insurance recovery related to Mountain Laurel longwall (23,518) -

Loss (Gain) on disposals and divestitures, net (3,727) 8,304

Non-cash asset impairment and restructuring 198,007 -

Preference Rights Lease Application settlement income - (39,000)

Changes in:

Receivables 63,657 30,713

Inventories (9,126) (15,251)

Accounts payable, accrued expenses and other current liabilities (46,066) (28,222)

Income taxes, net 22,859 38,152

Other 24,732 19,869

Cash provided by operating activities 61,106 419,714

Investing activities

Capital expenditures (285,821) (266,356)

Minimum royalty payments (1,248) (1,249)

Proceeds from disposals and divestitures 1,007 6,135

Purchases of short-term investments (120,624) (205,216)

Proceeds from sales of short-term investments 158,708 233,074

Investments in and advances to affiliates, net (1,549) (5,499)

Proceeds from property insurance recovery related to Mountain Laurel longwall 23,518 -

Cash used in investing activities (226,009) (239,111)

Financing activities

Payments on term loan due 2024 (3,000) (3,000)

Proceeds from equipment financing 53,611 -

Proceeds from tax exempt bonds 53,090 -

Proceeds from convertible debt 155,250 -

Purchase of capped call related to convertible debt (17,543) -

Net payments on other debt (15,922) (5,373)

Debt financing costs (9,718) -

Dividends paid (8,245) (30,220)

Purchases of treasury stock - (244,998)

Payments for taxes related to net share settlement of equity awards (2,195) (8,961)

Other - 32

Cash provided by (used in) financing activities 205,328 (292,520)

Increase (decrease) in cash and cash equivalents, including restricted cash 40,425 (111,917)

Cash and cash equivalents, including restricted cash, beginning of period 153,020 264,937

Cash and cash equivalents, including restricted cash, end of period $ $ 193,445 153,020

Cash and cash equivalents, including restricted cash, end of period

Cash and cash equivalents $ $ 187,492 153,020

Restricted cash 5,953 -

$ $ 193,445 153,020

Arch Resources, Inc. and Subsidiaries

Schedule of Consolidated Debt

(In thousands)

December 31, December 31,

2020 2019

(Unaudited)

Term loan due 2024 ($288.8 million face $ 288,033 $ 290,825value)

Tax exempt bonds ($53.1 million face value) 53,090 -

Convertible Debt ($155.3 million face value) 115,367 -

Other 62,695 25,007

Debt issuance costs (10,873) (5,013)

508,312 310,819

Less: current maturities of debt 31,097 20,753

Long-term debt $ 477,215 $ 290,066

Calculation of net debt

Total debt (excluding debt issuance costs) $ 519,185 $ 315,832

Less liquid assets:

Cash and cash equivalents 187,492 153,020

Short term investments 96,765 135,667

284,257 288,687

Net debt $ 234,928 $ 27,145

Arch Resources, Inc. and Subsidiaries

Operational Performance

(In millions, except per ton data)

Three Months Ended Three Months Ended Three Months Ended December 31, 2020 September 30, 2020 December 31, 2019

(Unaudited) (Unaudited) (Unaudited)

Powder River Basin

Tons Sold 13.3 14.3 18.1

Segment Sales $ 165.5 $ 12.46 $ 177.5 $ 12.41 $ 218.3 $ 12.07

Segment Cash Cost of Sales 144.5 10.88 143.5 10.03 193.6 10.70

Segment Cash Margin 21.0 1.58 34.0 2.38 24.7 1.37

Metallurgical

Tons Sold 1.8 2.0 2.0

Segment Sales $ 126.6 $ 72.18 $ 132.1 $ 67.04 $ 181.0 $ 90.51

Segment Cash Cost of Sales 111.5 63.59 119.8 60.78 140.0 70.02

Segment Cash Margin 15.1 8.59 12.4 6.26 41.0 20.49

Other Thermal

Tons Sold 0.8 0.8 2.1

Segment Sales $ 24.4 $ 31.16 $ 26.3 $ 32.06 $ 75.4 $ 35.41

Segment Cash Cost of Sales 31.7 40.37 28.8 35.02 67.7 31.81

Segment Cash Margin (7.2) (9.21) (2.4) (2.96) 7.7 3.60

Total Segment Cash Margin $ 28.8 $ 43.9 $ 73.4

Selling, general and administrative expenses (18.4) (21.5) (21.9)

Other (6.3) (4.9) (7.8)

Adjusted EBITDA $ 4.1 $ 17.4 $ 43.7

Arch Resources, Inc. and Subsidiaries

Reconciliation of NON-GAAP Measures

(In thousands, except per ton data)

Included in the accompanying release, we have disclosed certain non-GAAPmeasures as defined by Regulation G.The following reconciles these items to the most directly comparable GAAPmeasure.

