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Registration No. 333-124147
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 2
to
FORM S-1
JAMES RIVER COAL COMPANY
(Exact name of registrant as specified in its charter)
Virginia (State or other jurisdiction of incorporation or organization) |
1221 (Primary Standard Industrial Classification Code Number) |
54-1602012 (I.R.S. Employer Identification No.) |
901 E. Byrd
Street, Suite 1600 Richmond, Virginia 23219 (804) 780-3000 (Address, including zip code, and telephone number, including area code, of registrants principal executive offices) |
Peter T. Socha President & Chief Executive Officer James River Coal Company 901 E. Byrd Street, Suite 1600 Richmond, Virginia 23219 (804) 780-3000 (Name, address, including zip code, and telephone number, including area code, of agent for service) |
David A.
Stockton Kilpatrick Stockton LLP 1100 Peachtree Street, N.E., Suite 2800 Atlanta, Georgia 30309 (404) 815-6500 |
Andrew J. Pitts Cravath, Swaine & Moore LLP 825 Eighth Avenue New York, New York 10019-7475 (212) 474-1000 |
Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are being offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] __________
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] __________
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] __________
If delivery of the prospectus is expected to be made pursuant to Rule 434 under the Securities Act of 1933, check the following box. [ ]
EXPLANATORY NOTE
[E:
The information in this prospectus is not complete and may be
changed. We and the selling shareholder may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is
not permitted.
PROSPECTUS (Subject to Completion)
Issued May 20 , 2005
3,500,000 Shares
COMMON STOCK
Our common stock is listed on the Nasdaq National Market under the symbol JRCC. On May 19 , 2005, the reported last sale price of our common stock on the Nasdaq National Market was $ 31.78 per share.
Concurrent with this offering of shares of our common stock, we are also offering under a separate prospectus $150 million aggregate principal amount of our senior notes due 2012. The offering of shares of our common stock under this prospectus is not contingent on the consummation of the concurrent note offering.
Price to Public |
Underwriting Discounts and Commissions |
Proceeds, before Expenses, to James River Coal Company |
Proceeds to Selling Shareholder |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Per
share |
$ |
$ |
$ |
$ |
||||||||||||||
Total |
$ |
$ |
$ |
$ |
James River Coal Company has granted the underwriters the right to purchase up to an additional 525,000 shares to cover over-allotments.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
Morgan Stanley & Co. Incorporated expects to deliver the shares of common stock to purchasers on or about , 2005.
WACHOVIA SECURITIES |
RAYMOND JAMES |
, 2005]
[D:
The information in this prospectus is not complete and may be
changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is
not permitted.
PROSPECTUS (Subject to Completion)
Issued May 20 , 2005
$150,000,000
% SENIOR NOTES DUE 2012
Interest payable on and
James River Coal Company may redeem any of the notes beginning on , 2009. The initial redemption price is % of their principal amount plus accrued interest. In addition, before 2008, we may redeem up to 35% of the notes at a redemption price of % of their principal amount plus accrued interest using proceeds from the sales of our common stock.
The notes will be our unsecured unsubordinated obligations and will rank equally with all of our other unsecured senior indebtedness. All of our existing subsidiaries and, as required by the indenture governing the notes, specified future subsidiaries will guarantee the senior notes on an unsecured senior basis.
For a more detailed description of the notes, see Description of the Notes beginning on page 116.
Concurrent with this offering of notes, we and one of our shareholders are also offering under a separate prospectus 3,500,000 shares of our common stock. The offering of notes under this prospectus is not contingent on the consummation of the concurrent common stock offering.
Investing in the notes involves risks. See Risk Factors beginning on page 14.
PRICE % AND ACCRUED INTEREST, IF ANY
Price to Public |
Underwriting Discounts and Commissions |
Proceeds, Before Expenses, to James River Coal Company |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Per note |
$ |
$ |
$ |
|||||||||||
Total |
$ |
$ |
$ |
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
Morgan Stanley & Co. Incorporated expects to deliver the notes to purchasers on or about , 2005.
MORGAN STANLEY |
|
, 2005]
TABLE OF CONTENTS
Page |
||||||
---|---|---|---|---|---|---|
Prospectus
Summary |
1 | |||||
Risk
Factors |
14 | |||||
Forward
Looking Statements |
32 | |||||
[E: Market
for Our Common Stock] |
33 | |||||
Use of
Proceeds |
34 | |||||
[E: Dividend
Policy] |
34 | |||||
Capitalization |
35 | |||||
Unaudited Pro
Forma Condensed Consolidated Financial Statements |
36 | |||||
Selected
Historical Financial Data |
44 | |||||
Managements Discussion and Analysis of Financial Condition and Results of Operations |
48 | |||||
The Coal
Industry |
66 | |||||
Business |
71 | |||||
The Triad
Acquisition |
81 | |||||
Government
Regulation |
86 | |||||
Management |
92 | |||||
Executive
Compensation |
95 | |||||
[E: Principal
and Selling Shareholders] |
105 | |||||
[D: Principal
Shareholders] |
107 | |||||
Related Party
Transactions |
109 | |||||
[E:
Description of Capital Stock] |
110 | |||||
[D:
Description of the Notes] |
116 | |||||
Description
of [D: Other] Indebtedness |
150 | |||||
[E: Shares
Eligible for Future Sale] |
152 | |||||
[E:
Underwriting] |
155 | |||||
[D:
Underwriting] |
158 | |||||
Legal
Matters |
160 | |||||
Experts |
160 | |||||
Where You Can
Find More Information |
160 | |||||
Index to Our
Consolidated Financial Statements |
F-1 | |||||
Index to
Triad Mining, Inc. Consolidated Financial Statements |
T-1 |
i
PROSPECTUS SUMMARY
The Company
1
Competitive Strengths
Electric utilities prefer the high-energy, low sulfur characteristics that our coal reserves exhibit
We operate in areas with producer-favorable supply and demand dynamics for the types of coal we produce
We have highly productive, low cost operations
2
We have extensive experience in thin seam mining
Our balance sheet enhances our financial flexibility
We have assembled a strong, experienced team of senior managers with a track record of successful operations
Business Strategy
Capitalizing on industry conditions through the opportunistic contracting of our coal
Maintaining our position as a low-cost producer
|
Productivity: High productivity is a key area of focus for all of our employees and is a core component of the James River culture. We compare our five mining complexes on tonnage, Linear Feet (of mine advance) Per Man Hour (LFPMH) and other metrics, which helps us to assess the relative performance of our operations. We employ an incentive-based compensation structure for our mine-level employees based in part on tonnage produced and on efficiency. |
3
|
Costs: We actively monitor our spending and fixed-cost base by continuously assessing our cost per ton produced. We selectively use our capital to enhance our cost structure and overall productivity by, for example, investing in preparation plants and conveyors. Furthermore, we focus on minimizing non-mining costs, such as administrative overhead. |
Maximizing the consistency and profitability of our mining operations through diversification and balance
|
Mining methods: While maintaining our strength in underground mining, we intend to expand our surface mining operations. Triad currently operates six surface mines and one underground mine, which will significantly enhance the balance between our underground and surface mining operations. We expect that adding surface mines to our operations will reduce the overall costs per ton and volatility of the production at our mining operations. |
|
Coal basins: In addition to expanding our production in the Central Appalachian basin, we plan to expand our operations in other coal basins. Through the Triad acquisition, we will begin operating in the Illinois basin, thereby diversifying our operations into an area with supply/demand dynamics and mining conditions that differ from those in Central Appalachia. |
|
Other diversification opportunities: In addition to seeking balance between mining methods and coal basins, we will seek opportunities in other energy-related areas within our existing regions of operation. |
Pursuing growth opportunities via the efficient use of capital
Demand for Coal
4
Additional Information
Risk Factors
5
Summary Historical and Unaudited Pro Forma Financial Information
6
Predecessor Company |
||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Year Ended December 31, |
||||||||||||||||||||||||||||||||||||||||||
Pro Forma Three Months Ended 3/31/05 |
Successor Company Three Months Ended 3/31/05 |
Pro Forma Twelve Months Ended 12/31/04 |
Successor Company Eight Months Ended 12/31/04 |
Four Months Ended 4/30/04 |
Three Months Ended 3/31/04 |
2003 |
2002 |
2001 |
||||||||||||||||||||||||||||||||||
(All amounts in thousands, except per ton amounts) |
||||||||||||||||||||||||||||||||||||||||||
Statement of
Operations Data: |
||||||||||||||||||||||||||||||||||||||||||
Revenues
|
$ | 121,271 | 97,875 | 427,250 | 231,698 | 113,949 | 80,858 | 304,052 | 397,599 | 384,248 | ||||||||||||||||||||||||||||||||
Cost of coal
sold |
98,145 | 80,942 | 339,511 | 190,926 | 89,294 | 65,707 | 278,939 | 344,222 | 328,408 | |||||||||||||||||||||||||||||||||
Depreciation,
depletion, and amortization |
12,214 | 9,478 | 42,572 | 21,765 | 12,314 | 9,272 | 40,427 | 46,393 | 43,175 | |||||||||||||||||||||||||||||||||
Gross profit
(loss) |
10,912 | 7,455 | 45,167 | 19,007 | 12,341 | 5,879 | (15,314 | ) | 6,984 | 12,665 | ||||||||||||||||||||||||||||||||
Selling,
general, and administrative expenses |
6,259 | 5,035 | 24,226 | 11,412 | 5,023 | 3,561 | 19,835 | 19,994 | 15,725 | |||||||||||||||||||||||||||||||||
Other operating
expenses |
| | | | | | | 26,554 | | |||||||||||||||||||||||||||||||||
Operating
income (loss) |
4,653 | 2,420 | 20,941 | 7,595 | 7,318 | 2,318 | (35,149 | ) | (39,564 | ) | (3,060 | ) | ||||||||||||||||||||||||||||||
Interest
expense |
3,223 | 2,186 | 12,995 | 5,733 | 567 | 403 | 18,536 | 29,883 | 23,923 | |||||||||||||||||||||||||||||||||
Interest income
|
(21 | ) | (21 | ) | (72 | ) | (72 | ) | | | (144 | ) | (1,003 | ) | (662 | ) | ||||||||||||||||||||||||||
Miscellaneous
income, net |
(52 | ) | (123 | ) | (1,221 | ) | (833 | ) | (331 | ) | (53 | ) | (1,519 | ) | (1,222 | ) | 206 | |||||||||||||||||||||||||
Reorganization
items, net |
| | | | (100,907 | ) | 1,557 | 7,630 | | | ||||||||||||||||||||||||||||||||
Income tax
expense (benefit) |
351 | 69 | 2,310 | 791 | | | (2,891 | ) | (8,125 | ) | (10,318 | ) | ||||||||||||||||||||||||||||||
Income (loss)
before cumulative effect of accounting change |
1,152 | 309 | 6,929 | 1,976 | 107,989 | 411 | (56,761 | ) | (59,097 | ) | (16,209 | ) | ||||||||||||||||||||||||||||||
Cumulative
effect of accounting change |
| | | | | | (3,045 | ) | | | ||||||||||||||||||||||||||||||||
Net income
(loss) |
1,152 | 309 | 6,929 | 1,976 | 107,989 | 411 | (59,806 | ) | (59,097 | ) | (16,209 | ) | ||||||||||||||||||||||||||||||
Preferred
dividends |
| | | | | | (340 | ) | (680 | ) | (595 | ) | ||||||||||||||||||||||||||||||
(Increase)
decrease in redemption amount of redeemable common stock |
| | | | | | | 8,798 | 45,831 | |||||||||||||||||||||||||||||||||
Net income
(loss) attributable to common shareholders |
1,152 | 309 | 6,929 | 1,976 | 107,989 | 411 | (60,146 | ) | (50,979 | ) | 29,027 | |||||||||||||||||||||||||||||||
Consolidated
Balance Sheet Data (at end of period): |
||||||||||||||||||||||||||||||||||||||||||
Working capital
(deficit) (1) |
50,604 | 4,213 | 10,046 | 5,896 | 12,227 | 9,009 | (263,146 | ) | (241,857 | ) | ||||||||||||||||||||||||||||||||
Property,
plant, and equipment, net |
308,120 | 260,781 | 255,575 | 254,259 | 254,646 | 257,156 | 270,989 | 310,643 | ||||||||||||||||||||||||||||||||||
Total assets
|
475,710 | 341,133 | 327,826 | 332,589 | 327,241 | 318,289 | 340,311 | 393,411 | ||||||||||||||||||||||||||||||||||
Long term debt,
including current portion |
150,885 | 95,000 | 95,000 | 6,400 | 6,400 | | 252,867 | 249,576 | ||||||||||||||||||||||||||||||||||
Liabilities
subject to compromise |
| | | 319,451 | 319,813 | 319,595 | | | ||||||||||||||||||||||||||||||||||
Total
shareholders equity (deficit) |
122,967 | 66,342 | 65,585 | (127,837 | ) | (123,189 | ) | (123,601 | ) | (68,726 | ) | (9,034 | ) | |||||||||||||||||||||||||||||
Consolidated
Statement of Cash Flow Data: |
||||||||||||||||||||||||||||||||||||||||||
Net cash
provided by (used in) |
||||||||||||||||||||||||||||||||||||||||||
Operating
activities |
12,689 | 14,098 | 1,513 | (3,071 | ) | 23,033 | 28,899 | 30,793 | ||||||||||||||||||||||||||||||||||
Investing
activities |
(14,711 | ) | (21,744 | ) | (9,463 | ) | (6,796 | ) | (15,660 | ) | (33,522 | ) | (43,640 | ) | ||||||||||||||||||||||||||||
Financing
activities |
(133 | ) | 10,224 | 4,361 | 6,299 | (2,489 | ) | 3,347 | 14,119 | |||||||||||||||||||||||||||||||||
Capital
expenditures |
16,446 | 14,690 | 40,037 | 25,811 | 9,521 | 6,815 | 20,116 | 22,925 | 43,694 | |||||||||||||||||||||||||||||||||
Other
Financial Data: |
||||||||||||||||||||||||||||||||||||||||||
Adjusted EBITDA
(2) |
16,919 | 12,021 | 64,734 | 30,193 | 19,963 | 11,643 | 6,797 | 8,051 | 39,909 | |||||||||||||||||||||||||||||||||
Long term debt,
including current portion (3) |
150,885 | 95,000 | 95,000 | 325,851 | 326,213 | 319,595 | 252,867 | 249,576 | ||||||||||||||||||||||||||||||||||
Interest
expense |
3,223 | 2,186 | 12,995 | 5,733 | 567 | 403 | 18,536 | 29,883 | 23,923 | |||||||||||||||||||||||||||||||||
Ratio of
earnings to fixed charges (4) |
1.5 | 1.2 | 1.7 | 1.5 | 160.3 | 2.2 | | | | |||||||||||||||||||||||||||||||||
Supplemental
Operating Data: |
||||||||||||||||||||||||||||||||||||||||||
Tons sold
|
3,128 | 2,228 | 12,273 | 5,775 | 3,107 | 2,287 | 10,083 | 13,926 | 14,065 | |||||||||||||||||||||||||||||||||
Tons produced
|
3,206 | 2,301 | 12,235 | 5,770 | 3,081 | 2,400 | 9,294 | 12,350 | 13,134 | |||||||||||||||||||||||||||||||||
Revenue per ton
sold (excluding synfuel) |
$ | 38.30 | 43.27 | 34.21 | 39.21 | 35.98 | 34.65 | 29.53 | 28.26 | 27.29 |
7
(1) | Working capital is current assets less current liabilities. |
(2) | Adjusted EBITDA is a measure used by management to measure operating performance. We define Adjusted EBITDA as net income plus interest expense (net), income tax expense (benefit) and depreciation, depletion and amortization (EBITDA), as thereafter adjusted by management for items related to our reorganization and the cumulative effect of accounting changes, to better measure our operating performance. We regularly evaluate our performance as compared to other companies in our industry that have different financing and capital structures and/or tax rates by using Adjusted EBITDA. In addition, we use Adjusted EBITDA in evaluating acquisition targets. |
Adjusted EBITDA is not a recognized term under GAAP and is not
an alternative to net income, operating income or any other performance measures derived in accordance with GAAP or an alternative to cash flow from
operating activities as a measure of operating liquidity. Because not all companies use identical calculations, this presentation of Adjusted EBITDA
may not be comparable to other similarly titled measures of other companies. Additionally, Adjusted EBITDA is not intended to be a measure of free cash
flow for managements discretionary use, as it does not reflect certain cash requirements such as tax payments, interest payments and other
contractual obligations. The amounts presented for Adjusted EBITDA differ from the amounts calculated under the definition of EBITDA used in our debt
covenants. The definition of EBITDA used in our debt covenants is further adjusted for certain cash and non-cash charges and is used to determine
compliance with financial covenants and our ability to engage in certain activities such as incurring additional debt and making certain
payments. |
Our pro forma Adjusted EBITDA for the three months ended March 31, 2005 and the year ended December 31, 2004 and our Adjusted EBITDA for the three months ended March 31, 2005, the three months ended March 31, 2004, the eight months ended December 31, 2004, the four months ended April 30, 2004 and the years ended December 31, 2003, 2002 and 2001 is calculated and reconciled to net income in the table below: |
Predecessor Company |
||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Year Ended December 31, |
||||||||||||||||||||||||||||||||||||||||||
Pro Forma Three Months Ended 3/31/05 |
Successor Company Three Months Ended 3/31/05 |
Pro Forma Twelve Months Ended 12/31/04 |
Successor Company Eight Months Ended 12/31/04 |
Four Months Ended 4/30/04 |
Three Months Ended 3/31/04 |
2003 |
2002 |
2001 |
||||||||||||||||||||||||||||||||||
(All amounts in thousands) |
||||||||||||||||||||||||||||||||||||||||||
Net income
(loss) |
$ | 1,152 | 309 | 6,929 | 1,976 | 107,989 | 411 | (59,806 | ) | (59,097 | ) | (16,209 | ) | |||||||||||||||||||||||||||||
Income tax
expense (benefit) |
351 | 69 | 2,310 | 791 | | | (2,891 | ) | (8,125 | ) | (10,318 | ) | ||||||||||||||||||||||||||||||
Interest
expense |
3,223 | 2,186 | 12,995 | 5,733 | 567 | 403 | 18,536 | 29,883 | 23,923 | |||||||||||||||||||||||||||||||||
Interest income
|
(21 | ) | (21 | ) | (72 | ) | (72 | ) | | | (144 | ) | (1,003 | ) | (662 | ) | ||||||||||||||||||||||||||
Depreciation,
depletion, and amortization |
12,214 | 9,478 | 42,572 | 21,765 | 12,314 | 9,272 | 40,427 | 46,393 | 43,175 | |||||||||||||||||||||||||||||||||
EBITDA
|
16,919 | 12,021 | 64,734 | 30,193 | 120,870 | 10,086 | (3,878 | ) | 8,051 | 39,909 | ||||||||||||||||||||||||||||||||
Cumulative
effect of accounting change |
| | | | | | 3,045 | | | |||||||||||||||||||||||||||||||||
Reorganization
items, net |
| | | | (100,907 | ) | 1,557 | 7,630 | | | ||||||||||||||||||||||||||||||||
Adjusted
EBITDA |
$ | 16,919 | 12,021 | 64,734 | 30,193 | 19,963 | 11,643 | 6,797 | 8,051 | 39,909 |
(3) | During the predecessor period, debt includes liabilities subject to compromise. |
(4) | For purposes of this computation, earnings consist of pre-tax income from continuing operations plus fixed charges. Fixed charges consist of interest expense on all indebtedness plus amortization of deferred costs of financing and the interest component of lease rental expense. Earnings were insufficient to cover fixed charges by $59.7 million, $67.2 million and $26.5 million for the years ended December 31, 2003, 2002 and 2001, respectively. |
8
[E:
The Offering
Common stock
offered: |
||||||
By James River
Coal Company |
1,500,000 shares |
|||||
By selling
shareholder |
2,000,000 shares |
|||||
Total |
3,500,000 shares |
|||||
Common stock
to be outstanding after this offering |
16,240,694 shares |
|||||
Over-allotment
option |
The
underwriters have an option to purchase
525,000 additional shares of our common stock from us to cover any over-allotments. |
|||||
Use of
proceeds |
We
estimate that we will receive gross proceeds of approximately $50.4 million from our sale of the common stock in this offering
(based on an assumed offering price per share of $33.57) and $150.0
million from our sale of the notes in the concurrent offering. If the underwriters exercise
their over-allotment option in full, we estimate that we will receive gross proceeds of approximately $68.0 million from our sale of common stock. We
will not receive any of the proceeds from the sale of common stock by the selling shareholder. |
|||||
We
intend to use the gross proceeds of this offering and the concurrent notes offering in the following manner: |
||||||
approximately $95.0 million (without giving effect to payments since
March 31, 2005) to repay amounts outstanding under
our Senior Secured Credit Facility and our Term Credit Facility; |
||||||
approximately $58.7 million to finance the Triad acquisition; |
||||||
approximately $11.1 million for offering expenses, including underwriting discounts, and for the pre-payment penalty under our existing
debt facilities; and |
||||||
approximately $35.6 million for general corporate purposes, which may be used to fund internal growth projects or to reduce the
underfunded portion of our pension plan. |
||||||
If
the Triad acquisition is not consummated, the amount of the net proceeds of this offering and the concurrent notes offering available for general
corporate purposes will increase commensurately. Completion of this common stock offering is not contingent upon completion of the notes offering. If
the concurrent notes offering is not completed, proceeds of this offering will first be used to finance the Triad acquisition. See Use of
Proceeds. |
||||||
Dividend
policy |
We
currently do not anticipate paying cash dividends on our shares of common stock in the near future. |
|||||
Nasdaq National
Market symbol |
JRCC |
9
Concurrent Financings
10
[D:
The Offering
Issuer |
James River Coal Company |
|||||
Securities
offered |
$150 million aggregate principal amount of Senior Notes due 2012. |
|||||
Offering
price |
% of the principal amount. |
|||||
Maturity |
, 2012. |
|||||
Interest
rate |
% per annum. |
|||||
Interest payment
dates |
Semi-annually on and of each year, commencing on ,
2005. |
|||||
Ranking |
The
notes will be our senior unsecured obligations, and will (i) rank equally with all of our other existing and future unsecured and unsubordinated debt,
(ii) rank senior to all existing and future subordinated debt, (iii) rank junior to all obligations, including trade payables, of our subsidiaries
(other than subsidiary guarantors), and (iv) be effectively subordinated to all of our secured indebtedness to the extent of the value of the assets
securing such indebtedness, including indebtedness outstanding under our proposed new senior secured credit facility. |
|||||
Similarly, guarantees of the senior notes will be unsecured senior obligations of the subsidiary guarantors and will (i) rank equally in right
of payment to all of the applicable subsidiary guarantors existing and future senior indebtedness, including its guarantee of our new senior
secured credit facility, (ii) rank senior in right of payment to all of the applicable subsidiary guarantors existing and future senior
subordinated indebtedness, and (iii) be effectively subordinated in right of payment to the applicable subsidiary guarantors secured debt,
including its guarantee of our new senior secured credit facility, to the extent of the value of the assets securing such debt, and all liabilities and
preferred stock of the applicable subsidiary guarantors subsidiaries that do not guarantee the senior notes. |
Assuming the offering, the common stock offering, our proposed new senior secured credit facility and the Triad acquisition had been completed
as of
March 31, 2005 on a pro forma basis, we and the initial subsidiary guarantors would have had $0.9 million of consolidated
indebtedness outstanding, other than the notes, all of which would have been secured indebtedness. For more information on the ranking of the notes,
see Description of the NotesRanking. |
11
Optional
redemption |
We
may redeem the notes, in whole or in part, at any time on or after , 2009 at the redemption
prices specified under Description of the NotesOptional Redemption plus accrued and unpaid interest to the redemption date, after
giving the required notice under the indenture governing the notes. |
|||||
In
addition, at any time prior to , 2008 we may redeem up to 35% of the principal amount of
the notes with the net cash proceeds of a public equity offering at a redemption price (expressed as a percentage of principal amount) of
%, plus accrued and unpaid interest to the redemption date; provided that at least 65% of the aggregate principal amount of the
notes originally issued remains outstanding after each such redemption and notice of any such redemption is mailed within 60 days of each such public
equity offering. |
||||||
Guarantees |
Payment of the principal of, premium, if any, and interest on the notes will be guaranteed, jointly and severally, on an unsecured
unsubordinated basis by each restricted subsidiary (other than a foreign subsidiary) existing on the closing date. In addition, each future restricted
subsidiary (other than a foreign subsidiary), including Triad, upon consummation of the Triad acquisition, will guarantee the payment of the principal
of, premium, if any, and interest on the notes. |
|||||
The
obligations of each subsidiary guarantor under its note guarantee will be limited so as not to constitute a fraudulent conveyance under applicable
Federal or state laws. Each subsidiary guarantor that makes a payment or distribution under its note guarantee will be entitled to contribution from
any other subsidiary guarantor or us, as the case may be. |
||||||
The
note guarantee issued by any subsidiary guarantor will be automatically and unconditionally released and discharged upon (1) any sale, exchange or
transfer to any person (other than an affiliate of ours) of all the capital stock of such subsidiary guarantor or (2) the designations of such
subsidiary guarantor as an unrestricted subsidiary, in each case, in compliance with the terms of the indenture governing the notes. |
||||||
Change in
control |
If
we experience a change in control, we will be required to make an offer to repurchase the notes at a price equal to 101% of the principal amount plus
accrued and unpaid interest, if any, to the date of repurchase. |
Restrictive
covenants |
The
indenture will contain covenants that limit our ability and the ability of our restricted subsidiaries to, among other things: |
|||||
incur additional debt and, in the case of restricted subsidiaries, issue preferred stock; |
||||||
pay dividends, acquire shares of capital stock, make payments on subordinated debt or make investments; |
12
place limitations on dividends, distributions or asset transfers from restricted subsidiaries; |
||||||
issue guarantees; |
||||||
sell or exchange assets; |
||||||
enter into transactions with affiliates; |
||||||
create liens; |
||||||
engage in unrelated businesses; and |
||||||
effect mergers. |
||||||
Use of
proceeds |
We
estimate that we will receive gross proceeds of $150.0 million from our sale of the notes in this offering and approximately $50.4
million from our sale of common stock in the concurrent offering (based on an assumed offering price per share of $33.57). If the underwriters
exercise their over-allotment option in full, we estimate that we will receive net proceeds of approximately $68.0 million from our sale of
common stock. |
|||||
We
intend to use the net proceeds of this offering and the concurrent common stock offering in the following manner: |
||||||
approximately $95.0 million (without giving effect to payments since March 31, 2005) to repay amounts outstanding under
our Senior Secured Credit Facility and our Term Credit Facility; |
||||||
approximately $58.7 million to finance the Triad acquisition; |
||||||
approximately $11.1 million for offering expenses, including underwriting discounts, and for the pre-payment penalty under our existing
debt facilities; and |
||||||
approximately $35.6 million for general corporate purposes, which may be used to fund internal growth projects or to reduce the
underfunded portion of our pension plan. |
||||||
If
the Triad acquisition is not consummated, the amount of the net proceeds of this offering and the concurrent common stock offering available for
general corporate purposes will increase commensurately. Completion of this notes offering is not contingent upon completion of the common stock
offering. See Use of Proceeds. |
Concurrent Financings
13
RISK FACTORS
Risks Related to the Coal Industry
Because the demand and pricing for coal is greatly influenced by consumption patterns of the domestic electricity generation industry, a reduction in the demand for coal by this industry would likely cause our profitability to decline significantly.
Changes in the export and import markets for coal products could affect the demand for our coal, our pricing and our profitability.
|
currency exchange rates; |
|
growth of economic development; and |
|
ocean freight rates. |
14
Increased consolidation and competition in the U.S. coal industry may adversely affect our revenues and profitability.
Fluctuations in transportation costs and the availability and dependability of transportation could affect the demand for our coal and our ability to deliver coal to our customers.
Shortages or increased costs of skilled labor in the Central Appalachian coal region may hamper our ability to achieve high labor productivity and competitive costs.
15
related recruiting efforts by our competitors. Any future shortage of skilled miners, or increases in our labor costs, could have an adverse impact on our labor productivity and costs and on our ability to expand production.
Government laws, regulations and other requirements relating to the protection of the environment, health and safety and other matters impose significant costs on us, and future requirements could limit our ability to produce coal.
|
employee health and safety; |
|
permitting and licensing requirements; |
|
air quality standards; |
|
water quality standards; |
|
plant, wildlife and wetland protection; |
|
the management and disposal of hazardous and non-hazardous materials generated by mining operations; |
|
the storage of petroleum products and other hazardous substances; |
|
reclamation and restoration of properties after mining operations are completed; |
|
discharge of materials into the environment, including air emissions and wastewater discharge; |
|
surface subsidence from underground mining; and |
|
the effects of mining operations on groundwater quality and availability. |
The passage of legislation responsive to the Framework Convention on Global Climate Change or similar governmental initiatives could result in restrictions on coal use.
16
We are subject to the federal Clean Water Act and similar state laws which impose treatment, monitoring and reporting obligations.
New regulations have expanded the definition of black lung disease and generally made it easier for claimants to assert and prosecute claims, which could increase our exposure to black lung benefit liabilities.
Extensive environmental laws and regulations affect the end-users of coal and could reduce the demand for coal as a fuel source and cause the volume of our sales to decline.
17
The characteristics of coal may make it difficult for coal users to comply with various environmental standards related to coal combustion. As a result, they may switch to other fuels, which would affect the volume of our sales.
18
We must obtain governmental permits and approvals for mining operations, which can be a costly and time consuming process and result in restrictions on our operations.
Recent litigation could impact our ability to conduct underground mining operations.
19
We have significant reclamation and mine closure obligations. If the assumptions underlying our accruals are materially inaccurate, we could be required to expend greater amounts than anticipated.
Terrorist attacks and threats, escalation of military activity in response to such attacks or acts of war may negatively affect our business, financial condition and results of operations.
Risks Related to Our Operations
The loss of, or significant reduction in, purchases by our largest customers
could adversely affect our revenues.
|
British thermal units (Btus); |
20
|
sulfur content; |
|
ash content; |
|
grindability; and |
|
ash fusion temperature. |
In some cases, failure to meet these specifications could result in economic penalties, including price adjustments, the rejection of deliveries or termination of the contracts. In addition, all of our contracts allow our customers to renegotiate or terminate their contracts in the event of changes in regulations or other governmental impositions affecting our industry that increase the cost of coal beyond specified limits. Further, we and Triad have been required in the past to purchase sulfur credits to comply with contractual requirements of our customers relating to the sulfur content of coal sold to them, and may be required to do so in the future.
Our profitability will be negatively impacted if we are unable to balance our mix of contract and spot sales.
Our ability to operate our company effectively could be impaired if we lose senior executives or fail to employ needed additional personnel.
Unexpected increases in raw material costs could significantly impair our operating results.
Coal mining is subject to conditions or events beyond our control, which could cause our quarterly or annual results to deteriorate.
21
production and the cost of mining at particular mines for varying lengths of time and have a significant impact on our operating results. These conditions or events have included:
|
variations in thickness of the layer, or seam, of coal; |
|
variations in geological conditions; |
|
amounts of rock and other natural materials intruding into the coal seam; |
|
equipment failures and unexpected major repairs; |
|
unexpected maintenance problems; |
|
unexpected departures of one or more of our contract miners; |
|
fires and explosions from methane and other sources; |
|
accidental minewater discharges or other environmental accidents; |
|
other accidents or natural disasters; and |
|
weather conditions. |
Mining in Central Appalachia is complex due to geological characteristics of the region.
Our future success depends upon our ability to acquire or develop additional coal reserves that are economically recoverable.
Our financial performance may suffer if we do not successfully develop our new mine at the McCoy Elkhorn mining complex.
22
Factors beyond our control could impact the amount and pricing of coal supplied by our independent contractors and other third parties.
We face significant uncertainty in estimating our recoverable coal reserves, and variations from those estimates could lead to decreased revenues and profitability.
|
currently available geological, mining and property control data and maps; |
|
our own operational experience and that of our consultants; |
|
historical production from similar areas with similar conditions; |
|
previously completed geological and reserve studies; |
|
the assumed effects of regulations and taxes by governmental agencies; and |
|
assumptions governing future prices and future operating costs. |
|
mining activities; |
|
new engineering and geological data; |
|
acquisition or divestiture of reserve holdings; and |
|
modification of mining plans or mining methods. |
Therefore, actual coal tonnage recovered from identified reserve areas or properties, and costs associated with our mining operations, may vary from estimates. These variations could be material, and therefore could result in decreased profitability. For a further discussion of our coal reserves, see Managements Discussion and Analysis of Financial Condition and Results of OperationsCritical Accounting Estimates and BusinessReserves.
23
Our operations could be adversely affected if we are unable to obtain required surety bonds.
We have significant unfunded obligations for long-term employee benefits for which we accrue based upon assumptions, which, if incorrect, could result in us being required to expend greater amounts than anticipated.
We may be unable to adequately provide funding for our pension plan obligations based on our current estimates of those obligations.
As a result of our adoption of fresh start accounting in connection with our emergence from bankruptcy, you will not be able to compare our financial statements for periods before our emergence from bankruptcy with our financial results for periods after our emergence from bankruptcy.
24
Substantially all of our assets are subject to security interests.
We may be unable to comply with restrictions imposed by the terms of our indebtedness, which could result in a default under these agreements.
|
minimum fixed charge coverage ratio; |
|
maximum total leverage ratio; |
|
minimum levels of consolidated tangible net worth; |
|
minimum levels of Consolidated Total EBITDA (as defined in our credit facilities); and |
|
maximum limits on capital expenditures. |
Changes in our credit ratings could adversely affect our costs and expenses.
25
Defects in title or loss of any leasehold interests in our properties could limit our ability to mine these properties or result in significant unanticipated costs.
Inability to satisfy contractual obligations may adversely affect our profitability.
The disallowance or early termination of Section 29 tax credits for synfuel plants by the Internal Revenue Service could decrease our revenues.
Our auditors have previously identified material weaknesses in our internal controls. Although we have remediated these material weaknesses, if additional internal control issues develop, we may be unable to accurately report our financial results, detect fraud or comply with the requirements of Section 404 of the Sarbanes-Oxley Act.
26
We may be unable to exploit opportunities to diversify our operations.
There are risks associated with our acquisition strategy, including our inability to successfully complete acquisitions, our assumption of liabilities, dilution of your investment, significant costs and additional financing required.
27
The proceeds of our proposed financing transactions may not be sufficient to finance any additional acquisitions.
Because we do not have a combined operating history with Triad, historical financial information is not necessarily a good indicator of future results of operations or financial condition, and we may be unable to successfully integrate those operations.
Allocation of the excess of the purchase price we expect to pay for Triad over the book value of Triads fixed assets may impact our future earnings.
Our company could be less valuable if we are unable to close the Triad acquisition.
28
Triads current reserve base is limited.
Surface mining is subject to increased regulation, and may require us to incur additional costs.
[E:
Risks Relating to our Common Stock
The market price of our common stock has been volatile and difficult to predict, and may continue to be volatile and difficult to predict after the offering, and the value of your investment may decline.
|
variations in our quarterly operating results; |
|
changes in financial estimates by securities analysts; |
|
changes in general conditions in the economy or the financial markets; |
|
changes in accounting standards, policies or interpretations; |
|
other developments affecting us, our industry, clients or competitors; and |
|
the operating and stock price performance of companies that investors deem comparable to us. |
29
Dividends are prohibited by our existing loan agreements and will be limited by our proposed new senior secured credit facility [E: and senior notes] [D: and the notes].
Provisions of our articles of incorporation, bylaws and shareholder rights agreements could discourage potential acquisition proposals and could deter or prevent a change in control.
[D:
Risks Relating to the Notes
We may not be able to generate sufficient cash flow to meet our debt service obligations, including payments on the notes.
There may be no active trading market for the notes and the market price for the notes may be volatile.
