ARCH RESOURCES, INC. Cautionary Notice Regarding Forward-Looking Statements
This report 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 changes in the demand for our coal by the domestic electric generation and steel industries; 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 and weather-related factors; from the Tax Cuts and Jobs Act and other tax reforms; 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 pay dividends or repurchase shares in accordance with our announced capital allocation plan; from our ability to successfully integrate the operations that we acquire; from the impacts related to the termination of the proposed joint venture transaction with Peabody Energy Corporation; from our ability to generate significant revenue to make payments required by, and to comply with restrictions related to, our tax-exempt bonds; 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" in Item 1A of our Annual Report on Form 10-K for the year endedDecember 31, 2019 and subsequent Form 10-Q filings.
COVID-19
In the first quarter of 2020, COVID-19 emerged as a global level pandemic. The continuing responses to the COVID-19 outbreak include actions that have a significant impact on domestic and global economies, including travel restrictions, gathering bans, stay at home orders, and many other restrictive measures. All of our operations have been classified as essential in the states in which we operate. We have instituted many policies and procedures, in alignment with CDC guidelines and local mandates, to protect our employees during the COVID-19 outbreak. These policies and procedures include, but are not limited to, staggering shift times to limit the number of people in common areas at one time, limiting meetings and meeting sizes, continual cleaning and disinfecting of high touch and high traffic areas, including door handles, bath rooms, bath houses, access elevators, mining equipment, and other areas, limiting contractor access to our properties, limiting business travel, and instituting work from home for administrative employees. We plan to keep these policies and procedures in place and continually evaluate further enhancements for as long as necessary. We recognize that the COVID-19 outbreak and responses thereto will also impact both our customers and suppliers. To date, we have not had any significant issues with critical suppliers, and we continue to communicate with them and closely monitor their developments to ensure we have access to the goods and services required to maintain our operations and continue our Leer South development. Our customers have reacted, and continue to react, in various ways and to varying degrees to declining demand for their products. We have received force majeure letters from certain of our customers, primarily related to our thermal segments. During the current quarter, we concluded commercial negotiations with certain customers deferring over three million tons ofPowder River Basin contractual obligations from 2020 to future periods in exchange for over eight million tons of additional commitments in future periods. Less than 0.2 million tons of domestic coking coal contracted for 2020 have been deferred to 2021. Our current view of our customer demand situation is discussed in greater detail in the "Overview" section below. 31 Table of Contents Overview Our results for the third quarter of 2020 were impacted by continued weakness in metallurgical and thermal coal markets. Initial responses to the COVID-19 outbreak precipitated demand destruction that further weakened already depressed thermal and metallurgical coal markets. During the current quarter many of the initial responses to the COVID-19 outbreak were mitigated in certain areas of the national and global economy, stemming further decline in demand by the middle of the quarter. The industrial shutdowns, particularly in the automotive sector, that drove significant reductions in steel demand and the idling of multiple blast furnaces globally, began to reverse in the third quarter, leading to increasing steel demand and the restarting of many idled blast furnaces. In particular, domestic auto production returned to pre-shutdown levels in July. The return of industrial production to pre-pandemic levels has been, and will continue to be uneven; for example, oil and gas drilling activity remains significantly depressed. The return of industrial production to pre-COVID-19 levels is also likely to be lengthy and subject to possible setbacks should COVID-19 become resurgent. Demand for steel making raw materials, like coking coal, are at the end of the supply chain and saw a lag in improved demand from the ramp up of industrial production. By the end of the quarter, international prompt and forward coking coal pricing had improved from lows experienced in the current quarter. On the supply side, further high cost coking coal mine idlings were announced inNorth America and the overall production volume removed from the market this year is significant. We believe that the cash cost of a significant portion of global seaborne coking coal production, including much of North American coking coal production, exceeds current prompt pricing. To date, due to our low cost structure, we have avoided idling any of our coking coal operations. Longer term, we believe continued limited global capital investment in new coking coal production capacity, economic pressure on higher cost production sources, and production responses to the virus outbreak will provide support to coking coal markets as demand continues to return to the steel production supply chain. Demand for domestic thermal coal improved in the current quarter from lows in the first half of the year due to the anticipated summer cooling season demand, favorable weather during this cooling season, and increased natural gas prices. However, demand levels remain significantly below those in the prior year due to COVID-19 related commercial and industrial demand declines and the continued increase in renewable generation sources, particularly wind. Natural gas pricing recovered from historically low levels during the current quarter, and coal fired generation, particularlyPowder River Basin fired generation, was competitive in many regions of the country during the peak cooling season. Production levels of natural gas were below the prior year's levels, but storage levels remain significantly above this time last year. Additionally, generator coal stockpiles declined during the current quarter, but remain significantly above historical averages based on days of burn. International thermal coal market pricing remained at levels that are uneconomic for all of our thermal operations. Similar to metallurgical markets discussed above, actions taken to combat the spread of COVID-19 across many regions of the national and global economy continue to negatively impact thermal coal demand and supply. As a result, we expect domestic and global thermal markets to remain challenged. OnSeptember 29, 2020 theU.S. District Court ruled against our proposal with Peabody to form a joint venture that would have combined ourPowder River Basin andColorado mining operations with Peabody's. Following the ruling, we announced the termination of our joint venture efforts due to the significant investment of time, resources and funds that would be required to conduct an appeal. In light of the unfavorable ruling and decision to terminate efforts on the joint venture, we will pursue other strategic alternatives for our thermal assets. These alternatives include, among other things, potential divestiture. We will concurrently evaluate opportunities to shrink our operational footprint at those mines, reduce their asset retirement obligations, and establish self-funding mechanisms to address those long-term liabilities. Operationally we will maintain our focus on aligning our thermal production rates with declining domestic thermal coal demand, adjusting our thermal operating plans in order to minimize future cash requirements, and streamlining our entire organizational structure to reflect our long-term strategic direction as a leading producer of metallurgical products for the steelmaking industry. 32 Table of Contents Results of Operations
Three Months Ended
Revenues. Our revenues include sales to customers of coal produced at our operations and coal purchased from third parties. Transportation costs are included in cost of coal sales and amounts billed by us to our customers for transportation are included in revenues.
