Walter Energy Announces Third Quarter 2012 Results
BIRMINGHAM, AL -- (Marketwire) -- 11/05/12 -- Walter Energy Inc. (NYSE: WLT) (TSX: WLT)
- Reports net loss of $1.1 billion including non-cash impairment charges
- Reports third quarter revenues of $612 million; Adjusted EBITDA of $117 million
- Earns adjusted net income of $30 million, excluding impairment charges
- Produces 3.33 million metric tons of metallurgical coal, up 47% from third quarter 2011
Walter Energy Inc. (NYSE: WLT) (TSX: WLT), the world's leading, publicly traded "pure-play" producer of metallurgical (met) coal for the global steel industry, today announced results for the third quarter ended September 30, 2012.
Revenues were $612 million in the third quarter of 2012 down from $689 million in the third quarter of 2011 due principally to lower pricing and softening world demand. In the third quarter of 2012, the Company reported a net loss of $1.1 billion or $16.97 loss per diluted share. This loss includes estimated non-cash goodwill impairment charges of $1.1 billion or $17.05 per share primarily related to the 2011 acquisition of Western Coal and a charge of $40 million associated with the abandonment of a natural gas exploration project. Adjusted net income and adjusted EBITDA excluding these non-cash charges were $29.8 million or $0.48 per share and $117 million, respectively. Results for the third quarter also included a $41 million tax benefit.
"Our operational results in the third quarter were encouraging as we improved metallurgical coal production 14% as compared to the second quarter, while lowering cash costs of production," said Walt Scheller, Chief Executive Officer. "However, the recovery in the global economy and metallurgical coal markets is uncertain. As a result we are focusing on achieving further cost reductions, tightly managing capital spending and reducing marginal production in order to improve our results and be well positioned going into 2013."
Metallurgical Sales Volume and Pricing
Third quarter of 2012 met coal sales volume including both hard coking coal (HCC) and low-volatility (low-vol) PCI was 2.62 million metric tons (MMTs), or 8% less than in the second quarter. Sales were impacted by weaker worldwide demand and excess supply. HCC sales volume was 2.18 MMTs in the third quarter of 2012 compared to 2.29 MMTs in the second quarter. PCI sales volume was 0.44 MMTs, down from 0.55 MMTs in the prior quarter.
The average third quarter 2012 selling price of HCC (primarily low-vol and mid-vol) was $198 per metric ton (MT), which was slightly lower than the second quarter's average price of $201 per MT. The average selling price for low-vol PCI was $160 per MT as compared to $164 per MT in the second quarter.
Metallurgical Coal Production
Met coal production was 3.33 MMTs in the third quarter of 2012, comprised of 2.37 MMTs of HCC and 0.96 MMTs of low-vol PCI. Met coal production increased 47% from the 2.27 MMTs produced in the third quarter 2011 and was 14% higher than the 2.91 MMTs produced in the second quarter of 2012.
Canadian operations increased production to a quarterly record 1.61 MMTs in the third quarter of 2012, compared to 1.19 MMTs in the second quarter. Weak worldwide demand for PCI coal, however, resulted in a significant increase in the Company's inventory levels in the third quarter. The Company plans on reducing production and inventory during the fourth quarter.
Cash Cost of Sales
The consolidated cash cost of sales for HCC was $122 per MT in the third quarter compared to $115 per MT in the second quarter of 2012. In U.S. operations, the cash cost of sales for HCC increased to $119 per MT in the third quarter, up from $107 per MT in the second quarter. The U.S. operations sold a higher proportion of higher cost Mine No 4 production in the quarter which had a negative impact on cost per MT. In Canada, the cash costs of sales for HCC decreased 2% to $142 per MT in the third quarter of 2012, as compared with $144 per MT in the second quarter of 2012.
Cash cost of sales for low-vol PCI decreased 16% to $183 per MT in the third quarter of 2012 as compared with $218 per MT in the second quarter 2012. The Willow Creek development mine represented 21% of the low-vol PCI production and had average cash cost of sales of $290 per MT in the third quarter. As the Willow Creek mine completed the majority of its development work in the third quarter of 2012, costs at this mine are expected to decline materially going forward.
Capital Expenditures
The Company's capital expenditures were $85 million for the third quarter of 2012 and $331 million for the first nine months of 2012. For 2013, the Company currently expects capital expenditures of approximately $220 million.
Liquidity
At the end of the third quarter 2012, available liquidity was $297 million, consisting of cash and cash equivalents of $130 million plus $167 million of availability under the Company's $375 million revolving credit facility.
Safety and Stewardship Highlights
Walter Energy's emphasis on safety continues to show results as the majority of locations are achieving lower total reportable injury rates. On a consolidated basis Walter's total reportable injury rate has decreased by 22% on a year-to-date basis as compared with 2011.
Walter is also pleased to report that in September 2012 the coal processing facility at Mine No. 4 in Alabama received a certificate of achievement in safety entitled Sentinels of Safety Award sponsored by the National Mining Association for its outstanding safety record. The processing facility achieved 156,217 employee hours worked without a lost workday injury.
