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Cloud Peak Energy’s Cash Balances Fall, Leverage Is Controlled

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Capital structure remains solid

Low leverage is what separates Cloud Peak Energy (CLD) from larger peers (KOL), including Peabody Energy (BTU), Alpha Natural Resources (ANRZ), and Arch Coal (ACI). As of June 30, 2015, the company had debt of $498 million—less than total available liquidity of over $500 million. $298 million of the debt is maturing in 2019, and the remaining portion will mature in 2024. The debt-to-equity ratio, a measure of solvency, remained healthy, below 0.5x.

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So leverage isn’t a major concern for the company—unlike its peers, which are struggling to balance their debt levels and liquidity. Peabody Energy’s (BTU) debt increased by about $350 million during the quarter to reach $6.3 billion. Another highly leveraged coal producer, ANRZ, filed for bankruptcy on August 3, 2015. Arch Coal’s debt remained stable at $5.1 billion as of June 30, 2015, but its liquidity fell as the company continued to burn cash.

Liquidity falls

Cloud Peak Energy’s liquidity position declined during the quarter, as the company made a $69 million coal lease payment. The company had cash and cash equivalents of $95.5 million as of June 30, 2015—down from $168.7 million at the end of 2014. Plus, the company has access to a revolving credit facility of $500 million, which it left completely unused as of June 30, 2015. Even in the current difficult environment, the company is generating cash, adding to its liquidity. With no coal lease payments due hereafter, its operations may continue to add to its available liquidity.

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