Big Gain Gooses Arch Coal's Quarter - TheStreet

Big Gain Gooses Arch Coal's Quarter

The company sees coal markets bouncing back.
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Arch Coal

(ACI) - Get Report

posted a jump in third-quarter earnings due in part to a one-time charge, and despite a decline in revenue.

The company earned $11.05 million, or 18 cents a share, which included a net gain of $8.4 million, or 16 cents a share, due to adjustments and charges from the recent termination of hedge accounting for certain interest-rate swap agreements. This compares with earnings of $1.64 million, or 3 cents a share, in the same quarter last year.

Revenue was $370.3 million, down from $400.8 million last year. Coal sales were down 11% to 25.3 million tons.

The company said signs are favorable for a sustained rebound in U.S. coal markets. Arch said that during the quarter U.S. coal prices increased steadily, helped by increased coal consumption at U.S. power plants, declining utility stockpile levels, and the continuing rationalization in eastern coal supply.

"Arch's mining operations managed costs well despite reduced sales volumes stemming from a relatively mild summer, normally scheduled mine vacation shutdowns and three longwall moves," said Steven F. Leer, president and chief executive, in a press release. "Meanwhile, U.S. coal markets began a long-awaited rally, with coal prices moving up markedly and contract activity heating up as well."

But Arch also said output from eastern coalfields has fallen, due to degraded reserve bases and high costs. Due to lessened eastern output, U.S. coal production was down by an about 3% last year, the company said, and in 2003 total U.S. coal production is down about 2.2% year to date.

In the fourth quarter, Arch currently expects to earn 5 cents to 15 cents a share, excluding charges related to the termination of hedge accounting and future mark-to-market adjustments. Analysts are calling for 15 cents a share.