Arch Coal Inc. (NYSE:ACI) Q3 2018 Earnings Conference Call Transcript

Oct 23, 2018 • 10:00 am ET


Arch Coal Inc. (NYSE:ACI) Q3 2018 Earnings Conference Call Transcript


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Good day and welcome to the Arch Coal Third Quarter 2018 Earnings Conference Call. Today's conference is being recorded.

At this time, I'd like to turn the conference over to Deck Slone, Arch's Senior Vice President for Strategy and Public Policy. Please go ahead.

Deck Slone

Good morning and thanks for joining us. (Forward-Looking Cautionary Statements)

I'd also like to remind you that you can find a reconciliation of the non-GAAP financial measures that we plan to discuss this morning at the end of our press release, a copy of which we have posted in the Investors section of our website at

With me on the call this morning are John Eaves, Arch's CEO; Paul Lang, Arch's President and COO; and John Drexler, our Senior Vice President and CFO. We will begin with some brief formal remarks and thereafter we'll be happy to take your questions. John?

John Eaves

Thanks, Deck. Good morning, everyone. I'm pleased to report that Arch hit on all cylinders during the quarter just ended. We delivered our strongest quarter of EBITDA since emergence, captured robust margins at our coking coal operations, demonstrated strong cost control in both our thermal segments, saw record percentage of other thermal business in a tight seaborne marketplace, and had the opportunity in the PRB to shift significant incremental turns despite unusual wet summer weather in the region. In short, it was an excellent quarter by virtually every measure.

And just as importantly, we put the resulting free cash flow to excellent use by driving forward a successful and ongoing capital return program. On the buyback front, we repurchased nearly 900,000 shares of stock, bringing total purchase since the program's inception to 6.25 million shares. That represents just under 25% of shares outstanding at the program's launch, a highly significant achievement in just six quarters' time, and a clear demonstration of Arch's compelling cash generating potential.

In addition, we paid out $7.6 million in dividends during the third quarter and have now returned an incremental $48 million to shareholders in the form of recurring dividends over the same time frame. All told, we've now returned $544 million to shareholders via buybacks and dividends, which we view as a significant achievement. Given our confidence in the future of the business, we regard the capital return program as an excellent and value enhancing use of free cash, and we remain sharply focused on driving continued progress on that front going forward.

Before turning the call over to Paul for some additional color on our operating performance during the quarter, I'll first share a few thoughts on the condition of coal markets. I'm happy to report that in three of our four primary markets, seaborne coking, domestic coking and seaborne thermal, the fundamentals are highly compelling already with good reason for continued optimism. In the fourth, the domestic thermal segment, we remain in recovery mode, but with improving outlook.

We'll start with the coking coal markets. Globally, steel demand is up nearly 5% year-to-date, a very robust growth