Alliance Resources (a minor obsession of mine) is financially the best performed coal company in America. The stock is near all time records - and distributions are large and unimpaired.
Patriot Coal is in a spectacular bankruptcy.
I thought it reasonable to compare the best of the best with the worst of the worst - just to see how different they really were - perhaps so I could pin down what made Alliance Resources special.
Here the companies are compared by tons, employees and tons per employee.
|Patriot Coal||Alliance Resources|
|tons (millions)||Employees||tons/ employees||tons (millions)||Employees||tons/ employees|
Alliance is better - it is smoother for instance - which means less hiring and firing. And it does not have the crash in productivity at the end - but that crash happened after the bankruptcy.
But it is not massively different.
It probably makes sense to use the balance sheet data from 2011 (before multiple restatements) rather than 2012 to examine Patriot because that was before the bankruptcy mucked everything up. In those days Patriot was still humming along (admittedly in some distress).
Patriot had considerably less machinery but more "buildings and improvements" than Alliance. That figures - some of Patriot's operations were open-cut whereas Alliance is entirely an underground miner. Open-cut mining involves lots of "improvements" (although some would argue removing hills does not constituted improvement.)
Patriot produced far better coal. Some of their coal was metallurgical - and most was lower sulfur. This coal should get a massive premium price - so that is one in favor of Patriot.
Patriot had in 2011 way less debt than Alliance has now. This is kind of amazing - you can go spectacularly bankrupt with an operation this size and this level of productivity.
The main difference is in the size of other balance sheet liabilities. Patriot had $238 million in workers compensation obligations (2011) versus Alliance having only $68 million (2012). Even more pronounced is the post-retirement obligations where Patriot had $1387 million (2011) versus Alliance at a mere $31 million. Alliance might say that this was the benefit of a non-unionized workforce but if that is the case then union concessions would be enough to revive Patriot (and that does not look likely).
There is quite a deal that is strange and unusual about this story.