Coal Sales. The following table summarizes information about our coal sales
during the three months ended
Three Months Ended September 30,
2020 2019 (Decrease) / Increase
(In thousands)
Coal sales $ 382,261 $ 619,467 $ (237,206)
Tons sold 17,128 26,257 (9,129)
On a consolidated basis, coal sales in the third quarter of 2020 were
approximately $237.2 million or 38.3% less than in the third quarter of 2019,
while tons sold decreased approximately 9.1 million tons or 34.8%. Coal sales
from Metallurgical operations decreased approximately $86.4 million due to
decreased pricing and volume. Powder River Basin coal sales decreased
approximately $89.1 million due to decreased volume, and Other Thermal coal
sales decreased approximately $61.6 million due to decreased volume and pricing.
In the prior year quarter, our Coal-Mac operation in our Other Thermal Segment,
which was sold in December 2019 , provided approximately $30.8 million in coal
sales and 0.6 million tons sold. See discussion in "Operational Performance" for
further information about segment results.
Costs, expenses and other. The following table summarizes costs, expenses and
other components of operating income during the three months ended September 30,
2020 and 2019:
Three Months Ended September 30,
Increase
(Decrease)
in Net
2020 2019 Income
(In thousands)
Cost of sales (exclusive of items shown
separately below) $ 345,539 $ 491,004 $ 145,465
Depreciation, depletion and amortization 32,630 30,249 (2,381)
Accretion on asset retirement obligations 4,947 5,137 190
Change in fair value of coal derivatives and
coal trading activities, net 2,649 1,530 (1,119)
Selling, general and administrative expenses 21,541 24,566 3,025
Costs related to proposed joint venture with
Peabody Energy 4,423 3,754 (669)
Asset impairment 163,088 - (163,088)
Severance costs related to voluntary separation
plan 18 - (18)
Preference Rights Lease Application settlement
income - (39,000) (39,000)
Other operating income, net (4,894) (4,254) 640
Total costs, expenses and other $ 569,941 $ 512,986 $ (56,955)
Cost of sales. Our cost of sales for the third quarter of 2020 decreased
approximately $145.5 million or 29.6% versus the third quarter of 2019. In the
prior year quarter, our Coal-Mac operation, which was sold in December 2019 ,
accounted for approximately $30.8 million in cost of sales. The decline in cost
of sales at ongoing operations consists primarily of reduced repairs and
supplies costs of approximately $59.5 million , including approximately $12.8
million in reduced diesel fuel costs, reduced transportation costs of
approximately $25.0 million , reduced operating taxes and royalties of
approximately $27.0 million , and reduced compensation costs of approximately
$6.9 million . These cost decreases were partially offset by a larger decrease in
coal inventory value versus the prior year quarter of approximately $3.7
million . See discussion in "Operational Performance" for further information
about segment results.
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Depreciation, depletion, and amortization. The increase in depreciation, depletion, and amortization in the third quarter of 2020 versus the third quarter of 2019 is primarily due to increased depreciation of plant and equipment and amortization of development in our Metallurgical segment.
Change in fair value of coal derivatives and coal trading activities, net. The cost in both the third quarter of 2020 and 2019 is primarily related to mark-to-market losses on coal derivatives that we had entered into to hedge our price risk for anticipated international thermal coal shipments. Selling, general and administrative expenses. Selling, general and administrative expenses in the third quarter of 2020 decreased versus the third quarter of 2019 due primarily to decreased compensation costs of approximately$3.7 million , which includes the impact of reduced headcount from our voluntary separation program recognized in the first quarter of 2020, partially offset by increased contractor services of approximately$0.9 million . Costs related to proposed joint venture with Peabody Energy. OnJune 18, 2019 , we entered into a definitive implementation agreement (the "Implementation Agreement") with Peabody, to establish a joint venture that would have combined the companies'Powder River Basin andColorado mining operations. All costs associated with execution of the Implementation Agreement are reflected herein. OnSeptember 29, 2020 theU.S. District Court for the Eastern District of Missouri ruled against the proposed joint venture, and we announced the termination of our joint venture efforts due to the significant investment of time, resources and investment that would be required to conduct an appeal. For further information on our proposed joint venture with Peabody Energy, see Note 3, "Joint Venture with Peabody Energy" to the Condensed Consolidated Financial Statements. Asset Impairment. In the third quarter of 2020 we determined that we had indicators of impairment related to three of our thermal operations,Coal Creek , West Elk, and Viper. Additionally, we determined that we had indicators of impairment related to our equity investment inKnight Hawk Holdings LLC . Our analyses of future expected cash flows from these assets indicated full impairment of our listed thermal operations and partial impairment of our equity investment inKnight Hawk Holdings LLC . For further information on our Asset Impairment costs, see Note 8, "Asset Impairment" to the Condensed Consolidated Financial Statements.
Preference Rights Lease Application (PRLA) settlement income. Our PRLA
settlement income in the third quarter of 2019 relates to a settlement with the
Other operating income, net. The increase in other operating income, net in the third quarter of 2020 versus the third quarter of 2019 consists primarily of the favorable impact of mark-to-market movement on heating oil derivatives of approximately$1.5 million and increased income from equity investments of approximately$0.9 million , partially offset by the unfavorable impact of certain coal derivative settlements of approximately$0.6 million and reduced transloading income of approximately$1.0 million . Nonoperating (expenses) income. The following table summarizes our nonoperating (expenses) income during the three months endedSeptember 30, 2020 and 2019: Three Months Ended September 30, Increase (Decrease) 2020 2019 in Net Income (In thousands)
Non-service related pension and
postretirement benefit (costs) credits
Non-service related pension and postretirement benefit costs. The cost in non-service related pension and postretirement benefit costs in the third quarter of 2020 versus the benefit in the third quarter of 2019 is primarily due to increased postretirement benefit gain amortization in the third quarter
of
2019.
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Provision for income taxes. The following table summarizes our provision for
income taxes during the three months ended
Three Months Ended September 30,
Increase (Decrease)
2020 2019 in Net Income
(In thousands)
Provision for income taxes $ 379 $ 347 $ (32)
See Note 15, "Income Taxes," to the Condensed Consolidated Financial Statements
for a reconciliation of the federal income tax provision at the statutory rate
to the actual provision for income taxes.