30
Fraudulent conveyance laws could void our obligations under the notes.
|
were insolvent; |
|
were rendered insolvent by the issuance of the notes; |
|
were engaged in a business or transaction for which our remaining assets constituted unreasonably small capital; or |
|
intended to incur, or believed that we would incur, debts beyond our ability to repay those debts as they matured. |
31
FORWARD LOOKING STATEMENTS
|
our cash flows, results of operation or financial condition; |
|
the consummation of acquisition, disposition or financing transactions and the effect thereof on our business; |
|
governmental policies and regulatory actions; |
|
legal and administrative proceedings, settlements, investigations and claims; |
|
weather conditions or catastrophic weather-related damage; |
|
our production capabilities; |
|
availability of transportation; |
|
market demand for coal, electricity and steel; |
|
competition; |
|
our relationships with, and other conditions affecting, our customers; |
|
employee workforce factors; |
|
our assumptions concerning economically recoverable coal reserve estimates; |
|
future economic or capital market conditions; |
|
our plans and objectives for future operations and expansion or consolidation; and |
|
the closing or successful integration of the Triad acquisition. |
32
[E:
MARKET FOR OUR COMMON STOCK
Price Range of Common Stock |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
High |
Low |
||||||||||
Year Ended
December 31, 2004 |
|||||||||||
Fourth
Quarter |
$ | 59.00 | $ | 34.25 | |||||||
Year
Ending December 31, 2005 |
|||||||||||
First
Quarter |
$ | 45.75 | $ | 37.41 | |||||||
Second
Quarter (through
May 19 , 2005) |
$ | 40.50 | $ | 28.64 |
33
USE OF PROCEEDS
[E:
[D:
|
approximately $95.0 million (without giving effect to payments since March 31, 2005) to repay amounts outstanding under our Senior Secured Credit Facility and our Term Credit Facility; |
|
approximately $58.7 million to finance the Triad acquisition; |
|
approximately $11.1 million for offering expenses, including underwriting discounts, and for the pre-payment penalty under our existing debt facilities; and |
|
approximately $35.6 million for general corporate purposes, which may be used to fund internal growth projects or to reduce the underfunded portion of our pension plan. |
[E:
DIVIDEND POLICY
34
CAPITALIZATION
As of March 31, 2005 |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Actual |
As Adjusted |
Pro Forma, as adjusted |
|||||||||||||
(dollars in thousands) |
|||||||||||||||
Cash and cash
equivalents |
$ | 1,724 | 96,029 | 37,293 | |||||||||||
Debt |
|||||||||||||||
Existing
Senior Secured Credit Facility |
|||||||||||||||
Term Loan
Component |
20,000 | | | ||||||||||||
Revolver
Component |
| | | ||||||||||||
Existing Term
Credit Facility |
75,000 | | | ||||||||||||
Proposed New
Senior Secured Credit Facility (1) |
| | | ||||||||||||
%
Senior Notes due 2012 [D: offered hereby] |
| 150,000 | 150,000 | ||||||||||||
Other |
| | 885 | ||||||||||||
Total
Debt |
95,000 | 150,000 | 150,885 | ||||||||||||
Shareholders Equity (2) |
|||||||||||||||
Common
Stock |
147 | 162 | 166 | ||||||||||||
Additional
Paid in Capital |
73,592 | 121,152 | 132,148 | ||||||||||||
Deferred
Stock Based Compensation |
(8,900 | ) | (8,900 | ) | (8,900 | ) | |||||||||
Retained
Earnings (Deficit) (3) |
1,460 | (490 | ) | (490 | ) | ||||||||||
Accumulated
Comprehensive Income |
43 | 43 | 43 | ||||||||||||
Total
Shareholders Equity |
66,342 | 111,967 | 122,967 | ||||||||||||
Total
Capitalization |
$ | 161,342 | 261,967 | 273,852 |
(1) | Availability under our proposed new $100 million senior secured credit facility will be reduced on a dollar for dollar basis by the amount of letters of credit issued under the facility. See Description of [D: Other] Indebtedness for a description of the proposed new senior secured credit facility. As of March 31, 2005, we had $32.7 million of letters of credit outstanding under our existing Senior Secured Credit Facility and Triad had letters of credit outstanding of $6.9 million,and we expect that such letters of credit will be replaced with letters of credit issued under our proposed new senior secured creditfacility. |
(2) | Excludes the impact of the contingent issuance of shares of our common stock with an aggregate value of up to $5,000,000 in connection with the Triad acquisition. |
(3) | Reflects a prepayment penalty of $0.8 million on our existing debt and the write-off of $1.8 million of unamortized debt issuance costs associated with the payment of our existing debt, net of taxes. |
35
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
the completion of this offering and the concurrent [E: notes] [D: common stock] offering and the application of the net proceeds therefrom to refinance our debt and finance the Triad acquisition, as described under Use of Proceeds; |
|
the completion of our proposed new senior secured credit facility; and |
|
the Triad acquisition as described under The Triad Acquisition. |
36
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF
MARCH 31, 2005
(dollars in thousands)
(Unaudited)
Historical James River Coal |
Financing Adjustments |
Pro Forma for Financing |
Historical Triad |
Acquisition Adjustments |
Pro Forma |
|||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(a) |
||||||||||||||||||||||||||
Cash and
marketable securities |
$ | 1,724 | 190,105 | (b) | 96,029 | 23,546 | (17,782 | )(g) | 37,293 | |||||||||||||||||
(95,800 | )(c) | (64,500 | )(h) | |||||||||||||||||||||||
Trade
receivables |
37,496 | | 37,496 | 10,317 | | 47,813 | ||||||||||||||||||||
Other
receivables |
2,928 | | 2,928 | | | 2,928 | ||||||||||||||||||||
Total
receivables |
40,424 | 40,424 | 10,317 | | 50,741 | |||||||||||||||||||||
Coal
inventories |
5,500 | | 5,500 | 1,179 | | 6,679 | ||||||||||||||||||||
Materials and
supplies inventories |
4,446 | | 4,446 | 1,052 | | 5,498 | ||||||||||||||||||||
Total
inventories |
9,946 | 9,946 | 2,231 | | 12,177 | |||||||||||||||||||||
Other current
assets |
8,041 | | 8,041 | 1,082 | | 9,123 | ||||||||||||||||||||
Total current
assets |
60,135 | 94,305 | 154,440 | 37,176 | (82,282 | ) | 109,334 | |||||||||||||||||||
Property,
plant and equipment, net |
260,781 | | 260,781 | 25,207 | 22,132 | (h) | 308,120 | |||||||||||||||||||
Goodwill |
| | | | 31,188 | (h) | 31,188 | |||||||||||||||||||
Restricted
cash |
8,425 | | 8,425 | | | 8,425 | ||||||||||||||||||||
Other
assets |
11,792 | 6,320 | (d) | 18,112 | 531 | | 18,643 | |||||||||||||||||||
Total
assets |
$ | 341,133 | 100,625 | 441,758 | 62,914 | (28,962 | ) | 475,710 |
37
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF
MARCH 31, 2005
(dollars in thousands)
(Unaudited)
Historical James River Coal |
Pro Forma Financing Adjustment |
Pro Forma for Financing |
Historical Triad |
Pro Forma Acquisition Adjustments |
Pro Forma |
|||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(a) |
||||||||||||||||||||||||||
Current
maturities of long-term debt |
$ | 3,600 | (3,600 | )(e) | | 885 | | 885 | ||||||||||||||||||
Accounts
payable |
25,043 | | 25,043 | 3,561 | | 28,604 | ||||||||||||||||||||
Other current
liabilities |
27,279 | | 27,279 | 1,962 | | 29,241 | ||||||||||||||||||||
Total current
liabilities |
55,922 | (3,600 | ) | 52,322 | 6,408 | | 58,730 | |||||||||||||||||||
Long-term
debt, less current maturities |
91,400 | 58,600 | (e) | 150,000 | | | 150,000 | |||||||||||||||||||
Noncurrent
portion of workers compensation benefits |
38,381 | | 38,381 | | | 38,381 | ||||||||||||||||||||
Noncurrent
portion of black lung benefits |
23,421 | 23,421 | | | 23,421 | |||||||||||||||||||||
Pension
obligations |
15,206 | | 15,206 | | | 15,206 | ||||||||||||||||||||
Asset
retirement obligations |
15,129 | | 15,129 | 7,488 | | 22,617 | ||||||||||||||||||||
Other |
35,332 | | 35,332 | | 9,056 | (h) | 44,388 | |||||||||||||||||||
Total other
liabilities |
127,469 | | 127,469 | 7,488 | 9,056 | 144,013 | ||||||||||||||||||||
Total
liabilities |
274,791 | 55,000 | 329,791 | 13,896 | 9,056 | 352,743 | ||||||||||||||||||||
Total
shareholders equity |
66,342 | 47,575 | (b) | 111,967 | 49,018 | (17,782 | )(g) | 122,967 | ||||||||||||||||||
(1,950 | )(f) | (20,236 | )(i) | |||||||||||||||||||||||
Total
liabilities and shareholders equity |
$ | 341,133 | 100,625 | 441,758 | 62,914 | (28,962 | ) | 475,710 |
Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet Data
38
(dollars in thousands) |
||||||
---|---|---|---|---|---|---|
Repayment of
senior secured credit facility |
$ | (75,000 | ) | |||
Repayment of
term credit facility |
(20,000 | ) | ||||
New senior
notes |
150,000 | |||||
55,000 | ||||||
Repayment of
current maturities of long-term debt |
3,600 | |||||
Net increase
in long-term debt net of current maturities |
$ | 58,600 |
Cash |
$ | 64,000 | ||||
Equity |
11,000 | |||||
Acquisition
Costs |
500 | |||||
Total
Purchase Price |
$ | 75,500 |
39
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE
YEAR ENDED DECEMBER 31, 2004
(dollars in thousands, except share data)
(Unaudited)
James River Coal |
||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Predecessor Four Months April 30, 2004 |
Successor Eight Months December 31, 2004 |
(a) Pro Forma Fresh Start Adjustments |
Pro Forma Twelve Months December 31, 2004 |
(b) Pro Forma Financing Adjustments |
Pro Forma |
Triad Year Ended December 31, 2004 |
Pro Forma Acquisition Adjustments |
Pro Forma Triad Acquisition |
||||||||||||||||||||||||||||||
Revenues |
$ | 113,949 | 231,698 | | 345,647 | | 345,647 | 81,603 | | 427,250 | ||||||||||||||||||||||||||||
Cost of
sales |
||||||||||||||||||||||||||||||||||||||
Cost of coal
sold |
89,294 | 190,926 | | 280,220 | | 280,220 | 59,291 | | 339,511 | |||||||||||||||||||||||||||||
Depreciation,
depletion and amortization |
12,314 | 21,765 | (1,431 | ) | 32,648 | | 32,648 | 5,500 | 4,424 | (f) | 42,572 | |||||||||||||||||||||||||||
Total cost of
sales |
101,608 | 212,691 | (1,431 | ) | 312,868 | | 312,868 | 64,791 | 4,424 | 382,083 | ||||||||||||||||||||||||||||
Gross
profit |
12,341 | 19,007 | 1,431 | 32,779 | | 32,779 | 16,812 | (4,424 | ) | 45,167 | ||||||||||||||||||||||||||||
Sales, general
and administrative expenses |
5,023 | 11,412 | | 16,435 | 4,055 | (c) | 20,490 | 3,736 | | 24,226 | ||||||||||||||||||||||||||||
Operating
income (loss) |
7,318 | 7,595 | 1,431 | 16,344 | (4,055 | ) | 12,289 | 13,076 | (4,424 | ) | 20,941 | |||||||||||||||||||||||||||
Interest
expense |
567 | 5,733 | 2,300 | 8,600 | 4,221 | (d) | 12,821 | 174 | | 12,995 | ||||||||||||||||||||||||||||
Interest
income |
| (72 | ) | | (72 | ) | | (72 | ) | (567 | ) | 567 | (g) | (72 | ) | |||||||||||||||||||||||
Miscellaneous
income, net |
(331 | ) | (833 | ) | | (1,164 | ) | | (1,164 | ) | (57 | ) | | (1,221 | ) | |||||||||||||||||||||||
Total other
expense (income) |
236 | 4,828 | 2,300 | 7,364 | 4,221 | 11,585 | (450 | ) | 567 | 11,702 | ||||||||||||||||||||||||||||
Income (loss)
before reorganization costs and income taxes |
7,082 | 2,767 | (869 | ) | 8,980 | (8,276 | ) | 704 | 13,526 | (4,991 | ) | 9,239 | ||||||||||||||||||||||||||
Reorganization
gain, net |
(100,907 | ) | | 100,907 | | | | | | | ||||||||||||||||||||||||||||
Income loss
before income tax |
107,989 | 2,767 | (101,776 | ) | 8,980 | (8,276 | ) | 704 | 13,526 | (4,991 | ) | 9,239 | ||||||||||||||||||||||||||
Income tax
provision (benefit) |
| 791 | 1,454 | 2,245 | (2,069 | )(e) | 176 | | 2,134 | (h) | 2,310 | |||||||||||||||||||||||||||
Net income
(loss) |
$ | 107,989 | 1,976 | (103,230 | ) | 6,735 | (6,207 | ) | 528 | 13,526 | (7,125 | ) | 6,929 |
Earnings per share |
||||||||||
---|---|---|---|---|---|---|---|---|---|---|
Basic |
Diluted |
|||||||||
Weighted average shares
used to calculate earnings per share at December 31, 2004 |
13,799,994 | 14,622,620 | ||||||||
Shares issued
to Triad (i) |
327,674 | 327,674 | ||||||||
Shares issued
in financing (i) |
1,500,000 | 1,500,000 | ||||||||
Pro forma
shares |
15,627,668 | 16,450,294 | ||||||||
Pro forma
earnings per share |
$ | 0.44 | 0.42 |
40
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE
THREE MONTHS ENDED MARCH 31, 2005
(dollars in thousands, except share data)
(Unaudited)
James River Coal Three Months March 31, 2005 |
(b) Pro Forma Financing Adjustments |
Pro Forma |
Triad Three Months Ended March 31, 2005 |
Pro Forma Acquisition Adjustments |
Pro Forma Triad Acquisition |
|||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Revenues |
$ | 97,875 | | 97,875 | 23,396 | | 121,271 | |||||||||||||||||||
Cost of
sales |
||||||||||||||||||||||||||
Cost of coal
sold |
80,942 | | 80,942 | 17,203 | | 98,145 | ||||||||||||||||||||
Depreciation,
depletion and amortization |
9,478 | | 9,478 | 1,630 | 1,106 | (f) | 12,214 | |||||||||||||||||||
Total cost of
sales |
90,420 | | 90,420 | 18,883 | 1,106 | 110,359 | ||||||||||||||||||||
Gross
profit |
7,455 | | 7,455 | 4,563 | (1,106 | ) | 10,912 | |||||||||||||||||||
Sales,
general and administrative expenses |
5,035 | 338 | (c) | 5,373 | 886 | | 6,259 | |||||||||||||||||||
Operating
income (loss) |
2,420 | (338 | )(c) | 2,082 | 3,677 | (1,106 | ) | 4,653 | ||||||||||||||||||
Interest
expense |
2,186 | 1,016 | (d) | 3,202 | 21 | | 3,223 | |||||||||||||||||||
Interest
income |
(21 | ) | | (21 | ) | (149 | ) | 149 | (g) | (21 | ) | |||||||||||||||
Miscellaneous
income, net |
(123 | ) | | (123 | ) | 71 | | (52 | ) | |||||||||||||||||
Total other
expense (income) |
2,042 | 1,016 | 3,058 | (57 | ) | 149 | 3,150 | |||||||||||||||||||
Income loss
before income tax |
378 | (1,354 | ) | (976 | ) | 3,734 | (1,255 | ) | 1,503 | |||||||||||||||||
Income tax
provision (benefit) |
69 | (338 | )(e) | (269 | ) | | 620 | (h) | 351 | |||||||||||||||||
Net income
(loss) |
$ | 309 | (1,016 | ) | (707 | ) | 3,734 | (1,875 | ) | 1,152 |
Earnings per share |
||||||||||
---|---|---|---|---|---|---|---|---|---|---|
Basic |
Diluted |
|||||||||
Weighted average shares
used to calculate earnings per share at March 31, 2005 |
13,799,994 | 14,751,672 | ||||||||
Shares issued
to Triad (i) |
327,674 | 327,674 | ||||||||
Shares issued
in financing (i) |
1,500,000 | 1,500,000 | ||||||||
Pro forma
shares |
15,627,668 | 16,579,346 | ||||||||
Pro forma
earnings per share |
$ | 0.07 | 0.07 |
Notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations
41
completion of our proposed new $100 million senior secured credit facility. The common stock and notes offerings are not contingent upon each other or completion of the Triad acquisition. The proposed new senior secured credit facility is contingent upon completion of the Triad acquisition. As of March 31, 2005, we had $32.7 million of letters of credit outstanding under our existing Senior Secured Credit Facility and Triad had letters of credit outstanding of $6.9 million, and we expect that such letters of credit and letters of credit issued subsequently will be replaced with letters of credit issued under our proposed new senior secured credit facility.
Three Months Ended March 31, 2005 |
Twelve Months Ended December 31, 2004 |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|
Write off of
deferred financing costs associated with debt to be refinanced |
$ | | 1,800 | |||||||
Prepayment
penalty associated with the refinancing |
| 800 | ||||||||
Incremental
fees associated with our new senior secured credit facility |
338 | 1,455 | ||||||||
$ | 338 | 4,055 |
Three Months Ended March 31, 2005 |
Twelve Months Ended December 31, 2004 |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|
Eliminates
historical interest expense |
$ | (2,157 | ) | (8,471 | ) | |||||
Interest on
senior notes |
2,906 | 11,625 | ||||||||
Amortization
of financing costs |
267 | 1,067 | ||||||||
Pro forma
interest adjustment |
$ | 1,016 | 4,221 |
42
43
SELECTED HISTORICAL FINANCIAL DATA
Recent Reorganization
|
exchanged approximately $266 million in debt under various existing credit facilities for (1) restructured term debt of approximately $75 million, which is secured by a second lien on substantially all of our assets, and (2) a total of 13,799,994 shares of our new common stock, par value $0.01 per share, issued on a pro rata basis to the holders of the existing debt; |
|
distributed interests in an unsecured creditor liquidating trust (which trust initially held life insurance policies with cash surrender values of approximately $3.1 million, the right to receive certain refunds and the right to pursue certain derivative claims) to our general unsecured creditors in exchange for their claims, which were estimated to be valued at approximately $44.9 million; |
|
entered into a new senior secured credit facility allowing borrowings up to $50 million, which is secured by a first lien on substantially all of our assets; |
|
satisfied and discharged all of our obligations under our $20 million debtor-in-possession credit facility; |
|
rejected (i.e., terminated) certain agreements that we had entered into before the bankruptcy that were found to be unduly burdensome to us, and discharged the claims of creditors related to those agreements; |
|
canceled our existing equity securities; |
|
acknowledged that all intercompany debt was deemed to be extinguished; |
|
acknowledged that pre- and post-petition (i) environmental and regulatory obligations; (ii) obligations with respect to workers compensation and black lung programs; and (iii) regulatory obligations related to our employees would be unaffected by the Plan of Reorganization and would survive effectuation of the Plan of Reorganization; and |
|
elected and installed a new Board of Directors. |
Fresh Start Accounting
|
The reorganization value of the entity should be allocated to the entitys assets in conformity with SFAS No. 141 Business Combinations. |
|
Each liability existing at the plan confirmation date, other than deferred taxes, should be stated at present values of amounts to be paid as determined at appropriate current interest rates. |
|
Deferred taxes should be reported in conformity with generally accepted accounting principles. Benefits realized from pre-reorganization net operating loss carryforwards should first reduce reorganization value in excess of amounts allocable to identifiable assets and other intangibles until exhausted and thereafter be reported as a direct addition to paid-in capital. |
44
James River Coal Company and Subsidiaries
Selected Historical
Financial Data
|
Successor Company |
Predecessor Company
|
||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Year Ended December 31, |
||||||||||||||||||||||||||||||||||||||
Three Months Ended 3/31/05 |
Eight Months Ended 12/31/04 |
Four Months Ended 4/30/04 |
Three Months Ended 3/31/04 |
2003 |
2002 |
2001 |
2000 |
|||||||||||||||||||||||||||||||
(in thousands, except share information) |
||||||||||||||||||||||||||||||||||||||
Consolidated Statement of Operations: |
||||||||||||||||||||||||||||||||||||||
Revenues
|
$ | 97,875 | 231,698 | 113,949 | 80,858 | 304,052 | 397,599 | 384,248 | 416,756 | |||||||||||||||||||||||||||||
Cost of coal
sold
|
80,942 | 190,926 | 89,294 | 65,707 | 278,939 | 344,222 | 328,408 | 341,092 | ||||||||||||||||||||||||||||||
Depreciation,
depletion,
and amortization |
9,478 | 21,765 | 12,314 | 9,272 | 40,427 | 46,393 | 43,175 | 43,272 | ||||||||||||||||||||||||||||||
Gross profit
(loss)
|
7,455 | 19,007 | 12,341 | 5,879 | (15,314 | ) | 6,984 | 12,665 | 32,392 | |||||||||||||||||||||||||||||
Selling,
general, and administrative expenses
|
5,035 | 11,412 | 5,023 | 3,561 | 19,835 | 19,994 | 15,725 | 15,281 | ||||||||||||||||||||||||||||||
Other
operating expenses |
| | | | 26,554 | | | |||||||||||||||||||||||||||||||
Operating
income (loss)
|
2,420 | 7,595 | 7,318 | 2,318 | (35,149 | ) | (39,564 | ) | (3,060 | ) | 17,111 | |||||||||||||||||||||||||||
Interest
expense
|
2,186 | 5,733 | 567 | 403 | 18,536 | 29,883 | 23,923 | 17,706 | ||||||||||||||||||||||||||||||
Interest
income
|
(21 | ) | (72 | ) | | | (144 | ) | (1,003 | ) | (662 | ) | | |||||||||||||||||||||||||
Miscellaneous
income, net
|
(123 | ) | (833 | ) | (331 | ) | (53 | ) | (1,519 | ) | (1,222 | ) | 206 | (3,977 | ) | |||||||||||||||||||||||
Reorganization items, net
|
| | (100,907 | ) | 1,557 | 7,630 | | | | |||||||||||||||||||||||||||||
Income tax
expense (benefit) |
69 | 791 | | | (2,891 | ) | (8,125 | ) | (10,318 | ) | (2,503 | ) | ||||||||||||||||||||||||||
Income (loss)
before cumulative effect of accounting change
|
309 | 1,976 | 107,989 | 411 | (56,761 | ) | (59,097 | ) | (16,209 | ) | 5,885 | |||||||||||||||||||||||||||
Cumulative
effect of
accounting change |
| | | | (3,045 | ) | | | | |||||||||||||||||||||||||||||
Net income
(loss)
|
309 | 1,976 | 107,989 | 411 | (59,806 | ) | (59,097 | ) | (16,209 | ) | 5,885 | |||||||||||||||||||||||||||
Preferred
dividends
|
| | | | (340 | ) | (680 | ) | (595 | ) | (714 | ) | ||||||||||||||||||||||||||
Decrease in redemption amount of redeemable
common stock |
| | | | | 8,798 | 45,831 | 14,311 | ||||||||||||||||||||||||||||||
Net income
(loss) attributable to common shareholders |
$ | 309 | 1,976 | 107,989 | 411 | (60,146 | ) | (50,979 | ) | 29,027 | 19,482 |
45
James River Coal Company and Subsidiaries
Selected Historical Financial
Data
|
Successor Company |
Predecessor Company
|
||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Year Ended December 31, |
|||||||||||||||||||||||||||||||||||||
Three Months Ended 3/31/05 |
Eight Months Ended 12/31/04 |
Four Months Ended 4/30/04 |
Three Months Ended 3/31/04 |
2003 |
2002 |
2001 |
2000 |
|||||||||||||||||||||||||||||||
(in thousands, except
per
share
information) |
||||||||||||||||||||||||||||||||||||||
Basic
earnings (loss) per common share: |
||||||||||||||||||||||||||||||||||||||
Income (loss)
before cumulative effect of accounting change
|
$ | 0.02 | 0.14 | 6,393.67 | 24.33 | (3,380.78 | ) | (3,018.31 | ) | 1,718.56 | 1,153.46 | |||||||||||||||||||||||||||
Cumulative
effect of accounting change |
| | | | (180.28 | ) | | | | |||||||||||||||||||||||||||||
Net income
(loss) |
0.02 | 0.14 | 6,393.67 | 24.33 | (3,561.06 | ) | (3,018.31 | ) | 1,718.56 | 1,153.46 | ||||||||||||||||||||||||||||
Shares used
to calculate basic earnings (loss) per common share |
13,800 | 13,800 | 17 | 17 | 17 | 17 | 17 | 17 | ||||||||||||||||||||||||||||||
Diluted
earnings (loss) per common share: |
||||||||||||||||||||||||||||||||||||||
Income (loss)
before cumulative effect of accounting change
|
0.02 | 0.14 | 6,393.67 | 24.33 | (3,380.78 | ) | (3,018.31 | ) | 1,718.56 | 1,153.46 | ||||||||||||||||||||||||||||
Cumulative
effect of accounting change |
| | | | (180.28 | ) | | | | |||||||||||||||||||||||||||||
Net income
(loss) |
$ | 0.02 | 0.14 | 6,393.67 | 24.33 | (3,561.06 | ) | (3,018.31 | ) | 1,718.56 | 1,153.46 | |||||||||||||||||||||||||||
Shares used
to calculate diluted earnings (loss) per share |
14,752 | 14,623 | 17 | 17 | 17 | 17 | 17 | 17 |
46
Successor Company
|
Predecessor Company
|
|||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
December 31, |
||||||||||||||||||||||||||||||||||||||
3/31/05 |
12/31/04 |
4/30/04 |
3/31/04 |
2003 |
2002 |
2001
|
2000
|
|||||||||||||||||||||||||||||||
(in thousands)
|
||||||||||||||||||||||||||||||||||||||
Consolidated Balance Sheet Data: |
||||||||||||||||||||||||||||||||||||||
Working
capital (deficit) |
$ | 4,213 | 10,046 | 5,896 | 12,227 | 9,009 | (263,149 | ) | (241,857 | ) | (17,505 | ) | ||||||||||||||||||||||||||
Property,
plant, and equipment, net |
260,781 | 255,575 | 254,259 | 254,646 | 257,156 | 270,989 | 310,643 | 306,399 | ||||||||||||||||||||||||||||||
Total assets
|
341,133 | 327,826 | 332,589 | 327,241 | 318,289 | 340,311 | 393,411 | 382,534 | ||||||||||||||||||||||||||||||
Long term
debt, including current portion |
95,000 | 95,000 | 6,400 | 6,400 | | 252,867 | 249,576 | 232,734 | ||||||||||||||||||||||||||||||
Liabilities
subject to compromise |
| | 319,451 | 319,813 | 319,595 | | | | ||||||||||||||||||||||||||||||
Total
shareholders equity (deficit) |
66,342 | 65,585 | (127,837 | ) | (123,189 | ) | (123,601 | ) | (68,726 | ) | (9,034 | ) | (29,786 | ) |
Successor Company
|
Predecessor Company
|
|||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
December 31,
|
||||||||||||||||||||||||||||||||||||||
Three Months Ended 3/31/05 |
Eight Months Ended 12/31/04 |
Four Months Ended 4/30/04 |
Three Months Ended 3/31/04 |
2003 |
2002 |
2001 |
2000 |
|||||||||||||||||||||||||||||||
(in thousands, except per ton information and number of
employees) |
||||||||||||||||||||||||||||||||||||||
Consolidated Statement of Cash Flow Data: |
||||||||||||||||||||||||||||||||||||||
Net cash
provided by (used in) operating activities |
$ | 12,689 | 14,098 | 1,513 | (3,071 | ) | 23,033 | 28,899 | 30,793 | 46,038 | ||||||||||||||||||||||||||||
Net cash used
in investing activities |
(14,711 | ) | (21,744 | ) | (9,463 | ) | (6,796 | ) | (15,660 | ) | (33,522 | ) | (43,640 | ) | (34,061 | ) | ||||||||||||||||||||||
Net cash
provided by (used in) financing activities |
(133 | ) | 10,224 | 4,361 | 6,299 | (2,489 | ) | 3,347 | 14,119 | (11,981 | ) | |||||||||||||||||||||||||||
Supplemental Operating Data: |
||||||||||||||||||||||||||||||||||||||
Tons sold
|
2,228 | 5,775 | 3,107 | 2,287 | 10,083 | 13,926 | 14,065 | 15,961 | ||||||||||||||||||||||||||||||
Tons produced
|
2,301 | 5,770 | 3,081 | 2,400 | 9,294 | 12,350 | 13,134 | 15,599 | ||||||||||||||||||||||||||||||
Revenue per
ton sold (excluding synfuel) |
$ | 43.27 | 39.21 | 35.98 | 34.65 | 29.53 | 28.26 | 27.29 | 26.11 | |||||||||||||||||||||||||||||
Number of
employees |
1,141 | 1,070 | 984 | 972 | 1,127 | 1,145 | 1,319 | 1,172 | ||||||||||||||||||||||||||||||
Capital
expenditures |
$ | 14,690 | 25,811 | 9,521 | 6,815 | 20,116 | 22,925 | 43,694 | 35,927 |
47
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS
Overview
48
Reserves
|
Three Months Ended March 31, 2005 |
Nine Months Ended December 31, 2004 |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
Proven and
Probable Reserves beginning of period (1)
|
207.4 | 207.2 | ||||||||
Coal
Extracted
|
(2.2 | ) | (6.3 | ) | ||||||
Acquisitions
(2)
|
15.4 | 3.7 | ||||||||
Adjustments
(3)
|
1.0 | 2.8 | ||||||||
Proven and
Probable Reserves end of period
|
221.6 | 207.4 |
(1) | Calculated in the same manner, and based on the same assumptions and qualifications, as described above. Proven reserves have the highest degree of geologic assurance and are reserves for which (a) quantity is computed from dimensions revealed in outcrops, trenches, workings, or drill holes; grade and/or quality are computed from the results of detailed sampling and (b) the sites for inspections, sampling and measurement are spaced so closely and the geologic character is so well defined that size, shape, depth and mineral content of reserves are well-established. Probable reserves have a moderate degree of geologic assurance and are reserves for which quantity and grade and/or quality are computed from information similar to that used for proven reserves, but the sites for inspection, sampling and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven reserves, is high enough to assume continuity between points of observation. This reserve information reflects recoverable tonnage on an as-received basis with 5.5% moisture. |
(2) | Represents estimated reserves on properties acquired during the relevant period. We calculated the reserves in the same manner, and based on the same assumptions and qualifications, as described above, but such estimates were not covered by the MM&A report. |
(3) | Represents changes in reserves due to additional information obtained from exploration activities, production activities or discovery of new geologic information. We calculated the reserves in the same manner, and based on the same assumptions and qualifications, as described above, but such estimates were not covered by the MM&A report. |
49
Key Performance Indicators
Trends In Our Business
|
the supply of domestic and foreign coal; |
|
the demand for electricity; |
|
the demand for steel and the continued financial viability of the domestic and foreign steel industries; |
|
the cost of transporting coal to the customer; |
|
domestic and foreign governmental regulations and taxes; |
|
air emission standards and other environmental requirements for coal-fired power plants; and |
|
the price and availability of alternative fuels for electricity generation. |
50
Plan of Reorganization
Workers Compensation Cost and Accrued Liabilities
51
Results of Operations
Three Months Ended March 31, 2005 Compared with the Three Months Ended March 31, 2004
Three Months Ended March 31, |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2005 |
2004 |
Total |
|||||||||||||
Volume
(tons) |
2,228 | 2,287 | (3 | %) | |||||||||||
Revenues |
|||||||||||||||
Coal
sales |
$ | 96,401 | 79,239 | 22 | % | ||||||||||
Synfuel
handling |
1,474 | 1,619 | (9 | %) | |||||||||||
Cost of coal
sold |
80,942 | 65,707 | 23 | % | |||||||||||
Depreciation,
depletion and amortization |
9,478 | 9,272 | 2 | % | |||||||||||
Gross
Profit |
7,455 | 5,879 | 27 | % | |||||||||||
Selling,
general and administrative |
5,035 | 3,561 | 41 | % |
52
Year Ended December 31, 2004 Compared with the Year Ended December 31, 2003
Year Ended December 31, |
||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2004 |
2003 |
Change |
||||||||||||
Volume
(millions of tons) |
8.9 | 10.1 | (12 | %) | ||||||||||
Revenues
(000) |
||||||||||||||
Coal
sales |
$ | 338,297 | $ | 297,713 | 14 | % | ||||||||
Synfuel
handling |
7,350 | 6,339 | 16 | % | ||||||||||
Cost of coal
sold (000) |
280,220 | 278,939 | 1 | % |
53
Year Ended December 31, 2003 Compared with the Year Ended December 31, 2002
Year Ended December 31, |
||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2003 |
2002 |
Change |
||||||||||||
Volume
(millions of tons) |
10.1 | 13.9 | (27 | %) | ||||||||||
Revenues
(000) |
||||||||||||||
Coal
sales |
$ | 297,713 | 393,512 | (24 | %) | |||||||||
Synfuel
handling |
6,339 | 4,087 | 55 | % | ||||||||||
Cost of coal
sold (000) |
278,939 | 344,222 | (19 | %) | ||||||||||
Depreciation,
depletion and amortization |
40,427 | 46,393 | (13 | %) | ||||||||||
Selling,
general and administrative expenses |
19,835 | 19,994 | (1 | %) | ||||||||||
Other
operating expenses |
| 26,554 | ||||||||||||
Operating
loss |
(35,149 | ) | (39,564 | ) |
54
55
Liquidity and Capital Resources
56
57
Actual |
As adjusted |
||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
(in thousands) |
|||||||||||
Senior
Secured Credit Facility: |
|||||||||||
Term loan
component |
$ | 20,000 | | ||||||||
Revolver
component |
| | |||||||||
Term Credit
Facility |
75,000 | | |||||||||
Proposed New
Senior Secured Credit Facility |
| | |||||||||
Senior Notes
due 2012 |
| 150,000 | |||||||||
Other |
| 1,712 | |||||||||
Total long
term debt |
95,000 | 151,712 | |||||||||
Less amounts
classified as current |
2,700 | 1,712 | |||||||||
Total long
term debt, less current maturities |
$ | 92,300 | 150,000 |
58
59
Contractual Obligations
Payment Due by Period (in thousands) |
|||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Contractual Obligations |
Total |
Less than 1 year |
13 years |
35 years |
More than 5 years |
||||||||||||||||||
Long term
debt (1) |
$ | 95,000 | $ | 2,700 | $ | 17,700 | $ | 29,100 | $ | 45,500 | |||||||||||||
Interest on
long term debt (2) |
51,469 | 11,158 | 21,491 | 14,214 | 4,606 | ||||||||||||||||||
Capital lease
obligations (3) |
1,142 | 459 | 683 | | | ||||||||||||||||||
Operating
lease obligations (3) |
1,239 | 605 | 552 | 82 | | ||||||||||||||||||
Royalty
obligations (4) |
141,732 | 14,705 | 31,233 | 28,414 | 67,380 | ||||||||||||||||||
Purchase
obligations (5) |
603 | 603 | | | | ||||||||||||||||||
$ | 291,185 | $ | 30,230 | $ | 71,659 | $ | 71,810 | $ | 117,486 |
(1) | All existing long term debt will be repaid and replaced with the notes and the proposed new senior secured credit facility. Assuming our refinancing transactions are consummated as contemplated, subsequent to the refinancing, we will have $150 million of new senior notes outstanding, which will mature in 2012. |
(2) | Includes interest payments on variable rate debt that is based on the interest rate in effect as of December 31, 2004. All such debt will be repaid with proceeds from the [E: concurrent] notes offering and the proposed new senior secured credit facility. Assuming interest on the senior notes of 7. 75%, we would be contractually obligated to pay approximately $11.6 million of interest annually on such notes. A 25 basis point change in the interest rate on the senior notes would change the interest payment by $375,000 per annum. |
(3) | Capital lease obligations include the amount of imputed interest over the terms of the leases. See Note 13 in the notes to the consolidated financial statements for additional information on capital and operating leases. |
(4) | Royalty obligations include minimum royalties payable on leased coal rights. Certain coal leases do not have set expiration dates but extend until completion of mining of all merchantable and mineable coal reserves. For purposes of this table, we have generally assumed that minimum royalties on such leases will be paid for a period of ten years. |
(5) | Purchase obligations include agreements to purchase coal that include fixed quantities or minimum amounts and a fixed price provision. They do not include agreements to purchase coal with vendors that do not include quantities or minimum tonnages, or monthly purchase orders. |
Payments Due by Years (in thousands) |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Within 1 Year |
23 Years |
45 Years |
|||||||||
$17,700 |
$25,938 |
$21,318 |
Off-Balance Sheet Arrangements
60
Critical Accounting Estimates
Overview
Workers Compensation
Coal Miners Pneumoconiosis
61
Defined Benefit Pension
Reclamation and Mine Closure Obligation
Contingencies
62
Income Taxes
Coal Reserves
|
all currently available data; |
|
our own operational experience and that of our consultants; |
|
historical production from similar areas with similar conditions; |
|
previously completed geological and reserve studies; |
|
the assumed effects of regulations and taxes by governmental agencies; and |
|
assumptions governing future prices and future operating costs. |
|
mining activities; |
|
new engineering and geological data; |
|
acquisition or divestiture of reserve holdings; and |
|
modification of mining plans or mining methods. |
63
Recent Accounting Pronouncements
Other Supplemental Information
Labor and Turnover
Sales Commitments
Nine Months Ending December 31, 2005 |
2006 |
2007 |
|||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Average Price Per Ton |
Tons |
Average Price Per Ton |
Tons |
Average Price Per Ton |
Tons |
||||||||||||||||||||||
Total Sales
Commitments |
$ | 41.87 | 6,665,600 | $ | 40.21 | 4,694,000 | $ | 38.37 | 1,630,000 |
Project Development
Mine 15 Project
64
Potential Surface Mining Projects
Potential Preparation Plant Projects
Market Risk
65
THE COAL INDUSTRY
U.S. Coal Production Regions
Demand for U.S. Coal Production
66
End Use |
Tons |
% of Total |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
(In millions) |
|||||||||||
Electricity
generation |
1,015.1 | 91.92 | % | ||||||||
Industrial |
84.9 | 7.69 | % | ||||||||
Commercial |
3.8 | 0.34 | % | ||||||||
Residential |
0.5 | 0.05 | % | ||||||||
Total |
1,104.3 | 100 | % |
Electrical Generation Type |
Cents per Kilowatt Hour |
|||||
---|---|---|---|---|---|---|
Natural
Gas |
6.161 | |||||
Oil |
6.217 | |||||
Coal |
1.898 | |||||
Nuclear |
1.703 | |||||
Hydroelectric |
0.548 |
Electricity Generation Source |
% of Total Electricity Generation |
|||||
---|---|---|---|---|---|---|
Coal |
50.1 | % | ||||
Nuclear |
20.0 | % | ||||
Natural
Gas |
17.7 | % | ||||
Hydroelectric |
6.6 | % | ||||
Oil and
Other |
5.6 | % | ||||
Total |
100 | % |
67
Industry Trends
68
|
burning lower sulfur coal, either exclusively or mixed with higher sulfur coal; |
|
installing pollution control devices, such as scrubbers, that reduce the emissions from high sulfur coal; |
|
reducing electricity generating levels; or |
|
purchasing or trading emission credits to allow them to comply with the sulfur dioxide emission compliance requirements. |
Recent Coal Market Conditions
|
stronger industrial demand following a recovery in the U.S. manufacturing sector, evidenced by the most recent estimate of 3.9% real GDP growth in the fourth quarter of 2004 (from the fourth quarter of 2003), as reported by the Bureau of Economic Analysis; |
|
relatively low customer stockpiles, estimated by the EIA to be approximately 147 million tons at the end of 2004, down 11% from the prior year; |
|
declining coal production in Central Appalachia, including a decline of 13% in Central Appalachian coal production volume in 2004 as compared to 2000, according to Platts; |
|
capacity constraints of U.S. nuclear-powered electricity generators, which operated at an average utilization rate of 88.4% in 2003, up from 70.5% in 1993, as estimated by the EIA; |
|
high current and forward prices for natural gas and oil, important fuels for electricity generation, with spot prices as of April 12, 2005 for natural gas and heating oil at $7.34 per million Btu (Henry Hub) and $51.86 per barrel (WTI crude), respectively, as reported by Bloomberg L.P.; and |
|
increased international demand for U.S. coal for steelmaking, driven by global economic growth, high ocean freight rates and the weak U.S. dollar. |
69
70
General Business
Tons (000) |
Percentage of total coal obtained by the Company |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|
Coal produced
from Company-operated mines |
7,987 | 90 | % | |||||||
Coal obtained
from mines operated by independent contractors |
534 | 6 | % | |||||||
Coal
purchased from other third parties |
330 | 4 | % | |||||||
8,851 | 100 | % |
71
Mining Operations
|
Bell County Coal Corporation; |
|
Bledsoe Coal Corporation; |
|
Blue Diamond Coal Corporation; |
|
Leeco, Inc.; and |
|
McCoy Elkhorn Coal Corporation. |
72
73
Reserves
74
Approximate Overall Reserve Quality (2) |
|||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mining Complex |
Proven & Probable Reserves (1) (millions of tons) |