Non-GAAP Segment coal sales per ton sold

Non-GAAP Segment coal sales per ton sold is calculated as segment coal salesrevenues divided by segment tons sold. Segment coal sales revenues are adjustedfortransportation costs, and may be adjusted for other items that, due togenerally accepted accounting principles, are classified in "other income" onthe consolidatedstatements of operations, but relate to price protection on the sale of coal.Segment coal sales per ton sold is not a measure of financial performance inaccordance withgenerally accepted accounting principles. We believe segment coal sales per tonsold provides useful information to investors as it better reflects our revenuefor thequality of coal sold and our operating results by including all income fromcoal sales. The adjustments made to arrive at these measures are significant inunderstandingand assessing our financial condition. Therefore, segment coal sales revenuesshould not be considered in isolation, nor as an alternative to coal salesrevenues undergenerally accepted accounting principles.

Quarter ended December 31, 2020 Powder River Metallurgical Other Thermal Idle and Other Consolidated Basin

(In thousands)

GAAP Revenues in the Consolidated Statements of $ 169,730 $ 151,875 $ 34,015 $ 4,957 $ 360,578Operations

Less: Adjustments to reconcile to Non-GAAP Segment coalsales revenue

Coal risk management derivative settlements classified in - (29) (2,266) - (2,294) "other income"

Coal sales revenues from idled or otherwise disposed - - - 4,927 4,927 operations not included in segments

Transportation costs 4,224 25,306 11,835 30 41,395

Non-GAAP Segment coal sales revenues $ 165,506 $ 126,598 $ 24,446 $ - $ 316,550

Tons sold 13,288 1,754 784

Coal sales per ton sold $ 12.46 $ 72.18 $ 31.16

Quarter ended September 30, 2020 Powder River Metallurgical Other Thermal Idle and Other Consolidated Basin

(In thousands)

GAAP Revenues in the Consolidated Statements of $ 180,850 $ 168,054 $ 32,449 $ 908 $ 382,261Operations

Less: Adjustments to reconcile to Non-GAAP Segment coalsales revenue

Coal risk management derivative settlements classified in - (29) (2,552) - (2,581) "other income"

Coal sales revenues from idled or otherwise disposed - - - 903 903 operations not included in segments

Transportation costs 3,341 35,951 8,655 5 47,952

Non-GAAP Segment coal sales revenues $ 177,509 $ 132,132 $ 26,346 $ - $ 335,987

Tons sold 14,309 1,971 822

Coal sales per ton sold $ 12.41 $ 67.04 $ 32.06

Quarter ended December 31, 2019 Powder River Metallurgical Other Thermal Idle and Other Consolidated Basin

(In thousands)

GAAP Revenues in the Consolidated Statements of Operations $ 222,904 $ 221,551 $ 98,967 $ 6,058 $ 549,480

Less: Adjustments to reconcile to Non-GAAP Segment coalsales revenue

Coal risk management derivative settlements classified in - (616) (3,258) - (3,874) "other income"

Coal sales revenues from idled or otherwise disposed - - - 6,026 6,026 operations not included in segments

Transportation costs 4,567 41,165 26,849 32 72,613

Non-GAAP Segment coal sales revenues $ 218,337 $ 181,002 $ 75,376 $ - $ 474,715

Tons sold 18,086 2,000 2,129

Coal sales per ton sold $ 12.07 $ 90.51 $ 35.41

Arch Resources, Inc. and Subsidiaries

Reconciliation of NON-GAAP Measures

(In thousands, except per ton data)

Non-GAAP Segment cash cost per ton sold

Non-GAAP Segment cash cost per ton sold is calculated as segment cash cost ofcoal sales divided by segment tons sold. Segment cash cost of coal sales isadjustedfor transportation costs, and may be adjusted for other items that, due togenerally accepted accounting principles, are classified in "other income" onthe consolidatedstatements of operations, but relate directly to the costs incurred to producecoal. Segment cash cost per ton sold is not a measure of financial performanceinaccordance with generally accepted accounting principles. We believe segmentcash cost per ton sold better reflects our controllable costs and our operatingresults byincluding all costs incurred to produce coal. The adjustments made to arrive atthese measures are significant in understanding and assessing our financialcondition.Therefore, segment cash cost of coal sales should not be considered inisolation, nor as an alternative to cost of sales under generally acceptedaccounting principles.

Quarter ended December 31, 2020 Powder River Metallurgical Other Thermal Idle and Other Consolidated Basin

(In thousands)

GAAP Cost of sales in the Consolidated Statements of $ 148,926 $ 136,834 $ 43,504 $ 12,330 $ 341,593Operations

Less: Adjustments to reconcile to Non-GAAP Segment cashcost of coal sales

Diesel fuel risk management derivative settlements 188 - - - 188 classified in "other income"

Transportation costs 4,224 25,306 11,835 30 41,395

Cost of coal sales from idled or otherwise disposed - - - 10,362 10,362 operations not included in segments

Other (operating overhead, certain actuarial, etc.) - - - 1,938 1,938

Non-GAAP Segment cash cost of coal sales $ 144,514 $ 111,528 $ 31,669 $ - $ 287,711