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Nine Months Ended
Revenues. Our revenues include sales to customers of coal produced at our operations and coal purchased from third parties. Transportation costs are included in cost of coal sales and amounts billed by us to our customers for transportation are included in revenues.
Coal Sales. The following table summarizes information about our coal sales
during the nine months ended
Nine Months Ended September 30,
2020 2019 (Decrease) / Increase
(In thousands)
Coal sales $ 1,107,014 $ 1,744,872 $ (637,858)
Tons sold 47,367 67,958 (20,591)
On a consolidated basis, coal sales in the first nine months of 2020 were
approximately $637.9 million or 36.6% less than in the first nine months of
2019, while tons sold decreased approximately 20.6 million tons or 30.3%. Coal
sales from Metallurgical operations decreased approximately $279.3 million due
to decreased volume and pricing. Powder River Basin coal sales decreased
approximately $200.4 million due to decreased volume, and Other Thermal coal
sales decreased approximately $172.8 million due to decreased volume and
pricing. In the prior year period, our Coal-Mac operation in our Other Thermal
Segment, which was sold in December 2019 , provided approximately $85.8 million
in coal sales and 1.6 million tons sold. See discussion in "Operational
Performance" for further information about segment results.
Costs, expenses and other. The following table summarizes costs, expenses and
other components of operating income during the nine months ended September
30,
2020 and 2019:
Nine Months Ended September 30,
Increase
(Decrease)
in Net
2020 2019 Income
(In thousands)
Cost of sales (exclusive of items shown
separately below) $ 1,036,886 $ 1,380,563 $ 343,677
Depreciation, depletion and amortization 94,105 82,122 (11,983)
Accretion on asset retirement obligations 14,939 15,411 472
Change in fair value of coal derivatives and
coal trading activities, net 3,263 (19,851) (23,114)
Selling, general and administrative expenses 64,024 73,864 9,840
Costs related to proposed joint venture with
Peabody Energy 15,938 6,772 (9,166)
Asset impairment 163,088 - (163,088)
Severance costs related to voluntary separation
plan 13,283 - (13,283)
Gain on property insurance recovery related to
Mountain Laurel longwall (23,518) - 23,518
(Gain) loss on divestitures (1,369) 4,304 5,673
Preference Rights Lease Application settlement
income - (39,000) (39,000)
Other operating income, net (16,768) (9,143) 7,625
Total costs, expenses and other $ 1,363,871 $ 1,495,042 $ 131,171
Cost of sales. Our cost of sales for the first nine months of 2020 decreased
approximately $343.7 million or 24.9% versus the first nine months of 2019. In
the prior year period, our Coal-Mac operation, which was sold in December 2019 ,
accounted for approximately $85.3 million in cost of sales. The decline in cost
of sales at ongoing operations consists primarily of reduced repairs and
supplies costs of approximately $139.3 million , including approximately $28.0
million in reduced diesel fuel costs, reduced transportation costs of
approximately $67.9 million , reduced operating taxes and royalties of
approximately $62.1 million , and reduced compensation costs of approximately
$15.0 million . These cost decreases were partially offset by a smaller increase
in coal inventory value versus the prior year period of
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approximately
Depreciation, depletion, and amortization. The increase in depreciation, depletion, and amortization in the first nine months of 2020 versus the first nine months of 2019 is primarily due to increased depreciation of plant and equipment, amortization of development, and depletion in our Metallurgical segment.
Change in fair value of coal derivatives and coal trading activities, net. The significant benefit in the first nine months of 2019 is primarily related to mark-to-market gains on coal derivatives that we had entered to hedge our price risk for anticipated international thermal coal shipments. Selling, general and administrative expenses. Selling, general and administrative expenses in the first nine months of 2020 decreased versus the first nine months of 2019 due primarily to decreased compensation costs of approximately$10.2 million , which includes the impact of reduced headcount from our voluntary separation program recognized in the first quarter of 2020. Costs related to proposed joint venture with Peabody Energy. OnJune 18, 2019 , we entered into a definitive implementation agreement (the "Implementation Agreement") with Peabody, to establish a joint venture that would have combined the companies'Powder River Basin andColorado mining operations. All costs associated with execution of the Implementation Agreement are reflected herein. OnSeptember 29, 2020 theU.S. District Court for the Eastern District of Missouri ruled against the proposed joint venture, and we announced the termination of our joint venture efforts due to the significant investment of time, resources and investment that would be required to conduct an appeal. For further information on our proposed joint venture with Peabody Energy, see Note 3, "Joint Venture with Peabody Energy" to the Condensed Consolidated Financial Statements. Asset Impairment. In the third quarter of 2020 we determined that we had indicators of impairment related to three of our thermal operations,Coal Creek , West Elk, and Viper. Additionally, we determined we had indicators of impairment related to our equity investment inKnight Hawk Holdings LLC . Our analyses of future expected cash flows from these assets indicted full impairment of our listed thermal operations and partial impairment of our equity investment inKnight Hawk Holdings LLC . For further information on our Asset Impairment costs, see Note 8, "Asset Impairment" to the Condensed Consolidated Financial Statements. Severance costs related to voluntary separation plan (VSP). In the current year period we recorded approximately$13.3 million of employee severance expense related to voluntary separation plans that were accepted by 53 employees of the corporate staff and 201 employees of our thermal operations. For further information on our VSP costs see Note 5, "Severance Costs Related to Voluntary Separation Plan" to the Condensed Consolidated Financial Statements. Gain on property insurance recovery related to Mountain Laurel longwall. In the current year period we recorded a$23.5 million benefit from insurance proceeds related to the loss of certain longwall shields at our Mountain Laurel operation in November of 2019. For further information on our gain on property insurance recovery related to Mountain Laurel longwall, see Note 4, "Gain on Property Insurance Recovery Related to Mountain Laurel Longwall" to the Condensed Consolidated Financial Statements. (Gain) loss on divestitures. In the current year period we recorded a$1.4 million gain on the sale of our idle Dal-Tex andBriar Branch properties. In the prior year period we recorded a loss on our sale ofLone Mountain Processing, LLC related to certain workers' compensation liabilities that may accrue to us as a result of the bankruptcy filing ofRevelation Energy LLC . For further information on this gain and loss, see Note 6, "Divestitures" to the Condensed Consolidated Financial Statements. Other operating income, net. The increase in other operating income, net in the first nine months of 2020 versus the first nine months of 2019 consists primarily of the favorable impact of certain coal derivative settlements of approximately$9.0 million , increased outlease royalty income of 1.6 million, and increased income from equity investments of approximately$1.7 million , partially offset by reduced transloading income of approximately$2.5 million and a gain on sale of certain right of way rights in the prior year period
of approximately$2.3 million . 37 Table of Contents
Nonoperating (expenses) income. The following table summarizes our nonoperating
(expense) income during the nine months ended
Nine Months Ended September 30,
Increase
(Decrease)
2020 2019 in Net Income
(In thousands)
Non-service related pension and
postretirement benefit (costs) credits $ (3,076) $ (2,127) $ (949)
Reorganization items, net 26 71 (45)
Total nonoperating (expenses) income $ (3,050) $ (2,056) $ (994) Non-service related pension and postretirement benefit costs. The increase in non-service related pension and postretirement benefit costs in the first nine months of 2020 versus the first nine months of 2019 is primarily due to increased postretirement benefit gain amortization in the first nine months of 2019. Provision for (benefit from) income taxes. The following table summarizes our provision for (benefit from) income taxes during the nine months endedSeptember 30, 2020 and 2019: Nine Months Ended September 30, Increase (Decrease) 2020 2019 in Net Income (In thousands)
Provision for (benefit from) income taxes
714
See Note 15, "Income Taxes," to the Condensed Consolidated Financial Statements for a reconciliation of the federal income tax provision (benefit) at the statutory rate to the actual provision for (benefit from) income taxes.