Ash Content (%) |
Sulfur Content (%) |
Heat Value (Btu/lb.) |
|||||||||||||||
Bell
County |
12.5 | 5.1 | 1.0 | 13,500 | |||||||||||||||
Bledsoe |
59.1 | 7.8 | 1.2 | 13,000 | |||||||||||||||
Blue
Diamond |
66.2 | 4.7 | 1.1 | 13,700 | |||||||||||||||
Leeco |
35.7 | 7.0 | 1.2 | 13,200 | |||||||||||||||
McCoy
Elkhorn |
33.8 | 5.7 | 1.6 | 13,300 | |||||||||||||||
Total/Average |
207.3 | 6.3 | 1.3 | 13,300 |
(1) | Proven reserves have the highest degree of geologic assurance and are reserves for which (a) quantity is computed from dimensions revealed in outcrops, trenches, workings, or drill holes; grade and/or quality are computed from the results of detailed sampling and (b) the sites for inspections, sampling and measurement are spaced so closely and the geologic character is so well defined that size, shape, depth and mineral content of reserves are well-established. Probable reserves have a moderate degree of geologic assurance and are reserves for which quantity and grade and/or quality are computed from information similar to that used for proven reserves, but the sites for inspection, sampling and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven reserves, is high enough to assume continuity between points of observation. This reserve information reflects recoverable tonnage on an as-received basis with 5.5% moisture. |
(2) | Ash and sulfur content is expressed as the percent by weight of those constituents in the coal sample compared to the total weight of the sample being tested. Heat value is expressed as Btu per pound in the coal based on laboratory testing of coal samples. The samples are typically obtained from exploratory core borings placed at strategic locations within the coal reserve area. Approximately 82% of the reserve tons have representative samples (degree of representation varies from area to area) and 18% of the reserve tons have no site-specific samples (and are therefore not included in the overall quality estimate). The samples are sent to accredited laboratories for testing under protocols established by the American Society of Testing and Materials (ASTM). The estimated overall quality values are derived by a multiple step process, including: a) for each mine or reserve area, an arithmetic average quality (dry basis) was prepared to represent the coal tons within the area, based on samples from the area; b) the overall quality of reserves for each mine complex was determined by performing a tonnage-weighted average of the average quality of all mine and reserve areas within the division; and c) the resulting dry basis overall quality was converted to wet product basis to reflect its anticipated moisture content at the time of sale. The actual quality of the shipped coal may vary from these estimates due to factors such as: a) the particle size of the coal fed to the plant; b) the specific gravity of the float media in use at the preparation plant; c) the type of plant circuit(s); d) the efficiency of the plant circuit(s); e) the moisture content of the final product; and f) customer requirements. |
|
Room and pillar underground mining; |
|
Contour and auger surface mining; and |
|
Area mining (also known as mountaintop removal). |
75
Mine Characteristics
Processing and Transportation
76
Customers and Coal Contracts
|
Fixed price contracts; |
|
Annually negotiated prices that reflect market conditions at the time; or |
|
Base-price-plus-escalation methods that allow for periodic price adjustments based on fixed percentages or, in certain limited cases, pass-through of actual cost changes. |
77
Properties
(1) |
mineral rights, which allows the controlling party to remove the minerals on the property; |
(2) |
surface rights, which allows the controlling party to use and disturb the surface of the property; and |
(3) |
fee control, which includes both mineral and surface rights. |
|
length of term; |
|
renewal requirements; |
|
minimum royalties; |
|
recoupment provisions; |
|
tonnage royalty rates; |
|
minimum tonnage royalty rates; |
|
wheelage rates; |
|
usage fees; and |
|
other factors. |
Competition
|
the price of competing coal and alternative fuel supplies, including nuclear, natural gas, oil and renewable energy sources, such as hydroelectric power; |
|
coal quality; |
|
transportation costs from the mine to the customer; and |
|
the reliability of supply. |
78
Legal Proceedings
Employees
Recent Reorganization
|
exchanged approximately $266 million in debt under various existing credit facilities for (1) restructured term debt of approximately $75 million, which is secured by a second lien on substantially all of our assets, and (2) a total of 13,799,994 shares of our new common stock, par value $0.01 per share, issued on a pro rata basis to the holders of the existing debt; |
|
distributed interests in an unsecured creditor liquidating trust (which trust initially held life insurance policies with cash surrender values of approximately $3.1 million, the right to receive certain refunds and the right to pursue certain derivative claims) to our general unsecured creditors in exchange for their claims, which were estimated to be valued at approximately $44.9 million; |
|
entered into a new senior secured credit facility providing borrowings of up to $50 million, which is secured by a first lien on substantially all of our assets; |
|
satisfied and discharged all of our obligations under our $20 million debtor-in-possession credit facility; |
|
rejected (i.e., terminated) certain agreements that we had entered into before the bankruptcy that were found to be unduly burdensome to us, and discharged the claims of creditors related to those agreements; |
|
canceled our existing equity securities; |
|
acknowledged that all intercompany debt was deemed to be extinguished; |
|
acknowledged that pre- and post-petition (i) environmental and regulatory obligations; (ii) obligations with respect to workers compensation and black lung programs; and (iii) regulatory obligations related to our employees would be unaffected by the Plan of Reorganization and would survive effectuation of the Plan of Reorganization; and |
|
elected and installed a new Board of Directors. |
Fresh Start Accounting
|
The reorganization value of the entity should be allocated to the entitys assets in conformity with SFAS No. 141 Business Combinations. |
79
|
Each liability existing at the plan confirmation date, other than deferred taxes, should be stated at present values of amounts to be paid as determined at appropriate current interest rates. |
|
Deferred taxes should be reported in conformity with generally accepted accounting principles. Benefits realized from pre-reorganization net operating loss carryforwards should first reduce reorganization value in excess of amounts allocable to identifiable assets and other intangibles until exhausted and thereafter be reported as a direct addition to paid-in capital. |
Estimated
enterprise value of the reorganized company |
$ | 155,000 | ||||
Borrowings
under credit agreement |
(6,400 | ) | ||||
Capital
leases assumed |
(1,396 | ) | ||||
Cash balance
excluded from enterprise value |
1,301 | |||||
Administrative claims payable excluded from enterprise value |
(10,214 | ) | ||||
138,291 | ||||||
Less: new
secured debt issued to extinguish prepetition debt |
75,000 | |||||
Fair value of
common shares issued to extinguish prepetition debt |
$ | 63,291 |
80
THE TRIAD ACQUISITION
General
Triads Business
Summary Financial and Other Information
2005 |
2006 |
2007 |
|||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Average Price Per Ton |
Tons |
Average Price Per Ton |
Tons |
Average Price Per Ton |
Tons |
||||||||||||||||||||||
Total Sales
Commitments |
$ | 23.77 | 3.4 | million | $ | 23.51 | 3.1 | million | $ | 24.77 | 1.3 | million |
81
Mining Operations
Name |
Type of Mine |
County (Indiana) |
2004 Shipments (tons) |
Employees (December 31, 2004) |
Proven and Probable Reserves (February 1, 2005) (tons) |
Projected Years of Operation* |
||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Augusta |
Surface |
Pike |
676,000 | 35 | 1.9
million |
2.8 | ||||||||||||||||||||
Flint
Hill |
Surface |
Spencer |
311,000 | 15 | 1.3
million |
4.1 | ||||||||||||||||||||
Freelandville |
Surface |
Knox |
408,000 | 54 | 5.8
million |
14.2 | ||||||||||||||||||||
Freelandville East |
Surface |
Knox |
462,000 | 16 | 870,000 |
1.9 | ||||||||||||||||||||
Freelandville Underground |
Underground |
Knox |
444,000 | 40 | 2.4
million |
5.4 | ||||||||||||||||||||
Patoka
River |
Surface |
Pike |
799,000 | 33 | 1.2
million |
1.5 | ||||||||||||||||||||
South
Augusta |
Surface |
Pike |
N/A** | N/A** | 4.1
million |
N/A** |
* | Based on 2004 levels of production. |
** | Mining operations at South Augusta mine began in January 2005. |
Terms of Acquisition Agreement
Purchase Price
|
$64.0 million in cash will be paid to Triads shareholders as of the closing date; and |
|
the remainder of the purchase price will be paid by issuing to Triads shareholders shares of our common stock having a market value equal to $11.0 million, based on the average closing price of our common stock on The Nasdaq Stock Market for the 15 consecutive trading days ending two trading days prior to the closing date. |
82
Conditions, Termination and Indemnification
|
our having obtained financing for the acquisition on terms and conditions approved by our Board of Directors; |
|
the material accuracy of the representations and warranties of each party to the purchase agreement as of the closing date; |
|
receipt of all consents and regulatory approvals required to consummate the acquisition; and |
|
receipt by each party of certain legal opinions and other documents. |
Consulting Agreements
Registration Rights
83
the holders sell less than 33.3% in a given 90-day period, they would have the right to carry over and sell such additional amount in a subsequent period.
Selected Historical Consolidated Financial Information of Triad Mining, Inc.
Twelve Months Ended 12/31/04 |
Three Months Ended 3/31/05 |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|
(amounts in thousands, except per ton amounts) |
||||||||||
Consolidated Statement of Operations: |
||||||||||
Revenues |
$ | 81,603 | 23,396 |
|||||||
Cost of coal
sold |
59,291 | 17,203 |
||||||||
Depreciation, depletion and amortization |
5,500 | 1,630 |
||||||||
Gross
profit |
16,812 | 4,563 |
||||||||
Selling,
general and administrative expenses |
3,736 | 886 |
||||||||
Operating
income |
13,076 | 3,677 |
||||||||
Interest
expense |
174 | 21 |
||||||||
Interest
income |
(567 | ) | (149) |
|||||||
Other,
net |
(57 | ) | 71 |
|||||||
Net income
(a) |
13,526 | 3,734 |
||||||||
Consolidated Balance Sheet Data: |
||||||||||
Working
capital |
$ | 27,551 | 30,768 |
|||||||
Property,
plant and equipment, net |
26,368 | 25,207 |
||||||||
Total
assets |
62,191 | 62,914 |
||||||||
Long term
debt, including current portion |
1,712 | 885 |
||||||||
Total
shareholders equity |
47,054 | 49,018 |
||||||||
Consolidated Statement of Cash Flow Data: |
||||||||||
Net cash
provided by operating activities |
$ | 20,413 | 3,055 |
|||||||
Net cash
used in investing activities |
(6,965 | ) | (2,034) |
|||||||
Net cash
used in financing activities |
(14,387 | ) | (2,478) |
|||||||
Supplemental Operating Data: |
||||||||||
Tons
sold |
3,391 | 900 |
||||||||
Tons
produced |
3,384 | 905 |
||||||||
Revenue per
ton sold |
$ | 24.06 | 26.00 |
|||||||
Capital
expenditures |
4,705 | 1,756 |
(a) |
Triad is an S-Corporation and therefore does not have income tax expense. |
84
Twelve Months Ended 12/31/04 |
Three Months Ended 3/31/05 |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|
Net
income |
$ | 13,526 | 3,734 |
|||||||
Interest
expense |
174 | 21 |
||||||||
Interest
income |
(567 | ) | (149) |
|||||||
Depreciation, depletion and amortization |
5,500 | 1,630 |
||||||||
EBITDA |
$ | 18,633 | 5,236 |
85
GOVERNMENT REGULATION
|
employee health and safety; |
|
permitting and licensing requirements regarding environmental and safety matters ; |
|
air quality standards; |
|
water quality standards; |
|
plant and wildlife and wetland protection; |
|
blasting operations; |
|
the management and disposal of hazardous and non-hazardous materials generated by mining operations; |
|
the storage of petroleum products and other hazardous substances; |
|
reclamation and restoration of properties after mining operations are completed; |
|
discharge of materials into the environment, including air emissions and wastewater discharge; |
|
surface subsidence from underground mining; and |
|
the effects of mining operations on groundwater quality and availability. |
86
Mine Health and Safety Laws
Black Lung Legislation
|
current and former coal miners totally disabled from black lung disease; |
|
certain survivors of a miner who dies from black lung disease or pneumoconiosis; and |
|
a trust fund for the payment of benefits and medical expenses to any claimant whose last mine employment was before January 1, 1970, or where a miners last coal employment was on or after January 1, 1970 and no responsible coal mine operator has been identified for claims, or where the responsible coal mine operator has defaulted on the payment of such benefits. |
87
Workers Compensation
Environmental Laws and Regulations
|
the Surface Mining Control and Reclamation Act of 1977; |
|
the Clean Air Act; |
|
the Clean Water Act; |
|
the Toxic Substances Control Act; |
|
the Comprehensive Environmental Response, Compensation and Liability Act; |
|
the U.S. Army Corps of Engineers; and |
|
the Resource Conservation and Recovery Act. |
88
Surface Mining Control and Reclamation Act
Clean Air Act
89
90
Framework Convention On Global Climate Change
Clean Water Act
Comprehensive Environmental Response, Compensation and Liability Act
Resource Conservation and Recovery Act
91
MANAGEMENT
Executive Officers and Directors
Name |
Age |
Position |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
Peter T. Socha |
46 | Chairman, President and Chief Executive Officer |
||||||||
Coy K. Lane,
Jr. |
44 | Senior Vice President and Chief Operating Officer |
||||||||
Samuel M.
Hopkins, II |
48 | Vice President and Chief Accounting Officer |
||||||||
Richard L.
Douthat |
54 | Vice PresidentRisk Management |
||||||||
James T.
Ketron |
54 | Vice President, General Counsel and Secretary |
||||||||
Jeffrey A.
Wilson |
53 | Vice PresidentBusiness Development |
||||||||
William R.
Beasley |
64 | President of James River Coal Sales, Inc. |
||||||||
Joseph G.
Evans |
47 | President of Leeco, Inc.; President of Blue Diamond Coal Company |
||||||||
D. Brian Patton,
III |
38 | President of James River Coal Service Company |
||||||||
Charles G.
Snavely |
49 | President of Bell County Coal Corporation; President of Bledsoe Coal Corporation |
||||||||
Randall K.
Taylor |
45 | President of McCoy Elkhorn Coal Corporation |
||||||||
Alan F.
Crown |
57 | Director |
||||||||
Leonard J.
Kujawa |
72 | Director |
||||||||
Paul H.
Vining |
50 | Director |
||||||||
James F.
Wilson |
47 | Director |
92
93
94
EXECUTIVE COMPENSATION
Summary Compensation Table
Annual Compensation (1) |
Long-Term Compensation Awards |
|||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name and Principal Position |
Year |
Salary($) |
Bonus($) |
Restricted Stock Award(s) ($)(2) |
Securities Underlying Options/ SARs |
All Other Compensation($) |
||||||||||||||||||||
Peter T.
Socha (3) |
2004 | 409,798 | 601,000 | 1,377,000 | 150,000 | | ||||||||||||||||||||
President and
Chief Executive Officer |
2003 | 312,559 | | | | | ||||||||||||||||||||
Samuel M.
Hopkins, II (4) |
2004 | 145,799 | 50,000 | 315,563 | | | ||||||||||||||||||||
Vice
President and Chief Accounting |
2003 | 31,334 | | | | | ||||||||||||||||||||
Officer |
||||||||||||||||||||||||||
James B.
Crawford (5) |
2004 | | | | | | ||||||||||||||||||||
Former
President and Chief Executive |
2003 | 101,315 | | | | 678,689 | ||||||||||||||||||||
Officer |
2002 | 499,733 | | | | | ||||||||||||||||||||
William T.
Sullivan (6) |
2004 | | | | | | ||||||||||||||||||||
Former Vice
President |
2003 | 146,227 | 45,000 | | | 180,836 | (6) | |||||||||||||||||||
2002 | 135,942 | 67,500 | 85,666 | (7) |
(1) | Excludes perquisites and other personal benefits aggregating less than $50,000 or 10% of the Named Executive Officers annual salary and bonus. |
(2) | Based on our reorganization value of $4.59 per share, as determined in connection with our Plan of Reorganization. Mr. Sochas shares of restricted stock vest as follows: 68.75% of the shares vest in five equal annual installments, beginning on May 25, 2005, the first anniversary of the date of the grant, and the remaining 31.25% of the shares will vest upon the achievement of designated corporate performance criteria. Mr. Hopkins shares vest in five equal annual installments, beginning on May 25, 2005. |
(3) | Mr. Socha joined the Company in March 2003. |
(4) | Mr. Hopkins joined the Company in September 2003. |
(5) | Mr. Crawford resigned from all positions with the Company in March 2003. All Other Compensation represents the 2003 payments to Mr. Crawford in connection with his Settlement Agreement described below. |
(6) | This amount represents payments related to Mr. Sullivan leaving the Company in 2003. |
(7) | This payment was a bonus payment used to partially repay loans to purchase common stock. |
95
Option Grants in Fiscal 2004
Individual Grants |
Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Option Term (1) |
||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name |
Shares Underlying Options (#) |
Percent of Total Options Granted to Employees in Fiscal Year (2) |
Exercise Price ($/share) |
Expiration Date |
5% ($) |
10% ($) |
|||||||||||||||||||||||||
Peter T.
Socha |
150,000 | 55.6 | % | 10.80 | 5/7/2014 | 0 | 165,792 | ||||||||||||||||||||||||
Samuel M.
Hopkins, II |
| | | | | | |||||||||||||||||||||||||
James B.
Crawford |
| | | | | | |||||||||||||||||||||||||
William T.
Sullivan |
| | | | | |
(1) | Based on our reorganization value of $4.59 per share as of May 7, 2004, as determined in connection with our Plan of Reorganization. |
(2) | Based on options for 270,000 shares granted to directors and employees in fiscal 2004. |
Fiscal Year-End Option Values
Number of Securities Underlying Unexercised Options at December 31, 2004 |
Value of Unexercised In-the-Money Options at December 31, 2004(1) |
||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name |
Exercisable |
Unexercisable |
Exercisable |
Unexercisable |
|||||||||||||||
Peter T.
Socha |
| 150,000 | $ | | $ | 4,762,500 | |||||||||||||
Samuel M.
Hopkins, II |
| | | | |||||||||||||||
James B.
Crawford |
| | | | |||||||||||||||
William T.
Sullivan |
| | | |
(1) | Represents aggregate excess of market value of shares under option as of December 31, 2004, using the closing price of $42.55 at such date, over the exercise price of the options. |
Retirement Benefits
96
Pension Plan Table
Final Average Salary |
Years of Service |
||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
15 |
20 |
25 |
30 |
35 |
|||||||||||||||||||
$125,000 |
$ | 21,010 | $ | 28,014 | $ | 35,017 | $ | 42,020 | $ | 49,024 | |||||||||||||
$150,000 |
$ | 25,698 | $ | 34,263 | $ | 42,829 | $ | 51,395 | $ | 59,961 | |||||||||||||
$175,000 |
$ | 30,385 | $ | 40,513 | $ | 50,642 | $ | 60,770 | $ | 70,899 | |||||||||||||
$200,000 |
$ | 35,073 | $ | 46,764 | $ | 58,454 | $ | 70,145 | $ | 81,836 | |||||||||||||
$205,000* |
$ | 36,010 | $ | 48,013 | $ | 60,017 | $ | 72,020 | $ | 84,024 |
* | There is a $205,000 cap on compensation under our pension plan; accordingly, each remuneration level greater than $205,000 provides the same level of benefits. |
Peter T.
Socha |
1.00 | |||||
Samuel M.
Hopkins, II |
1.00 | |||||
James B.
Crawford* |
21.67 | |||||
William T.
Sullivan* |
16.00 |
* | These officers left the Company in 2003, and therefore were not active participants in our pension plan as of October 1, 2004. |
Employment Contracts, Termination of Employment, Severance and Change-in-Control Arrangements
(i) |
rights under two life insurance contracts, one of which represented the vested amount in Mr. Crawfords account in our Supplemental Savings and Profit Sharing Plan of $535,021, and the other of which was a life insurance policy with a cash value of $143,668; |
(ii) |
the right to receive $1,383,002 in cash from us upon our consummation of a Chapter 11 plan of reorganization or the sale of all or substantially all of our assets (which amount was paid on May 6, 2004); and |
(iii) |
welfare benefit continuation until the payment under (ii) above was made. |
In the event Mr. Crawford is engaged by us or any purchaser of us, or any successor to either, as Chairman, Chief Executive Officer, Chief Operations Officer or any similar position within the 12 months from the payment under (ii) above, Mr. Crawford is obligated to repay the amount received under (ii) above. Additionally, pursuant to the settlement agreement:
(iv) |
Mr. Crawford sold all of his equity interests in the Company to J.R. Coal Associates in exchange for the transfer by J.R. Coal Associates to the Company of certain life insurance policies; |
(v) |
each of the Company and Mr. Crawford released the other from certain claims; and |
(vi) |
Mr. Crawford agreed not to compete with us for a period that ended October 31, 2003. |
97
of the parties in one-year increments, beginning on the first anniversary of the agreement. The employment agreement provides for a base salary of $375,000 per year, subject to annual review, and that Mr. Socha will participate in our annual cash bonus program. Pursuant to the 2004 Equity Incentive Plan described below, on May 25, 2004, Mr. Socha was granted 300,000 restricted shares of common stock, 206,250 shares of which will vest in five equal annual installments, beginning on the first anniversary of the date of the grant, and the remaining 93,750 shares of which will vest upon the achievement of designated corporate performance criteria. The performance criteria include achieving EBITDA results for 2004 and 2005, as contained in our disclosure statement accompanying the Plan of Reorganization, of approximately $126.3 million for the two year period (80% of vesting) and the successful development of the new mine at McCoy Elkhorn (20% of vesting). The performance criteria will not be measured, and therefore no stock will vest, prior to the completion of the annual audit for the year ended December 31, 2005. Mr. Socha also was granted options to acquire 150,000 shares of common stock for $10.80 per share. The options will vest in five equal annual installments, beginning on the first anniversary of the date of grant. Upon termination without good reason or a change in control (as those terms are defined in the agreement) all of the restricted shares and options will immediately vest and the options will become exercisable. Following the recommendation of the secured creditors from the Chapter 11 reorganization process, the Board of Directors awarded Mr. Socha a one-time restructuring bonus of $800,000. Mr. Socha requested, and the Board of Directors approved, a reduction in the bonus to $601,000. We distributed the remaining bonus of $199,000 to other individuals in the organization not otherwise eligible for bankruptcy-related bonus payments, primarily operating level managers at the individual mine and preparation plant levels.
Indemnification Agreements
(i) |
indemnify each Indemnified Party to the fullest extent permitted by law; |
(ii) |
provide coverage for each Indemnified Party under our directors and officers liability insurance policy; and |
(iii) |
to advance certain expenses incurred by an Indemnified Party. |
2004 Equity Incentive Plan
(i) |
attract, motivate and retain employees, directors, consultants, advisors and other persons who perform services for us by providing compensation opportunities that are competitive with other companies; |
98
(ii) |
provide incentives to those individuals who contribute significantly to our long-term performance and growth and that of our affiliates; and |
(iii) |
align the long-term financial interests of employees and other individuals who are eligible to participate in the 2004 Incentive Plan with those of shareholders. |
99
restrictions, or by any other means which the Committee determines to be consistent with the 2004 Incentive Plans purpose and applicable law.
100
|
Each non-employee director received a grant of options to purchase 10,000 shares of common stock at a strike price of $15.00 per share and a grant of 1,000 restricted shares of common stock. These grants will vest in three equal annual installments, beginning on the first anniversary of the date of grant. Upon a change in control (as defined in the 2004 Incentive Plan) all of the restricted shares and options will immediately vest and the options will become immediately exercisable. |
|
Peter T. Socha received a grant of 300,000 restricted shares of common stock, 206,250 shares of which will vest automatically in five equal annual installments, beginning on the first anniversary of the date of the grant, and the remaining 93,750 shares of which will vest upon the achievement of designated performance criteria. The performance criteria include achieving EBITDA results for 2004 and 2005, as contained in our disclosure statement accompanying the Plan of Reorganization, of approximately $126.3 million for the two year period (80% of vesting) and the successful development of the new mine at McCoy Elkhorn (20% of vesting). The performance criteria will not be measured, and therefore no stock will vest, prior to the completion of the annual audit for the year ended December 31, 2005. Upon a change in control (as defined in the employment agreement between the Company and Mr. Socha) all of the restricted shares will immediately vest. |
|
Other members of our operating and senior management have received or will receive, in the aggregate, grants of 716,700 restricted shares of common stock and options for common stock, of which, 710,450 shares and options will vest automatically in five equal annual installments, beginning on the first anniversary of the date of the grant, and the remaining 6,250 shares and options of which will vest upon the achievement of performance criteria to be approved by the Committee. |
Federal Income Tax Consequences
101
102
Board of Directors
Board Committees
Compensation of Directors
103
Compensation Committee Interlocks and Insider Participation
104
[E:
PRINCIPAL AND SELLING SHAREHOLDERS
Shares Beneficially Owned Prior to Offering |
Shares Beneficially Owned After Offering |
||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Without Over-allotment Exercise |
With Over-allotment Exercise |
||||||||||||||||||||||||||||||
Name |
Number(1) |
%(2) |
Number of Shares Offered(3) |
Number(4) |
%(2)(4) |
Number(4) |
%(2)(4) |
||||||||||||||||||||||||
Carl Marks
Group (5) |
2,755,318 | 18.69 | % | 2,000,000 | 755,318 | 4.65 | % | 755,318 | 4.5 0 | % | |||||||||||||||||||||
Harbert Group
(6) |
2,210,205 | 14.99 | % | | 2,210,205 | 13.61 | % | 2,210,205 | 13. 18 | % | |||||||||||||||||||||
Glencore
Finance AG (7) |
2,208,948 | 14.99 | % | | 2,208,948 | 13.60 | % | 2,208,948 | 13. 18 | % | |||||||||||||||||||||
Merrill Lynch
PCG, Inc. (8) |
985,000 | 6.68 | % | | 985,000 | 6.07 | % | 985,000 | 5.8 8 | % | |||||||||||||||||||||
Triage Group
(9) |
813,426 | 5.52 | % | | 813,426 | 5.01 | % | 813,426 | 4.8 5 | % | |||||||||||||||||||||
Peter T. Socha
(10) |
71,250 | * | | 71,250 | * | 71,250 | * | ||||||||||||||||||||||||
Alan F. Crown
(11) |
3,666 | * | | 3,666 | * | 3,666 | * | ||||||||||||||||||||||||
Leonard J.
Kujawa (12) |
3,666 | * | | 3,666 | * | 3,666 | * | ||||||||||||||||||||||||
Paul H. Vining
(13) |
3,666 | * | | 3,666 | * | 3,666 | * | ||||||||||||||||||||||||
James F. Wilson
(5)(14) |
2,755,318 | 18.69 | % | 2,000,000 | 755,318 | 4.65 | % | 755,318 | 4.5 0 | % | |||||||||||||||||||||
Samuel M.
Hopkins, II (15) |
13,750 | * | | 13,750 | * | 13,750 | * | ||||||||||||||||||||||||
Coy K. Lane,
Jr. (16) |
0 | * | | 0 | * | 0 | * | ||||||||||||||||||||||||
James B.
Crawford (17) |
0 | * | | 0 | * | 0 | * | ||||||||||||||||||||||||
William T.
Sullivan (18) |
0 | * | | 0 | * | 0 | * | ||||||||||||||||||||||||
Executive
Officers and Directors as a Group (9 persons) |
2,851,316 | 19.29 | % | 2,000,000 | 851,316 | 5.23 | % | 851,316 | 5.0 6 | % |
* | Less than 1% |
(1) | This column lists all shares of common stock beneficially owned, whether or not registered hereunder, including all restricted shares of common stock that vest, and all shares of common stock that can be acquired through option exercises, within 60 days of the date of this prospectus. |
(2) | In calculating the percentage owned, we assumed that any options for the purchase of common stock that are exercisable by that shareholder within 60 days of the date of this prospectus are exercised by that shareholder (and the underlying shares of common stock issued). The total number of shares outstanding used in calculating the percentage owned assumes a base of 14,740,694 shares of common stock outstanding as of the date of this prospectus and no exercise of options held by other shareholders. |
(3) | Only the shares of common stock shown in this column are being offered by the selling shareholder pursuant to this prospectus. Before our emergence from bankruptcy, the selling shareholder was a secured creditor in our bankruptcy proceedings, as a holder of a portion of our pre-petition secured debt. Pursuant to the Plan of Reorganization, the selling shareholders pre-petition secured claims were converted into new secured notes (governed by the Term Credit Facility) and common stock. Accordingly, the selling shareholder may continue to have a secured lending relationship with us. |
(4) | Assumes all shares of common stock registered hereunder are sold by the selling shareholder. |
(5) | As of April 14, 2005, based on information supplied to us by the Carl Marks Group. Includes the following securities owned by James F. Wilson individually: 333 shares of restricted stock that will vest within 60 days of the date of this prospectus and 3,333 shares subject to presently exercisable stock options and options that will vest within 60 days of the date of this prospectus. The Carl Marks Group consists of Carl Marks Strategic Investments, L.P. (2,600,898 shares), Carl Marks Strategic Investments III, L.P. (150,754 shares) and James F. Wilson, one of our directors. The business address of the Carl Marks Group is 900 Third Avenue, 33rd Floor, New York, New York 10022. Only shares held by Carl Marks Strategic Investments, L.P. and Carl Marks Strategic Investments III, L.P. are being registered hereby and offered in this offering, which shares were issued upon the conversion of our pre-petition secured debt in connection with our emergence from bankruptcy. James F. Wilson is one of three individual general partners of Carl Marks Management Company, L.P., a Delaware limited partnership and registered investment advisor, which is the sole general partner of (i) Carl Marks Strategic Investments, L.P., a Delaware limited partnership and private investment partnership, and (ii) Carl Marks Strategic Investments III, L.P., a Delaware limited partnership and private investment partnership. The shares of common stock which are owned by Carl Marks Strategic Investments, L.P. and Carl |
105
Marks Strategic Investments III, L.P. may be deemed to be beneficially owned indirectly, on a shared basis, by Mr. Wilson and the other individual general partners of Carl Marks Management Company, L.P., who share the power to direct the vote or dispose of such securities. |
(6) | As of April 14, 2005, based upon information supplied to us by the Harbert Group, which consists of Harbert Distressed Investment Master Fund, Ltd. (Master Fund) and Alpha US Sub Fund VI, LLC (Alpha), and the Form 4 filed by the Master Fund, HMC Distressed Investment Offshore Manager, L.L.C. (Offshore Manager) and HMC Investors, L.L.C. (HMC Investors) with the SEC on April 18, 2005. The Offshore Manager and the Master Fund share voting and dispositive power over 2,155,760 shares of our common stock (the HMC Shares). In addition to the HMC Shares, HMC Investors, Raymond J. Harbert, Michael D. Luce and Philip A. Falcone may also be deemed to have shared voting and dispositive power over an additional 54,445 shares of our common stock owned by Alpha (the Alpha Shares). We have been informed by the Master Fund and Alpha that each disclaims beneficial ownership of the HMC Shares and the Alpha Shares except to the extent of their actual pecuniary interest. Each of Master Fund and Alpha is or may be deemed to be an affiliate of a registered broker-dealer. Master Fund is an entity organized in the Cayman Islands. Offshore Manager is the sole investment manager of the Master Fund. HMC Investors is the managing member of the Offshore Manager. Philip A. Falcone is a member of Offshore Manager and acts as portfolio manager for the Master Fund. Alpha is a separate managed account also managed by Philip A. Falcone. Raymond J. Harbert and Michael D. Luce are members of HMC Investors. The business address of the Master Fund is c/o International Fund Services (Ireland) Limited, 3rd Floor, Bishops Square, Redmonds Hill, Dublin 2, Ireland. The business address of Alpha is c/o 555 Madison Avenue, 16th Floor, New York, New York 10022. |
(7) | As of January 21, 2005, based on information in the Form 4/A filed on January 25, 2005. The business address of Glencore Finance AG is Baarermattstrasse 3, CH-6341 Baar, Switzerland. |
(8) | As of December 31, 2004, based on information in the Schedule 13G filed on February 14, 2005. The business address of Merrill Lynch PCG, Inc. is 4 World Financial Center, New York, New York 10080. |
(9) | As of December 31, 2004, based on information in the Schedule 13G filed on February 15, 2005. The Triage Group consists of Triage Capital LF Group LLC, a Delaware limited liability company (Triage Capital) that acts as a general partner to (i) a general partner of different funds and an investment manager of a managed account and (ii) an investment manager of a Cayman Islands company, and Leonid Frenkel, who is (i) the managing member of Triage Capital and controls its business activities and (ii) the manager of another limited liability company. The business address of the Triage Group is 401 City Avenue, Suite 800, Bala Cynwyd, Pennsylvania 19004. |
(10) | Includes 4 1,250 shares of restricted stock that will vest within 60 days of the date of this prospectus and 30,000 shares subject to presently exercisable stock options and options that will vest within 60 days of the date of this prospectus. Mr. Sochas business address is c/o James River Coal Company, 901 E. Byrd Street, Suite 1600, Richmond, Virginia 23219. |
(11) | Includes 333 shares of restricted stock that will vest within 60 days of the date of this prospectus and 3,333 shares subject to presently exercisable stock options and options that will vest within 60 days of the date of this prospectus. Mr. Crowns business address is c/o James River Coal Company, 901 E. Byrd Street, Suite 1600, Richmond, Virginia 23219. |
(12) | Includes 333 shares of restricted stock that will vest within 60 days of the date of this prospectus and 3,333 shares subject to presently exercisable stock options and options that will vest within 60 days of the date of this prospectus. Mr. Kujawas business address is c/o James River Coal Company, 901 E. Byrd Street, Suite 1600, Richmond, Virginia 23219. |
(13) | Includes 333 shares of restricted stock that will vest within 60 days of the date of this prospectus and 3,333 shares subject to presently exercisable stock options and options that will vest within 60 days of the date of this prospectus. Mr. Vinings business address is c/o James River Coal Company, 901 E. Byrd Street, Suite 1600, Richmond, Virginia 23219. |
(14) | Includes 333 shares of restricted stock that will vest within 60 days of the date of this prospectus and 3,333 shares subject to presently exercisable stock options and options that will vest within 60 days of the date of this prospectus. Mr. Wilsons business address is 900 Third Avenue, 33rd Floor, New York, New York 10022. Mr. Wilson is one of three individual general partners of Carl Marks Management Company, L.P., a Delaware limited partnership and registered investment advisor, which is the sole general partner of (i) Carl Marks Strategic Investments, L.P., a Delaware limited partnership and private investment partnership, and (ii) Carl Marks Strategic Investments III, L.P., a Delaware limited partnership and private investment partnership. The shares of common stock which are owned by Carl Marks Strategic Investments, L.P. and Carl Marks Strategic Investments III, L.P. may be deemed to be beneficially owned indirectly, on a shared basis, by Mr. Wilson and the other individual general partners of Carl Marks Management Company, L.P., who share the power to direct the vote or dispose of such securities. |
(15) | Includes 13,750 shares of restricted stock that will vest within 60 days of the date of this prospectus. Mr. Hopkins business address is c/o James River Coal Company, 901 E. Byrd Street, Suite 1600, Richmond, Virginia 23219. |
(16) | Mr. Lanes business address is c/o James River Coal Company, 901 E. Byrd Street, Suite 1600, Richmond, Virginia 23219. |
(17) | Mr. Crawfords business address is c/o James River Coal Company, 901 E. Byrd Street, Suite 1600, Richmond, Virginia 23219. |
(18) | Mr. Sullivans business address is c/o James River Coal Company, 901 E. Byrd Street, Suite 1600, Richmond, Virginia 23219.] |
106
[D:
PRINCIPAL SHAREHOLDERS
Name |
Number(1) |
%(2) |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
Carl Marks
Group (3) |
2,755,318 | 18.69 | % | |||||||
Harbert Group
(4) |
2,210,205 | 14.99 | % | |||||||
Glencore
Finance AG (5) |
2,208,948 | 14.99 | % | |||||||
Merrill Lynch
PCG, Inc. (6) |
985,000 | 6.68 | % | |||||||
Triage Group
(7) |
813,426 | 5.52 | % | |||||||
Peter T.
