Investors interested in Oils-Energy stocks should always be looking to find the best-performing companies in the group. Arch Resources (ARCH) is a stock that can certainly grab the attention of many investors, but do its recent returns compare favorably to the sector as a whole? Let's take a closer look at the stock's year-to-date performance to find out.Arch Resources is a member of the Oils-Energy sector. This group includes 249 individual stocks and currently holds a Zacks Sector Rank of #16. The Zacks S ...

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Financial Data and Key Metrics Changes - Arch Resources achieved an adjusted EBITDA of $126.3 million and generated $86.5 million in discretionary cash flow during Q3 2023 [5][6] - The company repurchased nearly 216,000 shares for $28.2 million and declared a quarterly cash dividend of $21.6 million, or $1.13 per share [6][26] - Operating cash flow totaled $131 million, with a working capital benefit of $16 million, while capital spending was just over $44 million [22] Business Line Data and Key Metrics Changes - The metallurgical segment delivered higher per ton realizations and stronger cash margins, with cash costs expected to be less than $90 per ton, approximately 5% lower than 2022 [13][14] - The thermal segment performed well, with solid supplemental cash flows despite a breakeven performance at West Elk, which is expected to improve in Q4 2023 [18][19] Market Data and Key Metrics Changes - Global coking coal prices for Arch's principal product, High-Vol A coal, are assessed at $277 per metric ton, remaining strong despite weak steel market dynamics [9][10] - Coking coal exports from Australia are down by roughly 5 million tons year-to-date, contributing to supply constraints in the metallurgical coal market [10] Company Strategy and Development Direction - The company is focused on delivering operational excellence and maintaining a strong financial position while advancing sustainability practices [11][12] - The Board adjusted the capital allocation model to prioritize share repurchases over dividends, reflecting a commitment to return 100% of discretionary cash flow to shareholders [8][26] Management's Comments on Operating Environment and Future Outlook - Management noted that despite weak demand in the steel market, supply constraints in metallurgical coal could lead to future price stability [9][10] - The outlook for the thermal segment remains positive, with expectations of substantial margins on thermal export volumes in 2024 and beyond [11][18] Other Important Information - Arch's operations achieved a total loss time incident rate of 0.42 per 200,000 employee hours worked, significantly better than the industry average [20] - The company received the 2023 Excellence in Coal Mining Good Neighbor Award, highlighting its commitment to community engagement [21] Q&A Session Summary Question: Capital return policy and framework - The company plans to allocate 25% of discretionary cash flow for dividends and up to 75% for buybacks, with flexibility based on market conditions [28][29] Question: Production expectations at Leer South - Production is expected to improve, with a target of around 3 million tons annually, and potential for further increases as operations transition to better geological conditions [34][36] Question: Thermal market outlook and pricing - The company anticipates modest reductions in pricing for Powder River Basin operations in 2024, but remains confident in maintaining solid margins [39][41] Question: Coking coal shipment growth potential - The company expects to comfortably exceed 9 million tons at the midpoint for 2024, driven by improved performance at Leer South and other operations [46] Question: West Elk production levels - West Elk is expected to reach around 4 million tons annually, with potential increases to 4.5 to 5 million tons by 2025 as operations improve [52][54]