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Operational Performance
Three and Nine Months Ended
Our mining operations are evaluated based on Adjusted EBITDA, per-ton cash operating costs (defined as including all mining costs except depreciation, depletion, amortization, accretion on asset retirements obligations, and pass-through transportation expenses), and on other non-financial measures, such as safety and environmental performance. Adjusted EBITDA is defined as net income (loss) attributable to the Company before the effect of net interest expense, income taxes, depreciation, depletion and amortization, the accretion on asset retirement obligations and nonoperating expenses. Adjusted EBITDA may also be adjusted for items that may not reflect the trend of future results by excluding transactions that are not indicative of our core operating performance. Adjusted EBITDA is not a measure of financial performance in accordance with generally accepted accounting principles, and items excluded from Adjusted EBITDA are significant in understanding and assessing our financial condition. Therefore, Adjusted EBITDA should not be considered in isolation, nor as an alternative to net income (loss), income (loss) from operations, cash flows from operations or as a measure of our profitability, liquidity or performance under generally accepted accounting principles. Furthermore, analogous measures are used by industry analysts and investors to evaluate the Company's operating performance. Investors should be aware that our presentation of Adjusted EBITDA may not be comparable to similarly titled measures used by other companies.
The following table shows results by operating segment for the three and nine
months ended
Three Months Ended September 30 ,
Nine Months Ended
2020 2019 Variance 2020 2019 Variance
Powder River Basin
Tons sold (in
thousands) 14,309 22,156 (7,847) 39,078 56,445 (17,367)
Coal sales per ton
sold $ 12.41 $ 12.02 $ 0.39 $ 12.36 $ 12.09 $ 0.27
Cash cost per ton
sold $ 10.03 $ 9.77 $ (0.26) $ 11.69 $ 10.60 $ (1.09)
Cash margin per ton
sold $ 2.38 $ 2.25 $ 0.13 $ 0.67 $ 1.49 $ (0.82)
Adjusted EBITDA (in
thousands) $ 34,486 $ 50,153 $ (15,667) $ 28,542 $ 85,433 $ (56,891)
Metallurgical
Tons sold (in
thousands) 1,971 2,084 (113) 5,225 5,769 (544)
Coal sales per ton
sold $ 67.04 $ 98.89 $ (31.85) $ 74.83 $ 110.47 $ (35.64)
Cash cost per ton
sold $ 60.78 $ 64.89 $ 4.11 $ 60.31 $ 64.70 $ 4.39
Cash margin per ton
sold $ 6.26 $ 34.00 $ (27.74) $ 14.52 $ 45.77 $ (31.25)
Adjusted EBITDA (in
thousands) $ 12,407 $ 70,814 $ (58,407) $ 76,037 $ 264,284 $ (188,247)
Other Thermal
Tons sold (in
thousands) 822 1,986 (1,164) 2,571 5,589 (3,018)
Coal sales per ton
sold $ 32.06 $ 39.52 $ (7.46) $ 31.83 $ 39.09 $ (7.26)
Cash cost per ton
sold $ 35.02 $ 31.16 $ (3.86) $ 35.61 $ 33.24 $ (2.37)
Cash margin per ton
sold $ (2.96) $ 8.36 $ (11.32) $ (3.78) $ 5.85 $ (9.63)
Adjusted EBITDA (in
thousands) $ (2,870) $ 16,659 $ (19,529) $ (8,942) $ 33,699 $ (42,641)
This table reflects numbers reported under a basis that differs from U.S. GAAP.
See "Reconciliation of Non-GAAP measures" below for explanation and
reconciliation of these amounts to the nearest GAAP measures. Other companies
may calculate these per ton amounts differently, and our calculation may not be
comparable to other similarly titled measures.