Socha (8) |
71,250 | * | ||||||||
Alan F. Crown
(9) |
3,666 | * | ||||||||
Leonard J.
Kujawa (10) |
3,666 | * | ||||||||
Paul H.
Vining (11) |
3,666 | * | ||||||||
James F.
Wilson (3)(12) |
2,755,318 | 18.69 | % | |||||||
Samuel M.
Hopkins, II (13) |
13,750 | * | ||||||||
Coy K. Lane,
Jr. (14) |
0 | * | ||||||||
James B.
Crawford (15) |
0 | * | ||||||||
William T.
Sullivan (16) |
0 | * | ||||||||
Executive
Officers and Directors as a Group (9 persons) |
2,851,316 | 19.29 | % |
* | Less than 1% |
(1) | This column lists all shares of common stock beneficially owned, including all restricted shares of common stock that vest, and all shares of common stock that can be acquired through option exercises, within 60 days of the date of this prospectus. |
(2) | In calculating the percentage owned, we assumed that any options for the purchase of common stock that are exercisable by that shareholder within 60 days of the date of this prospectus are exercised by that shareholder (and the underlying shares of common stock issued). The total number of shares outstanding used in calculating the percentage owned assumes a base of 14,740,694 shares of common stock outstanding as of the date of this prospectus and no exercise of options held by other shareholders. |
(3) | As of April 14, 2005, based on information supplied to us by the Carl Marks Group. Includes the following securities owned by James F. Wilson individually: 333 shares of restricted stock that will vest within 60 days of the date of this prospectus and 3,333 shares subject to presently exercisable stock options and options that will vest within 60 days of the date of this prospectus. The Carl Marks Group consists of Carl Marks Strategic Investments, L.P. (2,600,898 shares), Carl Marks Strategic Investments III, L.P. (150,754 shares) and James F. Wilson, one of our directors. The business address of the Carl Marks Group is 900 Third Avenue, 33rd Floor, New York, New York 10022. Shares held by Carl Marks Strategic Investments, L.P. and Carl Marks Strategic Investments III, L.P. are being registered and offered in the concurrent common stock offering. These shares were issued upon the conversion of our pre-petition secured debt in connection with our emergence from bankruptcy. James F. Wilson is one of three individual general partners of Carl Marks Management Company, L.P., a Delaware limited partnership and registered investment advisor, which is the sole general partner of (i) Carl Marks Strategic Investments, L.P., a Delaware limited partnership and private investment partnership, and (ii) Carl Marks Strategic Investments III, L.P., a Delaware limited partnership and private investment partnership. The shares of common stock which are owned by Carl Marks Strategic Investments, L.P. and Carl Marks Strategic Investments III, L.P. may be deemed to be beneficially owned indirectly, on a shared basis, by Mr. Wilson and the other individual general partners of Carl Marks Management Company, L.P., who share the power to direct the vote or dispose of such securities. |
(4) | As of April 14, 2005, based upon information supplied to us by the Harbert Group, which consists of Harbert Distressed Investment Master Fund, Ltd. (Master Fund) and Alpha US Sub Fund VI, LLC (Alpha), and the Form 4 filed by the Master Fund, HMC Distressed Investment Offshore Manager, L.L.C. (Offshore Manager) and HMC Investors, L.L.C. (HMC Investors) with the SEC on April 18, 2005. The Offshore Manager and the Master Fund share voting and dispositive power over 2,155,760 shares of our common stock (the HMC Shares). In addition to the HMC Shares, HMC Investors, Raymond J. Harbert, Michael D. Luce and Philip A. Falcone may also |
107
be deemed to have shared voting and dispositive power over an additional 54,445 shares of our common stock owned by Alpha (the Alpha Shares). We have been informed by the Master Fund and Alpha that each disclaims beneficial ownership of the HMC Shares and the Alpha Shares except to the extent of their actual pecuniary interest. Each of Master Fund and Alpha is or may be deemed to be an affiliate of a registered broker-dealer. Master Fund is an entity organized in the Cayman Islands. Offshore Manager is the sole investment manager of the Master Fund. HMC Investors is the managing member of the Offshore Manager. Philip A. Falcone is a member of Offshore Manager and acts as portfolio manager for the Master Fund. Alpha is a separate managed account also managed by Philip A. Falcone. Raymond J. Harbert and Michael D. Luce are members of HMC Investors. The business address of the Master Fund is c/o International Fund Services (Ireland) Limited, 3rd Floor, Bishops Square, Redmonds Hill, Dublin 2, Ireland. The business address of Alpha is c/o 555 Madison Avenue, 16th Floor, New York, New York 10022. |
(5) | As of January 21, 2005, based on information in the Form 4/A filed on January 25, 2005. The business address of Glencore Finance AG is Baarermattstrasse 3, CH-6341 Baar, Switzerland. |
(6) | As of December 31, 2004, based on information in the Schedule 13G filed on February 14, 2005. The business address of Merrill Lynch PCG, Inc. is 4 World Financial Center, New York, New York 10080. |
(7) | As of December 31, 2004, based on information in the Schedule 13G filed on February 15, 2005. The Triage Group consists of Triage Capital LF Group LLC, a Delaware limited liability company (Triage Capital) that acts as a general partner to (i) a general partner of different funds and an investment manager of a managed account and (ii) an investment manager of a Cayman Islands company, and Leonid Frenkel, who is (i) the managing member of Triage Capital and controls its business activities and (ii) the manager of another limited liability company. The business address of the Triage Group is 401 City Avenue, Suite 800, Bala Cynwyd, Pennsylvania 19004. |
(8) | Includes 4 1,250 shares of restricted stock that will vest within 60 days of the date of this prospectus and 30,000 shares subject to presently exercisable stock options and options that will vest within 60 days of the date of this prospectus. Mr. Sochas business address is c/o James River Coal Company, 901 E. Byrd Street, Suite 1600, Richmond, Virginia 23219. |
(9) | Includes 333 shares of restricted stock that will vest within 60 days of the date of this prospectus and 3,333 shares subject to presently exercisable stock options and options that will vest within 60 days of the date of this prospectus. Mr. Crowns business address is c/o James River Coal Company, 901 E. Byrd Street, Suite 1600, Richmond, Virginia 23219. |
(10) | Includes 333 shares of restricted stock that will vest within 60 days of the date of this prospectus and 3,333 shares subject to presently exercisable stock options and options that will vest within 60 days of the date of this prospectus. Mr. Kujawas business address is c/o James River Coal Company, 901 E. Byrd Street, Suite 1600, Richmond, Virginia 23219. |
(11) | Includes 333 shares of restricted stock that will vest within 60 days of the date of this prospectus and 3,333 shares subject to presently exercisable stock options and options that will vest within 60 days of the date of this prospectus. Mr. Vinings business address is c/o James River Coal Company, 901 E. Byrd Street, Suite 1600, Richmond, Virginia 23219. |
(12) | Includes 333 shares of restricted stock that will vest within 60 days of the date of this prospectus and 3,333 shares subject to presently exercisable stock options and options that will vest within 60 days of the date of this prospectus. Mr. Wilsons business address is 900 Third Avenue, 33rd Floor, New York, New York 10022. Mr. Wilson is one of three individual general partners of Carl Marks Management Company, L.P., a Delaware limited partnership and registered investment advisor, which is the sole general partner of (i) Carl Marks Strategic Investments, L.P., a Delaware limited partnership and private investment partnership, and (ii) Carl Marks Strategic Investments III, L.P., a Delaware limited partnership and private investment partnership. The shares of common stock which are owned by Carl Marks Strategic Investments, L.P. and Carl Marks Strategic Investments III, L.P. may be deemed to be beneficially owned indirectly, on a shared basis, by Mr. Wilson and the other individual general partners of Carl Marks Management Company, L.P., who share the power to direct the vote or dispose of such securities. |
(13) | Includes 13,750 shares of restricted stock that will vest within 60 days of the date of this prospectus. Mr. Hopkins business address is c/o James River Coal Company, 901 E. Byrd Street, Suite 1600, Richmond, Virginia 23219. |
(14) | Mr. Lanes business address is c/o James River Coal Company, 901 E. Byrd Street, Suite 1600, Richmond, Virginia 23219. |
(15) | Mr. Crawfords business address is c/o James River Coal Company, 901 E. Byrd Street, Suite 1600, Richmond, Virginia 23219. |
(16) | Mr. Sullivans business address is c/o James River Coal Company, 901 E. Byrd Street, Suite 1600, Richmond, Virginia 23219.] |
108
RELATED PARTY TRANSACTIONS
(i) |
rights under two life insurance contracts, one of which represented the vested amount in Mr. Crawfords account in our Supplemental Savings and Profit Sharing Plan of $535,021, and the other of which was a life insurance policy with a cash value of $143,668; |
(ii) |
the right to receive $1,383,002 in cash from us upon our consummation of a Chapter 11 plan of reorganization or the sale of all or substantially all of our assets (which amount was paid on May 6, 2004); and |
(iii) |
welfare benefit continuation until the payment under (ii) above was made. |
In the event Mr. Crawford is engaged by us or any purchaser of us, or any successor to either, as Chairman, Chief Executive Officer, Chief Operations Officer or any similar position within the 12 months from the payment under (ii) above, Mr. Crawford is obligated to repay the amount received under (ii) above. Additionally, pursuant to the settlement agreement:
(iv) |
Mr. Crawford sold all of his equity interests in the Company to J.R. Coal Associates in exchange for the transfer by J.R. Coal Associates to the Company of certain life insurance policies; |
(v) |
each of the Company and Mr. Crawford released the other from certain claims; and |
(vi) |
Mr. Crawford agreed not to compete with us for a period that ended October 31, 2003. |
109
[E:
DESCRIPTION OF CAPITAL STOCK
Authorized Capital Stock
Common Stock
Preferred Stock
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the designation of the series; |
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the number of shares of the series, which number our Board of Directors may later, except where otherwise provided in the preferred stock designation, increase or decrease, but not below the number of shares of that series then outstanding; |
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whether dividends, if any, will be cumulative or noncumulative, and, in the case of shares of any series having cumulative dividend rights, the date or dates or method of determining the date or dates from which dividends on the shares of the series having cumulative dividend rights shall be cumulative; |
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the rate of any dividends, or method of determining the dividends, payable to the holders of the shares of the series, any conditions upon which the dividends will be paid and the date or dates or the method for determining the date or dates upon which the dividends will be payable; |
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the redemption rights and price or prices, if any, for shares of the series; |
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the terms and amounts of any sinking fund provided for the purchase or redemption of shares of the series; |
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the amounts payable on and the preferences, if any, of shares of the series in the event of any voluntary or involuntary liquidation, dissolution or winding up of our affairs; |
110
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whether the shares of the series will be convertible or exchangeable into shares of any other class or series, or any other security, of us or any other corporation, and, if so, the specification of the other class or series or the other security, the conversion or exchange price or prices or rate or rates, any adjustments thereof, the date or dates as of which the shares will be convertible or exchangeable and all other terms and conditions upon which the conversion or exchange may be made; |
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restrictions on the issuance of shares of the same series or of any other class or series; and |
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the voting rights, if any, of the holders of the shares of the series. |
Preemptive Rights
Shareholder Rights Agreement
111
have the right to receive upon exercise, without payment of the exercise price, that number of shares of common stock having a market value of two times the exercise price of the share purchase right.
Certain Anti-Takeover Provisions of Virginia Law and Our Charter and Bylaws
Anti-Takeover Statutes
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one-fifth; |
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one-third; or |
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a majority. |
112
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the holders of at least two-thirds of the remaining voting shares; and |
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a majority of the disinterested directors if the acquisition transaction occurs within three years after the acquiring person became a 10% holder. |
Board of Directors; Duties; Classification; Removal; Vacancies
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by our shareholders; |
113
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by the remaining directors; or |
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by the affirmative vote of a majority of the remaining directors, though less than a quorum. |
Special Meetings of Shareholders
Shareholder Nominations and Proposals
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with respect to an election to be held at an annual meeting of shareholders, 120 days in advance of such meeting; or |
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with respect to a special meeting of shareholders for the election of directors, the close of business on the seventh day following the date on which notice of such meeting is given to shareholders. |
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the name and address of the shareholder making the nomination and of the person or persons being nominated; |
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a representation that the shareholder is a holder of record of our stock entitled to vote at such meeting and intends to appear in person or by proxy at the meeting; |
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a description of all the arrangements or understandings between the shareholder and each nominee and any other person pursuant to which the nomination is being made by the shareholder; |
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any other information regarding each nominee that would be required by the Securities and Exchange Commission to be included in a proxy statement had the nominee been nominated or intended to be nominated by the Board of Directors; and |
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the consent of each nominee to serve as a director if so elected. |
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on or after February 1st and before March 1st of the year in which the meeting will be held; or |
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not less than 90 days before the date of the meeting if the date of such meeting has been changed by more than 30 days. |
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the name and address of the shareholder proposing business; |
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the class and number of shares of our stock beneficially owned by such shareholder; |
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a brief description of the business desired to be brought before the meeting, including the complete text of any resolution and the reasons for conducting such business at the meeting; and |
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any interest that the shareholder may have in such business. |
114
Indemnification and Limitations on Liability of Directors and Officers
Transfer Agent and Registrar
115
[D:
DESCRIPTION OF THE NOTES
General
Optional Redemption
116
Year |
Redemption Price |
|||||
---|---|---|---|---|---|---|
2009 |
% |
|||||
2010 |
% |
|||||
2011 and thereafter |
100.000% |
|
in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed, or |
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if the Notes are not listed on a national securities exchange, by lot or by such other method as the Trustee in its sole discretion shall deem to be fair and appropriate. |
Guarantees
Ranking
|
be general senior unsecured obligations of the Issuer; |
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rank equal in right of payment with all existing and future unsubordinated indebtedness of the Issuer; |
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rank senior in right of payment to all existing and future subordinated indebtedness of the Issuer; |
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be effectively junior to all of the obligations, including trade payables, of the Subsidiaries of the Issuer (other than Subsidiary Guarantors); and |
117
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be effectively subordinated to all secured indebtedness of the Issuer to the extent of the value of the assets securing such indebtedness, including indebtedness outstanding under the Credit Agreement. |
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be general senior unsecured obligations of the Subsidiary Guarantors; |
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rank equal in right of payment with all existing and future unsubordinated indebtedness of the Subsidiary Guarantors; |
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rank senior in right of payment with all existing and future subordinated indebtedness of the Subsidiary Guarantors; and |
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be effectively subordinated to all secured indebtedness of the Subsidiary Guarantors to the extent of the value of the assets securing such indebtedness including guarantees of indebtedness outstanding under the Credit Agreement. |
Sinking Fund
Covenants
|
incur additional debt and issue preferred stock; |
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pay dividends, acquire shares of capital stock, make payments on subordinated debt or make investments; |
|
place limitations on distributions from Restricted Subsidiaries; |
|
issue or sell capital stock of Restricted Subsidiaries; |
|
issue guarantees; |
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sell or exchange assets; |
|
enter into transactions with shareholders and affiliates; |
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create liens; |
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engage in unrelated businesses; and |
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effect mergers. |
118
Limitation on Indebtedness and Issuance of Preferred Stock |
(a) |
The Issuer will not, and will not permit any of its Restricted Subsidiaries to, Incur any Indebtedness (other than the Notes, the Note Guarantees and other Indebtedness existing on the Closing Date) and the Issuer will not permit any of its Restricted Subsidiaries to issue any preferred stock; provided, however, that the Issuer or any Subsidiary Guarantor may Incur Indebtedness (including, without limitation, Acquired Indebtedness) and any Restricted Subsidiary may incur Indebtedness (including, without limitation, Acquired Indebtedness) or issue preferred stock if, after giving effect to the Incurrence of such Indebtedness or issuance of preferred stock and the receipt and application of the proceeds therefrom, the Fixed Charge Coverage Ratio would be greater than 2.25:1.0. |
Notwithstanding the foregoing, the Issuer and any Restricted Subsidiary (except as specified below) may Incur each and all of the following: |
(1) |
the incurrence by the Issuer and any Subsidiary Guarantor of additional Indebtedness and letters of credit under Credit Facilities in an aggregate principal amount at any one time outstanding under this clause (1) (with letters of credit being deemed to have a principal amount equal to the maximum potential liability of the Issuer thereunder) (together with refinancings thereof) not to exceed $ 125.0 million less any amount of such Indebtedness permanently repaid as provided under the Limitation on Asset Sales covenant; |
(2) |
Indebtedness owed (A) to the Issuer or any Subsidiary Guarantor evidenced by an unsubordinated promissory note or (B) to any other Restricted Subsidiary; provided that (x) any event which results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any subsequent transfer of such Indebtedness (other than to the Issuer or another Restricted Subsidiary) shall be deemed, in each case, to constitute an Incurrence of such Indebtedness not permitted by this clause (2) and (y) if the Issuer or any Subsidiary Guarantor is the obligor on such Indebtedness, such Indebtedness must be expressly subordinated in right of payment to the Notes, in the case of the Issuer, or the Note Guarantee, in the case of a Subsidiary Guarantor; |
(3) |
Indebtedness issued in exchange for, or the net proceeds of which are used to refinance or refund, then outstanding Indebtedness (other than Indebtedness outstanding under clauses (1), (2), (5), (6) and (7) and any refinancings thereof) in an amount not to exceed the amount so refinanced or refunded (plus premiums, accrued interest, fees and expenses); provided that (a) Indebtedness the proceeds of which are used to refinance or refund the Notes or Indebtedness that is pari passu with, or subordinated in right of payment to, the Notes or the Note Guarantee shall only be permitted under this clause (3) if (x) in case the Notes are refinanced in part or the Indebtedness to be refinanced is pari passu with the Notes or the Note Guarantee, such new Indebtedness, by its terms or by the terms of any agreement or instrument pursuant to which such new Indebtedness is outstanding, is expressly made pari passu with, or subordinate in right of payment to, the remaining Notes or the Note Guarantee, or (y) in case the Indebtedness to be refinanced is subordinated in right of payment to the Notes or the Note Guarantee, such new Indebtedness, by its terms or by the terms of any agreement or instrument pursuant to which such new Indebtedness is issued or remains outstanding, is expressly made subordinate in right of payment to the Notes or the Note Guarantee at least to the extent that the Indebtedness to be refinanced is subordinated to the Notes or the Note Guarantee, (b) such new Indebtedness, determined as of the date of Incurrence of such new Indebtedness, does not mature prior to the Stated Maturity of the Indebtedness to be refinanced or refunded, and the Average Life of such new Indebtedness is at least equal to the remaining Average Life of the Indebtedness to be refinanced or refunded and (c) such new Indebtedness is Incurred by the Issuer or a Subsidiary |
119
Guarantor or by the Restricted Subsidiary that is the obligor on the Indebtedness to be refinanced or refunded; |
(4) |
Indebtedness of the Issuer, to the extent the net proceeds thereof are promptly (A) used to purchase Notes tendered in an Offer to Purchase made as a result of a Change in Control or (B) deposited to defease the Notes as described under Defeasance or Satisfaction and Discharge; |
(5) |
Guarantees of the Notes and Guarantees of Indebtedness of the Issuer or any Restricted Subsidiary of the Issuer by any other Restricted Subsidiary of the Issuer; provided the Guarantee of such Indebtedness is permitted by and made in accordance with the Limitation on Issuance of Guarantees by Restricted Subsidiaries covenant; |
(6) |
Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently (except in the case of daylight overdrafts) drawn against insufficient funds in the ordinary course of business provided, however, that such Indebtedness is extinguished within two business days of incurrence; |
(7) |
obligations under (a) Interest Rate Agreements directly related to Indebtedness permitted to be Incurred by the Issuer or a Restricted Subsidiary pursuant to the Indenture and (b) Commodity Agreements and Currency Agreements entered into by the Issuer or a Restricted Subsidiary in the ordinary course of the financial management of the Issuer or such Restricted Subsidiary and not for speculative purposes; |
(8) |
Acquired Indebtedness; provided, however, that on the date of such acquisition and after giving effect thereto, the Issuer would have been able to Incur at least $1.00 of additional Indebtedness pursuant to the first paragraph of part (a) of this covenant; |
(9) |
the incurrence by the Issuer or any of its Restricted Subsidiaries of Indebtedness in respect of workers compensation claims, payment obligations in connection with health or other types of social security benefits, unemployment or other insurance or self-insurance obligations, reclamation, statutory obligations, bankers acceptances, performance, surety or similar bonds and letters of credit or completion or performance guarantees (including without limitation, performance guarantees pursuant to coal supply agreements or equipment leases), or other similar obligations in the ordinary course of business; and |
(10) |
additional Indebtedness of the Issuer (in addition to Indebtedness permitted under clauses (1) through (9) above) in an aggregate principal amount outstanding at any time (together with refinancings thereof) not to exceed $10.0 million, less any amount of such Indebtedness permanently repaid as provided under the Limitation on Asset Sales covenant. |
(b) |
Notwithstanding any other provision of this Limitation on Indebtedness and Issuance of Preferred Stock covenant, the maximum amount of Indebtedness that may be Incurred pursuant to this Limitation on Indebtedness and Issuance of Preferred Stock covenant will not be deemed to be exceeded, with respect to any outstanding Indebtedness due solely to the result of fluctuations in the exchange rates of currencies. |
(c) |
For purposes of determining any particular amount of Indebtedness under this Limitation on Indebtedness and Issuance of Preferred Stock covenant, (x) Indebtedness outstanding under the Credit Agreement on the Closing Date shall be treated as Incurred pursuant to clause (1) of the second paragraph of part (a) of this Limitation on Indebtedness and Issuance of Preferred Stock covenant, (y) Guarantees, Liens or obligations with respect to letters of credit supporting Indebtedness otherwise included in the determination of such particular amount shall not be included and (z) any Liens granted pursuant to the equal and ratable provisions referred to in the Limitation on Liens covenant shall not be treated as Indebtedness. For purposes of determining compliance with this Limitation on Indebtedness and Issuance of Preferred Stock covenant, in the event that an item of Indebtedness meets the criteria of more than one of the types of Indebtedness described above |
120
other than Indebtedness referred to in clause (x) of the preceding sentence, including under the first paragraph of clause (a), the Issuer, in its sole discretion, may classify, and from time to time may reclassify, such item of Indebtedness. |
(d) |
The Obligors will not Incur any Indebtedness if such Indebtedness is subordinate in right of payment to any other Indebtedness unless such Indebtedness is also subordinate in right of payment to the Notes (in the case of the Issuer) or the Note Guarantees (in the case of any Subsidiary Guarantor), in each case, to the same extent. |
(A) |
a Default or Event of Default shall have occurred and be continuing, |
(B) |
the Issuer could not Incur at least $1.00 of Indebtedness under the first paragraph of part (a) of the Limitation on Indebtedness and Issuance of Preferred Stock covenant, or |
(C) |
the aggregate amount of all Restricted Payments made after the Closing Date would exceed the sum of: |
(i) |
50% of the aggregate amount of the Adjusted Consolidated Net Income (or, if the Adjusted Consolidated Net Income is a loss, minus 100% of the amount of such loss) accrued on a cumulative basis during the period (taken as one accounting period) beginning on the first day of the fiscal quarter immediately following the Closing Date and ending on the last day of the last fiscal quarter preceding the Transaction Date for which reports have been filed with the SEC or provided to the Trustee, plus |
(ii) |
the aggregate Net Cash Proceeds received by the Issuer after the Closing Date as a capital contribution or from the issuance and sale of its Capital Stock (other than Disqualified Stock) to a Person who is not a Subsidiary of the Issuer, including an issuance or sale permitted by the Indenture of Indebtedness of the Issuer for cash subsequent to the Closing Date upon the conversion of such Indebtedness into Capital Stock (other than Disqualified Stock) of the Issuer, or from the issuance to a Person who is not a Subsidiary of the Issuer of any options, warrants or other rights to acquire Capital Stock of the Issuer (in each case, exclusive of any Disqualified Stock or any options, warrants or other rights that are redeemable at the option of the holder, or are required to be redeemed, prior to the Stated Maturity of the Notes) plus |
(iii) |
an amount equal to the net reduction in Investments (other than reductions in Permitted Investments) in any Person resulting from payments of interest on Indebtedness, dividends, repayments of loans or advances, or other transfers of assets, in each case, to the Issuer or any Restricted Subsidiary or from the Net Cash Proceeds from the sale of any such Investment (except, in each case, to the extent any such payment or proceeds are included in the calculation of Adjusted Consolidated Net Income), |
121
from the release of any Guarantee or from redesignations of Unrestricted Subsidiaries as Restricted Subsidiaries (valued in each case as provided in the definition of Investments), not to exceed, in each case, the amount of Investments previously made by the Issuer or any Restricted Subsidiary in such Person or Unrestricted Subsidiary. |
(1) |
the payment of any dividend or redemption of any Capital Stock within 60 days after the related date of declaration or call for redemption if, at said date of declaration or call for redemption, such payment or redemption would comply with the preceding paragraph; |
(2) |
the redemption, repurchase, defeasance or other acquisition or retirement for value of Indebtedness that is subordinated in right of payment to the Notes or any Note Guarantee, including premium, if any, and accrued interest, with the proceeds of, or in exchange for, Indebtedness Incurred under clause (3) of the second paragraph of part (a) of the Limitation on Indebtedness and Issuance of Preferred Stock covenant; |
(3) |
the repurchase, redemption or other acquisition of Capital Stock of the Issuer or a Subsidiary Guarantor (or options, warrants or other rights to acquire such Capital Stock) in exchange for, or out of the proceeds of a capital contribution or a substantially concurrent offering of, shares of Capital Stock (other than Disqualified Stock) of the Issuer (or options, warrants or other rights to acquire such Capital Stock); provided that such options, warrants or other rights are not redeemable at the option of the holder, or required to be redeemed, prior to the Stated Maturity of the Notes; |
(4) |
the making of any principal payment or the repurchase, redemption, retirement, defeasance or other acquisition for value of Indebtedness which is subordinated in right of payment to the Notes or any Note Guarantee in exchange for, or out of the proceeds of a capital contribution or a substantially concurrent offering of, shares of the Capital Stock (other than Disqualified Stock) of the Issuer (or options, warrants or other rights to acquire such Capital Stock); provided that such options, warrants or other rights are not redeemable at the option of the holder, or required to be redeemed, prior to the Stated Maturity of the Notes; |
(5) |
payments or distributions to dissenting stockholders required by applicable law, pursuant to or in connection with a consolidation, merger or transfer of assets of the Issuer that complies with the provisions of the Indenture applicable to mergers, consolidations and transfers of all or substantially all of the property and assets of the Issuer; |
(6) |
Investments acquired as a capital contribution to, or in exchange for, or out of the proceeds of a substantially concurrent offering of, Capital Stock (other than Disqualified Stock) of the Issuer; |
(7) |
the repurchase of Capital Stock deemed to occur upon the exercise of options or warrants if such Capital Stock represents all or a portion of the exercise price thereof; or |
(8) |
Restricted Payments in an aggregate amount which, when taken together with all Restricted Payments made pursuant to this clause (8), do not exceed $10.0 million; |
provided that, except in the case of clauses (1) and (3), no Default or Event of Default shall have occurred and be continuing or occur as a consequence of the actions or payments set forth therein.
122
(1) |
existing on the Closing Date in the Credit Agreement, the Indenture or any other agreements in effect on the Closing Date, and any extensions, refinancings, renewals or replacements of such agreements; provided that the encumbrances and restrictions in any such extensions, refinancings, renewals or replacements taken as a whole are no less favorable in any material respect to the Holders than those encumbrances or restrictions that are then in effect and that are being extended, refinanced, renewed or replaced; |
(2) |
existing under or by reason of applicable law; |
(3) |
with respect to any Person or the property or assets of such Person acquired by the Issuer or any Restricted Subsidiary, existing at the time of such acquisition and not incurred in contemplation thereof, which encumbrances or restrictions are not applicable to any Person or the property or assets of any Person other than such Person or the property or assets of such Person so acquired and any extensions, refinancings, renewals or replacements thereof; provided that the encumbrances and restrictions in any such extensions, refinancings, renewals or replacements taken as a whole are no less favorable in any material respect to the Holders than those encumbrances or restrictions that are then in effect and that are being extended, refinanced, renewed or replaced; |
(4) |
in the case of clause (4) of the first paragraph of this Limitation on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries covenant: |
(A) |
that restrict in a customary manner the subletting, assignment or transfer of any property or asset that is a lease, license, conveyance or contract or similar property or asset, |
(B) |
existing by virtue of any transfer of, agreement to transfer, option or right with respect to, or Lien on, any property or assets of the Issuer or any Restricted Subsidiary not otherwise prohibited by the Indenture, or |
(C) |
arising or agreed to in the normal course of business, not relating to any Indebtedness, and that do not, individually or in the aggregate, detract from the value of property or assets of the Issuer or any Restricted Subsidiary in any manner material to the Issuer or any Restricted Subsidiary; |
(5) |
with respect to a Restricted Subsidiary and imposed pursuant to an agreement that has been entered into for the sale or disposition of all or substantially all of the Capital Stock of, or property and assets of, such Restricted Subsidiary; and |
123
(6) |
arising from customary provisions in joint venture agreements and other similar agreements entered into in the ordinary course of business. |
(1) |
to the Issuer or a Wholly Owned Restricted Subsidiary; |
(2) |
issuances of directors qualifying shares or sales to foreign nationals of shares of Capital Stock of foreign Restricted Subsidiaries, to the extent required by applicable law; |
(3) |
if, immediately after giving effect to such issuance or sale, such Restricted Subsidiary would no longer constitute a Restricted Subsidiary and any Investment in such Person remaining after giving effect to such issuance or sale would have been permitted to be made under the Limitation on Restricted Payments covenant if made on the date of such issuance or sale; or |
(4) |
sales of common stock (including options, warrants or other rights to purchase shares of such common stock) of a Restricted Subsidiary, provided that the Issuer or such Restricted Subsidiary applies the Net Cash Proceeds of any such sale in accordance with the Limitation on Asset Sales covenant. |
(1) |
any sale, exchange or transfer, to any Person not an Affiliate of the Issuer, of all of the Issuers and each Restricted Subsidiarys Capital Stock in, or all or substantially all the assets of, such Restricted Subsidiary (which sale, exchange or transfer is not prohibited by the Indenture) or upon the designation of such Restricted Subsidiary as an Unrestricted Subsidiary in accordance with the terms of the Indenture; or |
124
(2) |
the release or discharge of the Guarantee which resulted in the creation of such Subsidiary Guarantee, except a discharge or release by or as a result of payment under such Guarantee. |
(1) |
transactions (A) approved by a majority of the disinterested members of the Board of Directors or (B) for which the Issuer or a Restricted Subsidiary delivers to the Trustee a written opinion of a nationally recognized investment banking, accounting, valuation or appraisal firm stating that the transaction is fair to the Issuer or such Restricted Subsidiary from a financial point of view; |
(2) |
any transaction solely between the Issuer and any of its Restricted Subsidiaries or solely among Restricted Subsidiaries; |
(3) |
the payment of reasonable and customary regular fees to officers, directors, employees or consultants of the Issuer or any of its Restricted Subsidiaries and indemnification arrangements entered into by the Issuer consistent with past practices of the Issuer; |
(4) |
any payments or other transactions pursuant to any tax-sharing agreement between the Issuer and any other Person with which the Issuer files a consolidated tax return or with which the Issuer is part of a consolidated group for tax purposes; |
(5) |
any sale of shares of Capital Stock (other than Disqualified Stock) of the Issuer; |
(6) |
any Permitted Investments or any Restricted Payments not prohibited by the Limitation on Restricted Payments covenant; and |
(7) |
any agreement as in effect or entered into as of the Closing Date (as disclosed in this prospectus) or any amendment thereto or any transaction contemplated thereby (including pursuant to any amendment thereto) and any replacement agreement thereto so long as any such amendment or replacement agreement is not more disadvantageous to the Holders in any material respect than the original agreement as in effect on the Closing Date. |
125
(1) |
Liens existing on the Closing Date, including Liens securing obligations under the Credit Agreement; |
(2) |
Liens granted on or after the Closing Date on any assets or Capital Stock of the Issuer or its Restricted Subsidiaries created in favor of the Holders; |
(3) |
Liens with respect to the assets of a Restricted Subsidiary granted by such Restricted Subsidiary to the Issuer or a Wholly Owned Restricted Subsidiary to secure Indebtedness owing to the Issuer or such other Wholly Owned Restricted Subsidiary; |
(4) |
Liens securing Indebtedness which is Incurred to refinance secured Indebtedness which is permitted to be Incurred under clause (3) of the second paragraph of part (a) of the Limitation on Indebtedness and Issuance of Preferred Stock covenant; provided that such Liens do not extend to or cover any property or assets of the Issuer or any Restricted Subsidiary other than the property or assets securing the Indebtedness being refinanced; |
(5) |
Liens to secure Indebtedness under clause (1) of the second paragraph of part (a) of the Limitation of Indebtedness and Issuance of Preferred Stock covenant; |
(6) |
Liens (including extensions and renewals thereof) upon real or personal property acquired after the Closing Date; provided that (a) such Lien is created solely for the purpose of securing Indebtedness Incurred, in accordance with the Limitation on Indebtedness and Issuance of Preferred Stock covenant, to finance the cost (including the cost of improvement or construction) of the item of property or assets subject thereto and such Lien is created prior to, at the time of or within six months after the later of the acquisition, the completion of construction or the commencement of full operation of such property, (b) the principal amount of the Indebtedness secured by such Lien does not exceed 100% of such cost and (c) any such Lien shall not extend to or cover any property or assets other than such item of property or assets and any improvements on such item; |
(7) |
Liens on cash set aside at the time of the Incurrence of any Indebtedness, or government securities purchased with such cash, in either case, to the extent that such cash or government securities pre-fund the payment of interest on such Indebtedness and are held in a collateral or escrow account or similar arrangement to be applied for such purpose; or |
(8) |
Permitted Liens. |
(a) |
the consideration received in such Sale and Leaseback Transaction is at least equal to the fair market value of the property so sold or otherwise transferred, as determined by a resolution of the Board of Directors; |
(b) |
the Issuer or such Restricted Subsidiary, as applicable, would be permitted to grant a Lien to secure Indebtedness under the Limitation on Liens covenant in the amount of the Attributable Debt in respect of such Sale Leaseback Transaction; |
(c) |
prior to and after giving effect to the Attributable Debt in respect of such Sale and Leaseback Transaction, the Issuer and such Restricted Subsidiary comply with the Limitation on Indebtedness and Issuance of Preferred Stock covenant; and |
(d) |
the Issuer or such Restricted Subsidiary applies the proceeds received from such sale in accordance with the Limitation on Asset Sales covenant. |
126
(1) |
within 12 months after the date of receipt of any Net Cash Proceeds from an Asset Sale, |
(A) |
apply an amount equal to such Net Cash Proceeds to permanently repay unsubordinated Indebtedness of the Issuer or any Subsidiary Guarantor or Indebtedness of any other Restricted Subsidiary, in each case, owing to a Person other than the Issuer or any Affiliate of the Issuer, or |
(B) |
invest an equal amount, or the amount not so applied pursuant to clause (A) (or enter into a definitive agreement committing to so invest within 12 months after the date of such agreement) in Replacement Assets, and |
(2) |
apply (no later than the end of the 12-month period referred to in clause (1)) any excess Net Cash Proceeds (to the extent not applied pursuant to clause (1)) as provided in the following paragraphs of this Limitation on Asset Sales covenant. |
Repurchase of Notes upon a Change of Control
127
SEC Reports and Reports to Holders
Events of Default
(a) |
default in the payment of principal of (or premium, if any, on) any Note when the same becomes due and payable at maturity, upon acceleration, redemption or otherwise; |
(b) |
default in the payment of interest on any Note when the same becomes due and payable, and such default continues for a period of 30 days; |
(c) |
default in the performance or breach of the provisions of the Indenture applicable to mergers, consolidations and transfers of all or substantially all of the assets of the Issuer or any Subsidiary Guarantor or the failure by the Issuer to make or consummate an Offer to Purchase in accordance with the provisions under the caption CovenantsLimitation on Asset Sales or Repurchase of Notes upon a Change of Control; |
(d) |
the Issuer or any Subsidiary Guarantor defaults in the performance of or breaches any other covenant or agreement in the Indenture or under the Notes (other than a default specified in clause (a), (b) or (c) above) and such default or breach continues for a period of 30 consecutive days after written notice by the Trustee or the Holders of 25% or more in aggregate principal amount of the Notes; |
(e) |
there occurs with respect to any issue or issues of Indebtedness of the Issuer, any Subsidiary Guarantor or any Significant Subsidiary having an outstanding principal amount of $10.0 million or more in the aggregate for all such issues of all such Persons, whether such Indebtedness now exists or shall hereafter be created, (I) an event of default that has caused the holder thereof to declare such Indebtedness to be due and payable prior to its Stated Maturity and such Indebtedness has not been discharged in full or such acceleration has not been rescinded or annulled within 30 days of such acceleration and/or (II) the failure to make a principal payment at the final (but not any interim) fixed maturity and such defaulted payment shall not have been made, waived or extended within 30 days of such payment default; |
(f) |
any final judgment or order (not covered by insurance) for the payment of money in excess of $10.0 million in the aggregate for all such final judgments or orders against all such Persons (treating any deductibles, self-insurance or retention as not so covered) shall be rendered against the Issuer, any Subsidiary Guarantor or any Significant Subsidiary and shall not be paid or discharged, and there shall |
128
be any period of 30 consecutive days following entry of the final judgment or order that causes the aggregate amount for all such final judgments or orders outstanding and not paid or discharged against all such Persons to exceed $10.0 million during which a stay of enforcement of such final judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; |
(g) |
a court having jurisdiction in the premises enters a decree or order for (A) relief in respect of the Issuer, any Subsidiary Guarantor or any Significant Subsidiary in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, (B) appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Issuer, any Subsidiary Guarantor or any Significant Subsidiary or for all or substantially all of the property and assets of the Issuer, any Subsidiary Guarantor or any Significant Subsidiary or (C) the winding up or liquidation of the affairs of the Issuer, any Subsidiary Guarantor or any Significant Subsidiary and, in each case, such decree or order shall remain unstayed and in effect for a period of 30 consecutive days; |
(h) |
the Issuer, any Subsidiary Guarantor or any Significant Subsidiary (A) commences a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consents to the entry of an order for relief in an involuntary case under any such law, (B) consents to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Issuer, any Subsidiary Guarantor or any Significant Subsidiary or for all or substantially all of the property and assets of the Issuer, any Subsidiary Guarantor or any Significant Subsidiary or (C) effects any general assignment for the benefit of creditors; or |
(i) |
any Subsidiary Guarantor repudiates its obligations under its Note Guarantee or, except as permitted by the Indenture, any Note Guarantee is determined to be unenforceable or invalid or shall for any reason cease to be in full force and effect and such default continues for 10 days. |
129
(1) |
the Holder gives the Trustee written notice of a continuing Event of Default; |
(2) |
the Holders of at least 25% in aggregate principal amount of outstanding Notes make a written request to the Trustee to pursue the remedy; |
(3) |
such Holder or Holders offer the Trustee indemnity satisfactory to the Trustee against any costs, liability or expense; |
(4) |
the Trustee does not comply with the request within 60 days after receipt of the request and the offer of indemnity; and |
(5) |
during such 60-day period, the Holders of a majority in aggregate principal amount of the outstanding Notes do not give the Trustee a direction that is inconsistent with the request. |
Consolidation, Merger and Sale of Assets
(1) |
it shall be the continuing Person, or the Person (if other than it) formed by such consolidation or into which it is merged or that acquired or leased such property and assets (the Surviving Person) shall be a corporation organized and validly existing under the laws of the United States of America or any jurisdiction thereof and shall expressly assume, by a supplemental indenture, executed and delivered to the Trustee, all of the Issuers obligations under the Indenture and the Notes ; |
(2) |
immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing; |
(3) |
immediately after giving effect to such transaction on a pro forma basis, the Issuer (or the Surviving Person, if applicable) shall have a Consolidated Net Worth equal to or greater than the Consolidated Net Worth of the Issuer immediately prior to such transaction; |
(4) |
immediately after giving effect to such transaction on a pro forma basis the Issuer (or the Surviving Person, if applicable) could Incur at least $1.00 of Indebtedness under the first paragraph of part (a) of the Limitation on Indebtedness and Issuance of Preferred Stock covenant; provided that this clause (4) shall not apply to a consolidation, merger or sale of all (but not less than all) of the assets of the Issuer if all Liens and Indebtedness of the Issuer (or the Surviving Person), together with the Restricted Subsidiaries of such Person, outstanding immediately after such transaction would have been permitted (and all such Liens and Indebtedness, other than Liens and Indebtedness of such Person and its Restricted Subsidiaries outstanding immediately prior to the transaction, shall be deemed to have been Incurred) for all purposes of the Indenture; |
130
(5) |
each Subsidiary Guarantor, unless such Subsidiary Guarantor is the Person with which the Issuer has entered into a transaction under this Consolidation, Merger and Sale of Assets section, shall have, by supplemental indenture amending its Note Guarantee, confirmed that its Note Guarantee shall apply to the obligations of the Issuer or the Surviving Person in accordance with the Notes and the Indenture; and |
(6) |
the Issuer will have delivered to the Trustee an officers certificate (attaching the arithmetic computations to demonstrate compliance with clauses (3) and (4) of this paragraph) and an opinion of counsel, each stating that such transaction and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture comply with the applicable provisions of the Indenture, that all conditions precedent in the Indenture relating to such transaction have been satisfied and that such supplemental indenture is enforceable; |
provided, however, that clauses (3) and (4) above do not apply if, in the good faith determination of the Board of Directors, whose determination shall be evidenced by a Board Resolution, the principal purpose of such transaction is to change the state of incorporation of the Issuer and any such transaction shall not have as one of its purposes the evasion of the foregoing limitations.
