Oct. 30, 2009 (PR Newswire) -- ST. LOUIS, Oct. 30 /PRNewswire-FirstCall/ --

Earnings Highlights
-------------------

In $ millions, except per      Quarter Ended      Nine Months Ended
share data                 9/30/09     9/30/08   9/30/09   9/30/08
------------------------    -------     -------   -------   -------

Revenues                     $615.0     $769.5    $1,850.6  $2,253.9
Income from Operations         48.3       87.9        94.2     373.9
Net Income(1)                  25.2       97.8        40.6     292.0
Fully Diluted EPS              0.16       0.68        0.28      2.02
-----------------              ----       ----        ----      ----
Adjusted EBITDA(2)           $120.6     $159.9      $314.4    $590.3

(1)/- Net income attributable to ACI.
(2)/- Adjusted EBITDA is defined and reconciled under "Reconciliation of
Non-GAAP Measures" in this release.

Arch Coal, Inc. (NYSE: ACI) today reported net income of $25.2 million, or $0.16 per fully diluted share, in the third quarter of 2009 compared with net income of $97.8 million, or $0.68 per fully diluted share, in the third quarter of 2008. The company also recorded adjusted earnings before interest, taxes, depreciation, depletion and amortization ("EBITDA") of $120.6 million in the third quarter of 2009, representing a decline versus the prior-year quarter when stronger coal market conditions prevailed.

"Arch's third quarter financial results reflect an improved performance over the second quarter," said Steven F. Leer, Arch's chairman and chief executive officer. "We achieved margin expansion in each operating segment, driven by increased metallurgical coal demand in Central Appalachia and continued successful cost control across all regions. Our trading and brokerage operations also added incremental earnings in the quarter just ended."

For the first nine months of 2009, Arch earned net income of $40.6 million and adjusted EBITDA of $314.4 million. Net income and earnings per share figures included $7.2 million of expenses pertaining to the acquisition of Jacobs Ranch. By comparison, Arch earned net income of $292.0 million and adjusted EBITDA of $590.3 million in the prior-year period when coal market conditions were stronger.

Strategic Acquisition

As previously announced, Arch completed the acquisition of Rio Tinto's Jacobs Ranch mine on Oct. 1, 2009, for a purchase price of approximately $764 million, which includes an estimate for working capital adjustments. The company estimates synergies from the transaction of between $45 million and $55 million annually, beginning in 2010. Roughly one half of the synergies represent operational cost savings, while the remaining savings relate to administrative cost reductions as well as enhanced coal-blending optimization opportunities.

"The acquisition of Jacobs Ranch will further expand our size, scale and strategic position in the Powder River Basin ("PRB"), the nation's largest, fastest-growing and most cost competitive coal supply region," said Leer. "The integration of Jacobs Ranch into Black Thunder also creates what we believe to be the largest single coal-mining complex in the world, and further strengthens Arch's standing as a preferred, low-cost energy supplier to our nation's electric power generators."

"The integration process has been smooth and swift to date, and we remain on target for complete integration during the fourth quarter," said Leer. "This acquisition will allow us to reduce the expanded operation's average cost structure, improve coal quality optimization, boost our operational flexibility and increase output as market conditions warrant."

"Looking ahead, this acquisition supplements our existing low-cost assets and reserves in the PRB and further positions the company to capitalize on improving coal market fundamentals as 2010 progresses," continued Leer.

During the fourth quarter of 2009, Arch expects to record roughly $8 million in one-time acquisition-related expenses related to severance costs, advisory and legal fees as well as other costs from the integration of the operations.

Financial Developments

During the third quarter of 2009, Arch issued new debt and equity, with net proceeds from those transactions totaling nearly $900 million. Additionally, the company successfully amended and extended its $800 million revolving credit facility, increasing the capacity to $860 million through June 2011 and extending more than 95 percent of the original capacity through March 2013.

Arch ended the third quarter of 2009 with $1.9 billion in total debt, slightly increasing its debt-to-total-capital ratio to 47 percent. At Sept. 30, the company had $1.466 billion of committed total liquidity, comprised of $840 million of cash on hand and $626 million available under its short-term borrowing facilities. On a pro forma basis at Oct. 1 (which reflects the payment of $764 million for the Jacobs Ranch acquisition), Arch had $702 million of committed total liquidity.