Powder River Basin - Adjusted EBITDA for the three and nine months ended
September 30, 2020 decreased versus the three and nine months ended September
30, 2019 , due to decreased volume versus the prior year periods. Pricing
increased, and cash cost per ton sold increased, particularly in the nine month
period, driven by the decrease in
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volume and the reimposition of a higher Federal Black Lung Excise Tax rate. Pricing in the current periods benefitted from our ability to recoup the reimposition of the higher Federal Black Lung Excise Tax rate under certain of our term supply contracts. The volume decline was primarily due to competitive natural gas pricing, and the continued growth of renewable generation sources, particularly wind. Natural gas pricing reached historical lows during the current year periods, but pricing of the competing fuel was volatile in the current year three month period even exceeding prior year prices at times. Natural gas production levels fell below prior year levels, but natural gas storage levels remained above prior year levels and these opposing market forces led to pricing volatility. The continued buildout of subsidized renewable generation sources, particularly wind, significantly increased the market share of renewable generation in the current year periods. During the current year periods, we also experienced reduced electric generation related to demand destruction due to restrictive responses taken to combat the spread of COVID-19. During the current year three month period, generator stockpiles of thermal coal declined from historical highs seen earlier in the current year, but remain above historical averages in terms of days of burn. OurPowder River Basin shipment volumes will continue to be pressured as natural gas prices remain competitive, subsidized renewable generation continues to grow, and thermal coal stockpiles remain elevated. Additionally, we are at risk of further demand destruction should a resurgence of COVID-19 lead to the imposition of economically damaging responses to control the spread of the virus. In 2019 the Federal Black Lung Excise Tax rate reverted to the pre-1986 rates. For 2020,Congress reimposed the higher 1986 to 2018 rates of$0.55 per ton sold or 4.4% of gross selling price on all domestic sales. For 2019, the Federal Black Lung Excise Tax rate for surface mines was$0.25 per ton or 2% of gross selling price on all domestic sales. Metallurgical - Adjusted EBITDA for the three and nine months endedSeptember 30, 2020 decreased from the three and nine months endedSeptember 30, 2019 due to the decline in coking coal pricing and shipment volume discussed in the "Overview" section above, partially offset by decreased cash cost per ton sold. The cost decrease was driven by an increase in the percentage of segment tons sold from our low cost Leer mine in the current year periods. Additionally, operating tax and royalty costs declined in the current year periods due to lower pricing and a severance tax credit. Actions taken to combat the spread of COVID-19 continued to significantly impact our metallurgical segment in the third quarter of 2020. In particular, the initial industrial shutdowns and subsequent uneven recovery discussed in the "Overview" section above continued to have a negative impact on the entire steel making supply chain. These impacts include a significant decline in coking coal pricing and deferral of some shipments out of the current year. Our Metallurgical segment sold 1.7 million tons of coking coal and 0.3 million tons of associated thermal coal in the three months endedSeptember 30, 2020 , compared to 1.9 million tons of coking coal and 0.2 million tons of associated thermal coal in the three months endedSeptember 30, 2019 . For the nine months endedSeptember 30, 2020 , our Metallurgical segment sold 4.5 million tons of coking coal and 0.7 million tons of associated thermal coal compared to 5.0 million tons of coking coal and 0.8 million tons of associated thermal coal in the nine months endedSeptember 30, 2019 . Longwall operations accounted for approximately 60% of our shipment volume in both the three and nine months endedSeptember 30, 2020 , respectively, compared to approximately 78% and 72% of our shipment volume in the three and nine months endedSeptember 30, 2019 , respectively. Other Thermal - Adjusted EBITDA for the three and nine months endedSeptember 30, 2020 decreased versus the three and nine months endedSeptember 30, 2019 due to reduced sales volume, decreased pricing, and increased cash cost per ton sold. All of these metrics are impacted by the inclusion of our former Coal-Mac operation, which was sold inDecember 2019 . Coal-Mac provided approximately 0.6 and 1.6 million tons sold in the three and nine months endedSeptember 30, 2019 , respectively. Tons sold from ongoing operations declined approximately 0.6 million tons in the three months endedSeptember 30, 2020 and 1.4 million tons in the nine months endedSeptember 30, 2020 as competitive natural gas pricing, increased renewable generation, and uneconomic international pricing impacted volume. In addition, in late March of the current year we temporarily idled our Viper mine due to nonperformance of the mine's primary customer. The customer restarted deliveries in early May, and we reopened the mine at approximately the same time. We are at risk of further demand destruction should a resurgence of COVID-19 lead to the imposition of economically damaging responses to control the spread of the virus. 40 Table of Contents
Reconciliation of Non-GAAP measures
Segment coal sales per ton sold
Non-GAAP Segment coal sales per ton sold is calculated as segment coal sales
revenues divided by segment tons sold. Segment coal sales revenues are adjusted
for transportation costs, and may be adjusted for other items that, due to
generally accepted accounting principles, are classified in "other income" on
the statement 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 in
accordance with generally accepted accounting principles. We believe segment
coal sales per ton sold provides useful information to investors as it better
reflects our revenue for the quality of coal sold and our operating results by
including all income from coal sales. The adjustments made to arrive at these
measures are significant in understanding and assessing our financial condition.
Therefore, segment coal sales revenues should not be considered in isolation,
nor as an alternative to coal sales revenues under generally accepted accounting
principles.