Revenue and Sales Performance - For the three months ended September 30, 2023, coal sales revenue was approximately $744.6 million, a decrease of $119.2 million or 13.8% compared to the same period in 2022[125]. - Coal sales for the first nine months of 2023 were approximately $2.37 billion, a decrease of $493.3 million or 17.2% compared to the same period in 2022[134]. - Tons sold during the same period decreased by approximately 1.1 million tons, or 5.4%, totaling 19.2 million tons[125]. - Tons sold in the first nine months of 2023 decreased to 57,066, down 2,850 tons or 4.8% from 59,916 tons in the same period of 2022[134]. - Metallurgical segment sold 2.2 million tons of coking coal in Q3 2023, up from 1.8 million tons in Q3 2022, representing a 22.2% increase[149]. - Thermal segment sold 16.8 million tons in Q3 2023, down from 18.4 million tons in Q3 2022, a decline of 8.4%[150]. Cost and Expenses - The cash cost per ton sold for the Metallurgical Segment was increased from $79-$89 to $88-$91, representing a cost increase of approximately $5.50 per ton sold[119]. - Cost of sales for Q3 2023 decreased by approximately $13.1 million, or 2.2%, compared to Q3 2022, primarily due to decreased transportation costs of approximately $29.0 million[126]. - Cost of sales for the first nine months of 2023 increased by approximately $16.7 million or 1.0% to $1.77 billion compared to $1.76 billion in 2022[136]. - Selling, general and administrative expenses decreased by approximately $6.2 million to $73.1 million in the first nine months of 2023, primarily due to decreased compensation costs[139]. - Cash cost per ton sold for the Thermal segment increased to $15.39 in Q3 2023 from $14.76 in Q3 2022, an increase of 4.3%[160]. Profitability and Financial Metrics - Adjusted EBITDA for the Metallurgical segment in Q3 2023 was $128.3 million, down from $155.2 million in Q3 2022, a decrease of 17.3%[153]. - Adjusted EBITDA for the nine months ended September 30, 2023, was $534,018, down from $1,003,906 in the same period of 2022[166]. - Cash margin per ton sold for the Metallurgical segment decreased to $54.70 in Q3 2023 from $81.07 in Q3 2022, a drop of 32.5%[160]. - The change in fair value of coal derivatives resulted in a net gain of $1.4 million in the first nine months of 2023, compared to a loss of $5.1 million in 2022[136]. - The company recorded a net loss of $1.1 million from early retirement of debt in the first nine months of 2023, compared to a loss of $14.1 million in 2022[142]. Tax and Non-Operating Expenses - Provision for income taxes in the first nine months of 2023 was $66.8 million, a decrease of $65.4 million compared to $1.4 million in 2022[143]. - Total nonoperating expenses for the first nine months of 2023 were $4.6 million, a decrease of $20.9 million compared to $16.3 million in 2022[141]. Cash Flow and Liquidity - Cash provided by operating activities decreased by approximately $561 million to $453.8 million for the nine months ended September 30, 2023, compared to $1,015.2 million in the prior year[181]. - Cash used in investing activities increased by approximately $29.4 million, primarily due to increased capital expenditures of approximately $26.5 million for maintenance capital[182]. - Cash used in financing activities declined by $372.7 million, with a decrease of approximately $355 million in overall debt payments and a reduction in dividends paid of approximately $80.8 million[182]. - The company ended Q3 2023 with cash, cash equivalents, and short-term investments totaling $213.5 million, and total liquidity of $337.2 million[169]. - The company expects to maintain minimum liquidity levels of approximately $250 million to $300 million, primarily held in cash[169]. Strategic Initiatives and Market Conditions - The ongoing Russian invasion of Ukraine continues to disrupt global coal trading patterns, affecting supply availability and pricing dynamics[114]. - The company continues to pursue strategic alternatives for its thermal assets, including potential divestiture, while shrinking its operational footprint in the Powder River Basin[122]. - Domestic thermal coal consumption was pressured by falling natural gas prices and a mild winter heating season, with firm sales commitments ensuring economic operation despite some volume deferrals[120]. - The company has committed to selling 1.8 million tons of North America priced coking coal at $182.50 per ton and 5.3 million tons of seaborne priced coking coal at $170.06 per ton for 2023[186]. - Proposed regulations under the Black Lung Benefits Act may require the company to post additional collateral, potentially impacting liquidity[171]. Capital Expenditures and Shareholder Returns - Capital expenditures for the first nine months of 2023 were approximately $121.0 million, with expectations to maintain spending at maintenance levels[169]. - A combined fixed and variable dividend payment of $1.13 per share will be made to stockholders of record as of November 30, 2023[172]. - The company repurchased shares for approximately $28.7 million during Q3 2023, bringing total repurchases to approximately $1.1 billion since the program's inception in 2017[174].