(1) |
it shall be the continuing Person, or the Person (if other than it) formed by such consolidation or into which it is merged or that acquired or leased such property and assets shall expressly assume, by a supplemental indenture, executed and delivered to the Trustee, all of such Subsidiary Guarantors obligations under its Note Guarantee; |
(2) |
immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing; and |
(3) |
the Issuer will have delivered to the Trustee an officers certificate and an opinion of counsel, each stating that such transaction and such supplemental indenture comply with the applicable provisions of the Indenture, that all conditions precedent in the Indenture relating to such transaction have been satisfied and that such supplemental indenture is enforceable. |
Defeasance
(A) |
the Issuer has deposited with the Trustee, in trust, money and/or U.S. Government Obligations that through the payment of interest and principal in respect thereof in accordance with their terms will provide money in an amount sufficient to pay the principal of, premium, if any, and accrued interest on the Notes on the Stated Maturity of such payments in accordance with the terms of the Indenture and the Notes; |
(B) |
the Issuer has delivered to the Trustee (1) either (x) an Opinion of Counsel to the effect that Holders will not recognize income, gain or loss for federal income tax purposes as a result of the Issuers exercise of its option under this Defeasance provision and will be subject to federal income tax on the same amount and in the same manner and at the same times as would have been the case if such deposit, defeasance and discharge had not occurred, which Opinion of Counsel must be based upon (and accompanied by a copy of) a ruling of the Internal Revenue Service to the same effect unless there has |
131
been a change in applicable federal income tax law after the Closing Date such that a ruling is no longer required or (y) a ruling directed to the Trustee received from the Internal Revenue Service to the same effect as the aforementioned Opinion of Counsel and (2) an Opinion of Counsel to the effect that the creation of the defeasance trust does not violate the Investment Company Act of 1940 and after the passage of 123 days following the deposit, the trust fund will not be subject to the effect of Section 547 of the United States Bankruptcy Code or Section 15 of the New York Debtor and Creditor Law; |
(C) |
immediately after giving effect to such deposit on a pro forma basis, no Event of Default, or event that after the giving of notice or lapse of time or both would become an Event of Default, shall have occurred and be continuing on the date of such deposit or during the period ending on the 123rd day after the date of such deposit, and such deposit shall not result in a breach or violation of, or constitute a default under, any other agreement or instrument to which the Issuer or any of its Subsidiaries is a party or by which the Issuer or any of its Subsidiaries is bound; and |
(D) |
if at such time the Notes are listed on a national securities exchange, the Issuer has delivered to the Trustee an Opinion of Counsel to the effect that the Notes will not be delisted as a result of such deposit, defeasance and discharge. |
Satisfaction and Discharge
(1) |
either: |
(A) |
all of the Notes theretofore authenticated and delivered (except lost, stolen or destroyed Notes which have been replaced or paid and Notes for whose payment money has theretofore been deposited in trust by the Issuer and thereafter repaid to the Issuer) have been delivered to the Trustee for cancellation or |
132
(B) |
all Notes not theretofore delivered to the Trustee for cancellation have become due and payable pursuant to an optional redemption notice or otherwise or will become due and payable within one year, and the Issuer has irrevocably deposited or caused to be deposited with the Trustee funds in an amount sufficient to pay and discharge the entire indebtedness on the Notes not theretofore delivered to the trustee for cancellation, for principal of, premium, if any, and interest on the Notes to the date of deposit together with irrevocable instructions from the Issuer directing the Trustee to apply such funds to the payment thereof at maturity or redemption, as the case may be; and |
(2) |
the Issuer has paid all other sums payable under the Indenture by the Issuer. |
Modification and Waiver
(1) |
cure any ambiguity, defect or inconsistency in the Indenture; |
(2) |
comply with the provisions described under Consolidation, Merger and Sale of Assets or Limitation on Issuance of Guarantees by Restricted Subsidiaries; |
(3) |
evidence and provide for the acceptance of appointment by a successor Trustee; |
(4) |
to add a Subsidiary Guarantor; or |
(5) |
make any change that, in the good faith opinion of the Board of Directors, does not materially and adversely affect the rights of any Holder. |
(1) |
change the Stated Maturity of the principal of, or any installment of interest on, any Note; |
(2) |
reduce the principal amount of, or premium, if any, or interest on, any Note; |
(3) |
change the optional redemption dates or optional redemption prices of the Notes from that stated under the caption Optional Redemption; |
(4) |
change the place or currency of payment of principal of, or premium, if any, or interest on, any Note; |
(5) |
impair the right to institute suit for the enforcement of any payment on or after the Stated Maturity (or, in the case of a redemption, on or after the Redemption Date) of any Note; |
(6) |
waive a default in the payment of principal of, premium, if any, or interest on the Notes; |
(7) |
release any Subsidiary Guarantor from its Note Guarantee, except as provided in the Indenture; |
(8) |
amend or modify any of the provisions of the Indenture in any manner which subordinates the Notes issued thereunder in right of payment to any other Indebtedness of the Issuer or which subordinates any Note Guarantee in right of payment to any other Indebtedness of the Subsidiary Guarantor issuing any such Note Guarantee; or |
(9) |
reduce the percentage or aggregate principal amount of outstanding Notes the consent of whose Holders is necessary for waiver of compliance with certain provisions of the Indenture or for waiver of certain defaults. |
133
Governing Law
No Personal Liability of Incorporators, Stockholders, Officers, Directors, or Employees
Concerning the Trustee
Book-Entry; Delivery and Form
|
a limited-purpose trust company organized under the New York Banking Law; |
|
a banking organization within the meaning of the New York Banking Law; |
|
a member of the Federal Reserve System; |
|
a clearing corporation within the meaning of the New York Uniform Commercial Code; and |
|
a clearing agency registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. |
134
trust companies, clearing corporations, and certain other organizations. DTC is owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., the American Stock Exchange LLC, and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as securities brokers and dealers, banks, and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (Indirect Participants). The rules applicable to DTC and its Direct and Indirect Participants are on file with the Securities and Exchange Commission. |
135
Definitions
(1) |
the net income (or loss) of any Person that is not a Restricted Subsidiary, except that, subject to the exclusion contained in clause (4) below, the Issuers equity in the net income (or loss) of any such Person for such period shall be included in such Adjusted Consolidated Net Income up to the aggregate amount of cash actually distributed by such Person during such period to the Issuer or a Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution paid to a Restricted Subsidiary, to the limitations contained in clause (3) below); |
(2) |
solely for purposes of calculating the amount of Restricted Payments that may be made pursuant to clause (C) of the first paragraph of the Limitation on Restricted Payments covenant, the net income (or loss) of any Person accrued prior to the date it becomes a Restricted Subsidiary or is merged into or consolidated with the Issuer or any of its Restricted Subsidiaries or all or substantially all of the property and assets of such Person are acquired by the Issuer or any of its Restricted Subsidiaries; |
(3) |
the net income of any Restricted Subsidiary to the extent that the declaration or payment of dividends or similar distributions by such Restricted Subsidiary of such net income is not at the time permitted by the operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to such Restricted Subsidiary; |
136
(4) |
any gains or losses (on an after-tax basis) attributable to sales of assets outside the ordinary course of business of the Issuer and its Restricted Subsidiaries; |
(5) |
solely for purposes of calculating the amount of Restricted Payments that may be made pursuant to clause (C) of the first paragraph of the Limitation on Restricted Payments covenant, any amount paid or accrued as dividends on preferred stock of the Issuer owned by Persons other than the Issuer and any of its Restricted Subsidiaries; |
(6) |
all extraordinary gains or, solely for purposes of calculating the Fixed Charge Coverage Ratio, extraordinary losses; |
(7) |
the cumulative effect of a change in accounting principles; and |
(8) |
income or loss attributable to discontinued operations (including, without limitation, operations disposed of during such period whether or not such operations were classified as discontinued). |
(1) |
all or any of the Capital Stock of any Restricted Subsidiary, |
(2) |
all or substantially all of the property and assets of an operating unit or business of the Issuer or any of its Restricted Subsidiaries, or |
(3) |
any other property and assets (other than the Capital Stock or other Investment in an Unrestricted Subsidiary) of the Issuer or any of its Restricted Subsidiaries outside the ordinary course of business of the Issuer or such Restricted Subsidiary, and |
(4) |
in each case, that is not governed by the provisions of the Indenture applicable to mergers, consolidations and sales of assets of the Issuer; provided that Asset Sale shall not include: |
(a) |
sales or other dispositions of inventory, receivables and other current assets, |
(b) |
sales, transfers or other dispositions of assets constituting a Permitted Investment or Restricted Payment permitted to be made under the Limitation on Restricted Payments covenant, |
(c) |
sales, transfers or other dispositions of assets with a fair market value not in excess of $3.0 million in any transaction or series of related transactions, |
(d) |
any sale, transfer, assignment or other disposition of any property or equipment that has become damaged, worn out, obsolete or otherwise unsuitable for use in connection with the business of the Issuer or its Restricted Subsidiaries, or |
137
(e) |
sales or grants of licenses to use the Issuers or any Restricted Subsidiarys patents, trade secrets, know-how and technology to the extent that such license does not prohibit the licensor from using the patent, trade secret, know-how or technology. |
(1) |
the direct or indirect sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of the Issuer and its Restricted Subsidiaries, taken as a whole, to any person (within the meaning of Section 13(d) of the Exchange Act); |
(2) |
the adoption of a plan relating to the liquidation or dissolution of the Issuer; |
(3) |
a person or group (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act) becomes the ultimate beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of more than 35% of the total voting power of the Voting Stock of the Issuer on a fully diluted basis; |
(4) |
individuals who on the Closing Date constituted the Board of Directors (together with any new directors whose election by the Board of Directors or whose nomination by the Board of Directors for election by the Issuers stockholders was approved by a vote of at least two-thirds of the members of the Board of Directors then in office who either were members of the Board of Directors on the Closing Date or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the members of the Board of Directors then in office; or |
(5) |
the Issuer consolidates with, or merges with or into, any Person, or any Person consolidates with, or merges with or into, the Issuer, in any such event pursuant to a transaction in which any of the outstanding Voting Stock of the Issuer or such other Person is converted into or exchanged for cash, securities or other property, other than any such transaction where (a) the Voting Stock of the Issuer outstanding immediately prior to such transaction is converted into or exchanged for (or continues as) Voting Stock (other than Disqualified Stock) of the surviving or transferee Person constituting a majority of the outstanding shares of Voting Stock of such surviving or transferee Person (immediately after giving effect to such issuance) and (b) immediately after such transaction, no person or group (as defined above), becomes the |
138
ultimate beneficial owner (as defined above) of 35% or more of the voting power of the Voting Stock of the surviving or transferee Person. |
(1) |
Fixed Charges, |
(2) |
income taxes, |
(3) |
depreciation expense, |
(4) |
amortization expense, and |
(5) |
all other non-cash items (including non-cash asset impairment charges) reducing Adjusted Consolidated Net Income (other than items that will require cash payments and for which an accrual or reserve is, or is required by GAAP to be, made), less all non-cash items increasing Adjusted Consolidated Net Income, all as determined on a consolidated basis for the Issuer and its Restricted Subsidiaries in conformity with GAAP; |
139
(A) |
pro forma effect shall be given to any Indebtedness Incurred or repaid during the period (the Reference Period) commencing on the first day of the Four Quarter Period and ending on the Transaction Date, in each case, as if such Indebtedness had been Incurred or repaid on the first day of such Reference Period; |
140
(B) |
Consolidated Interest Expense attributable to interest on any Indebtedness (whether existing or being Incurred) computed on a pro forma basis and bearing a floating interest rate shall be computed as if the rate in effect on the Transaction Date (taking into account any Interest Rate Agreement applicable to such Indebtedness if such Interest Rate Agreement has a remaining term in excess of 12 months or, if shorter, at least equal to the remaining term of such Indebtedness) had been the applicable rate for the entire period; |
(C) |
pro forma effect shall be given to Asset Dispositions and Asset Acquisitions (including giving pro forma effect to the application of proceeds of any Asset Disposition) that occur during such Reference Period as if they had occurred and such proceeds had been applied on the first day of such Reference Period; and |
(D) |
pro forma effect shall be given to asset dispositions and asset acquisitions (including giving pro forma effect to the application of proceeds of any asset disposition) that have been made by any Person that has become a Restricted Subsidiary or has been merged with or into the Issuer or any Restricted Subsidiary during such Reference Period and that would have constituted Asset Dispositions or Asset Acquisitions had such transactions occurred when such Person was a Restricted Subsidiary as if such asset dispositions or asset acquisitions were Asset Dispositions or Asset Acquisitions that occurred on the first day of such Reference Period; provided that to the extent that clause (C) or (D) of this paragraph requires that pro forma effect be given to an Asset Acquisition or Asset Disposition, such pro forma calculation shall be based upon the four full fiscal quarters immediately preceding the Transaction Date of the Person, or division or line of business of the Person, that is acquired or disposed for which financial information is available. |
(1) |
Consolidated Interest Expense plus |
(2) |
the product of (x) the amount of all dividend payments on any series of preferred stock of such Person or any of its Restricted Subsidiaries (other than dividends payable solely in Capital Stock of such Person or such Restricted Subsidiary (other than Disqualified Stock) or to such Person or a Restricted Subsidiary of such Person) paid, accrued or scheduled to be paid or accrued during such period times (y) a fraction, the numerator of which is one and the denominator of which is one minus the then current effective consolidated federal, state and local income tax rate of such Person, expressed as a decimal, as determined on a consolidated basis in accordance with GAAP. |
141
thereof (in whole or in part); provided that the term Guarantee shall not include endorsements for collection or deposit in the normal course of business. The term Guarantee used as a verb has a corresponding meaning.
(1) |
all indebtedness of such Person for borrowed money; |
(2) |
all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; |
(3) |
all obligations of such Person in respect of letters of credit or other similar instruments (including reimbursement obligations with respect thereto, but excluding obligations with respect to letters of credit (including trade letters of credit) securing obligations (other than obligations described in (1) or (2) above or (5), (6) or (7) below) entered into in the normal course of business of such Person to the extent such letters of credit are not drawn upon or, if drawn upon, to the extent such drawing is reimbursed no later than the third business day following receipt by such Person of a demand for reimbursement); |
(4) |
all obligations of such Person to pay the deferred and unpaid purchase price of property or services, which purchase price is due more than six months after the date of placing such property in service or taking delivery and title thereto or the completion of such services, except Trade Payables; |
(5) |
all Capitalized Lease Obligations and Attributable Debt; |
(6) |
all Indebtedness of other Persons secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person; provided that the amount of such Indebtedness shall be the lesser of (A) the fair market value of such asset at such date of determination and (B) the amount of such Indebtedness; |
(7) |
all Indebtedness of other Persons Guaranteed by such Person to the extent such Indebtedness is Guaranteed by such Person; |
(8) |
to the extent not otherwise included in this definition, obligations under Commodity Agreements, Currency Agreements and Interest Rate Agreements (other than Commodity Agreements, Currency Agreements and Interest Rate Agreements designed solely to protect the Issuer or its Restricted Subsidiaries against fluctuations in commodity prices, foreign currency exchange rates or interest rates and that do not increase the Indebtedness of the obligor outstanding at any time other than as a result of fluctuations in commodity prices, foreign currency exchange rates or interest rates or by reason of fees, indemnities and compensation payable thereunder); and |
(9) |
all Disqualified Stock issued by such Person with the amount of Indebtedness represented by such Disqualified Stock being equal to the greater of its voluntary or involuntary liquidation preference and its maximum fixed repurchase price, but excluding accrued dividends, if any. |
(A) |
the amount outstanding at any time of any Indebtedness issued with original issue discount is the face amount of such Indebtedness less the remaining unamortized portion of the original issue discount of such Indebtedness at such time as determined in conformity with GAAP; |
142
(B) |
money borrowed and set aside at the time of the Incurrence of any Indebtedness in order to prefund the payment of the interest on such Indebtedness shall not be deemed to be Indebtedness so long as such money is held to secure the payment of such interest; and |
(C) |
Indebtedness shall not include: |
(i) |
any liability for federal, state, local or other taxes, |
(ii) |
performance, surety or appeal bonds provided in the normal course of business, or |
(iii) |
agreements providing for indemnification, adjustment of purchase price or similar obligations, or Guarantees or letters of credit, surety bonds or performance bonds securing any obligations of the Issuer or any of its Restricted Subsidiaries pursuant to such agreements, in any case, Incurred in connection with the disposition of any business, assets or Restricted Subsidiary (other than Guarantees of Indebtedness Incurred by any Person acquiring all or any portion of such business, assets or Restricted Subsidiary for the purpose of financing such acquisition), so long as the principal amount does not to exceed the gross proceeds actually received by the Issuer or any Restricted Subsidiary in connection with such disposition. |
(a) |
with respect to any Asset Sale, the proceeds of such Asset Sale in the form of cash or cash equivalents, including payments in respect of deferred payment obligations (to the extent corresponding to the principal, |
143
but not interest, component thereof) when received in the form of cash or cash equivalents and proceeds from the conversion of other property received when converted to cash or cash equivalents, net of: |
(1) |
brokerage commissions and other fees and expenses (including fees and expenses of counsel and investment bankers) related to such Asset Sale; |
(2) |
provisions for all taxes (whether or not such taxes will actually be paid or are payable) as a result of such Asset Sale without regard to the consolidated results of operations of the Issuer and its Restricted Subsidiaries, taken as a whole; |
(3) |
payments made to repay Indebtedness or any other obligation outstanding at the time of such Asset Sale that either (x) is secured by a Lien on the property or assets sold or (y) is required to be paid as a result of such sale; and |
(4) |
appropriate amounts to be provided by the Issuer or any Restricted Subsidiary as a reserve against any liabilities associated with such Asset Sale, including, without limitation, pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale, all as determined in conformity with GAAP; and |
(b) |
with respect to any issuance or sale of Capital Stock, the proceeds of such issuance or sale in the form of cash or cash equivalents, including payments in respect of deferred payment obligations (to the extent corresponding to the principal, but not interest, component thereof) when received in the form of cash or cash equivalents and proceeds from the conversion of other property received when converted to cash or cash equivalents, net of attorneys fees, accountants fees, underwriters or placement agents fees, discounts or commissions and brokerage, consultant and other fees incurred in connection with such issuance or sale and net of taxes paid or payable as a result thereof. |
(1) |
the provision of the Indenture pursuant to which the offer is being made and that all Notes validly tendered will be accepted for payment on a pro rata basis; |
(2) |
the purchase price and the date of purchase, which shall be a business day no earlier than 30 days nor later than 60 days from the date such notice is mailed (the Payment Date); |
(3) |
that any Note not tendered will continue to accrue interest pursuant to its terms; |
(4) |
that, unless the Issuer defaults in the payment of the purchase price, any Note accepted for payment pursuant to the Offer to Purchase shall cease to accrue interest on and after the Payment Date; |
(5) |
that Holders electing to have a Note purchased pursuant to the Offer to Purchase will be required to surrender the Note, together with the form entitled Option of the Holder to Elect Purchase on the reverse side of the Note completed, to the Paying Agent at the address specified in the notice prior to the close of business on the business day immediately preceding the Payment Date; |
(6) |
that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the third business day immediately preceding the Payment Date, a telegram, facsimile transmission or letter setting forth the name of such Holder, the principal amount of Notes delivered for purchase and a statement that such Holder is withdrawing his election to have such Notes purchased; and |
(7) |
that Holders whose Notes are being purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered; provided that each Note purchased and each new Note issued shall be in a principal amount of $1,000 or integral multiples of $1,000. |
144
(1) |
an Investment in the Issuer or a Restricted Subsidiary or a Person which will, upon the making of such Investment, become a Restricted Subsidiary or be merged or consolidated with or into, or transfer or convey all or substantially all its assets to, the Issuer or a Restricted Subsidiary; |
(2) |
Temporary Cash Investments; |
(3) |
payroll, travel and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses in accordance with GAAP; |
(4) |
stock, obligations or securities received in satisfaction of judgments; |
(5) |
an Investment in an Unrestricted Subsidiary consisting solely of an Investment in another Unrestricted Subsidiary; |
(6) |
Commodity Agreements, Interest Rate Agreements and Currency Agreements designed solely to protect the Issuer or its Restricted Subsidiaries against fluctuations in commodity prices, interest rates or foreign currency exchange rates; |
(7) |
loans and advances to employees and officers of the Issuer and its Restricted Subsidiaries made in the ordinary course of business for bona fide business purposes and in accordance with applicable law not to exceed $1.0 million in the aggregate at any one time outstanding; |
(8) |
Investments in securities of trade creditors or customers received |
(a) |
pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of such trade creditors or customers, or |
(b) |
in settlement of delinquent obligations of, and other disputes with, customers, suppliers and others, in each case arising in the ordinary course of business or otherwise in satisfaction of a judgment; |
(9) |
Investments made by the Issuer or its Restricted Subsidiaries consisting of consideration received in connection with an Asset Sale made in compliance with the Limitation on Asset Sales covenant; |
(10) |
Investments of a Person or any of its Subsidiaries existing at the time such Person becomes a Restricted Subsidiary of the Issuer or at the time such Person merges or consolidates with the Issuer or any of its |
145
Restricted Subsidiaries, in either case, in compliance with the Indenture; provided that such Investments were not made by such Person in connection with, or in anticipation or contemplation of, such Person becoming a Restricted Subsidiary of the Issuer or such merger or consolidation; |
(11) |
repurchases of the Notes; and |
(12) |
additional Investments in an aggregate amount which, together with the aggregate principal amount of all other Investments made pursuant to this clause (12) that are then outstanding, does not exceed 5% of Total Tangible Assets. |
(1) |
Liens for taxes, assessments, governmental charges or claims that are being contested in good faith by appropriate legal proceedings promptly instituted and diligently conducted and for which a reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made; |
(2) |
statutory and common law Liens of landlords and carriers, warehousemen, mechanics, suppliers, materialmen, repairmen or other similar Liens arising in the ordinary course of business and with respect to amounts not yet delinquent or being contested in good faith by appropriate legal proceedings promptly instituted and diligently conducted and for which a reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made; |
(3) |
Liens incurred or deposits made in the ordinary course of business in connection with workers compensation, unemployment insurance and other types of social security; |
(4) |
Liens incurred or deposits made to secure the performance of tenders, bids, leases, statutory or regulatory obligations, bankers acceptances, surety and appeal bonds, government contracts, performance and return-of-money bonds and other obligations of a similar nature incurred in the ordinary course of business (exclusive of obligations for the payment of borrowed money); |
(5) |
easements, rights-of-way, municipal and zoning ordinances and similar charges, encumbrances, title defects or other irregularities that do not materially interfere with the ordinary course of business of the Issuer or any of its Restricted Subsidiaries; |
(6) |
leases or subleases granted to others that do not materially interfere with the ordinary course of business of the Issuer and its Restricted Subsidiaries, taken as a whole; |
(7) |
Liens encumbering property or assets under construction arising from progress or partial payments by a customer of the Issuer or its Restricted Subsidiaries relating to such property or assets; |
(8) |
any interest or title of a lessor in the property subject to any Capitalized Lease or operating lease; |
(9) |
Liens arising from filing Uniform Commercial Code financing statements regarding leases; |
(10) |
Liens on property of, or on shares of Capital Stock or Indebtedness of, any Person existing at the time such Person becomes, or becomes a part of, any Restricted Subsidiary; provided that such Liens do not extend to or cover any property or assets of the Issuer or any Restricted Subsidiary other than the property or assets acquired; |
(11) |
Liens in favor of the Issuer or any Restricted Subsidiary; |
(12) |
Liens arising from the rendering of a final judgment or order against the Issuer or any Restricted Subsidiary that does not give rise to an Event of Default; |
(13) |
Liens securing reimbursement obligations with respect to letters of credit that encumber documents and other property relating to such letters of credit and the products and proceeds thereof; |
(14) |
Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods; |
146
(15) |
Liens encumbering customary initial deposits and margin deposits, and other Liens that are within the general parameters customary in the industry and incurred in the ordinary course of business, in each case, securing Indebtedness under Interest Rate Agreements, Currency Agreements or Commodity Agreements designed solely to protect the Issuer or any of its Restricted Subsidiaries from fluctuations in interest rates, currencies or the price of commodities; |
(16) |
Liens arising out of conditional sale, title retention, consignment or similar arrangements for the sale of goods entered into by the Issuer or any of its Restricted Subsidiaries in the ordinary course of business in accordance with the past practices of the Issuer and its Restricted Subsidiaries prior to the Closing Date; |
(17) |
Liens on shares of Capital Stock of any Unrestricted Subsidiary to secure Indebtedness of such Unrestricted Subsidiary; |
(18) |
Liens on or sales of receivables; and |
(19) |
Liens securing Indebtedness of the Issuer or a Restricted Subsidiary in an aggregate principal amount which, together with the aggregate principal amount of all other Indebtedness secured by Liens incurred pursuant to this clause (19), does not exceed the greater of (a) $10.0 million and (b) 2.5% of Total Tangible Assets. |
147
(1) |
direct obligations of the United States of America or any agency thereof or obligations fully and unconditionally guaranteed by the United States of America or any agency thereof, in each case, maturing within one year unless such obligations are deposited by the Issuer (x) to defease any Indebtedness or (y) in a collateral or escrow account or similar arrangement to prefund the payment of interest on any indebtedness; |
(2) |
time deposit accounts, certificates of deposit and money market deposits maturing within 180 days of the date of acquisition thereof issued by a bank or trust company which is organized under the laws of the United States of America, any state thereof or any foreign country recognized by the United States of America, and which bank or trust company has capital, surplus and undivided profits aggregating in excess of $100 million (or the foreign currency equivalent thereof) and has outstanding debt which is rated A (or such similar equivalent rating) or higher by at least one nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act) or any money market fund sponsored by a registered broker dealer or mutual fund distributor; |
(3) |
repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clause (1) above entered into with a bank or trust company meeting the qualifications described in clause (2) above; |
(4) |
commercial paper, maturing not more than one year after the date of acquisition, issued by a corporation (other than an Affiliate of the Issuer) organized and in existence under the laws of the United States of America, any state thereof or any foreign country recognized by the United States of America with a rating at the time as of which any investment therein is made of P-1 (or higher) according to Moodys or A-1 (or higher) according to S&P; |
(5) |
securities with maturities of six months or less from the date of acquisition issued or fully and unconditionally guaranteed by any state, commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof, and rated at least A by S&P or Moodys; and |
(6) |
any mutual fund that has at least 95% of its assets continuously invested in investments of the types described in clauses (1) through (5) above. |
(1) |
the excess of cost over fair market value of assets or businesses acquired; |
(2) |
any revaluation or other write-up in book value of assets subsequent to the last day of the fiscal quarter of the Issuer immediately preceding such date of determination as a result of a change in the method of valuation in accordance with GAAP; |
(3) |
unamortized debt discount and expenses and other unamortized deferred charges, goodwill, patents, trademarks, service marks, trade names, copyrights, licenses, organization or developmental expenses and other intangible items; |
(4) |
minority interests in consolidated Subsidiaries held by Persons other than the Issuer or any Restricted Subsidiary; |
(5) |
treasury stock; |
(6) |
cash or securities set aside and held in a sinking or other analogous fund established for the purpose of redemption or other retirement of Capital Stock; and |
148
(7) |
Investments in and assets of Unrestricted Subsidiaries. |
149
DESCRIPTION OF [D: OTHER] INDEBTEDNESS
Description of Proposed New Senior Secured Credit Facility
|
declare dividends or make other distributions on capital stock; |
|
redeem and repurchase capital stock; |
150
|
prepay, redeem and repurchase debt (other than loans under the senior secured credit facilities); |
|
incur liens and sale-leaseback transactions; |
|
make loans and investments; |
|
incur debt and enter into hedging arrangements; |
|
engage in mergers and other business combinations, recapitalizations, acquisitions and asset sales; |
|
engage in transactions with affiliates; |
|
alter the business that we conduct; and |
|
amend debt and other material agreements. |
[E:
Description of Proposed Senior Notes due 2012
151
[E:
SHARES ELIGIBLE FOR FUTURE SALE
Lock-up Agreements
|
the sale of shares of common stock to the underwriters pursuant to this offering; |
|
the issuance by us of shares of common stock pursuant to the exercise of an option or similar security; |
|
transactions by any person other than us relating to shares of our common stock acquired in open market transactions after completion of this offering; |
|
transfers of shares of common stock as a bona fide gift or as a result of testate, intestate succession or bona fide estate planning; transfers of shares to a trust, partnership, limited liability company or other entity, all of the beneficial ownership interests of which are held by the transferor; or distributions of shares to limited partners or shareholders of the transferor, in each case provided that the transferee or distributee agrees to be bound by the restrictions described in the previous paragraph; |
152
|
the issuance of any shares in connection with the Triad acquisition; or |
|
the transfer of shares to us solely to satisfy tax withholding obligations incurred as a result of the vesting of restricted stock. |
Rule 144
|
1% of the number of shares of our common stock then outstanding, which will equal approximately 165,000 shares immediately after this offering (assuming completion of the Triad acquisition); or |
|
the average weekly trading volume of the common stock on the Nasdaq National Market System during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale. |
Sales under Rule 144 are also subject to manner of sale provisions and notice requirements and to the availability of current public information about us.