Powder River Other Idle and
Three Months Ended
September 30, 2020 Basin Metallurgical Thermal Other Consolidated
(In thousands)
GAAP Revenues in the Condensed
Consolidated Statements of
Operations $ 180,850 $ 168,054 $ 32,449 $ 908 $ 382,261
Less: Adjustments to reconcile to
Non-GAAP Segment coal sales revenue
Coal risk management derivative
settlements classified in "other
income" - (29) (2,552) - (2,581)
Coal sales revenues from idled or
otherwise disposed operations not
included in segments - - - 903 903
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 Powder River Other Idle and Three Months Ended September 30, 2019 Basin Metallurgical Thermal Other Consolidated (In thousands) GAAP Revenues in the Condensed Consolidated Statements of Operations$ 269,968 $ 254,493 $ 94,052 $ 954 $ 619,467 Less: Adjustments to reconcile to Non-GAAP Segment coal sales revenue Coal risk management derivative settlements classified in "other income" - (506) (4,533) - (5,039) Coal sales revenues from idled or otherwise disposed operations not included in segments - - - 954 954 Transportation costs 3,581 48,925 20,080 - 72,586 Non-GAAP Segment coal sales revenues$ 266,387 $ 206,074
$ 78,505 -$ 550,966 Tons sold 22,156 2,084 1,986 Coal sales per ton sold$ 12.02 $ 98.89$ 39.52 41 Table of Contents Powder River Other Idle and
Nine Months Ended September 30, 2020 Basin Metallurgical Thermal Other Consolidated (In thousands) GAAP Revenues in the Condensed Consolidated Statements of Operations$ 492,406 $ 489,660 $ 105,481 $ 19,467 $ 1,107,014 Less: Adjustments to reconcile to Non-GAAP Segment coal sales revenue Coal risk management derivative settlements classified in "other income" - (548) (6,366) - (6,914) Coal sales revenues from idled or otherwise disposed operations not included in segments - - - 19,395 19,395 Transportation costs 9,402 99,188 30,016 72 138,678 Non-GAAP Segment coal sales revenues$ 483,004 $ 391,020
$ 81,831 $ -$ 955,855 Tons sold 39,078 5,225 2,571 Coal sales per ton sold$ 12.36 $ 74.83$ 31.83 Powder River Other Idle and
Nine Months Ended September 30, 2019 Basin Metallurgical Thermal Other Consolidated (In thousands) GAAP Revenues in the Condensed Consolidated Statements of Operations$ 692,845 $ 769,000 $ 278,235 $ 4,792 $ 1,744,872 Less: Adjustments to reconcile to Non-GAAP Segment coal sales revenue Coal risk management derivative settlements classified in "other income" - (506) (3,524) - (4,030) Coal sales revenues from idled or otherwise disposed operations not included in segments - - - 4,792 4,792 Transportation costs 10,511 132,187 63,302 - 206,000 Non-GAAP Segment coal sales revenues$ 682,334 $ 637,319 $ 218,457 -$ 1,538,110 Tons sold 56,445 5,769
5,589
Coal sales per ton sold$ 12.09 $ 110.47
$ 39.09 42 Table of Contents
Segment cash cost per ton sold
Non-GAAP Segment cash cost per ton sold is calculated as segment cash cost of
coal sales divided by segment tons sold. Segment cash cost of coal sales is
adjusted for transportation costs, and may be adjusted for other items that, due
to generally accepted accounting principles, are classified in "other income" on
the statement of operations, but relate directly to the costs incurred to
produce coal. Segment cash cost per ton sold is not a measure of financial
performance in accordance with generally accepted accounting principles. We
believe segment cash cost per ton sold better reflects our controllable costs
and our operating results by including all costs incurred to produce coal. The
adjustments made to arrive at these measures are significant in understanding
and assessing our financial condition. Therefore, segment cash cost of coal
sales should not be considered in isolation, nor as an alternative to cost of
sales under generally accepted accounting principles.
Powder River Other Idle and
Three Months Ended
September 30, 2020 Basin Metallurgical Thermal Other Consolidated
(In thousands)
GAAP Cost of sales in the Condensed
Consolidated Statements of
Operations $ 146,610 $ 155,729 $ 37,435 $ 5,765 $ 345,539
Less: Adjustments to reconcile to
Non-GAAP Segment cash cost of coal
sales
Diesel fuel risk management
derivative settlements classified
in "other income" (278) - - - (278)
Transportation costs 3,341 35,951 8,655 5 47,952
Cost of coal sales from idled or
otherwise disposed operations not
included in segments - - - 4,007 4,007
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
Powder River Other Idle and
Three Months Ended
September 30, 2019 Basin Metallurgical Thermal Other Consolidated
(In thousands)
GAAP Cost of sales in the Condensed
Consolidated Statements of
Operations $ 218,966 $ 184,149 $ 81,976 $ 5,913 $ 491,004
Less: Adjustments to reconcile to
Non-GAAP Segment cash cost of coal
sales
Diesel fuel risk management
derivative settlements classified
in "other income" (1,057) - - - (1,057)
Transportation costs 3,581 48,925 20,080 - 72,586
Cost of coal sales from idled or
otherwise disposed operations not
included in segments - - - 3,871 3,871
Other (operating overhead, certain
actuarial, etc.) - - - 2,042 2,042
Non-GAAP Segment cash cost of coal
sales $ 216,442 $ 135,224 $ 61,896 $ - $ 413,562
Tons sold 22,156 2,084 1,986
Cash Cost Per Ton Sold $ 9.77 $ 64.89 $ 31.16
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Table of Contents
Powder River Other Idle and
Nine Months Ended
September 30, 2020 Basin Metallurgical Thermal Other Consolidated
(In thousands)
GAAP Cost of sales in the Condensed
Consolidated Statements of
Operations $ 464,252 $ 414,301 $ 121,585 $ 36,748 $ 1,036,886
Less: Adjustments to reconcile to
Non-GAAP Segment cash cost of coal
sales -
Diesel fuel risk management
derivative settlements classified
in "other income" (1,976) - - - (1,976)
Transportation costs 9,402 99,188 30,016 72 138,678
Cost of coal sales from idled or
otherwise disposed operations not
included in segments - - - 30,960 30,960
Other (operating overhead, certain
actuarial, etc.) - - - 5,716 5,716
Non-GAAP Segment cash cost of coal
sales 456,826 315,113 91,569 - 863,508
Tons sold 39,078 5,225 2,571
Cash Cost Per Ton Sold $ 11.69 $ 60.31 $ 35.61
Powder River Other Idle and
Nine Months Ended
September 30, 2019 Basin Metallurgical Thermal Other Consolidated
(In thousands)
GAAP Cost of sales in the Condensed
Consolidated Statements of
Operations $ 606,561 $ 505,479 $ 249,091 $ 19,432 $ 1,380,563
Less: Adjustments to reconcile to
Non-GAAP Segment cash cost of coal
sales
Diesel fuel risk management
derivative settlements classified
in "other income" (2,307) - - - (2,307)
Transportation costs 10,511 132,187 63,302 - 206,000
Cost of coal sales from idled or
otherwise disposed operations not
included in segments - - - 12,690 12,690
Other (operating overhead, certain
actuarial, etc.) - - - 6,742 6,742
Non-GAAP Segment cash cost of coal
sales $ 598,357 $ 373,292 $ 185,789 $ - $ 1,157,438
Tons sold 56,445 5,769 5,589
Cash Cost Per Ton Sold $ 10.60 $ 64.70 $ 33.24
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Table of Contents
Reconciliation of Segment Adjusted EBITDA to Net Income (Loss)
The discussion in "Results of Operations" above includes references to our
Adjusted EBITDA for each of our reportable segments. Adjusted EBITDA is defined
as net income attributable to the Company before the effect of net interest
expense, income taxes, depreciation, depletion and amortization, the accretion
on asset retirement obligations and nonoperating expenses. Adjusted EBITDA may
also be adjusted for items that may not reflect the trend of future results by
excluding transactions that are not indicative of our core operating
performance. We use Adjusted EBITDA to measure the operating performance of our
segments and allocate resources to our segments. Adjusted EBITDA is not a
measure of financial performance in accordance with generally accepted
accounting principles, and items excluded from Adjusted EBITDA are significant
in understanding and assessing our financial condition. Therefore, Adjusted
EBITDA should not be considered in isolation, nor as an alternative to net
income (loss), income (loss) from operations, cash flows from operations or as a
measure of our profitability, liquidity or performance under generally accepted
accounting principles. Investors should be aware that our presentation of
Adjusted EBITDA may not be comparable to similarly titled measures used by other
companies. The table below shows how we calculate Adjusted EBITDA.
Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
(In thousands)
Net income (loss) $ (191,467) $
106,769
379 347 (206) 508
Interest expense, net 2,530 340 6,389 4,916
Depreciation, depletion and amortization 32,630 30,249 94,105 82,122
Accretion on asset retirement
obligations 4,947 5,137 14,939 15,411
Costs related to proposed joint venture
with Peabody Energy 4,423 3,754 15,938 6,772
Asset impairment 163,088 - 163,088 -
Severance costs related to voluntary
separation plan 18 - 13,283 -
Gain on property insurance recovery
related to Mountain Laurel longwall - - (23,518) -
(Gain) loss on divestitures - - (1,369) 4,304
Preference Rights Lease Application
settlement income - (39,000) - (39,000)
Non-service related pension and
postretirement benefit costs 878 (975) 3,076 2,127
Reorganization items, net - - (26) (71)
Adjusted EBITDA 17,426 106,621 19,609 319,439
EBITDA from idled or otherwise disposed
operations 2,896 2,584 10,691 3,151
Selling, general and administrative
expenses 21,541 24,566 64,024 73,864
Other 2,160 3,855 1,313 (13,038)
Segment Adjusted EBITDA from coal
operations $ 44,023 $ 137,626 $ 95,637 $ 383,416 Other includes income from our equity investments, certain changes in fair value
of heating oil and diesel fuel derivatives we use to manage our exposure to
diesel fuel pricing, certain changes in the fair value of coal derivatives and
coal trading activities, EBITDA provided by our land company, and certain
miscellaneous revenue.
45
Table of Contents
Liquidity and Capital Resources
Our primary sources of liquidity are proceeds from coal sales to customers and certain financing arrangements. Excluding significant investing activity, we intend to satisfy our working capital requirements and fund capital expenditures and debt-service obligations with cash generated from operations and cash on hand. As we continue to evaluate the impacts of COVID-19 and the responses thereto on our business, we remain focused on prudently managing costs, including capital expenditures, maintaining a strong balance sheet, and ensuring adequate liquidity. Given the volatile nature of coal markets, and the significant challenges and uncertainty surrounding the COVID-19 outbreak, we believe it is increasingly important to take a prudent approach to managing our balance sheet and liquidity, as demonstrated by the suspension of our dividend and share repurchases. While we continue to prefer targeted liquidity levels of at least$400 million , with a significant portion of that being cash, it is likely that our liquidity will remain below our preferred levels while the COVID-19 outbreak and the responses thereto continue. Due to the current economic uncertainties related to COVID-19 and the related disruption in the financial markets, we may be limited in accessing capital markets or obtaining additional bank financing or the cost of accessing this financing could become more expensive. We believe our current liquidity level is sufficient to fund our business; however, given the uncertainty in the global economy and our primary markets, we believe it is prudent to explore opportunities to secure additional capital to further enhance our liquidity position as we drive forward with our Leer South development. In the future, we will continue to evaluate our capital allocation initiatives in light of the current state of, and our outlook, for coal markets; the amount of our planned production that has been committed and priced; the capital needs of the business; other strategic opportunities; and developments in the COVID-19 outbreak and the responses thereto. OnMarch 7, 2017 , we entered into a senior secured term loan credit agreement in an aggregate principal amount of$300 million (the "Term Loan Debt Facility") with Credit Suisse AG,Cayman Islands Branch, as administrative agent and collateral agent and the other financial institutions from time to time party thereto. The Term Loan Debt Facility was issued at 99.50% of the face amount and will mature onMarch 7, 2024 . The term loans provided under the Term Loan Debt Facility (the "Term Loans") are subject to quarterly principal amortization payments in an amount equal to$750,000 . Proceeds from the Term Loan Debt Facility were used to repay all outstanding obligations under our previously existing term loan credit agreement, dated as ofOctober 5, 2016 . OnApril 3, 2018 , we entered into the Second Amendment (the "Second Amendment") to the Term Loan Debt Facility. The Second Amendment reduced the interest rate on the Term Loan to, at our option, either (i) theLondon interbank offered rate ("LIBOR") plus an applicable margin of 2.75%, subject to a 1.00% LIBOR floor, or (ii) a base rate plus an applicable margin of 1.75%. For further information regarding the Term Loan Debt Facility, see Note 14, "Debt and Financing Arrangements" to the Condensed Consolidated Financial Statements. We have entered into a series of interest rate swaps to fix a portion of the LIBOR interest payments due under the term loan. As interest payments are made on the term loan, amounts in accumulated other comprehensive income will be reclassified into earnings through interest expense to reflect a net interest on the term loan equal to the effective yield of the fixed rate of the swap plus 2.75%, which is the spread on the LIBOR term loan as amended. For further information regarding the interest rate swaps, see Note 14, "Debt and Financing Arrangements" to the Condensed Consolidated Financial Statements. OnSeptember 30, 2020 , we extended and amended our existing trade accounts receivable securitization facility provided toArch Receivable Company, LLC , a special-purpose entity that is a wholly owned subsidiary ofArch Resources ("Arch Receivable") (the "Extended Securitization Facility"), which supports the issuance of letters of credit and requests for cash advances. The amendment to the Extended Securitization Facility changed the facility size from$160 million to$110 million and extended the maturity date toSeptember 29, 2023 . Additionally, the amendment eliminated the provision that accelerated maturity of the facility upon falling below a specified level of liquidity and modified the pricing for the Extended Securitization Facility. Pursuant to the Extended Securitization Facility, we also agreed to a revised schedule of fees payable to the administrator and the providers of the Extended Securitization Facility. For further information regarding the Extended Securitization Facility see Note 14, "Debt and Financing Arrangements" to the Condensed Consolidated Financial Statements. 