Use of Non-GAAP Measures
This release contains the use of certain U.S. non-GAAP (Generally Accepted Accounting Principles) measures. These non-GAAP measures are provided as supplemental information for financial measures prepared in accordance with GAAP. Management believes that these non-GAAP measures provide additional insights into the performance of the Company, and they reflect how management analyzes Company performance and compares that performance against other companies. These non GAAP measures may not be comparable to other similarly titled measures used by other entities. A reconciliation of non-GAAP to GAAP measures is provided in the financial section of this release.
Conference Call Webcast
The Company will hold a webcast to discuss third quarter 2012 results on Tuesday, November 6, 2012, at 9 a.m. ET. To listen to the live event, visit www.walterenergy.com.
About Walter Energy
Walter Energy is the world's leading, publicly traded "pure-play" metallurgical coal producer for global industry with strategic access to high-growth steel markets in Asia, South America and Europe. The Company also produces thermal coal, anthracite, metallurgical coke and coal bed methane gas. Walter Energy employs approximately 4,400 employees and contractors with operations in the United States, Canada and United Kingdom. For more information about Walter Energy, please visit www.walterenergy.com.
Safe Harbor Statement
Except for historical information contained herein, the statements in this release are forward-looking and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and may involve a number of risks and uncertainties. Forward-looking statements are based on information available to management at the time, and they involve judgments and estimates. Forward-looking statements include expressions such as "believe," "anticipate," "expect," "estimate," "intend," "may," "plan," "predict," "will," and similar terms and expressions. These forward-looking statements are made based on expectations and beliefs concerning future events affecting us and are subject to various risks, uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control, that could cause our actual results to differ materially from those matters expressed in or implied by these forward-looking statements. The following factors are among those that may cause actual results to differ materially from our forward-looking statements: the market demand for coal, coke and natural gas as well as changes in pricing and costs; the availability of raw material, labor, equipment and transportation; changes in weather and geologic conditions; changes in extraction costs, pricing and assumptions and projections concerning reserves in our mining operations; changes in customer orders; pricing actions by our competitors, customers, suppliers and contractors; changes in governmental policies and laws, including with respect to safety enhancements and environmental initiatives; availability and costs of credit, surety bonds and letters of credit; and changes in general economic conditions. Forward-looking statements made by us in this release, or elsewhere, speak only as of the date on which the statements were made. See also the "Risk Factors" in our 2011 Annual Report on Form 10-K and subsequent filings with the SEC, which are currently available on our website at www.walterenergy.com. New risks and uncertainties arise from time to time, and it is impossible for us to predict these events or how they may affect us or our anticipated results. We have no duty to, and do not intend to, update or revise the forward-looking statements in this release, except as may be required by law. In light of these risks and uncertainties, readers should keep in mind that any forward-looking statement made in this press release may not occur. These non-GAAP measures may not be comparable to similarly titled measures used by other entities. All data presented herein is as of the date of this release unless otherwise noted.
WALTER ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
($ in thousands, except per share and share amounts)
Unaudited
For the three months
ended September 30,
------------------------
Recast
2012 2011(1)
----------- -----------
Revenues:
Sales $ 612,510 $ 683,730
Miscellaneous income (loss) (536) 5,017
----------- -----------
611,974 688,747
----------- -----------
Costs and expenses:
Cost of sales (exclusive of depreciation and
depletion) 448,765 420,690
Depreciation and depletion 82,560 57,144
Selling, general and administrative (2) 32,486 43,122
Postretirement benefits 13,213 9,764
Impairment charges (3) 1,106,715 -
----------- -----------
1,683,739 530,720
----------- -----------
Operating income (loss) (1,071,765) 158,027
Interest expense (30,545) (27,642)
Interest income 113 40
Other income (loss) (4) (943) (13,143)
----------- -----------
Income (loss) before income tax expense (1,103,140) 117,282
Income tax expense (benefit) (5) (41,184) 30,202
----------- -----------
Net income (loss) $(1,061,956) $ 87,080
=========== ===========
Net income (loss) per share:
Basic $ (16.97) $ 1.40
=========== ===========
Diluted $ (16.97) 1.39
=========== ===========
Weighted average number of shares outstanding (6) 62,572,440 62,413,694
=========== ===========
Weighted average number of diluted shares
outstanding (6) 62,572,440 62,758,658
=========== ===========
Comprehensive income (loss) $(1,054,336) $ 92,869
=========== ===========
(1) Certain previously reported three months ended September 30, 2011
balances have been recast to reflect the effects of finalizing the
allocation of the Western Coal purchase price during the 2012 first
quarter. Previously reported net income increased by $10.9 million and
diluted earnings per share increased by $0.18 per share.
(2) The 2011 third quarter includes $6.1 million of costs associated with
the acquisition of Western Coal.
(3) The 2012 third quarter includes a goodwill impairment charge of $1.1
billion and an impairment charge of $40.0 million associated with the
abandonment of a natural gas exploration project.
(4) The 2012 and 2011 third quarters primarily consist of losses on the sale
and remeasurement to fair value of equity investments.