Rule 144(k)
Rule 701
Registration Rights
153
154
[E:
UNDERWRITING
Name |
Number of Shares |
|||||
---|---|---|---|---|---|---|
Morgan
Stanley & Co. Incorporated |
||||||
Bear, Stearns
& Co. Inc. |
||||||
Raymond James
& Associates, Inc. |
||||||
Wachovia
Capital Markets, LLC |
||||||
Total |
3,500,000 |
Per Share |
Total |
||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
No Exercise |
Full Exercise |
No Exercise |
Full Exercise |
||||||||||||||||
Underwriting
discounts and commissions paid by us |
$ | $ | $ | $ | |||||||||||||||
Underwriting
discounts and commissions paid by the selling shareholder |
$ | $ | $ | $ |
155
|
offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of directly or indirectly, any shares of common stock or any securities convertible into or exercisable or exchangeable for common stock, referred to as common stock rights; or |
|
enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the common stock, |
whether any transaction described above is to be settled by delivery of common stock or such other securities, in cash or otherwise.
|
the sale of shares of common stock to the underwriters pursuant to this offering; |
|
the issuance by us of shares of common stock pursuant to the exercise of an option or similar security; |
|
transactions by any person other than us relating to shares of our common stock acquired in open market transactions after completion of this offering; |
|
transfers of shares of common stock as a bona fide gift or as a result of testate, intestate succession or bona fide estate planning; transfers of shares to a trust, partnership, limited liability company or other entity, all of the beneficial ownership interests of which are held by the transferor; or distributions of shares to limited partners or shareholders of the transferor, in each case provided that the transferee or distributee agrees to be bound by the restrictions described in the previous paragraph; |
|
the issuance of any shares in connection with the Triad acquisition; or |
|
the transfer of shares to us solely to satisfy tax withholding obligations incurred as a result of the vesting of restricted stock. |
156
157
[D:
UNDERWRITING
Name |
Principal Amount |
|||||
---|---|---|---|---|---|---|
Morgan
Stanley & Co. Incorporated |
$ | |||||
PNC Capital
Markets, Inc. |
||||||
Total |
$ | 150,000,000 |
Underwriting Discounts and Commissions Paid by Us |
||||||
---|---|---|---|---|---|---|
Per $1,000
principal amount of notes |
$ | |||||
Total |
$ |
158
159
LEGAL MATTERS
EXPERTS
WHERE YOU CAN FIND MORE INFORMATION
160
INDEX TO OUR CONSOLIDATED FINANCIAL STATEMENTS
Page
|
||||||
---|---|---|---|---|---|---|
Audited
Financial Statements |
||||||
Report of
Independent Registered Public Accounting Firm |
F-2 | |||||
Consolidated
Balance Sheets as of December 31, 2004 (Successor) and December 31, 2003 (Predecessor) |
F-3 | |||||
Consolidated
Statements of Operations for the eight months ended December 31, 2004 (Successor), the four months ended April 30, 2004 (Predecessor) and the years
ended December 31, 2003 (Predecessor) and 2002 (Predecessor) |
F-5 | |||||
Consolidated
Statements of Changes in Shareholders Equity (Deficit) and Comprehensive Income (Loss) for the eight months ended December 31, 2004 (Successor),
the four months ended April 30, 2004 (Predecessor) and the years ended December 31, 2003 (Predecessor) and 2002 (Predecessor) |
F-6 | |||||
Consolidated
Statements of Cash Flows for the eight months ended December 31, 2004 (Successor), the four months ended April 30, 2004 (Predecessor) and the years
ended December 31, 2003 (Predecessor) and 2002 (Predecessor) |
F-7 | |||||
Notes to
Consolidated Financial Statements |
F-8 | |||||
Unaudited
Financial Statements |
||||||
Condensed
Consolidated Balance Sheets as of March 31, 2005 and December 31, 2004 (Successor)
|
F-35 | |||||
Condensed
Consolidated Statements of Operations for the three months ended March 31, 2005 (Successor) and March 31, 2004
(Predecessor) |
F-37 | |||||
Condensed
Consolidated Statements of Changes in Shareholders
Equity (Deficit) and Comprehensive Income (Loss) for the three
months ended March 31, 2005 (Successor), eight months ended December 31, 2004 (Successor) and four months ended April 30, 2004
(Predecessor) |
F-38 | |||||
Condensed
Consolidated Statements of Cash Flows for the three months ended March 31, 2005 (Successor)
and March 31, 2004
(Predecessor) |
F-39 | |||||
Notes to
Condensed Consolidated Financial Statements |
F-40 |
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We have audited the accompanying consolidated balance sheets of James River Coal Company and subsidiaries as of December 31, 2004 (Successor Company) and 2003 (Predecessor Company), and the related consolidated statements of operations, changes in shareholders equity (deficit) and comprehensive income (loss), and cash flows for the eight months ended December 31, 2004 (Successor Company), the four months ended April 30, 2004, and the years ended December 31, 2003 and 2002 (Predecessor Company). These consolidated financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of James River Coal Company and subsidiaries as of December 31, 2004 (Successor Company) and 2003 (Predecessor Company), and the results of their operations and their cash flows for the eight months ended December 31, 2004 (Successor Company), the four months ended April 30, 2004, and the years ended December 31, 2003 and 2002 (Predecessor Company) in conformity with U.S. generally accepted accounting principles.
As described more fully in Notes 1 and 3 to the consolidated financial statements, the Company was reorganized under a plan of reorganization confirmed by the United States Bankruptcy Court for the Middle District of Tennessee, effective May 6, 2004. In connection with the Companys emergence from Chapter 11, all assets and liabilities were restated to their respective fair values in order to reflect the effects of fresh start accounting. As a result of the application of fresh start accounting, the consolidated financial statements of the Successor Company are presented on a different basis than those of the Predecessor Company and, therefore, are not comparable in all respects.
As discussed in Notes 1(f) and 9(d) to the consolidated financial statements, the Company changed its method of accounting for reclamation liabilities and its method of accounting for redeemable preferred stock in 2003.
/s/ KPMG LLP
Richmond, Virginia
March 25, 2005
F-2
JAMES RIVER COAL COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE
SHEETS
(in thousands, except share data) |
Successor |
Predecessor |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
December 31, |
2004 |
2003 |
|||||||||||
Assets |
|||||||||||||
Current
assets: |
|||||||||||||
Cash |
$ | 3,879 | $ | 4,890 | |||||||||
Receivables: |
|||||||||||||
Trade |
23,871 | 17,631 | |||||||||||
Other |
7,362 | 4,324 | |||||||||||
Total
receivables |
31,233 | 21,955 | |||||||||||
Inventories: |
|||||||||||||
Coal |
2,305 | 3,278 | |||||||||||
Materials and
supplies |
4,084 | 4,624 | |||||||||||
Total
inventories |
6,389 | 7,902 | |||||||||||
Prepaid
royalties |
4,358 | 8,417 | |||||||||||
Other current
assets |
6,337 | 4,742 | |||||||||||
Total current
assets |
52,196 | 47,906 | |||||||||||
Property,
plant, and equipment, at cost: |
|||||||||||||
Land |
2,698 | 6,666 | |||||||||||
Mineral
rights |
162,577 | 216,336 | |||||||||||
Buildings,
machinery and equipment |
106,105 | 230,346 | |||||||||||
Mine
development costs |
5,729 | 11,208 | |||||||||||
Construction-in-progress |
231 | 997 | |||||||||||
Total
property, plant, and equipment |
277,340 | 465,553 | |||||||||||
Less
accumulated depreciation, depletion, and amortization |
21,765 | 208,397 | |||||||||||
Property,
plant and equipment, net |
255,575 | 257,156 | |||||||||||
Restricted
cash (note 1(c)) |
8,404 | 8,321 | |||||||||||
Other
assets |
11,651 | 4,906 | |||||||||||
Total
assets |
$ | 327,826 | $ | 318,289 |
See accompanying notes to consolidated financial statements.
F-3
JAMES RIVER COAL COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE
SHEETS
(in thousands, except share data) |
Successor |
Predecessor |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
December 31, |
2004 |
2003 |
|||||||||||
Liabilities and Shareholders Equity (Deficit) |
|||||||||||||
Current
liabilities: |
|||||||||||||
Current
maturities of long-term debt (note 5) |
$ | 2,700 | $ | | |||||||||
Current
installments of obligations under capital leases |
388 | 613 | |||||||||||
Accounts
payable |
15,116 | 18,566 | |||||||||||
Accrued
salaries, wages, and employee benefits |
2,093 | 2,275 | |||||||||||
Workers
compensation benefits |
12,090 | 9,000 | |||||||||||
Black lung
benefits |
2,600 | 2,200 | |||||||||||
Accrued
taxes |
3,530 | 3,449 | |||||||||||
Other current
liabilities |
3,633 | 2,794 | |||||||||||
Total current
liabilities |
42,150 | 38,897 | |||||||||||
Long-term
debt, less current maturities (note 5) |
92,300 | | |||||||||||
Other
liabilities: |
|||||||||||||
Noncurrent
portion of workers compensation benefits |
38,223 | 41,782 | |||||||||||
Noncurrent
portion of black lung benefits |
23,341 | 11,508 | |||||||||||
Pension
obligations |
15,744 | 14,315 | |||||||||||
Asset
retirement obligations |
14,939 | 13,674 | |||||||||||
Obligations
under capital leases, excluding current installments |
637 | 1,457 | |||||||||||
Deferred
income taxes |
34,615 | | |||||||||||
Other |
292 | 662 | |||||||||||
Total other
liabilities |
127,791 | 83,398 | |||||||||||
Liabilities
subject to compromise |
| 319,595 | |||||||||||
Total
liabilities |
262,241 | 441,890 | |||||||||||
Shareholders equity (deficit): |
|||||||||||||
Preferred
Stock, $1.00 par value. Authorized 10,000,000 shares |
| | |||||||||||
Common stock,
$.01 par value. Authorized 100,000,000 shares; (40,000shares as of December 31, 2003); issued and outstanding 14,715,694shares (16,890 shares as of
December 31, 2003) |
147 | | |||||||||||
Paid-in-capital |
71,784 | 226 | |||||||||||
Deferred
stock-based compensation |
(7,540 | ) | | ||||||||||
Retained
earnings (accumulated deficit) |
1,151 | (107,989 | ) | ||||||||||
Subscribed
shares |
| (821 | ) | ||||||||||
Accumulated
other comprehensive income (loss) |
43 | (15,017 | ) | ||||||||||
Total
shareholders equity (deficit) |
65,585 | (123,601 | ) | ||||||||||
Commitments
and contingencies (note 14) |
|||||||||||||
Total
liabilities and shareholders equity (deficit) |
$ | 327,826 | $ | 318,289 |
See accompanying notes to consolidated financial statements.
F-4
JAMES RIVER COAL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
OPERATIONS
Successor |
Predecessor |
|||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in thousands, except per share
data) |
Eight Months Ended 12/31/04 |
Four Months Ended 04/30/04 |
Year Ended 12/31/2003 |
Year Ended 12/31/2002 |
||||||||||||||||||
Revenues |
$ | 231,698 | $ | 113,949 | $ | 304,052 | $ | 397,599 | ||||||||||||||
Cost of
sales: |
||||||||||||||||||||||
Cost of coal
sold |
190,926 | 89,294 | 278,939 | 344,222 | ||||||||||||||||||
Depreciation,
depletion, and amortization |
21,765 | 12,314 | 40,427 | 46,393 | ||||||||||||||||||
Total cost of
sales |
212,691 | 101,608 | 319,366 | 390,615 | ||||||||||||||||||
Gross profit
(loss) |
19,007 | 12,341 | (15,314 | ) | 6,984 | |||||||||||||||||
Selling,
general, and administrative expenses |
11,412 | 5,023 | 19,835 | 19,994 | ||||||||||||||||||
Other
operating expenses (note 15) |
| | | 26,554 | ||||||||||||||||||
Total
operating income (loss) |
7,595 | 7,318 | (35,149 | ) | (39,564 | ) | ||||||||||||||||
Interest
expense |
5,733 | 567 | 18,536 | 29,883 | ||||||||||||||||||
Interest
income |
(72 | ) | | (144 | ) | (1,003 | ) | |||||||||||||||
Miscellaneous
income, net |
(833 | ) | (331 | ) | (1,519 | ) | (1,222 | ) | ||||||||||||||
Total other
expense, net |
4,828 | 236 | 16,873 | 27,658 | ||||||||||||||||||
Income (loss)
before reorganization items and income tax expense |
2,767 | 7,082 | (52,022 | ) | (67,222 | ) | ||||||||||||||||
Reorganization items, net (note 16) |
| (100,907 | ) | 7,630 | | |||||||||||||||||
Income (loss)
before income taxes |
2,767 | 107,989 | (59,652 | ) | (67,222 | ) | ||||||||||||||||
Income tax
expense (benefit) |
791 | | (2,891 | ) | (8,125 | ) | ||||||||||||||||
Net income
(loss) before cumulative effect of accounting change |
1,976 | 107,989 | (56,761 | ) | (59,097 | ) | ||||||||||||||||
Cumulative
effect of accounting change (note 17) |
| | (3,045 | ) | | |||||||||||||||||
Net income
(loss) |
1,976 | 107,989 | (59,806 | ) | (59,097 | ) | ||||||||||||||||
Preferred
dividends (note 9(d)) |
| | (340 | ) | (680 | ) | ||||||||||||||||
Decrease in
redemption amount of redeemable common stock (note 9(e)) |
| | | 8,798 | ||||||||||||||||||
Net income
(loss) attributable to common shareholders |
$ | 1,976 | $ | 107,989 | $ | (60,146 | ) | $ | (50,979 | ) | ||||||||||||
Earnings
(loss) per common share (note 18) |
||||||||||||||||||||||
Basic
earnings (loss) per common share |
||||||||||||||||||||||
Income (loss)
before cumulative effect of accounting change |
$ | 0.14 | $ | 6,393.67 | $ | (3,380.78 | ) | $ | (3,018.31 | ) | ||||||||||||
Cumulative
effect of accounting change |
| | (180.28 | ) | | |||||||||||||||||
Net income
(loss) |
$ | 0.14 | $ | 6,393.67 | $ | (3,561.06 | ) | $ | (3,018.31 | ) | ||||||||||||
Shares used
to calculate basic earnings (loss) per share |
13,800 | 17 | 17 | 17 | ||||||||||||||||||
Diluted
earnings (loss) per common share |
||||||||||||||||||||||
Income (loss)
before cumulative effect of accounting change |
$ | 0.14 | $ | 6,393.67 | $ | (3,380.78 | ) | $ | (3,018.31 | ) | ||||||||||||
Cumulative
effect of accounting change |
| | (180.28 | ) | | |||||||||||||||||
Net income
(loss) |
$ | 0.14 | $ | 6,393.67 | $ | (3,561.06 | ) | $ | (3,018.31 | ) | ||||||||||||
Shares used
to calculate dilutive earnings (loss) per share |
14,623 | 17 | 17 | 17 |
See accompanying notes to consolidated financial statements.
F-5
JAMES RIVER COAL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
CHANGES IN SHAREHOLDERS EQUITY
(in thousands) |
Common stock |
Paid-in- capital |
Deferred stock-based Compensation |
Retained earnings (accumulated deficit) |
Subscribed shares |
Accumulated other comprehensive income (loss) |
Total |
|||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Predecessor
Company |
||||||||||||||||||||||||||||||
Balances,
December 31, 2001 |
$ | | 226 | | 3,137 | (1,403 | ) | (10,995 | ) | (9,035 | ) | |||||||||||||||||||
Net
loss |
| | | (59,097 | ) | | | (59,097 | ) | |||||||||||||||||||||
Minimum pension
liability adjustment |
| | | | | (7,546 | ) | (7,546 | ) | |||||||||||||||||||||
Change in fair
value of cash flow hedges |
| | | | | (1,663 | ) | (1,663 | ) | |||||||||||||||||||||
Comprehensive
loss |
| | | | | | (68,306 | ) | ||||||||||||||||||||||
Payments on
subscribed shares |
| | | | 497 | | 497 | |||||||||||||||||||||||
Preferred
dividends |
| | | (680 | ) | | | (680 | ) | |||||||||||||||||||||
Change in
redemption amount of redeemable common stock |
| | | 8,797 | | | 8,797 | |||||||||||||||||||||||
Balances,
December 31, 2002 |
| 226 | | (47,843 | ) | (906 | ) | (20,204 | ) | (68,727 | ) | |||||||||||||||||||
Net
loss |
| | | (59,806 | ) | | | (59,806 | ) | |||||||||||||||||||||
Minimum pension
liability adjustment |
(1,194 | ) | (1,194 | ) | ||||||||||||||||||||||||||
Reclassification to interest expense, net of taxes of $2,890 |
| | | | | 6,381 | 6,381 | |||||||||||||||||||||||
Comprehensive
loss |
(54,619 | ) | ||||||||||||||||||||||||||||
Forgiveness of
receivable for subscribed shares |
| | | | 85 | | 85 | |||||||||||||||||||||||
Preferred
dividends |
| | | (340 | ) | | | (340 | ) | |||||||||||||||||||||
Balances,
December 31, 2003 |
| 226 | | (107,989 | ) | (821 | ) | (15,017 | ) | (123,601 | ) | |||||||||||||||||||
Net
income |
| | | 107,989 | | | 107,989 | |||||||||||||||||||||||
Minimum pension
liability adjustment |
| | | | | (692 | ) | (692 | ) | |||||||||||||||||||||
Comprehensive
income |
107,297 | |||||||||||||||||||||||||||||
Application of
fresh start accounting (note 3) |
||||||||||||||||||||||||||||||
Cancellation
of Predecessor common stock |
| (226 | ) | | | | | (226 | ) | |||||||||||||||||||||
Elimination
of Predecessor accumulated other comprehensive loss and subscribed shares |
| | | | 821 | 15,709 | 16,530 | |||||||||||||||||||||||
Balances, April
30, 2004 |
| | | | | | | |||||||||||||||||||||||
Successor
Company |
||||||||||||||||||||||||||||||
Issuance of
Successor common stock |
138 | 63,153 | | | | | 63,291 | |||||||||||||||||||||||
Net
income |
| | | 1,976 | | | 1,976 | |||||||||||||||||||||||
Unrealized gain
on marketable securities, net |
| | | | | 43 | 43 | |||||||||||||||||||||||
Comprehensive
Income |
2,019 | |||||||||||||||||||||||||||||
Deferred
compensation related to restricted stock awards |
9 | 8,631 | (8,640 | ) | | | | |||||||||||||||||||||||
Cost to
register common stock |
| | | (825 | ) | | | (825 | ) | |||||||||||||||||||||
Amortization of
deferred stock-based compensation |
| | 1,100 | | | | 1,100 | |||||||||||||||||||||||
Balances,
December 31, 2004 |
$ | 147 | 71,784 | (7,540 | ) | 1,151 | | 43 | 65,585 |
See accompanying notes to consolidated financial statements.
F-6
JAMES RIVER COAL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
CASH FLOWS
Successor |
Predecessor |
|||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in thousands, except share data) |
Eight Months Ended 12/31/04 |
Four Months Ended 04/30/04 |
Year Ended 12/31/2003 |
Year Ended 12/31/2002 |
||||||||||||||||||
Cash flows from
operating activities: |
||||||||||||||||||||||
Net income
(loss) |
$ | 1,976 | 107,989 | (59,806 | ) | (59,097 | ) | |||||||||||||||
Adjustments
to reconcile net income (loss) to net cash provided by operating activities |
||||||||||||||||||||||
Depreciation,
depletion, and amortization of property, plant, and equipment |
21,765 | 12,314 | 40,692 | 46,664 | ||||||||||||||||||
Accretion of
asset retirement obligations |
807 | 397 | 1,128 | | ||||||||||||||||||
Amortization
of debt issue costs |
275 | | | 5,750 | ||||||||||||||||||
Amortization
of deferred stock-based compensation |
1,100 | | | | ||||||||||||||||||
Deferred
income tax expense (benefit) |
766 | | (2,891 | ) | (3,146 | ) | ||||||||||||||||
Gain (loss)
on sale or disposal of property, plant, and equipment |
(36 | ) | 19 | (23 | ) | 18,881 | ||||||||||||||||
Gain on sale
of investment |
| | (999 | ) | | |||||||||||||||||
Provision for
severance costs |
| | | 2,879 | ||||||||||||||||||
Fresh start
accounting adjustment |
| (111,533 | ) | | | |||||||||||||||||
Non-cash
reorganization items |
| 10,010 | 796 | | ||||||||||||||||||
Cumulative
effect of change in accounting principle |
| | 3,045 | | ||||||||||||||||||
Realized loss
on termination of interest rate swap agreement |
| | 9,272 | | ||||||||||||||||||
Unrealized
gain on interest rate swap |
| | (949 | ) | 111 | |||||||||||||||||
Changes in
operating assets and liabilities: |
||||||||||||||||||||||
Receivables |
4,604 | (12,882 | ) | 4,193 | 7,019 | |||||||||||||||||
Inventories |
6,619 | (4,028 | ) | (233 | ) | 2,226 | ||||||||||||||||
Prepaid
royalties and other current assets |
3,093 | (1,236 | ) | 991 | 1,691 | |||||||||||||||||
Other
assets |
(7,001 | ) | 132 | 661 | (656 | ) | ||||||||||||||||
Accounts
payable |
(11,177 | ) | (2,921 | ) | 15,016 | 2,684 | ||||||||||||||||
Accrued
salaries, wages, and employee benefits |
(2,408 | ) | 1,429 | (818 | ) | (1,169 | ) | |||||||||||||||
Accrued
taxes |
(58 | ) | 139 | (651 | ) | (1,196 | ) | |||||||||||||||
Other current
liabilities |
(404 | ) | 1,535 | 6,574 | 3,880 | |||||||||||||||||
Workers
compensation benefits |
(1,886 | ) | 1,417 | 5,770 | 2,574 | |||||||||||||||||
Black lung
benefits |
(830 | ) | (547 | ) | (630 | ) | (347 | ) | ||||||||||||||
Pension
obligations |
(1,887 | ) | (609 | ) | 2,906 | 451 | ||||||||||||||||
Asset
retirement obligation |
(477 | ) | (108 | ) | (978 | ) | (164 | ) | ||||||||||||||
Other
liabilities |
(743 | ) | (4 | ) | (33 | ) | (136 | ) | ||||||||||||||
Net cash
provided by operating activities |
14,098 | 1,513 | 23,033 | 28,899 | ||||||||||||||||||
Cash flows
from investing activities: |
||||||||||||||||||||||
Additions to
property, plant, and equipment |
(25,811 | ) | (9,521 | ) | (20,116 | ) | (22,925 | ) | ||||||||||||||
Proceeds from
sale of property and equipment |
4,123 | 86 | 179 | | ||||||||||||||||||
Proceeds from
sale of investment |
| | 2,000 | | ||||||||||||||||||
(Increase)
decrease in restricted cash |
(56 | ) | (28 | ) | 2,277 | (10,597 | ) | |||||||||||||||
Net cash used
in investing activities |
(21,744 | ) | (9,463 | ) | (15,660 | ) | (33,522 | ) | ||||||||||||||
Cash flows
from financing activities: |
||||||||||||||||||||||
Proceeds from
issuance of long-term debt |
20,000 | | | 3,373 | ||||||||||||||||||
Proceeds from
(repayments of) short-term borrowings |
(6,400 | ) | 6,400 | (1,940 | ) | (74 | ) | |||||||||||||||
Common stock
registration costs |
(825 | ) | | | ||||||||||||||||||
Principal
payments under capital lease obligations |
(370 | ) | (165 | ) | (549 | ) | (449 | ) | ||||||||||||||
Debt issuance
costs |
(2,181 | ) | (1,874 | ) | | | ||||||||||||||||
Proceeds from
issuance of common stock and payments on subscribed shares |
| | | 497 | ||||||||||||||||||
Net cash
provided by (used in) financing activities |
10,224 | 4,361 | (2,489 | ) | 3,347 | |||||||||||||||||
Increase in
cash |
2,578 | (3,589 | ) | 4,884 | (1,276 | ) | ||||||||||||||||
Cash at
beginning of period |
1,301 | 4,890 | 6 | 1,282 | ||||||||||||||||||
Cash at end
of period |
$ | 3,879 | 1,301 | 4,890 | 6 |
See accompanying notes to consolidated financial statements.
F-7
JAMES RIVER COAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(In Thousands, Except Share Data)
(1) | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION |
(a) | Description of Business and Principles of Consolidation |
(b) | Bankruptcy and Restructuring |
F-8
JAMES RIVER COAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(In Thousands, Except Share Data)
(c) | Restricted Cash |
(d) | Trade Receivables |
(e) | Inventories |
(f) | Reclamation Costs |
F-9
JAMES RIVER COAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(In Thousands, Except Share Data)
12/31/2004 |
12/31/2003 |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|
Amount
included in other current liabilities |
$ | 1,050 | $ | 1,405 | ||||||
Long term
asset retirement obligations |
13,674 | 6,319 | ||||||||
Reclamation
liability at beginning of year |
14,724 | 7,724 | ||||||||
Cumulative
effect adjustment |
| 6,849 | ||||||||
Liabilities
incurred in current period (Predecessor Company) |
636 | | ||||||||
Accretion
expense |
||||||||||
Predecessor
Company |
398 | 1,128 | ||||||||
Successor
Company |
806 | | ||||||||
Liabilities
settled in current period |
||||||||||
Predecessor
Company |
(131 | ) | (977 | ) | ||||||
Successor
Company |
(454 | ) | | |||||||
Reclamation
liability at end of year |
15,979 | 14,724 | ||||||||
Less amount
included in other current liabilities |
(1,040 | ) | (1,050 | ) | ||||||
Total
noncurrent liability |
$ | 14,939 | $ | 13,674 |
(g) | Property, Plant, and Equipment |
(h) | Impairment of Long-Lived Assets |
(i) | Mine Development Costs |
F-10
JAMES RIVER COAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(In Thousands, Except Share Data)
(j) | Prepaid Royalties |
(k) | Revenue Recognition |
(l) | Income Taxes |
(m) | Accumulated Comprehensive Gain (Loss) |
(n) | Derivative Financial Instruments |
F-11
JAMES RIVER COAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(In Thousands, Except Share Data)
(o) | Workers Compensation |
(p) | Black Lung Benefits |
(q) | Health Claims |
F-12
JAMES RIVER COAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(In Thousands, Except Share Data)
(r) | Stock Plans |
Eight Months December 31, 2004 |
||||||
---|---|---|---|---|---|---|
Net Income,
as reported |
$ | 1,976 | ||||
Add: Net
stock-based employee compensation expense recorded for restricted and performance based stock grants |
785 | |||||
Deduct: Net
stock-based employee compensation expense for restricted and performance based stock determined under Black-Scholes option pricing
model |
(479 | ) | ||||
Pro forma net
income |
$ | 2,282 | ||||
Income per
share: |
||||||
Basicas
reported |
$ | 0.14 | ||||
Basicpro forma |
$ | 0.17 | ||||
Dilutedas reported |
$ | 0.14 | ||||
Dilutedpro forma |
$ | 0.16 |
(s) | Use of Estimates |
F-13
JAMES RIVER COAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(In Thousands, Except Share Data)
(3) | FRESH START ACCOUNTING |
Estimated
enterprise value of the reorganized company |
$ | 155,000 | ||||
Borrowings under
credit facility |
(6,400 | ) | ||||
Capital leases
assumed |
(1,396 | ) | ||||
Cash balance
excluded from enterprise value |
1,301 | |||||
Administrative
claims payable excluded from enterprise value |
(10,214 | ) | ||||
138,291 | ||||||
Less: new
secured debt issued to extinguish prepetition debt |
75,000 | |||||
Fair value of
common shares issued to extinguish prepetition debt |
$ | 63,291 |
Fresh Start Adjustments |
|||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Assets |
Predecessor Company 4/30/04 |
Debt Extinguishment |
Reorganization Adjustments |
Successor Company 4/30/04 |
|||||||||||||||
Cash |
$ | 1,301 | | | 1,301 | ||||||||||||||
Receivables |
35,838 | | | 35,838 | |||||||||||||||
Inventories |
11,930 | | 1,079 | (2) | 13,009 | ||||||||||||||
Prepaid
royalties |
9,932 | | (362 | )(2) | 9,570 | ||||||||||||||
Other current
assets |
4,463 | | (347 | )(2) | 4,116 | ||||||||||||||
Total
current assets |
63,464 | | 370 | 63,834 | |||||||||||||||
Land and
mineral rights |
223,004 | | (57,567) (2 | ) | 165,437 | ||||||||||||||
Buildings,
machinery, and equipment |
236,901 | | (155,050) (2 | ) | 81,851 | ||||||||||||||
Mine
development costs |
12,984 | | (12,984) (2 | ) | | ||||||||||||||
Construction-in-progress |
974 | | | 974 | |||||||||||||||
473,863 | | (225,601 | ) | 248,262 | |||||||||||||||
Less
accumulated depreciation, depletion, and amortization |
219,604 | | (219,604) | (2) | | ||||||||||||||
Net
property, plant, and equipment |
254,259 | | (5,997 | ) | 248,262 | ||||||||||||||
Restricted
cash |
8,348 | | | 8,348 | |||||||||||||||
Other
long-term assets |
6,518 | (3,110) (1 | ) | (734) (2 | ) | 2,674 | |||||||||||||
Total
assets |
$ | 332,589 | (3,110 | ) | (6,361 | ) | 323,118 |
F-14
JAMES RIVER COAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(In Thousands, Except Share Data)
Fresh Start Adjustments |
|||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Liabilities and Shareholders Equity (Deficit) |
Predecessor Company 4/30/04 |
Debt Extinguishment |
Reorganization Adjustments |
Successor Company 4/30/04 |
|||||||||||||||
Borrowings
under DIP credit agreement |
$ | 6,400 | | | 6,400 | ||||||||||||||
Current
installments of obligations under capital leases |
749 | | (272 | )(3) | 477 | ||||||||||||||
Accounts
payable |
26,293 | | | 26,293 | |||||||||||||||
Accrued
salaries, wages and employee benefits |
4,501 | | | 4,501 | |||||||||||||||
Workers
compensation benefits |
9,500 | | | 9,500 | |||||||||||||||
Black lung
benefits |
2,500 | | | 2,500 | |||||||||||||||
Accrued
taxes |
3,588 | | | 3,588 | |||||||||||||||
Other current
liabilities |
4,037 | | | 4,037 | |||||||||||||||
Total
current liabilities |
57,568 | | (272 | ) | 57,296 | ||||||||||||||
Long term
debt |
| 75,000 | (1) | | 75,000 | ||||||||||||||
Noncurrent
portion of workers compensation benefits |
42,699 | | | 42,699 | |||||||||||||||
Noncurrent
portion of black lung benefits |
10,661 | | 13,610 | (4) | 24,271 | ||||||||||||||
Pension
obligations |
14,267 | | 3,363 | (5) | 17,630 | ||||||||||||||
Asset
retirement obligations |
13,963 | | | 13,963 | |||||||||||||||
Obligations
under capital leases, excluding current installments |
1,159 | | (240 | )(3) | 919 | ||||||||||||||
Deferred
income taxes |
| | 27,391 | (6) | 27,391 | ||||||||||||||
Other long
term liabilities |
658 | | | 658 | |||||||||||||||
Total
other liabilities |
83,407 | | 44,124 | 127,531 | |||||||||||||||
Liabilities
subject to compromise |
319,451 | (319,451 | )(1) | | | ||||||||||||||
Total
liabilities |
460,426 | (244,451 | ) | 43,852 | 259,827 | ||||||||||||||
Common
stock |
| 138 | (1) | | 138 | ||||||||||||||
Paid-in-capital |
226 | 63,153 | (1) | (226 | )(7) | 63,153 | |||||||||||||
Retained
earnings (accumulated deficit) |
(111,533 | ) | 178,050 | (1) | (66,517 | )(7) | | ||||||||||||
Subscribed
shares |
(821 | ) | | 821 | (7) | | |||||||||||||
Accumulated
other comprehensive income (loss) |
(15,709 | ) | | 15,709 | (7) | | |||||||||||||
Total
shareholders equity (deficit) |
(127,837 | ) | 241,341 | (50,213 | ) | 63,291 | |||||||||||||
Total
liabilities and shareholders equity |
$ | 332,589 | (3,110 | ) | (6,361 | ) | 323,118 |
F-15
JAMES RIVER COAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(In Thousands, Except Share Data)
Extinguishment of Debt
(1) | Liabilities subject to compromise that were extinguished in bankruptcy consist of: |
Pre-petition
bank loan agreement |
$ | 207,807 | ||||
Pre-petition
senior note |
37,953 | |||||
Accrued and
unpaid interest |
12,234 | |||||
Terminated
interest rate swap |
8,434 | |||||
Total
secured |
266,428 | |||||
Promissory
notes |
5,176 | |||||
Redeemable
preferred stock |
8,500 | |||||
Accounts payable
and other |
39,347 | |||||
Total
unsecured |
53,023 | |||||
Total
liabilities subject to compromise |
$ | 319,451 |
Liabilities
subject to compromise |
$ | 319,451 | ||||
Less: Assets of
rabbi trust transferred to creditors |
(3,110 | ) | ||||
Less: New
secured debt issued in exchange for pre-petition debt |
(75,000 | ) | ||||
Less: Fair value
of common shares issued |
(63,291 | ) | ||||
Gain on
extinguishment of pre-petition claims |
$ | 178,050 |
Reorganization Adjustments
(2) | In connection with the application of fresh start accounting, the Company made adjustments aggregating approximately $6,361 to record its identifiable assets at fair value as follows: |
Increase/(Decrease) |
||||||
---|---|---|---|---|---|---|
Coal
inventories |
$ | 1,079 | ||||
Prepaid
royalties |
(362 | ) | ||||
Other current
assets |
(347 | ) | ||||
Land and mineral
rights |
(57,567 | ) | ||||
Buildings,
machinery and equipment |
(155,050 | ) | ||||
Mine development
costs |
(12,984 | ) | ||||
Less accumulated
depreciation, depletion, and amortization |
219,604 | |||||
Other long-term
assets |
(734 | ) | ||||
Total fair value
adjustments to identifiable assets |
$ | (6,361 | ) |
(3) | Contractual terms of certain capital lease agreements were renegotiated during bankruptcy. Obligations under capital leases have been adjusted to reflect the revised terms. |
(4) | The liability for black lung benefits has been adjusted to reflect the total discounted benefit obligation. |
F-16
JAMES RIVER COAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(In Thousands, Except Share Data)
(5) | The pension liability has been adjusted to reflect the total discounted projected benefit obligation of the plan. |
(6) | Deferred income taxes have been adjusted to reflect differences in the book and tax basis of the revalued assets and liabilities of the Company after application of fresh start accounting. |
(7) | The equity of the predecessor company, including subscribed shares and accumulated other comprehensive loss, has been eliminated in fresh start accounting. |
(4) | OTHER CURRENT ASSETS |
2004 |
2003 |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|
Prepaid
insurance |
$ | 3,535 | $ | 3,107 | ||||||
Income tax
receivable |
2,575 | | ||||||||
Other |
227 | 1,635 | ||||||||
$ | 6,337 | $ | 4,742 |
(5) | LONG TERM DEBT, DIP FINANCING, AND INTEREST EXPENSE |
December 31, 2004 |
||||||
---|---|---|---|---|---|---|
Senior secured
credit facility: |
||||||
Term loan
component |
$ | 20,000 | ||||
Revolver
component |
| |||||
Term credit
facility |
75,000 | |||||
Total
long-term debt |
95,000 | |||||
Less amounts
classified as current |
2,700 | |||||
Total
long-term debt, less current maturities |
$ | 92,300 |
Year ended December 31: |
||||||
---|---|---|---|---|---|---|
2005 |
$ | 2,700 | ||||
2006 |
8,100 | |||||
2007 |
9,600 | |||||
2008 |
12,600 | |||||
2009 |
16,500 | |||||
Thereafter |
45,500 | |||||
Total
Debt |
$ | 95,000 |
(a) | Senior Secured Credit Facility |
F-17
JAMES RIVER COAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(In Thousands, Except Share Data)
Credit Facility is comprised of a $30,000 revolver component (the Revolver) and a $20,000 term component. The term loan was fully funded at closing. Borrowings under the Revolver bear interest at LIBOR +2.5% or the Base Rate (as defined in the credit agreement) +1.0%. Borrowings under the term component bear interest at LIBOR +5.25% or the Base Rate +3.85%. The Companys interest rate was 7.53% at December 31, 2004. The term of the Senior Secured Credit Facility is five years. Principal payments on the term component of $900 per quarter commence on April 1, 2005 and continue through April 1, 2009, with the remaining principal balance due on May 6, 2009. Interest is payable in arrears, on the first day of each month on Base Rate borrowings while interest on LIBOR Rate borrowings is due on the last day of the LIBOR interest period. Advances under the Senior Secured Credit Facility are secured by a first priority lien on substantially all of the Companys assets, and, except for the Term Credit Facility, the Company may not incur additional debt on the assets securing the Revolver. Advances under the Revolver may not exceed a borrowing base calculation derived as a percentage of eligible assets less outstanding letters of credit. Based on the Companys eligible assets and letters of credit outstanding, the Company had no availability under the Revolver at December 31, 2004. The Senior Secured Credit Facility can be terminated with 90 days written notice by paying all outstanding principal and interest and making any prepayment premium payments due. The $30,000 Revolver has a prepayment premium of 2.5% of the total revolver commitment for the first year, declining to 2.0% for the second year, 1.5% for the third year and 0.5% for the fourth year. There is not a prepayment premium for the fifth year of the revolver component of the Senior Secured Credit Facility. The $20,000 term loan component has a prepayment premium of $200 (1.0%) if paid prior to April 30, 2007. There is no prepayment premium after April 30, 2007 for the term loan component. The Revolver has a commitment fee of .375% per annum on the unused portion reduced by outstanding letters of credit (note 14).