46 Table of Contents OnSeptember 30, 2020 , we amended the senior secured inventory-based revolving credit facility in an aggregate principal amount of$50 million (the "Inventory Facility") withRegions Bank ("Regions") as administrative agent and collateral agent, as lender and swingline lender (in such capacities, the "Lender") and as letter of credit issuer. Availability under the Inventory Facility is subject to a borrowing base consisting of (i) 85% of the net orderly liquidation value of eligible coal inventory, (ii) the lesser of (x) 85% of the net orderly liquidation value of eligible parts and supplies inventory and (y) 35% of the amount determined pursuant to clause (i), and (iii) 100% ofArch Resources's Eligible Cash (defined in the Inventory Facility), subject to reduction for reserves imposed by Regions. The amendment of the Inventory Facility extended the maturity date toSeptember 29, 2023 , eliminated the provision that accelerated maturity of the facility upon falling below a specified level of liquidity, and reduced the minimum liquidity requirement from$175 million to$100 million . Additionally, the amendment includes provisions that reduce the advance rates for coal inventory and parts and supplies, depending on Liquidity. For further information regarding the Inventory Facility, see Note 14, "Debt and Financing Arrangements" to the Condensed Consolidated Financial Statements. OnMarch 4, 2020 , we entered into an equipment financing arrangement accounted for as debt. We received$53.6 million in exchange for conveying an interest in certain equipment in operation at ourLeer Mine and entered into a 48 month master lease arrangement for use of that equipment. Upon maturity, all interests in the equipment will revert back to us. For further information regarding this equipment financing arrangement, see Note 14, "Debt and Financing Arrangements" to the Condensed Consolidated Financial Statements. OnJuly 2, 2020 , theWest Virginia Economic Development Authority (the "Issuer") issued$53.1 million aggregate principal amount of Solid Waste Disposal Facility Revenue Bonds (Arch Resources Project ), Series 2020 (the "Bonds") pursuant to an Indenture of Trust dated as ofJune 1, 2020 (the "Indenture") between theIssuer andCitibank, N.A ., as trustee (the "Trustee"). The proceeds of the Bonds are loaned to us as we make qualifying expenditures pursuant to a Loan Agreement dated as ofJune 1, 2020 between the Issuer and us. The Bonds are payable solely from payments to be made by us under the Loan Agreement as evidenced by a Note from us to the Trustee. The proceeds of the Bonds were used to finance certain costs of the acquisition, construction, reconstruction, and equipping of solid waste disposal facilities at our Leer South development, and for capitalized interest and certain costs related to issuance of the Bonds. As ofSeptember 30, 2020 , we have received$38.1 million of the total bonds issues. The remaining$13.9 is held in trust and is recorded on our balance sheet as restricted cash. The remainder of the funds will be released as qualified expenditures are made over the next several quarters. For further information regarding these bonds, see Note 14, "Debt and Financing Arrangements" to the Condensed Consolidated Financial Statements. OnApril 27, 2017 , our Board of Directors authorized a capital return program consisting of a share repurchase program and a quarterly cash dividend. The share repurchase plan has a total authorization of$1.05 billion of which we have used$827.4 million . During the quarter endedSeptember 30, 2020 , we did not repurchase any shares of our stock. OnApril 23, 2020 we announced the suspension of our quarterly dividend due to the significant economic uncertainty surrounding the COVID-19 virus and the steps being taken to control the virus. During the quarter endedSeptember 30, 2020 , we did not pay any dividends on shares of our stock. The timing and amount of any future dividends or of any future share purchases and the ultimate number of shares to be purchased will depend on a number of factors, including business and market conditions, our future financial performance, and other capital priorities. Any shares acquired would be in the open market or through private transactions in accordance withSecurities and Exchange Commission requirements.
On
Letters of
Borrowing Credit Contractual
Face Amount Base Outstanding Availability Expiration
(Dollars in thousands)
Securitization Facility $ 110,000 $ 84,500 $ 49,990 $ 34,510 September 29, 2023
Inventory Facility 50,000 39,306 29,195 10,111 September 29, 2023
Total $ 160,000 $ 123,806 $ 79,185 $ 44,621
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The above standby letters of credit outstanding have primarily been issued to satisfy certain insurance-related collateral requirements. The amount of collateral required by counterparties is based on their assessment of our ability to satisfy our obligations and may change at the time of policy renewal or based on a change in their assessment. Future increases in the amount of collateral required by counterparties would reduce our available liquidity. The following is a summary of cash provided by or used in each of the indicated types of activities during the nine months endedSeptember 30, 2020 and 2019: Nine Months Ended September 30, 2020 2019 (In thousands) Cash provided by (used in): Operating activities $ 55,914 $ 334,053 Investing activities (111,945) (154,002) Financing activities 73,585 (269,560) Cash Flow Cash provided by operating activities decreased in the nine months endedSeptember 30, 2020 versus the nine months endedSeptember 30, 2019 mainly due to the deterioration of results from operations discussed in the "Overview" and "Operational Performance" sections above. Cash used in investing activities decreased in the nine months endedSeptember 30, 2020 versus the nine months endedSeptember 30, 2019 primarily due to an approximately$84 million increase in net proceeds from short term investments, and approximately$24 million in property insurance proceeds on our Mountain Laurel longwall claim, partially offset by increased capital expenditures of approximately$68 million . Capital spending in the first nine months of 2020 includes approximately$154 million related to our Leer South mine development. Cash was provided by financing activities in the nine months endedSeptember 30, 2020 compared to cash used in financing activities in the nine months endedSeptember 30, 2019 primarily due to suspension of treasury stock purchases and dividend payments, and proceeds from the new$54 million equipment financing arrangement, and proceeds of approximately$53 million from the new tax exempt bond issuance. For further information regarding the equipment financing arrangement and tax free bonds, see Note 14, "Debt and Financing Arrangements" to the Condensed Consolidated Financial Statements. 48 Table of Contents
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