Financial Data and Key Metrics Changes - The company reported adjusted EBITDA of $130 million for Q2 2023, which was lower sequentially and compared to the previous year's second quarter due to weakened market prices for both metallurgical and thermal coal [19][20] - Operating cash flow for the quarter was $197 million, an increase of over 56% sequentially, although lower than the previous year's second quarter [20] - Discretionary cash flow for the quarter totaled $151 million, with a declared dividend of $3.97 per share [21] Business Line Data and Key Metrics Changes - Coking coal sales for the metallurgical segment totaled $2 million at $6.54 per ton for the first half of the year, with Q2 representing the strongest production quarter for Leer South to date [13][14] - The thermal segment contributed total segment-level EBITDA of $29.2 million, which was higher than initially anticipated, demonstrating excellent cost control [14] Market Data and Key Metrics Changes - Global hot metal production, excluding China, was down 2.8% through May compared to 2022, contributing to a softening in coking coal markets [9] - High-Vol A coal, the principal product, is currently trading at $210 per metric ton on the US East Coast, with demand remaining weak but prices still supporting healthy margins [10] Company Strategy and Development Direction - The company aims to enhance its position in the market by maintaining a strong cash generation capability and a robust capital return program, having returned nearly $1.2 billion to shareholders since relaunching the program in February 2022 [8][12] - The focus remains on expanding the Asian market presence, with expectations of increased demand for coking coal driven by growth in blast furnace capacity in Asia [76][78] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the current market weakness as an opportunity to differentiate the company by highlighting its low-cost position and ability to generate substantial free cash flow [83] - The company expects to return to normal operations at West Elk by Q4 after addressing localized geological challenges [65] Other Important Information - The company has maintained a perfect performance in environmental compliance, achieving zero environmental violations and a 47% reduction in CO2 equivalent emissions since 2011 [17] - The Board is committed to the capital return program, with ongoing discussions about the relative weighting of dividends versus share buybacks [9][70] Q&A Session Summary Question: Cost expectations for the metallurgical segment - Management expressed confidence in achieving cost guidance for the metallurgical segment, despite variability due to mining operations [29][30] Question: Market appetite for spot pricing - Management indicated confidence in managing the met book and remaining exposure, with ongoing efforts to optimize sales [31][33] Question: Discrepancy in asset retirement obligations - Management clarified that the funding on the asset side is primarily directed towards Black Thunder, with ongoing reclamation efforts [34][35] Question: Working capital return expectations - Management expects around $60 million to $65 million in working capital returns in the back half of the year, potentially skewed towards Q4 [43][45] Question: Performance expectations for West Elk - Management confirmed that West Elk is on track to return to normal operations by Q4, following a longwall move to a higher quality area [64][65] Question: Future market flexibility - Management indicated readiness to shift volumes to the seaborne market if it proves to be the best economic option [80]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended June 30, 2023 or ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to . Commission file number: 1-13105 Arch Resources, Inc. (Exact name of registrant as specified in its charter) Delaware 43-0921172 (State or ...

Financial Data and Key Metrics Changes - Arch Resources generated adjusted EBITDA of $277.3 million in Q1 2023, reflecting an 8% sequential increase [6] - The average cash margin for the metallurgical segment increased by over 31% sequentially, showcasing improved cash generation capabilities [7] - Discretionary cash flow reached nearly $96 million despite a working capital build of approximately $170 million [7][8] Business Line Data and Key Metrics Changes - The metallurgical segment contributed $263 million in EBITDA for Q1, marking a significant cash generation capability post the Leer South plant [15] - The thermal segment generated $46.3 million in EBITDA, despite challenges in rail service and international thermal prices [17] - The cost performance for the metallurgical segment was reported at $82.66 per ton, the best in six quarters [15] Market Data and Key Metrics Changes - Seaborne coking coal prices have declined by about 25% from $328 to $247 per metric ton due to macroeconomic concerns [10] - Global steel prices remain approximately 50% above their November lows, indicating a potential recovery in demand [11] - Coking coal supplies are constrained, with Australian exports declining by over nine million tons in 2022 [12] Company Strategy and Development Direction - The company is focused on long-term value creation through a robust capital return program, having deployed over $1 billion since its relaunch [8][9] - Arch aims to maintain a net positive cash position while simplifying its capital structure and enhancing ESG performance [14] - The strategy includes expanding the metallurgical contract book and maintaining a strong market position despite price fluctuations [21] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the long-term demand for coking coal, citing supply constraints and increasing steel demand [13] - The company anticipates a modest contribution from the thermal segment in Q2 due to geological challenges but expects a return to normalcy in Q4 [20] - Management remains focused on operational excellence and cost management, with expectations for continued improvements in the metallurgical segment [15][34] Other Important Information - The company declared a quarterly dividend of $47.8 million or $2.45 per share, reflecting its commitment to shareholder returns [8] - Arch has maintained a strong safety record, with zero environmental violations reported in Q1 [22][23] Q&A Session Summary Question: Outlook on met-coal costs and potential improvements - Management noted that while production levels may not change significantly in Q2, they expect to achieve cost targets as volumes increase in the latter half of the year [38][39] Question: Global marginal costs and positioning on the cost curve - The company is positioned in the second quartile of the global metallurgical coal cost curve, with a significant cost advantage over competitors [41][43] Question: Thermal coal commitments for 2024 - Management indicated that they have established a solid book for 2024 at favorable pricing, despite the current market pressures [45][46] Question: Impact of geological challenges at West Elk - The company expects a reduction of about one million tons from West Elk due to geological issues but anticipates a return to normal production levels by Q4 [20][52] Question: Transportation logistics performance - The East experienced good service from railroads, while the West faced challenges, particularly in the Powder River Basin, but improvements are expected [71][72]