(b) | Term Credit Facility |
(c) | Debtor-In-Possession Financing |
F-18
JAMES RIVER COAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(In Thousands, Except Share Data)
(d) | Interest Expense and Other |
(e) | Prepetition Debt |
2003 |
||||||
---|---|---|---|---|---|---|
Bank Loan
Agreement, revolving component |
$ | 170,596 | ||||
Bank Loan
Agreement, term component |
37,211 | |||||
Senior Note,
interest at 12.61% |
37,953 | |||||
Promissory note,
interest at 5.32% |
4,664 | |||||
Promissory note,
interest at 5.82% |
512 | |||||
Total notes
payable and debt |
250,936 | |||||
Less amounts
classified as liabilities subject to compromise (note 6) |
250,936 | |||||
Total
long-term debt, less current maturities and debt in default |
$ | |
F-19
JAMES RIVER COAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(In Thousands, Except Share Data)
(6) | LIABILITIES SUBJECT TO COMPROMISE |
Prepetition Bank
Loan Agreement |
$ | 207,807 | ||||
Prepetition
Senior Note |
37,953 | |||||
Accrued and
unpaid interest |
12,234 | |||||
Terminated
interest rate swap |
8,434 | |||||
Total
secured |
266,428 | |||||
Promissory
notes |
5,176 | |||||
Redeemable
preferred stock |
8,500 | |||||
Accounts payable
and other |
39,491 | |||||
Total
unsecured |
53,167 | |||||
Total
liabilities subject to compromise |
$ | 319,595 |
(7) | WORKERS COMPENSATION BENEFITS |
2004 |
2003 |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|
Workers
compensation benefits |
$ | 50,313 | $ | 50,782 | ||||||
Less current
portion |
12,090 | 9,000 | ||||||||
Noncurrent
portion of workers compensation |
$ | 38,223 | $ | 41,782 |
F-20
JAMES RIVER COAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(In Thousands, Except Share Data)
(8) | PNEUMOCONIOSIS (BLACK LUNG) BENEFITS |
2004 |
2003 |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|
Black lung
benefits |
$ | 25,941 | $ | 13,708 | ||||||
Less current
portion |
2,600 | 2,200 | ||||||||
Noncurrent
portion of black lung benefits |
$ | 23,341 | $ | 11,508 |
2004 |
2003 |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|
Beginning of
the year black lung obligation |
$ | 13,708 | $ | 22,528 | ||||||
Fresh Start
adjustment (note 3) |
13,610 | |||||||||
Service
cost: |
||||||||||
Predecessor
Company |
99 | 350 | ||||||||
Successor
Company |
221 | | ||||||||
Interest
cost: |
||||||||||
Predecessor
Company |
254 | 1,210 | ||||||||
Successor
Company |
566 | | ||||||||
Actuarial
loss: |
||||||||||
Predecessor
Company |
261 | 6,269 | ||||||||
Successor
Company |
2,789 | | ||||||||
Benefit
payments: |
||||||||||
Predecessor
Company |
(1,613 | ) | (3,039 | ) | ||||||
Successor
Company |
(1,165 | ) | | |||||||
End of year
accumulated black lung obligation |
28,730 | 27,318 | ||||||||
Unamortized
actuarial loss |
(2,789 | ) | (13,610 | ) | ||||||
Accrued black
lung obligation |
$ | 25,941 | $ | 13,708 |
F-21
JAMES RIVER COAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(In Thousands, Except Share Data)
(9) | EQUITY |
(a) | Preferred Stock and Shareholder Rights Agreement |
(b) | Equity Based Compensation |
Restricted Stock Awards
F-22
JAMES RIVER COAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(In Thousands, Except Share Data)
Performance Stock Awards
Stock Options Awards
Range of Exercise Price |
Outstanding Options |
Weighted Average Exercise Price |
Weighted Average Remaining Contractual Life (Years) |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
$10.80 |
150,000 | $ | 10.80 | 4.3 | ||||||||||
$15.00$17.50 |
120,000 | $ | 16.70 | 3.8 | ||||||||||
$10.80$17.50 |
270,000 | $ | 13.41 | 4.1 |
Performance Stock |
Restricted Stock |
Stock Options |
|||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Number of Shares |
Estimated Fair Value at Issue |
Number of Shares |
Estimated Fair Value at Issue |
Number of Shares |
Weighted Average Exercise Price |
||||||||||||||||||||||
Outstanding
at April 30, 2004 |
| $ | | | $ | | | $ | | ||||||||||||||||||
Granted |
100,000 | 4.59 | 839,000 | 4.59 | 270,000 | 13.41 | |||||||||||||||||||||
Vested/Exercised |
| | | | | | |||||||||||||||||||||
Canceled |
| | (23,300 | ) | 4.59 | | | ||||||||||||||||||||
December 31,
2004 |
100,000 | $ | 4.59 | 815,700 | $ | 4.59 | 270,000 | $ | 13.41 |
(c) | Stock Split |
(d) | Redeemable Preferred Stock (Predecessor Company) |
F-23
JAMES RIVER COAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(In Thousands, Except Share Data)
(e) | Redeemable Common Stock (Predecessor Company) |
(10) | INCOME TAXES |
Year Ended |
||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Eight Months Ended 12/31/2004 |
Four Months Ended 4/30/2004 |
2003 |
2002 |
|||||||||||||||||||
Current: |
||||||||||||||||||||||
Federal |
$ | 25 | | | (4,980 | ) | ||||||||||||||||
State |
| | | | ||||||||||||||||||
25 | | | (4,980 | ) | ||||||||||||||||||
Deferred: |
||||||||||||||||||||||
Federal |
692 | | (2,528 | ) | (3,017 | ) | ||||||||||||||||
State |
74 | | (363 | ) | (128 | ) | ||||||||||||||||
766 | | (2,891 | ) | (3,145 | ) | |||||||||||||||||
$ | 791 | | (2,891 | ) | (8,125 | ) |
F-24
JAMES RIVER COAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(In Thousands, Except Share Data)
Year Ended |
||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Eight Months Ended 12/31/2004 |
Four Months Ended 4/30/2004 |
2003 |
2002 |
|||||||||||||||||||
Federal income
taxes at statutory rates |
34.0 | % | 34.0 | % | (34.0 | )% | (34.0 | )% | ||||||||||||||
Percentage
depletion |
(42.0 | ) | (2.2 | ) | (0.5 | ) | (1.6 | ) | ||||||||||||||
Other permanent
items |
12.3 | | | | ||||||||||||||||||
Amortization of
coal properties not deductible |
| | 0.8 | 0.9 | ||||||||||||||||||
Non-Taxable gain
on debt discharge |
| (35.1 | ) | | | |||||||||||||||||
Non-deductible
reorganization costs |
| 3.3 | | | ||||||||||||||||||
Change in
valuation allowance |
23.8 | | 28.5 | 21.2 | ||||||||||||||||||
State income
taxes, net of federal |
1.8 | | (0.4 | ) | (0.1 | ) | ||||||||||||||||
Other,
net |
(1.3 | ) | | 1.0 | 1.5 | |||||||||||||||||
28.6 | % | % | (4.6 | )% | (12.1 | )% |
2004 |
2003 |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|
Deferred tax
assets: |
||||||||||
Accruals for
financial reporting purposes, principally workers compensation and black lung obligations |
$ | 46,279 | $ | 34,340 | ||||||
Alternative
minimum tax credit carryforwards |
5,450 | 5,425 | ||||||||
Net operating
loss carryforwards |
55,631 | 56,213 | ||||||||
Accumulated
comprehensive income |
26 | 7,162 | ||||||||
Total gross
deferred tax assets |
107,386 | 103,140 | ||||||||
Less
valuation allowance |
61,081 | 45,859 | ||||||||
Net deferred
tax asset |
46,305 | 57,281 | ||||||||
Deferred tax
liabilitiesproperty, plant and equipment, principally due to differences in depreciation, depletion and amortization |
80,920 | 57,281 | ||||||||
Net deferred
tax asset (liability) |
$ | (34,615 | ) | $ | |
F-25
JAMES RIVER COAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(In Thousands, Except Share Data)
(11) | EMPLOYEE BENEFIT PLANS |
(a) | Defined Benefit Pension Plan |
F-26
JAMES RIVER COAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(In Thousands, Except Share Data)
2004 |
2003 |
||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Amount |
Percentage |
Amount |
Percentage |
||||||||||||||||
Equity
securities |
$ | 24,859 | 67.7 | % | $ | 19,732 | 66.4 | % | |||||||||||
Debt
securities |
10,689 | 29.1 | % | 9,836 | 33.1 | % | |||||||||||||
Other
(includes cash and cash equivalents) |
1,195 | 3.2 | % | 149 | 0.5 | % | |||||||||||||
36,743 | 100.0 | % | 29,717 | 100.0 | % |
2004 |
2003 |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|
Change in
benefit obligation: |
||||||||||
Benefit
obligation at beginning of year |
$ | 48,522 | $ | 41,013 | ||||||
Service
cost |
1,834 | 1,764 | ||||||||
Interest
cost |
2,924 | 2,707 | ||||||||
Actuarial
loss |
7,207 | 4,985 | ||||||||
Benefits
paid |
(1,851 | ) | (1,947 | ) | ||||||
Benefit
obligation at end of year |
58,636 | 48,522 | ||||||||
Change in
plan assets: |
||||||||||
Fair value of
plan assets at beginning of year |
29,717 | 23,718 | ||||||||
Actual return
on plan assets |
3,590 | 4,333 | ||||||||
Employer
contributions |
5,287 | 3,613 | ||||||||
Benefits
paid |
(1,851 | ) | (1,947 | ) | ||||||
Fair value of
plan assets at end of year |
36,743 | 29,717 | ||||||||
Reconciliation of funded status: |
||||||||||
Funded
status |
(21,893 | ) | (18,805 | ) | ||||||
Unrecognized
actuarial loss |
6,149 | 23,348 | ||||||||
Unrecognized
prior service cost |
| 390 | ||||||||
Net amount
recognized |
(15,744 | ) | 4,933 | |||||||
Amounts
recognized in the consolidated balance sheets consist of: |
||||||||||
Accrued
benefit liability |
(15,744 | ) | (14,315 | ) | ||||||
Intangible
asset |
| 390 | ||||||||
Accumulated
other comprehensive loss |
| 18,858 | ||||||||
Net amount
recognized |
(15,744 | ) | 4,933 |
F-27
JAMES RIVER COAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(In Thousands, Except Share Data)
Successor |
Predecessor |
|||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Eight Months Ended 12/31/04 |
Four Months Ended 4/30/04 |
Year Ended 2003 |
Year Ended 2002 |
|||||||||||||||||||
Service
cost |
$ | 1,223 | 611 | 1,764 | 1,583 | |||||||||||||||||
Interest
cost |
1,959 | 965 | 2,707 | 2,444 | ||||||||||||||||||
Expected
return on plan assets |
(1,721 | ) | (811 | ) | (2,092 | ) | (2,122 | ) | ||||||||||||||
Amortization
of prior service cost |
| 130 | 843 | 843 | ||||||||||||||||||
Recognized
actuarial loss |
| 340 | 1,178 | 670 | ||||||||||||||||||
Net periodic
benefit cost |
$ | 1,461 | 1,235 | 4,400 | 3,418 | |||||||||||||||||
Benefits
Paid |
$ | 1,288 | 563 | 1,947 |
2004 |
2003 |
2002 |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Discount
rate |
5.50% |
6.00% |
6.75% |
|||||||||||
Expected return
on plan assets |
8.00% |
8.00% |
8.50% |
|||||||||||
Rate of
compensation increase |
4.00% |
4.00% |
4.00% |
|||||||||||
Measurement
date |
October 1,
2004 |
October 1,
2003 |
October 1,
2002 |
Year ended
December 31: |
||||||
2005 |
$ | 1,989 | ||||
2006 |
2,122 | |||||
2007 |
1,782 | |||||
2008 |
1,982 | |||||
2009 |
2,170 | |||||
Thereafter |
14,485 |
(b) | Savings and Profit Sharing Plan |
(c) | Nonqualified Retirement Plan |
F-28
JAMES RIVER COAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(In Thousands, Except Share Data)
2003 |
||||||
---|---|---|---|---|---|---|
Benefit
obligation at beginning of year |
$ | 4,244 | ||||
Service
cost |
14 | |||||
Interest
cost |
95 | |||||
Actuarial (gain)
loss |
2,423 | |||||
Benefits
paid |
(28 | ) | ||||
Benefits
forfeited |
(2,370 | ) | ||||
Benefit
obligation at end of year |
$ | 4,378 |
2003 |
2002 |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|
Service
cost |
$ | 14 | $ | 158 | ||||||
Interest
cost |
95 | 312 | ||||||||
Amortization
of prior service cost |
28 | 111 | ||||||||
Recognized
actuarial loss |
6 | 55 | ||||||||
Recognized
benefits forfeited |
(2,371 | ) | | |||||||
Effect of
plan termination |
4,388 | | ||||||||
Net periodic
benefit cost |
2,160 | 636 |
2003 |
2002 |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|
Discount
rate |
6.00 | % | 6.75 | % | ||||||
Rate of
compensation increase |
4.00 | % | 4.00 | % | ||||||
Measurement
date |
March 25,
2003 |
October 1,
2002 |
(12) | MAJOR CUSTOMERS |
F-29
JAMES RIVER COAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(In Thousands, Except Share Data)
(13) | LEASES |
2004 |
2003 |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|
Machinery and
equipment |
$ | 1,367 | 3,189 | |||||||
Less
accumulated amortization |
539 | 1,111 | ||||||||
$ | 828 | 2,078 |
Capital leases |
Operating leases |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|
Year ended
December 31: |
||||||||||
2005 |
$ | 459 | $ | 605 | ||||||
2006 |
444 | 312 | ||||||||
2007 |
239 | 240 | ||||||||
2008 |
| 82 | ||||||||
1,142 | $ | 1,239 | ||||||||
Less amount
representing interest (at 8.5%) |
117 | |||||||||
Present value
of net minimum capital lease payments |
1,025 | |||||||||
Less current
portion of obligations under capital leases |
388 | |||||||||
Obligations
under capital leases, excluding current portion |
$ | 637 |
(14) | COMMITMENTS AND CONTINGENCIES |
Royalty commitments |
||||||
---|---|---|---|---|---|---|
Year ended
December 31: |
||||||
2005 |
$ | 14,705 | ||||
2006 |
15,919 | |||||
2007 |
15,314 | |||||
2008 |
14,512 | |||||
2009 and
thereafter |
81,282 | |||||
$ | 141,732 |
F-30
JAMES RIVER COAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(In Thousands, Except Share Data)
(15) | OTHER OPERATING EXPENSES |
Fixed asset
disposals |
$ | 9,111 | ||||
Write off of
mine development costs |
7,664 | |||||
Write off of
prepaid royalties on abandoned properties |
4,167 | |||||
Write off of
capitalized debt issuance costs for terminated transactions |
4,062 | |||||
Accrual for
legal obligations |
1,512 | |||||
Other |
38 | |||||
$ | 26,554 |
(16) | REORGANIZATION ITEMS, NET |
Predecessor |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Four Months Ended 4/30/04 |
Year Ended 12/31/03 |
||||||||||
Professional
fees and administrative expenses |
$ | 10,685 | 8,399 | ||||||||
Forgiveness
of receivable for subscribed shares, including accrued interest |
| 94 | |||||||||
Gain on
settlements of obligations, net |
(111,533 | ) | (798 | ) | |||||||
Interest
income |
(59 | ) | (65 | ) | |||||||
$ | (100,907 | ) | 7,630 |
F-31
JAMES RIVER COAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(In Thousands, Except Share Data)
(17) | CUMULATIVE EFFECT OF ACCOUNTING CHANGE FOR RECLAMATION LIABILITIES |
2002 |
||||||
---|---|---|---|---|---|---|
Net loss, as
reported |
$ | (59,097 | ) | |||
Pro forma net
loss |
(59,778 | ) |
(18) | EARNINGS (LOSS) PER SHARE |
Successor Company Eight Months Ended 12/31/04 |
Predecessor Company Four Months Ended 4/30/04 |
Predecessor Company Twelve Months Ended 12/31/03 |
Predecessor Company Twelve Months Ended 12/31/02 |
||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Weighted
average number of common shares outstanding: |
|||||||||||||||||||||
Basic |
13,799,994 | 16,890 | 16,890 | 16,890 | |||||||||||||||||
Effect of
dilutive instruments |
822,626 | | | | |||||||||||||||||
Diluted |
14,622,620 | 16,890 | 16,890 | 16,890 |
(19) | FAIR VALUE OF FINANCIAL INSTRUMENTS |
F-32
JAMES RIVER COAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(In Thousands, Except Share Data)
(20) | SUBSEQUENT EVENT |
(21) | QUARTERLY INFORMATION (UNAUDITED) |
Three Months Ended (1) |
|||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
March 31, 2004 |
June 30, 2004 |
September 30, 2004 |
December 31, 2004 |
||||||||||||||||
Total
revenue |
$ | 80,858 | 97,576 | 89,881 | 77,332 | ||||||||||||||
Gross profit
(loss) |
5,879 | 18,099 | 8,276 | (906 | ) | ||||||||||||||
Income (loss)
from operations |
2,318 | 14,071 | 3,434 | (4,910 | ) | ||||||||||||||
Reorganization items gain (loss), net |
(1,557 | ) | 102,465 | | | ||||||||||||||
Income (loss)
before taxes |
411 | 115,650 | 1,780 | (7,085 | ) | ||||||||||||||
Net income
(loss) |
411 | 113,923 | 1,399 | (5,768 | ) | ||||||||||||||
Income per
share (Basic and Diluted) |
$ | 24.33 | N/A(2 | ) | 0.10 | (0.42 | ) |
Three Months Ended (1) |
|||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
March 31, 2003 |
June 30, 2003 |
September 30, 2003 |
December 31, 2003 |
||||||||||||||||
Total
revenue |
$ | 77,372 | 78,704 | 79,885 | 68,092 | ||||||||||||||
Gross
loss |
(6,375 | ) | (1,015 | ) | (950 | ) | (6,974 | ) | |||||||||||
Loss from
operations |
(14,495 | ) | (5,003 | ) | (4,650 | ) | (11,000 | ) | |||||||||||
Reorganization items gain (loss), net |
| (2,541 | ) | (2,471 | ) | (2,618 | ) | ||||||||||||
Loss before
taxes |
(31,022 | ) | (7,681 | ) | (7,414 | ) | (13,534 | ) | |||||||||||
Loss before
cumulative effect of accounting change |
(28,131 | ) | (7,681 | ) | (7,414 | ) | (13,534 | ) | |||||||||||
Net
loss |
(31,176 | ) | (7,681 | ) | (7,414 | ) | (13,534 | ) | |||||||||||
Loss per
share (Basis and Diluted): |
|||||||||||||||||||
Loss before
cumulative effect of accounting change |
$ | (1,665.56 | ) | (464.85 | ) | (438.97 | ) | (801.33 | ) | ||||||||||
Net
loss |
$ | (1,845.84 | ) | (464.85 | ) | (438.97 | ) | (801.33 | ) |
(1) | The quarters ended in 2003 and the quarter ended March 31, 2004, represent the results of the Predecessor Company. The quarter ended June 30, 2004 includes the Predecessor Company for one month (April 2004) and the Successor Company for two months. The quarters ended September 30, 2004 and December 31, 2004 represent the results of the Successor Company. As discussed in Note 1, the consolidated financial statements of the Company after emergence from bankruptcy are those of a new reporting entity (the Successor) and are not comparable to the financial statements of the pre-emergence Company (the Predecessor). |
F-33
JAMES RIVER COAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(In Thousands, Except Share Data)
(2) | Information for the net income per share for the two months ended June 30, 2004 (Successor) and the one month ended April 30, 2004 (Predecessor) follows: |
Two Months Ended June 30, 2004 |
One Month Ended April 30, 2004 |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|
Total
revenue |
$ | 64,485 | 33,091 | |||||||
Gross profit
(loss) |
11,637 | 6,462 | ||||||||
Income from
operations |
9,071 | 5,000 | ||||||||
Reorganization items gain (loss), net |
| 102,465 | ||||||||
Income before
taxes |
8,072 | 107,578 | ||||||||
Net
income |
6,345 | 107,578 | ||||||||
Basic
Earnings Per Share |
0.46 | 6,369.32 | ||||||||
Diluted
Earning Per Share |
0.43 | 6,369.32 |
F-34
JAMES RIVER COAL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
March 31, 2005 |
December 31, 2004 |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(Unaudited) |
|||||||||||||
Assets |
|||||||||||||
Current
assets: |
|||||||||||||
Cash |
$ | 1,724 | 3,879 | ||||||||||
Receivables: |
|||||||||||||
Trade |
37,496 | 23,871 | |||||||||||
Other |
2,928 | 7,362 | |||||||||||
Total
receivables |
40,424 | 31,233 | |||||||||||
Inventories: |
|||||||||||||
Coal |
5,500 | 2,305 | |||||||||||
Materials and
supplies |
4,446 | 4,084 | |||||||||||
Total
inventories |
9,946 | 6,389 | |||||||||||
Prepaid
royalties |
3,731 | 4,358 | |||||||||||
Other current
assets |
4,310 | 6,337 | |||||||||||
Total current
assets |
60,135 | 52,196 | |||||||||||
Property,
plant, and equipment, at cost: |
|||||||||||||
Land |
2,745 | 2,698 | |||||||||||
Mineral
rights |
162,577 | 162,577 | |||||||||||
Buildings,
machinery and equipment |
114,597 | 106,105 | |||||||||||
Mine
development costs |
11,428 | 5,729 | |||||||||||
Construction-in-progress |
706 | 231 | |||||||||||
Total
property, plant, and equipment |
292,053 | 277,340 | |||||||||||
Less
accumulated depreciation, depletion, and amortization |
31,272 | 21,765 | |||||||||||
Property,
plant and equipment, net |
260,781 | 255,575 | |||||||||||
Restricted
cash (note 1(c)) |
8,425 | 8,404 | |||||||||||
Other
assets |
11,792 | 11,651 | |||||||||||
Total
assets |
$ | 341,133 | 327,826 |
See accompanying notes to condensed consolidated financial statements.
F-35
JAMES RIVER COAL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
March 31, 2005 |
December 31, 2004 |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(Unaudited) |
|||||||||||||
Liabilities and Shareholders Equity |
|||||||||||||
Current
liabilities: |
|||||||||||||
Current
maturities of long-term debt (note 3) |
$ | 3,600 | 2,700 | ||||||||||
Current
installments of obligations under capital leases |
374 | 388 | |||||||||||
Accounts
payable |
25,043 | 15,116 | |||||||||||
Accrued
salaries, wages, and employee benefits |
3,235 | 2,093 | |||||||||||
Workers
compensation benefits |
12,090 | 12,090 | |||||||||||
Black lung
benefits |
2,600 | 2,600 | |||||||||||
Accrued
taxes |
4,326 | 3,530 | |||||||||||
Other current
liabilities |
4,654 | 3,633 | |||||||||||
Total current
liabilities |
55,922 | 42,150 | |||||||||||
Long-term
debt, less current maturities (note 3) |
91,400 | 92,300 | |||||||||||
Other
liabilities: |
|||||||||||||
Noncurrent
portion of workers compensation benefits |
38,381 | 38,223 | |||||||||||
Noncurrent
portion of black lung benefits |
23,421 | 23,341 | |||||||||||
Pension
obligations |
15,206 | 15,744 | |||||||||||
Asset
retirement obligations |
15,129 | 14,939 | |||||||||||
Obligations
under capital leases, excluding current installments |
518 | 637 | |||||||||||
Deferred
income taxes |
34,569 | 34,615 | |||||||||||
Other |
245 | 292 | |||||||||||
Total
liabilities |
274,791 | 262,241 | |||||||||||
Shareholders equity |
|||||||||||||
Preferred
Stock, $1.00 par value. Authorized 10,000,000 shares; none issued |
| | |||||||||||
Common stock,
$.01 par value. Authorized 100,000,000 shares; issued and outstanding 14,740,694 and 14,715,694, respectively |
147 | 147 | |||||||||||
Paid-in-capital |
73,592 | 71,784 | |||||||||||
Deferred
stock-based compensation |
(8,900 | ) | (7,540 | ) | |||||||||
Retained
earnings |
1,460 | 1,151 | |||||||||||
Accumulated
other comprehensive income |
43 | 43 | |||||||||||
Total
shareholders equity |
66,342 | 65,585 | |||||||||||
Commitments
and contingencies (note 5) |
|||||||||||||
Total
liabilities and shareholders equity |
$ | 341,133 | 327,826 |
See accompanying notes to condensed consolidated financial statements.
F-36
JAMES RIVER COAL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Successor |
Predecessor |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Three Months Ended 03/31/05 |
Three Months Ended 03/31/04 |
||||||||||||
Revenues |
$ | 97,875 | 80,858 | ||||||||||
Cost of
sales: |
|||||||||||||
Cost of coal
sold |
80,942 | 65,707 | |||||||||||
Depreciation,
depletion, and amortization |
9,478 | 9,272 | |||||||||||
Total cost of
sales |
90,420 | 74,979 | |||||||||||
Gross
profit |
7,455 | 5,879 | |||||||||||
Selling,
general, and administrative expenses |
5,035 | 3,561 | |||||||||||
Total
operating income |
2,420 | 2,318 | |||||||||||
Interest
expense (note 3) |
2,186 | 403 | |||||||||||
Interest
income |
(21 | ) | | ||||||||||
Miscellaneous
income, net |
(123 | ) | (53 | ) | |||||||||
Total other
expense, net |
2,042 | 350 | |||||||||||
Income before
reorganization items and income tax expense |
378 | 1,968 | |||||||||||
Reorganization items, net (note 6) |
| 1,557 | |||||||||||
Income before
income taxes |
378 | 411 | |||||||||||
Income tax
expense |
69 | | |||||||||||
Net income
attributable to common shareholders |
$ | 309 | 411 | ||||||||||
Earnings per
common share (note 7) |
|||||||||||||
Basic
earnings per common share |
$ | 0.02 | 24.33 | ||||||||||
Shares used
to calculate basic earnings per share |
13,800 | 17 | |||||||||||
Diluted
earnings per common share |
$ | 0.02 | 24.33 | ||||||||||
Shares used
to calculate diluted earnings per share |
14,752 | 17 |
See accompanying notes to condensed consolidated financial statements.
F-37
JAMES RIVER COAL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF CHANGES IN SHAREHOLDERS
EQUITY (DEFICIT) AND COMPREHENSIVE INCOME (LOSS)
Three Months ended March 31, 2005 (Successor),
eight months ended December 31, 2004 (Successor) and four months ended April 30, 2004 (Predecessor)
(in thousands) |
Common stock |
Paid-in- capital |
Deferred stock-based Compensation |
Retained earnings (accumulated deficit) |
Subscribed shares |
Accumulated other comprehensive income (loss) |
Total |
|||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Predecessor
Company |
||||||||||||||||||||||||||||||
Balances,
December 31, 2003 |
$ | | 226 | | (107,989 | ) | (821 | ) | (15,017 | ) | (123,601 | ) | ||||||||||||||||||
Net
income |
| | | 107,989 | | | 107,989 | |||||||||||||||||||||||
Minimum pension
liability adjustment |
| | | | | (692 | ) | (692 | ) | |||||||||||||||||||||
Comprehensive
income |
107,297 | |||||||||||||||||||||||||||||
Application of
fresh start accounting (note 2) |
||||||||||||||||||||||||||||||
Cancellation
of Predecessor common stock |
| (226 | ) | | | | | (226 | ) | |||||||||||||||||||||
Elimination
of Predecessor accumulated other comprehensive loss and subscribed shares |
| | | | 821 | 15,709 | 16,530 | |||||||||||||||||||||||
Balances, April
30, 2004 |
$ | | | | | | | | ||||||||||||||||||||||
Successor
Company |
||||||||||||||||||||||||||||||
Issuance of
Successor common stock |
$ | 138 | 63,153 | | | | | 63,291 | ||||||||||||||||||||||
Net
income |
| | | 1,976 | | | 1,976 | |||||||||||||||||||||||
Unrealized gain
on marketable securities, net |
| | | | | 43 | 43 | |||||||||||||||||||||||
Comprehensive
Income |
2,019 | |||||||||||||||||||||||||||||
Deferred
compensation related to restricted stock awards |
9 | 8,631 | (8,640 | ) | | | | | ||||||||||||||||||||||
Cost to
register common stock |
| | | (825 | ) | | | (825 | ) | |||||||||||||||||||||
Amortization of
deferred stock-based compensation |
| | 1,100 | | | | 1,100 | |||||||||||||||||||||||
Balances,
December 31, 2004 |
147 | 71,784 | (7,540 | ) | 1,151 | | 43 | 65,585 | ||||||||||||||||||||||
Net
income |
| | | 309 | | | 309 | |||||||||||||||||||||||
Deferred
compensation related to restricted stock awards |
| 1,808 | (1,808 | ) | | | | | ||||||||||||||||||||||
Amortization of
deferred stock-based compensation |
| | 448 | | | | 448 | |||||||||||||||||||||||
Balances, March
31, 2005 |
$ | 147 | 73,592 | (8,900 | ) | 1,460 | | 43 | 66,342 |
See accompanying notes to consolidated financial statements.
F-38
JAMES RIVER COAL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Successor |
Predecessor |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Three Months Ended 03/31/05 |
Three Months Ended 03/31/04 |
||||||||||||
Cash flows
from operating activities: |
|||||||||||||
Net
income |
$ | 309 | 411 | ||||||||||
Adjustments
to reconcile net income to net cash provided by
operating activities |
|||||||||||||
Depreciation,
depletion, and amortization |
9,478 | 9,271 | |||||||||||
Accretion of
asset retirement obligations |
325 | 299 | |||||||||||
Amortization
of debt issue costs |
103 | | |||||||||||
Amortization
of deferred stock-based compensation |
448 | | |||||||||||
Deferred
income tax expense |
(46 | ) | | ||||||||||
Gain on sale
or disposal of property, plant, and equipment |
6 | 14 | |||||||||||
Changes in
operating assets and liabilities: |
|||||||||||||
Receivables |
(9,191 | ) | (10,776 | ) | |||||||||
Inventories |
(3,557 | ) | (3,068 | ) | |||||||||
Prepaid
royalties and other current assets |
627 | (1,193 | ) | ||||||||||
Other
assets |
1,783 | 27 | |||||||||||
Accounts
payable |
9,927 | (3,241 | ) | ||||||||||
Accrued
salaries, wages, and employee benefits |
1,142 | 1,211 | |||||||||||
Accrued
taxes |
796 | 2,127 | |||||||||||
Other current
liabilities |
1,021 | 1,172 | |||||||||||
Workers
compensation benefits |
158 | 1,165 | |||||||||||
Black lung
benefits |
80 | (391 | ) | ||||||||||
Pension
obligations |
(538 | ) | 28 | ||||||||||
Asset
retirement obligation |
(135 | ) | (131 | ) | |||||||||
Other
liabilities |
(47 | ) | 4 | ||||||||||
Net cash
provided by (used in) operating activities |
12,689 | (3,071 | ) | ||||||||||
Cash flows
from investing activities: |
|||||||||||||
Additions to
property, plant, and equipment |
(14,690 | ) | (6,815 | ) | |||||||||
Proceeds from
sale of equipment and property |
| 40 | |||||||||||
Increase in
restricted cash |
(21 | ) | (21 | ) | |||||||||
Net cash used
in investing activities |
(14,711 | ) | (6,796 | ) | |||||||||
Cash flows
from financing activities: |
|||||||||||||
Proceeds from
borrowings |
| 6,400 | |||||||||||
Principal
payments under capital lease obligations |
(133 | ) | (101 | ) | |||||||||
Net cash
provided by (used in) financing activities |
(133 | ) | 6,299 | ||||||||||
Decrease in
cash |
(2,155 | ) | (3,568 | ) | |||||||||
Cash at
beginning of period |
3,879 | 4,890 | |||||||||||
Cash at end
of period |
$ | 1,724 | 1,322 |
See accompanying notes to condensed consolidated financial statements.
F-39
JAMES RIVER COAL COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated
Financial Statements
(Unaudited)
(1) | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION |
(a) | Description of Business and Principles of Consolidation |
(b) Bankruptcy and Restructuring
F-40
JAMES RIVER COAL COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated
Financial Statements
(Unaudited)
(c) Restricted Cash
(d) Inventories
(e) Reclamation Costs
(f) Workers Compensation
F-41
JAMES RIVER COAL COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated
Financial Statements
(Unaudited)
(g) Black Lung Benefits
(h) Revenue Recognition
(i) Income Taxes
(j) Equity-Based Compensation Plan
F-42
JAMES RIVER COAL COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated
Financial Statements
(Unaudited)
had followed the fair value method under FASB Statement No. 123 for options outstanding the impact on the three months ended March 31, 2005 would have been less than $.01 per share. In performing the Statement No. 123 analysis for stock options, a risk free rate of 5% was assumed, expected volatility was zero, and no dividends were anticipated. The Company had no stock options outstanding as of March 31, 2004.
