"As expected, our first quarter results reflect a challenging global metallurgical coal market and the impact of rail performance issues," said John W. Eaves, Arch's president and chief executive officer. "At Arch, we are taking proactive steps to manage our controllable costs and capital spending, reduce our cash outflows and preserve our liquidity. Moreover, we are reducing our expected metallurgical coal sales volume by approximately 1 million tons for 2014 in response to soft market conditions and concentrating our metallurgical production in our lowest-cost assets in Appalachia. Based on the smooth start-up of the Leer longwall mine in the first quarter of 2014, we also are lowering our full year cost-per-ton guidance in Appalachia."

"At the same time, we are encouraged by the strengthening dynamics in the U.S. thermal market," added Eaves. "Positive electric generation and coal demand trends to date, declining U.S. coal generator stockpiles and higher competing fuel prices should provide the catalyst for improvement in our domestic thermal coal operations during 2014." 

Liquidity

As of March 31, 2014, Arch had a total liquidity position of $1.4 billion, with more than $1.1 billion of that in cash and short-term investments. The company continues to have no borrowings under its revolving credit facility and has no debt maturities until 2018.

Consistent with the company's strategy to re-align its asset portfolio, Arch divested non-strategic assets in Appalachia during the first quarter of 2014, including its Hazard thermal mining complex in Kentucky and its ADDCAR equipment subsidiary. Total consideration for these divestitures was $46 million. As a result of these sales, Arch recorded a pre-tax gain of $13.8 million in the first quarter of 2014, which is included in other net operating income. Offsetting this gain in that line, Arch recorded a charge of $12.5 million for the three months ended March 31, 2014, associated with minimum port and rail commitments for export tonnage.

Core Values

Arch subsidiaries earned 12 safety and environmental awards in the three months ended March 31, 2014. Most notably, Arch's Leer mine attained the 2013 Greenlands Award, West Virginia's top environmental honor in the U.S. coal industry. This honor marks the tenth time that an Arch subsidiary has earned this prestigious award since 2001. In addition, the Coal-Mac operation completed 2 million employee hours without a lost-time safety incident in March 2014. Furthermore, five of Arch's operations and facilities attained a Perfect Zero – a dual goal of operating without a reportable safety incident or environmental violation – for the three months ended March 31, 2014.

"We commend our employees for achieving such safety and environmental accomplishments, and for their ongoing commitment to living our core values," said Paul A. Lang, Arch's executive vice president and chief operating officer. "We are constantly striving for improvement at all of our operations, with an ultimate goal of a Perfect Zero across our entire operating platform each and every quarter."

Operational Results

"During the first quarter of 2014, our Appalachian region, anchored by the Leer mine, delivered its strongest cost performance since 2011, prompting a reduction in our 2014 expected cost per ton for that region," said Lang. "In addition, increased domestic thermal demand has resulted in an improving outlook for the West Elk mine in Colorado, prompting us to reduce our 2014 cost per ton for that region. In the Powder River Basin, we remain focused on achieving further improvement during 2014 as rail congestion eases and customer demand climbs."