Tons sold 13,288 1,754 784

Cash cost per ton sold $ 10.88 $ 63.59 $ 40.37

Quarter ended September 30, 2020 Powder River Metallurgical Other Thermal Idle and Other Consolidated Basin

(In thousands)

GAAP Cost of sales in the Consolidated Statements of $ 146,610 $ 155,729 $ 37,435 $ 5,765 $ 345,539Operations

Less: Adjustments to reconcile to Non-GAAP Segment cashcost of coal sales

Diesel fuel risk management derivative settlements (278) - - - (278) classified in "other income"

Transportation costs 3,341 35,951 8,655 5 47,952

Cost of coal sales from idled or otherwise disposed - - - 4,007 4,007 operations not included in segments

Other (operating overhead, certain actuarial, etc.) - - - 1,753 1,753

Non-GAAP Segment cash cost of coal sales $ 143,547 $ 119,778 $ 28,780 $ - $ 292,105

Tons sold 14,309 1,971 822

Cash cost per ton sold $ 10.03 $ 60.78 $ 35.02

Quarter ended December 31, 2019 Powder River Metallurgical Other Thermal Idle and Other Consolidated Basin

(In thousands)

GAAP Cost of sales in the Consolidated Statements of $ 197,434 $ 181,192 $ 94,565 $ 19,263 $ 492,454Operations

Less: Adjustments to reconcile to Non-GAAP Segment cashcost of coal sales

Diesel fuel risk management derivative settlements (728) - - - (728) classified in "other income"

Transportation costs 4,567 41,165 26,849 32 72,613

Cost of coal sales from idled or otherwise disposed - - - 16,023 16,023 operations not included in segments

Other (operating overhead, certain actuarial, etc.) - - - 3,208 3,208

Non-GAAP Segment cash cost of coal sales $ 193,595 $ 140,027 $ 67,716 $ - $ 401,338

Tons sold 18,086 2,000 2,129

Cash cost per ton sold $ 10.70 $ 70.02 $ 31.81

Arch Resources, Inc. and Subsidiaries

Reconciliation of Non-GAAP Measures

(In thousands)

Adjusted EBITDA

Adjusted EBITDA is defined as net income (loss) attributable to the Companybefore the effect of net interest expense, income taxes, depreciation,depletionand amortization, accretion on asset retirement obligations and nonoperatingexpenses. Adjusted EBITDA may also be adjusted for items that may not reflectthe trend of future results by excluding transactions that are not indicativeof the Company's core operating performance.

Adjusted EBITDA is not a measure of financial performance in accordance withgenerally accepted accounting principles, and items excluded from AdjustedEBITDA are significant in understanding and assessing our financial condition.Therefore, Adjusted EBITDA should not be considered in isolation, nor as analternative to net income (loss), income (loss) from operations, cash flowsfrom operations or as a measure of our profitability, liquidity or performanceundergenerally accepted accounting principles. The Company uses adjusted EBITDA tomeasure the operating performance of its segments and allocate resourcesto the segments. Furthermore, analogous measures are used by industry analystsand investors to evaluate our operating performance. Investors should beaware that our presentation of Adjusted EBITDA may not be comparable tosimilarly titled measures used by other companies. The table below shows how wecalculate Adjusted EBITDA.

Three Months Ended December 31, Twelve Months Ended December 31,

2020 2019 2020 2019

(Unaudited) (Unaudited)

Net income (loss) $ (78,525) $ (8,551) $ (344,615) $ 233,799

Provision for (benefit from) income taxes 199 (260) (7) 248

Interest expense, net 4,235 1,878 10,624 6,794

Depreciation, depletion and amortization 27,447 29,499 121,552 111,621

Accretion on asset retirement obligations 4,948 5,137 19,887 20,548

Costs related to proposed joint venture with Peabody Energy 149 7,044 16,087 13,816

Asset impairment and restructuring 45,009 - 221,380 -

Gain on property insurance recovery related to Mountain Laurel longwall - - (23,518) -

(Gain) loss on divestitures (136) 9,008 (1,505) 13,312

Preference Rights Lease Application settlement income - - - (39,000)

Non-service related pension and postretirement benefit (costs) credits 808 (74) 3,884 2,053

Reorganization items, net - 47 (26) (24)

Adjusted EBITDA $ 4,134 $ 43,728 $ 23,743 $ 363,167

EBITDA from idled or otherwise disposed operations 5,167 9,775 15,858 12,926

Selling, general and administrative expenses 18,373 21,917 82,397 95,781

Other 2,046 (1,450) 3,359 (14,488)

Segment Adjusted EBITDA from coal operations $ 29,720 $ 73,970 $ 125,357 $ 457,386

Segment Adjusted EBITDA

Powder River Basin $ 21,703 $ 25,095 $ 50,246 $ 110,528

Metallurgical 15,286 41,079 91,322 305,363

Other Thermal (7,269) 7,796 (16,211) 41,495

Total Segment Adjusted EBITDA $ 29,720 $ 73,970 $ 125,357 $ 457,386

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SOURCE Arch Resources, Inc.