Three Months March 31, 2005 |
||||||
---|---|---|---|---|---|---|
Net Income,
as reported |
$ | 309 | ||||
Add: Net
stock-based employee compensation expense recorded for restricted and performance based stock grants |
358 | |||||
Deduct: Net
stock-based employee compensation expense for restricted and performance based stock grants determined under Black-Scholes option pricing
model |
(289 | ) | ||||
Pro forma net
income |
$ | 378 | ||||
Income per
share:
|
||||||
Basicas
reported |
$ | 0.02 | ||||
Basicpro forma |
$ | 0.03 | ||||
Dilutedas reported |
$ | 0.02 | ||||
Dilutedpro forma |
$ | 0.03 |
(2) FRESH START ACCOUNTING
F-43
JAMES RIVER COAL COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated
Financial Statements
(Unaudited)
Estimated
enterprise value of the reorganized company |
$ | 155,000 | ||||
Borrowings under
credit facility |
(6,400 | ) | ||||
Capital leases
assumed |
(1,396 | ) | ||||
Cash balance
excluded from enterprise value |
1,301 | |||||
Administrative
claims payable excluded from enterprise value |
(10,214 | ) | ||||
138,291 | ||||||
Less: new
secured debt issued to extinguish prepetition debt |
75,000 | |||||
Fair value of
common shares issued to extinguish prepetition debt |
$ | 63,291 |
James River Coal Company
Reorganized Condensed Consolidated Balance
Sheet
As of April 30, 2004
(amounts in 000s)
(Unaudited)
Fresh Start Adjustments |
|||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Assets |
Predecessor Company 4/30/04 |
Debt Extinguishment |
Reorganization Adjustments |
Successor Company 4/30/04 |
|||||||||||||||
Cash |
$ | 1,301 | | | 1,301 | ||||||||||||||
Receivables |
35,838 | | | 35,838 | |||||||||||||||
Inventories |
11,930 | | 1,079 | (2) | 13,009 | ||||||||||||||
Prepaid
royalties |
9,932 | | (362 | )(2) | 9,570 | ||||||||||||||
Other current
assets |
4,463 | | (347 | )(2) | 4,116 | ||||||||||||||
Total
current assets |
63,464 | | 370 | 63,834 | |||||||||||||||
Land and
mineral rights |
223,004 | | (57,567 | )(2) | 165,437 | ||||||||||||||
Buildings,
machinery, and equipment |
236,901 | | (155,050 | )(2) | 81,851 | ||||||||||||||
Mine
development costs |
12,984 | | (12,984 | )(2) | | ||||||||||||||
Construction-in-progress |
974 | | | 974 | |||||||||||||||
473,863 | | (225,601 | ) | 248,262 | |||||||||||||||
Less
accumulated depreciation, depletion, and amortization |
219,604 | | (219,604 | )(2) | | ||||||||||||||
Net
property, plant, and equipment |
254,259 | | (5,997 | ) | 248,262 | ||||||||||||||
Restricted
cash |
8,348 | | | 8,348 | |||||||||||||||
Other
long-term assets |
6,518 | (3,110 | )(1) | (734 | )(2) | 2,674 | |||||||||||||
Total
assets |
$ | 332,589 | (3,110 | ) | (6,361 | ) | 323,118 |
F-44
JAMES RIVER COAL COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated
Financial Statements
(Unaudited)
James River Coal Company
Reorganized Condensed Consolidated Balance
Sheet
As of April 30, 2004
(amounts in 000s)
(Unaudited)
Fresh Start Adjustments |
|||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Liabilities and Shareholders Equity (Deficit) |
Predecessor Company 4/30/04 |
Debt Extinguishment |
Reorganization Adjustments |
Successor Company 4/30/04 |
|||||||||||||||
Borrowings
under DIP credit agreement |
$ | 6,400 | | | 6,400 | ||||||||||||||
Current
installments of obligations under capital leases |
749 | | (272 | )(3) | 477 | ||||||||||||||
Accounts
payable |
26,293 | | | 26,293 | |||||||||||||||
Accrued
salaries, wages and employee benefits |
4,501 | | | 4,501 | |||||||||||||||
Workers
compensation benefits |
9,500 | | | 9,500 | |||||||||||||||
Black lung
benefits |
2,500 | | | 2,500 | |||||||||||||||
Accrued
taxes |
3,588 | | | 3,588 | |||||||||||||||
Other current
liabilities |
4,037 | | | 4,037 | |||||||||||||||
Total
current liabilities |
57,568 | | (272 | ) | 57,296 | ||||||||||||||
Long term
debt |
| 75,000 | (1) | | 75,000 | ||||||||||||||
Noncurrent
portion of workers compensation benefits |
42,699 | | | 42,699 | |||||||||||||||
Noncurrent
portion of black lung benefits |
10,661 | | 13,610 | (4) | 24,271 | ||||||||||||||
Pension
obligations |
14,267 | | 3,363 | (5) | 17,630 | ||||||||||||||
Asset
retirement obligations |
13,963 | | | 13,963 | |||||||||||||||
Obligations
under capital leases, excluding current installments |
1,159 | | (240 | )(3) | 919 | ||||||||||||||
Deferred
income taxes |
| | 27,391 | (6) | 27,391 | ||||||||||||||
Other long
term liabilities |
658 | | | 658 | |||||||||||||||
Total
other liabilities |
83,407 | | 44,124 | 127,531 | |||||||||||||||
Liabilities
subject to compromise |
319,451 | (319,451 | )(1) | | | ||||||||||||||
Total
liabilities |
460,426 | (244,451 | ) | 43,852 | 259,827 | ||||||||||||||
Common
stock |
| 138 | (1) | | 138 | ||||||||||||||
Paid-in-capital |
226 | 63,153 | (1) | (226 | )(7) | 63,153 | |||||||||||||
Retained
earnings (accumulated deficit) |
(111,533 | ) | 178,050 | (1) | (66,517 | )(7) | | ||||||||||||
Subscribed
shares |
(821 | ) | | 821 | (7) | | |||||||||||||
Accumulated
other comprehensive income (loss) |
(15,709 | ) | | 15,709 | (7) | | |||||||||||||
Total
shareholders equity (deficit) |
(127,837 | ) | 241,341 | (50,213 | ) | 63,291 | |||||||||||||
Total
liabilities and shareholders equity |
$ | 332,589 | (3,110 | ) | (6,361 | ) | 323,118 |
F-45
JAMES RIVER COAL COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated
Financial Statements
(Unaudited)
Extinguishment of Debt
(1) | Liabilities subject to compromise that were extinguished in bankruptcy consist of the following (amounts in 000s): |
Pre-petition
bank loan agreement |
$ | 207,807 | ||||
Pre-petition
senior note |
37,953 | |||||
Accrued and
unpaid interest |
12,234 | |||||
Terminated
interest rate swap |
8,434 | |||||
Total
secured |
266,428 | |||||
Promissory
notes |
5,176 | |||||
Redeemable
preferred stock |
8,500 | |||||
Accounts payable
and other |
39,347 | |||||
Total
unsecured |
53,023 | |||||
Total
liabilities subject to compromise |
$ | 319,451 |
Liabilities
subject to compromise |
$ | 319,451 | ||||
Less: Assets of
rabbi trust transferred to creditors |
(3,110 | ) | ||||
Less: New
secured debt issued in exchange for pre-petition debt |
(75,000 | ) | ||||
Less: Fair value
of common shares issued |
(63,291 | ) | ||||
Gain on
extinguishment of pre-petition claims |
$ | 178,050 |
Reorganization Adjustments
(2) | In connection with the application of fresh start accounting, the Company made adjustments aggregating approximately $6.3 million to record its identifiable assets at fair value as follows (amounts in 000s): |
Increase/(Decrease) |
||||||
---|---|---|---|---|---|---|
Coal
inventories |
$ | 1,079 | ||||
Prepaid
royalties |
(362 | ) | ||||
Other current
assets |
(347 | ) | ||||
Land and mineral
rights |
(57,567 | ) | ||||
Buildings,
machinery and equipment |
(155,050 | ) | ||||
Mine development
costs |
(12,984 | ) | ||||
Less accumulated
depreciation, depletion, and amortization |
219,604 | |||||
Other long-term
assets |
(734 | ) | ||||
Total fair value
adjustments to identifiable assets |
$ | (6,361 | ) |
(3) | Contractual terms of certain capital lease agreements were renegotiated during bankruptcy. Obligations under capital leases have been adjusted to reflect the revised terms. |
(4) | The liability for black lung benefits has been adjusted to reflect the total discounted benefit obligation. |
F-46
JAMES RIVER COAL COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated
Financial Statements
(Unaudited)
(5) | The pension liability has been adjusted to reflect the total discounted projected benefit obligation of the plan. |
(6) | Deferred income taxes have been adjusted to reflect differences in the book and tax basis of the revalued assets and liabilities of the Company after application of fresh start accounting. |
(7) | The equity of the predecessor company, including subscribed shares and accumulated other comprehensive loss, has been eliminated in fresh start accounting. |
(3) | LONG TERM DEBT AND INTEREST EXPENSE |
March 31, 2005 |
||||||
---|---|---|---|---|---|---|
Senior secured
credit facility: |
||||||
Term loan
component |
$ | 20,000 | ||||
Revolver
component |
| |||||
Term credit
facility |
75,000 | |||||
Total
long-term debt |
95,000 | |||||
Less amounts
classified as current |
3,600 | |||||
Total
long-term debt, less current maturities |
$ | 91,400 |
(a) Senior Secured Credit Facility
F-47
JAMES RIVER COAL COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated
Financial Statements
(Unaudited)
(b) Term Credit Facility
(c) Interest Expense and Other
(4) EQUITY
(a) Preferred Stock and Shareholder Rights Agreement
F-48
JAMES RIVER COAL COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated
Financial Statements
(Unaudited)
thereafter be void), will receive, upon the exercise of the Right, that number of shares of common stock of the acquiring company which at the time of such transaction will have a market value of two times the exercise price of the Right. In the event that any person becomes an Acquiring Person, each Right holder, other than the Acquiring Person (whose Rights will become void), will have the right to receive upon exercise that number of shares of common stock having a market value of two times the exercise price of the Right.
(b) Redeemable Preferred Stock (Predecessor Company)
(5) COMMITMENTS AND CONTINGENCIES
(6) REORGANIZATION ITEMS, NET
Predecessor Company Three Months Ended 03/31/04 |
||||||
---|---|---|---|---|---|---|
Professional
fees and administrative expenses |
$ | 1,607 | ||||
Interest
income |
(50 | ) | ||||
$ | 1,557 |
F-49
JAMES RIVER COAL COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated
Financial Statements
(Unaudited)
(7) EARNINGS PER SHARE
Successor Company Three Months Ended 3/31/05 |
Predecessor Company Three Months Ended 3/31/04 |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Weighted
average number of common
shares outstanding: |
|||||||||||||
Basic |
13,799,994 | 16,890 | |||||||||||
Effect of
dilutive instruments |
951,678 | | |||||||||||
Diluted |
14,751,672 | 16,890 |
(8) PENSION EXPENSE
Successor Company Three Months Ended 3/31/05 |
Predecessor Company Three Months Ended 3/31/04 |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Service
cost |
$ | 527 | 459 | ||||||||||
Interest
cost |
793 | 723 | |||||||||||
Expected
return on plan assets |
(761 | ) | (608 | ) | |||||||||
Amortization
of prior service cost |
| 97 | |||||||||||
Recognized
actuarial loss |
| 255 | |||||||||||
Net periodic
benefit cost |
$ | 559 | 926 |
F-50
JAMES RIVER COAL COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated
Financial Statements
(Unaudited)
(9) PNEUMOCONIOSIS (BLACK LUNG) BENEFITS
Successor Company Three Months Ended 3/31/05 |
Predecessor Company Three Months Ended 3/31/04 |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Service
cost |
$ | 74 | 74 | ||||||||||
Interest
cost |
340 | 188 | |||||||||||
Amortization
of actuarial loss |
54 | 262 | |||||||||||
Total
expense |
$ | 468 | 524 |
(10) DEFINITIVE AGREEMENT TO ACQUIRE TRIAD MINING, INC.
F-51
INDEX TO TRIAD MINING, INC. CONSOLIDATED FINANCIAL STATEMENTS
Page |
||||||
---|---|---|---|---|---|---|
Audited
Financial Statements |
||||||
Report of
Independent Registered Public Accounting Firm |
T-2 | |||||
Consolidated
Balance Sheet December 31, 2004 |
T-3 | |||||
Consolidated
Statement of Income Year ended December 31, 2004 |
T-4 | |||||
Consolidated
Statement of Changes in Stockholders Equity and Other Comprehensive Income Year ended December 31, 2004 |
T-5 | |||||
Consolidated
Statement of Cash Flows Year ended December 31, 2004 |
T-6 | |||||
Notes to
Financial Statements December 31, 2004 |
T-7 | |||||
Unaudited
Financial Statements |
||||||
Condensed
Consolidated Balance Sheets March 31, 2005 and December 31, 2004 |
T-14 | |||||
Condensed
Consolidated Statements of Income Three months ended March 31, 2005 and March 31, 2004 |
T-15 | |||||
Condensed
Consolidated Statements of Changes in Stockholders Equity and Comprehensive Income Three months ended March 31, 2005 and year ended December 31, 2004 |
T-16 | |||||
Condensed
Consolidated Statements of Cash Flows Three months ended March 31, 2005 and March 31, 2004 |
T-17 | |||||
Notes to
Condensed Consolidated Financial Statements March 31, 2005 |
T-18 |
T-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors
Triad Mining, Inc.:
We have audited the accompanying consolidated balance sheet of Triad Mining, Inc. and subsidiary (the Company) as of December 31, 2004 and the related consolidated statements of income, changes in stockholders equity and other comprehensive income, and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Triad Mining, Inc. and subsidiary as of December 31, 2004, and the results of their operations and their cash flows for the year then ended in conformity with U.S. generally accepted accounting principles.
/s/ KPMG LLP
Richmond, Virginia
April 12, 2005
T-2
TRIAD MINING, INC. AND SUBSIDIARY
Consolidated Balance Sheet
December
31, 2004
Assets |
||||||
Current
assets: |
||||||
Cash and cash
equivalents |
$ | 8,135,128 | ||||
Available for
sale securities |
16,729,848 | |||||
Accounts
receivable |
7,371,053 | |||||
Coal
inventory |
981,646 | |||||
Stores
inventory |
948,775 | |||||
Advance
royalties current portion |
430,449 | |||||
Prepaid
expenses |
545,660 | |||||
Accrued
interest receivable |
120,881 | |||||
Other |
28,664 | |||||
Total current
assets |
35,292,104 | |||||
Property and
equipment, net |
21,245,321 | |||||
Mineral
rights, net |
4,052,590 | |||||
Mine
development costs, net |
1,070,043 | |||||
Long-term
portion of advance royalties |
530,525 | |||||
$ | 62,190,583 | |||||
Liabilities and Stockholders Equity |
||||||
Current
liabilities: |
||||||
Current
maturities of long-term debt |
$ | 1,712,361 | ||||
Accounts
payable |
4,756,779 | |||||
Accrued
expenses |
1,271,780 | |||||
Total current
liabilities |
7,740,920 | |||||
Reclamation
and mine closing liabilities |
7,395,580 | |||||
Total
liabilities |
15,136,500 | |||||
Stockholders equity: |
||||||
Common stock,
no par value. Authorized 1,000 shares; issued and outstanding 411 shares |
48,446 | |||||
Accumulated
other comprehensive loss |
(135,967 | ) | ||||
Notes
receivable from and advances to stockholders |
(388,928 | ) | ||||
Retained
earnings |
47,530,532 | |||||
Total
stockholders equity |
47,054,083 | |||||
$ | 62,190,583 |
See accompanying notes to consolidated financial statements.
T-3
TRIAD MINING, INC. AND SUBSIDIARY
Consolidated Statement of Income
Year ended December 31, 2004
Coal
sales |
$ | 81,602,894 | ||||
Operating
costs and expenses: |
||||||
Cost of coal
sold |
59,290,543 | |||||
Selling,
administrative, and other |
3,736,452 | |||||
Depreciation |
4,621,489 | |||||
Amortization |
878,321 | |||||
Total
operating costs and expenses |
68,526,805 | |||||
Income from
operations |
13,076,089 | |||||
Other income
(expense): |
||||||
Interest
income |
567,227 | |||||
Interest
expense |
(174,328 | ) | ||||
Loss on sale
and impairment of investments |
(72,696 | ) | ||||
Gain on sale
of assets |
16,615 | |||||
Miscellaneous
income |
112,634 | |||||
Total other
income |
449,452 | |||||
Net
income |
$ | 13,525,541 |
See accompanying notes to consolidated financial statements.
T-4
TRIAD MINING, INC. AND SUBSIDIARY
Consolidated Statement of Changes in
Stockholders Equity
and Other Comprehensive Income
Year ended December 31, 2004
Common Stock |
Accumulated other comprehensive loss |
Notes receivable from and advances to stockholders |
Retained earnings |
Total stockholders equity |
||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Balances at
January 1, 2004 |
$ | 48,446 | $ | (45,635 | ) | $ | (137,351 | ) | $ | 45,970,492 | $ | 45,835,952 | ||||||||||
Comprehensive
income: |
||||||||||||||||||||||
Net
income |
| | | 13,525,541 | 13,525,541 | |||||||||||||||||
Other
comprehensive loss: |
||||||||||||||||||||||
Unrealized
losses on securities, net of reclassification adjustment |
| (90,332 | ) | | | (90,332 | ) | |||||||||||||||
Comprehensive
income |
13,435,209 | |||||||||||||||||||||
Increase in
receivables from and advances to stockholders, net |
| | (251,577 | ) | | (251,577 | ) | |||||||||||||||
Distributions
to stockholders |
| | | (11,965,501 | ) | (11,965,501 | ) | |||||||||||||||
Balances at
December 31, 2004 |
$ | 48,446 | $ | (135,967 | ) | $ | (388,928 | ) | $ | 47,530,532 | $ | 47,054,083 |
See accompanying notes to consolidated financial statements.
T-5
TRIAD MINING, INC. AND SUBSIDIARY
Consolidated Statement of Cash Flows
Year ended December 31, 2004
Operating
activities: |
||||||
Net
income |
$ | 13,525,541 | ||||
Adjustments
to reconcile net income to net cash provided by operating activities: |
||||||
Depreciation
and amortization |
5,499,810 | |||||
Accretion of
reclamation and mine closing liabilities |
323,443 | |||||
Gain on sale
of assets |
(16,615 | ) | ||||
Loss on sale
and impairment of investments |
72,696 | |||||
(Increase)
decrease in: |
||||||
Accounts
receivable |
(329,611 | ) | ||||
Inventories |
74,935 | |||||
Advance
royalties |
171,674 | |||||
Prepaid
expenses |
67,133 | |||||
Accrued
interest |
2,712 | |||||
Other
assets |
158,289 | |||||
Increase
in: |
||||||
Accounts
payable |
707,148 | |||||
Accrued
expenses |
156,190 | |||||
Net cash
provided by operating activities |
20,413,345 | |||||
Investing
activities: |
||||||
Expenditures
for property and equipment |
(4,705,437 | ) | ||||
Proceeds from
sale of property and equipment |
19,615 | |||||
Purchases of
securities |
(7,721,433 | ) | ||||
Proceeds from
maturities of securities |
1,990,000 | |||||
Proceeds from
sale of securities |
4,314,000 | |||||
Purchase of
mineral rights |
(400,887 | ) | ||||
Expenditures
for mine development costs |
(208,821 | ) | ||||
Receivables
from and advances to stockholders |
(571,275 | ) | ||||
Repayment of
receivables from and advances to stockholders |
319,698 | |||||
Net cash used
in investing activities |
(6,964,540 | ) | ||||
Financing
activities: |
||||||
Distributions
to stockholders |
(11,965,501 | ) | ||||
Repayment of
long-term debt |
(2,421,859 | ) | ||||
Net cash used
in financing activities |
(14,387,360 | ) | ||||
Net decrease
in cash and cash equivalents |
(938,555 | ) | ||||
Cash and cash
equivalents at beginning of year |
9,073,683 | |||||
Cash and cash
equivalents at end of year |
$ | 8,135,128 | ||||
Supplemental
disclosure of cash flow information: |
||||||
Cash paid
during the year for: |
||||||
Interest |
$ | 174,328 |
See accompanying notes to consolidated financial statements.
T-6
Triad Mining, Inc. and Subsidiary
Notes to Consolidated Financial
Statements
December 31, 2004
(1) OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Operations
(b) Principles of Consolidation
(c) Use of Estimates
(d) Cash and Cash Equivalents
(e) Available for Sale Securities
(f) Inventories
(g) Property and Equipment
(h) Mine Development Costs
T-7
Triad Mining, Inc. and Subsidiary
Notes to Consolidated Financial
Statements
December 31, 2004
(i) Mineral Rights
Original
cost |
$ | 8,885,588 | ||||
Less
accumulated depletion |
(4,832,998 | ) | ||||
Balance at
December 31, 2004 |
$ | 4,052,590 |
(j) Income Taxes
(k) Allowance for Uncollectible Receivables
(l) Asset Impairment
(m) Revenue Recognition
(n) Advance Coal Royalty
(o) Reclamation and Mine Closing Liabilities
T-8
Triad Mining, Inc. and Subsidiary
Notes to Consolidated Financial
Statements
December 31, 2004
cost is depreciated over the useful life of the related asset. A gain or loss upon settlement is recorded upon the settlement of the liability to the extent there is a difference between the liability recognized and the amount of cash paid to settle the obligation. The Company annually reviews its estimated future cash flows for its asset retirement obligations.
(p) Derivatives
(2) PROPERTY AND EQUIPMENT
Land |
$ | 2,869,992 | ||||
Mine equipment
and vehicles |
64,368,454 | |||||
Less
accumulated depreciation |
(45,993,125 | ) | ||||
Property and
equipment, net |
$ | 21,245,321 |
(3) MINE DEVELOPMENT COSTS
Mine development
costs |
$ | 2,943,538 | ||||
Less
accumulated amortization |
(1,873,495 | ) | ||||
Mine development
costs, net |
$ | 1,070,043 |
(4) AVAILABLE FOR SALE SECURITIES
Cost Basis |
Gross unrealized gains |
Gross unrealized losses |
Fair value |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity
securities |
$ | 381,359 | $ | 26,620 | $ | (19,253 | ) | $ | 388,726 | |||||||||
U.S. Government
agency obligations |
2,099,156 | 397 | (8,990 | ) | 2,090,563 | |||||||||||||
Municipal bonds
and notes |
14,385,300 | 9,693 | (144,434 | ) | 14,250,559 | |||||||||||||
$ | 16,865,815 | $ | 36,710 | $ | (172,677 | ) | $ | 16,729,848 |
T-9
Triad Mining, Inc. and Subsidiary
Notes to Consolidated Financial
Statements
December 31, 2004
Greater than 12 months |
Less than 12 months |
||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Fair Value |
Gross unrealized losses |
Fair value |
Gross unrealized losses |
||||||||||||||||
Equity
securities |
$ | 63,017 | | 117,474 | 19,253 | ||||||||||||||
U.S. Government
agency obligations |
199,000 | 1,009 | 1,691,157 | 7,981 | |||||||||||||||
Municipal bonds
and notes |
9,996,848 | 128,924 | 1,333,782 | 15,510 | |||||||||||||||
$ | 10,258,865 | 129,933 | 3,142,413 | 42,744 |
Cost Basis |
Fair value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|
Year ended
December 31, |
||||||||||
2005 |
$ | 6,194,316 | 6,145,416 | |||||||
2006 |
5,965,468 | 5,895,078 | ||||||||
2007 |
3,896,243 | 3,871,538 | ||||||||
2008 |
428,429 | 429,090 | ||||||||
$ | 16,484,456 | 16,341,122 |
2004 |
||||||
---|---|---|---|---|---|---|
Unrealized
holding losses arising during the year |
$ | (163,028 | ) | |||
Less:
reclassification adjustment for losses included in net income |
72,696 | |||||
Net unrealized
losses on available for sale securities |
$ | (90,332 | ) |
(5) NOTES RECEIVABLE FROM AND ADVANCES TO STOCKHOLDERS
|
A $371,275 unsecured promissory note (interest rate 3.00%) from a stockholder, maturing in 2006. Principal and interest are due at maturity. |
|
A $15,553 unsecured promissory note from a stockholder, maturing in 2007. Principal and interest (6.00%) are payable monthly. |
|
Other non-interest bearing advances to stockholders aggregating $2,100. |
T-10
Triad Mining, Inc. and Subsidiary
Notes to Consolidated Financial
Statements
December 31, 2004
(6) LONG-TERM DEBT
Note payable
to a bank, principal and interest payable monthly; interest rate based on LIBOR + 1.00% (3.31% as of December 31, 2004), secured by equipment and
accounts receivable; maturing October 2005 |
$ | 1,064,623 | ||||
Note payable
to a bank, principal and interest payable monthly; interest rate based on LIBOR + 1.00% (3.31% as of December 31, 2004), secured by equipment and
accounts receivable; maturing October 2005 |
647,738 | |||||
Total |
1,712,361 | |||||
Less current
maturities |
1,712,361 | |||||
Long-term
debt |
$ | |
(7) RECLAMATION LIABILITY
Reclamation
and mine closing liabilities, beginning of year |
$ | 7,486,744 | ||||
Accretion
expense |
323,443 | |||||
Settlements |
(117,323 | ) | ||||
Reclamation
and mine closing liabilities, end of year |
7,692,864 | |||||
Less: amount
included in accrued expenses |
297,284 | |||||
Non-current
reclamation and mine closing liabilities, end of year |
$ | 7,395,580 |
(8) PNEUMOCONIOSIS (BLACK LUNG) BENEFIT OBLIGATION
(9) LEASES
T-11
Triad Mining, Inc. and Subsidiary
Notes to Consolidated Financial
Statements
December 31, 2004
(10) SALES COMMITMENTS AND MAJOR CUSTOMERS
Tons |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Minimum |
Maximum |
||||||||||
Year ended
December 31: |
|||||||||||
2005 |
2,601,555 | 3,410,000 | |||||||||
2006 |
2,116,500 | 2,853,500 | |||||||||
2007 |
950,000 | 2,350,000 | |||||||||
2008 |
950,000 | 2,350,000 | |||||||||
2009 |
950,000 | 1,250,000 | |||||||||
7,568,055 | 12,213,500 |
(11) SELF-INSURANCE HEALTH CARE PLAN
(12) EMPLOYEE BENEFIT PLAN
T-12
Triad Mining, Inc. and Subsidiary
Notes to Consolidated Financial
Statements
December 31, 2004
(13) CONCENTRATION OF CREDIT RISK
(14) CONTINGENCY
(15) SUBSEQUENT EVENT
T-13
TRIAD MINING, INC. AND SUBSIDIARY
Condensed Consolidated Balance
Sheets
March 31, 2005 |
December 31, 2004 |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|
(unaudited) |
||||||||||
Assets |
||||||||||
Current
assets: |
||||||||||
Cash and
cash equivalents |
$ | 6,677,899 | 8,135,128 | |||||||
Available
for sale securities |
16,868,567 | 16,729,848 | ||||||||
Accounts
receivable |
10,316,934 | 7,371,053 | ||||||||
Coal
inventory |
1,178,785 | 981,646 | ||||||||
Stores
inventory |
1,052,226 | 948,775 | ||||||||
Advance
royalties current portion |
595,245 | 430,449 | ||||||||
Prepaid
expenses |
367,735 | 545,660 | ||||||||
Accrued
interest receivable |
119,055 | 120,881 | ||||||||
Other |
| 28,664 | ||||||||
Total
current assets |
37,176,446 | 35,292,104 | ||||||||
Property and
equipment, net |
20,620,950 | 21,245,321 | ||||||||
Mineral
rights, net |
3,597,714 | 4,052,590 | ||||||||
Mine
development costs, net |
988,338 | 1,070,043 | ||||||||
Long-term
portion of advance royalties |
530,525 | 530,525 | ||||||||
$ | 62,913,973 | 62,190,583 | ||||||||
Liabilities and Stockholders Equity |
||||||||||
Current
liabilities: |
||||||||||
Current
maturities of long-term debt |
$ | 884,899 | 1,712,361 | |||||||
Accounts
payable |
3,561,019 | 4,756,779 | ||||||||
Accrued
expenses |
1,962,285 | 1,271,780 | ||||||||
Total
current liabilities |
6,408,203 | 7,740,920 | ||||||||
Reclamation
and mine closing liabilities |
7,488,228 | 7,395,580 | ||||||||
Total
liabilities |
13,896,431 | 15,136,500 | ||||||||
Stockholders equity: |
||||||||||
Common
stock, no par value. Authorized 1,000 shares; issued and outstanding 411 shares |
48,446 | 48,446 | ||||||||
Accumulated
other comprehensive loss |
(249,227 | ) | (135,967 | ) | ||||||
Notes
receivable from and advances to stockholders |
(396,201 | ) | (388,928 | ) | ||||||
Retained
earnings |
49,614,524 | 47,530,532 | ||||||||
Total
stockholders equity |
49,017,542 | 47,054,083 | ||||||||
$ | 62,913,973 | 62,190,583 |
See accompanying notes to condensed consolidated financial
statements.
T-14
TRIAD MINING, INC. AND SUBSIDIARY
Condensed Consolidated Statements of
Income
(unaudited)
Three Months Ended |
||||||||||
---|---|---|---|---|---|---|---|---|---|---|
March 31, 2005 |
March 31, 2004 |
|||||||||
Coal
sales |
$ | 23,396,026 | 19,645,000 | |||||||
Operating
costs and expenses: |
||||||||||
Cost of coal
sold |
17,202,910 | 14,111,235 | ||||||||
Selling,
administrative, and other |
886,214 | 841,625 | ||||||||
Depreciation |
1,204,724 | 1,125,300 | ||||||||
Amortization |
425,733 | 189,623 | ||||||||
Total
operating costs and expenses |
19,719,581 | 16,267,783 | ||||||||
Income from
operations |
3,676,445 | 3,377,217 | ||||||||
Other income
(expense): |
||||||||||
Interest
income |
149,543 | 122,055 | ||||||||
Interest
expense |
(21,031 | ) | (53,313 | ) | ||||||
Loss on sale
of investments |
(19,211 | ) | (13,488 | ) | ||||||
Loss on sale
of assets |
(80,500 | ) | | |||||||
Miscellaneous income |
28,875 | 18,061 | ||||||||
Total other
income |
57,676 | 73,315 | ||||||||
Net
income |
$ | 3,734,121 | 3,450,532 |
See accompanying notes to condensed consolidated financial
statements.
T-15
TRIAD MINING, INC. AND SUBSIDIARY
Condensed Consolidated Statements of
Changes in Stockholders Equity
and Other Comprehensive Income
Three Months Ended March 31, 2005 and the Year Ended December 31, 2004
(unaudited)
Common Stock |
Accumulated other comprehensive loss |
Notes receivable from and advances to stockholders |
Retained earnings |
Total stockholders equity |
||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Balances at
January 1, 2004 |
$ | 48,446 | (45,635 | ) | (137,351 | ) | 45,970,492 | 45,835,952 | ||||||||||||||
Comprehensive income: |
||||||||||||||||||||||
Net
income |
| | | 13,525,541 | 13,525,541 | |||||||||||||||||
Other
comprehensive loss: |
||||||||||||||||||||||
Unrealized
losses on securities, net of reclassification adjustment |
| (90,332 | ) | | | (90,332 | ) | |||||||||||||||
Comprehensive income |
13,435,209 | |||||||||||||||||||||
Increase in
receivables from and advances to stockholders, net |
| | (251,577 | ) | | (251,577 | ) | |||||||||||||||
Distributions to stockholders |
| | | (11,965,501 | ) | (11,965,501 | ) | |||||||||||||||
Balances at
December 31, 2004 |
48,446 | (135,967 | ) | (388,928 | ) | 47,530,532 | 47,054,083 | |||||||||||||||
Comprehensive income: |
||||||||||||||||||||||
Net
income |
| | | 3,734,121 | 3,734,121 | |||||||||||||||||
Other
comprehensive loss: |
||||||||||||||||||||||
Unrealized
losses on securities, net of reclassification adjustment |
| (113,260 | ) | | | (113,260 | ) | |||||||||||||||
Comprehensive income |
3,620,861 | |||||||||||||||||||||
Increase in
receivables from and advances to stockholders, net |
| | (7,273 | ) | | (7,273 | ) | |||||||||||||||
Distributions to stockholders |
| | | (1,650,129 | ) | (1,650,129 | ) | |||||||||||||||
Balances at
March 31, 2005 |
$ | 48,446 | (249,227 | ) | (396,201 | ) | 49,614,524 | 49,017,542 |
See accompanying notes to condensed consolidated financial
statements.
T-16
TRIAD MINING, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Cash
Flows
(unaudited)
Three Months Ended |
||||||||||
---|---|---|---|---|---|---|---|---|---|---|
March 31, 2005 |
March 31, 2004 |
|||||||||
Operating
activities: |
||||||||||
Net
income |
$ | 3,734,121 | 3,450,532 | |||||||
Adjustments
to reconcile net income to net cash provided by operating activities: |
||||||||||
Depreciation
and amortization |
1,630,457 | 1,314,923 | ||||||||
Accretion of
reclamation and mine closing liabilities |
92,648 | 80,800 | ||||||||
Loss on sale
of assets |
80,500 | | ||||||||
Loss on sale of securities |
19,211 | 13,488 | ||||||||
Change in
operating assets and liabilities |
||||||||||
Accounts
receivable |
(2,945,881 | ) | (317,797 | ) | ||||||
Inventories |
(300,590 | ) | (552,232 | ) | ||||||
Advance
royalties |
(164,796 | ) | (7,391 | ) | ||||||
Prepaid
expenses |
177,925 | 90,406 | ||||||||
Accrued
interest |
1,826 | (54,410 | ) | |||||||
Other
assets |
28,664 | 160,807 | ||||||||
Accounts
payable |
10,241 | 86,778 | ||||||||
Other
liabilities |
690,505 | 213,199 | ||||||||
Net cash
provided by operating activities |
3,054,831 | 4,479,103 | ||||||||
Investing
activities: |
||||||||||
Capital
expenditures |
(1,756,006 | ) | (46,008 | ) | ||||||
Purchases of
securities |
(2,224,401 | ) | (872,365 | ) | ||||||
Proceeds
from maturities of securities |
1,953,211 | 287,300 | ||||||||
Repayment
and advances to stockholders, net |
(7,273 | ) | 102,710 | |||||||
Net cash
used in investing activities |
(2,034,469 | ) | (528,363 | ) | ||||||
Financing
activities: |
||||||||||
Distributions to stockholders |
(1,650,129 | ) | (1,100,180 | ) | ||||||
Repayment of
long-term debt |
(827,462 | ) | (613,067 | ) | ||||||
Net cash
used in financing activities |
(2,477,591 | ) | (1,713,247 | ) | ||||||
Net increase
(decrease) in cash and cash equivalents |
(1,457,229 | ) | 2,237,493 | |||||||
Cash and
cash equivalents at beginning of year |
8,135,128 | 9,073,683 | ||||||||
Cash and
cash equivalents at end of year |
$ | 6,677,899 | 11,311,176 |
See accompanying notes to condensed consolidated financial
statements.
T-17
TRIAD MINING, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
MARCH 31, 2005
(unaudited)
(1) OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Operations and Definitive Agreement to Sell the Outstanding Common Stock
(b) Principles of Consolidation
(c) Use of Estimates
(d) Cash and Cash Equivalents
(e) Available for Sale Securities
T-18
TRIAD MINING, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
MARCH 31, 2005
(unaudited)
(f) Inventories
(g) Property and Equipment
(h) Mine Development Costs
(i) Mineral Rights
(j) Income Taxes
(k) Allowance for Uncollectible Receivables
(l) Asset Impairment
(m) Revenue Recognition
T-19
TRIAD MINING, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
MARCH 31, 2005
(unaudited)
(n) Advance Coal Royalty
(o) Reclamation and Mine Closing Liabilities
(p) Derivatives
T-20
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
Securities and
Exchange Commission Registration Fee |
$ | 27,760 | ||||
Printing
Expenses |
200,000 | |||||
Legal
Fees |
400,000 | |||||
Accounting
Fees |
200,000 | |||||
NASD Filing
Fee |
32,907 | |||||
Miscellaneous
Expenses |
39,333 | |||||
$ | 900,000 |
Item 14. Indemnification of Directors and Officers
Item 15. Recent Sales of Unregistered Securities
II-1
Recipient |
No. Shares |
No. Options |
Date of Issuance |
Consideration |
Option Exercise Price |
|||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Operating and
senior management |
881,700 | 150,000 | May 25,2004 |
Services
rendered |
$ | 10.80 | ||||||||||||||||
20,000 | 80,000 | June 2,
2004 |
Services
rendered |
$ | 17.50 | |||||||||||||||||
8,000 | | November 1,
2004 |
Services
rendered |
$ | N/A | |||||||||||||||||
2,000 | | November 11,
2004 |
Services
rendered |
$ | N/A | |||||||||||||||||
25,000 | | January 10,
2005 |
Services
rendered |
$ | N/A | |||||||||||||||||
Non-employee
directors (aggregate) |
4,000 | 40,000 | May 7,
2004 |
Services
rendered |
$ | 15.00 |
Item 16. Exhibits and Financial Statement Schedules.
a. |
Exhibits |
b. |
Financial Statement Schedules |
Item 17. Undertakings.
(1) |
That, for the purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as a part of this registration statement in reliance upon Rule 430A and conformed in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. |
(2) |
That, for the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the security offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
II-2
SIGNATURES
JAMES RIVER COAL COMPANY |
||||||||||
By: /s/ Peter T. Socha Peter T. Socha, Chairman, President and Chief Executive Officer |
Signature |
Title |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|
/s/ Peter T.
Socha Peter T. Socha |
Chairman, President and Chief Executive Officer (Principal Executive Officer) |
|||||||||
/s/ Samuel
M. Hopkins II Samuel M. Hopkins II |
Vice
President and Chief Accounting Officer (Principal Financial and Accounting Officer) |
|||||||||
* Alan F. Crown |
Director |
|||||||||
* Leonard J. Kujawa |
Director |
|||||||||
* Paul H. Vining |
Director |
|||||||||
* James F. Wilson |
Director |
|||||||||
*By: /s/
Peter T. Socha Peter T. Socha Attorney-in-Fact |
II-3
EXHIBIT INDEX
Exhibit Number |
Description |
|||||
---|---|---|---|---|---|---|
1.1 |
Form of Notes Underwriting Agreement |
|||||
1.2 |
Form of Equity Underwriting Agreement |
|||||
2.1# |
Second Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code of the Registrant and its Subsidiaries, dated as of April
20, 2004 |
|||||
2.2## |
Stock Purchase Agreement by and among James River Coal Company, Triad Mining, Inc. and the Stockholders of Triad Mining, Inc. dated as of
March 30, 2005 |
|||||
3.1# |
Amended and Restated Articles of Incorporation of the Registrant, as Amended |
|||||
3.2# |
Amended and Restated Bylaws of the Registrant |
|||||
4.1# |
Specimen common stock certificate |
|||||
4.2# |
Rights Agreement between the Registrant and SunTrust Bank as Rights Agent, dated as of May 25, 2004 |
|||||
4.3 |
Form
of Indenture for Senior Notes due 2012 |
|||||
5 |
Opinion and Consent of Kilpatrick Stockton LLP |
|||||
10.1# |
Registration Rights Agreement by and among the Registrant and the Shareholders identified therein, dated May 6, 2004 |
|||||
10.2# |
Loan
and Security Agreement by and among the Registrant and its Subsidiaries, the Lenders that are Signatories thereto, Wells Fargo Foothill, Inc. and
Morgan Stanley Senior Funding, Inc., dated as of May 6, 2004 |
|||||
10.3# |
$75,000,000 Term Loan Agreement by and among the Registrant and its Subsidiaries, the Lenders from time to time party thereto and BNY Asset
Solutions LLC, dated as of May 6, 2004 |
|||||
10.4*# |
Employment Agreement between the Registrant and Peter T. Socha, dated as of May 7, 2004 |
|||||
10.5*# |
2004
Equity Incentive Plan of the Registrant |
|||||
10.6# |
Form
of Indemnification Agreement between the Registrant and its officers and directors |
|||||
10.7**# |
Agreement for Purchase and Sale of Coal among Georgia Power Company, the Registrant and James River Coal Sales, Inc., dated as of March 11,
2004 |
|||||
10.8**# |
Fuel
Supply Agreement #141944 between South Carolina Public Service Authority and the Registrant, dated as of March 1, 2004 |
|||||
12 |
Computation of Ratio of Earnings to Fixed Charges |
|||||
21# |
Subsidiaries of the Registrant |
|||||
23.1 |
Consent of Kilpatrick Stockton LLP (included in Exhibit 5) |
|||||
23.2 |
Consent of KPMG LLP |
|||||
23.3## |
Consent of Marshall Miller & Associates, Inc. |
|||||
23.4 |
Consent of KPMG LLP |
|||||
24## |
Power of Attorney (see signature page) |
|||||
25## |
Statement of Eligibility of Trustee on Form T-1 |
* | Management contract or compensatory plan or arrangement. |
** | Portions of these documents have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment of the omitted portions. |
# | Previously filed as an exhibit to the Registrants Registration Statement on Form S-1 (Reg. No. 333-118190) originally filed with the SEC as of August 13, 2004. |
## | Previously filed. |
II-4
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