"Arch's successful capital markets transactions helped to pre-finance the Jacobs Ranch acquisition, further strengthen our balance sheet and expand our liquidity position," said John T. Drexler, Arch's senior vice president and chief financial officer. "We currently expect our cash on hand plus the expected cash flows from operations to sufficiently fund our anticipated capital spending plans for the remainder of this year and next year."

Operational Results

"Our mines turned in good operational performances in the third quarter of 2009 when compared with the second quarter, with each region achieving an increase in per-ton operating margin and demonstrating effective cost management," said John W. Eaves, Arch's president and chief operating officer. "In particular, our Western Bituminous region overcame several challenges during the first half of the year to deliver a significant expansion in operating margin in the third quarter. Additionally, our Central Appalachian region benefited from improving metallurgical coal sales in the quarter just ended compared with the second quarter of 2009."

Arch Coal, Inc.
3Q09      2Q09     3Q08
----      ----     ----

Tons sold (in millions)            29.1     27.4     34.8
Average sales price per ton      $20.05   $19.43   $20.38
Cash cost per ton                $15.75   $16.26   $14.59
Cash margin per ton               $4.30    $3.17    $5.79
Total operating cost per ton     $18.19   $18.74   $16.65
Operating margin per ton          $1.86    $0.69    $3.73

Consolidated results may not tie to regional breakout due to rounding.

Above figures exclude transportation costs billed to customers.

Operating cost per ton includes depreciation, depletion and
amortization.

Amounts reflected in this table exclude certain coal sales and purchases
which have no effect on company results.  For further description of the
excluded transactions, please refer to the supplemental regional schedule
that can be found at http://investor.archcoal.com.

Consolidated tons sold and average sales price per ton increased modestly in the third quarter of 2009 compared with the second quarter, reflecting a larger sales percentage of Western Bituminous and Central Appalachian tons in the company's overall sales mix. Third quarter 2009 consolidated per-ton operating costs declined 3 percent over the same time period, benefiting from cost containment across the company's operating segments. Arch's consolidated operating margin expanded nearly three-fold in the third quarter of 2009 compared with the second quarter.

Powder River Basin
3Q09      2Q09      3Q08
----      ----      ----

Tons sold (in millions)                  21.5     21.3      26.2
Average sales price per ton            $12.26   $12.56    $11.21
Cash cost per ton                      $10.04   $10.54     $9.27
Cash margin per ton                     $2.22    $2.02     $1.94
Total operating cost per ton           $11.31   $11.84    $10.41
Operating margin per ton                $0.95    $0.72     $0.80

Above figures exclude transportation costs billed to customers.

Operating cost per ton includes depreciation, depletion and
amortization.

In the Powder River Basin, third quarter 2009 volumes increased slightly when compared with the second quarter, due to higher brokerage activity which offset lower production stemming from current weak coal market conditions. Average sales price declined $0.30 per ton over the same time period, resulting from lower pricing obtained on market-priced tons as well as a larger percentage of lower-priced Coal Creek tons in the region's sales mix. Despite reduced production, third quarter 2009 operating costs fell by $0.53 per ton versus the second quarter, driven by ongoing cost containment efforts in the region. Arch's Powder River Basin segment expanded its third quarter 2009 per-ton operating margin by 32 percent compared with the second quarter.

Western Bituminous Region
3Q09      2Q09       3Q08
----      ----       ----

Tons sold (in millions)                4.6       3.5      5.1
Average sales price per ton         $29.08    $29.93   $26.76
Cash cost per ton                   $20.70    $26.06   $19.01
Cash margin per ton                  $8.38     $3.87    $7.75
Total operating cost per ton        $25.57    $31.49   $22.69
Operating margin per ton             $3.51    ($1.56)   $4.07

Above figures exclude transportation costs billed to customers.

Operating cost per ton includes depreciation, depletion and
amortization.

In the Western Bituminous region, third quarter 2009 volumes increased 1.1 million tons versus the second quarter, reflecting increased shipments among the operations in Utah. Average sales price declined $0.85 per ton over the same time period due to a less favorable mix of customer shipments. Third quarter 2009 operating costs declined $5.92 per ton compared with the second quarter, benefiting from the absence of longwall moves and improved cost control at the West Elk mine during the quarter just ended.