(5) The Company recognized an income tax benefit of $41.2 million for the
three months ended September 30, 2012, compared to a tax provision of
$30.2 million for the three months ended September 30, 2011. For the
2012 third quarter, the Company determined the current year income tax
provision for Canada, U.K. and West Virginia operations using actual
year-to-date financial results as compared to the estimated annual
effective tax rate method utilized in 2011 resulting in a tax benefit.
The current year income tax provision for the Alabama operations
continues to be based upon an estimated annual effective tax rate
method. The decrease in income tax expense is primarily due to the
pretax operating loss for the three months ended September 30, 2012 as
compared to pretax operating income for the same period of 2011.
(6) In periods of net loss, the number of shares used to calculate diluted
earnings per share is the same as that used to calculate basic earnings
per share.
WALTER ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
($ in thousands, except per share and share amounts)
Unaudited
For the nine months
ended September 30,
------------------------
Recast
2012 2011(1)
----------- -----------
Revenues:
Sales $ 1,908,413 $ 1,854,892
Miscellaneous income 12,698 13,460
----------- -----------
1,921,111 1,868,352
----------- -----------
Costs and expenses:
Cost of sales (exclusive of depreciation and
depletion) 1,366,383 1,105,224
Depreciation and depletion 223,512 157,972
Selling, general and administrative (2) 104,578 132,525
Postretirement benefits 39,639 30,374
Impairment charges (3) 1,106,715 -
----------- -----------
2,840,827 1,426,095
----------- -----------
Operating income (loss) (919,716) 442,257
Interest expense (89,716) (63,245)
Interest income 731 356
Other income (loss) (4) (13,855) 11,360
----------- -----------
Income (loss) from continuing operations before
income tax expense (1,022,556) 390,728
Income tax expense (benefit) (5) (27,972) 107,382
----------- -----------
Income (loss) from continuing operations (994,584) 283,346
Income from discontinued operations (6) 5,180 -
----------- -----------
Net income (loss) $ (989,404) $ 283,346
=========== ===========
Basic income (loss) per share:
Income (loss) from continuing operations $ (15.91) $ 4.75
Income from discontinued operations 0.09 -
----------- -----------
Net income (loss) $ (15.82) $ 4.75
=========== ===========
Weighted average number of shares outstanding (7) 62,523,798 59,601,241
=========== ===========
Diluted income (loss) per share:
Income (loss) from continuing operations $ (15.91) $ 4.72
Income from discontinued operations 0.09 -
----------- -----------
Net income (loss) $ (15.82) $ 4.72
=========== ===========
Weighted average number of diluted shares
outstanding (7) 62,523,798 59,972,442
=========== ===========
Comprehensive income (loss) $ (978,418) $ 289,061
=========== ===========
(1) Includes the results of Western Coal since the April 1, 2011 date of
acquisition. Certain previously reported nine months ended September 30,
2011 balances have been recast to reflect the effects of finalizing the
allocation of the Western Coal purchase price during the 2012 first
quarter. Previously reported net income increased by $18.0 million and
diluted earnings per share increased by $0.29 per share.
(2) The 2011 period includes $23.1 million of costs associated with the
acquisition of Western Coal.
(3) The 2012 third quarter includes a goodwill impairment charge of $1.1
billion and an impairment charge of $40.0 million associated with the
abandonment of a natural gas exploration project.
(4) The 2012 period includes losses on the sale and remeasurement to fair
value of equity investments. The 2011 period includes a gain recognized
on April 1, 2011 of $20.6 million as a result of remeasuring to fair
value Western Coal shares acquired from Audley Capital in January 2011,
partially offset by a net loss on the sale and remeasurement to fair
value of our other equity investments.
(5) The Company recognized an income tax benefit of $28.0 million for the
nine months ended September 30, 2012, compared to a tax provision of
$107.4 million for the nine months ended September 30, 2011. For the
nine months ended September 30, 2012, the Company determined the current
year income tax provision for Canada, U.K. and West Virginia operations
using actual year-to-date financial results as compared to the estimated
annual effective tax rate method utilized in 2011 resulting in a tax
benefit. The current year income tax provision for the Alabama
operations continues to be based upon an estimated annual effective tax
rate method. The decrease in income tax expense is primarily due to the
pretax operating loss for the nine months ended September 30, 2012 as
compared to pretax operating income for the same period of 2011.
(6) Discontinued operations includes the gain on the sale of our closed
Kodiak operations, net of tax.
(7) In periods of net loss, the number of shares used to calculate diluted
earnings per share is the same as that used to calculate basic earnings
per share.
WALTER ENERGY, INC. AND SUBSIDIARIES
RESULTS BY OPERATING SEGMENT
($ in thousands)
Unaudited
For the three months For the nine months
ended September 30, ended September 30,
------------------------ ------------------------
Recast Recast
2012 2011(1) 2012 2011(1)
----------- ----------- ----------- -----------
REVENUES:
U.S. Operations $ 483,615 $ 471,155 $ 1,402,526 $ 1,390,171
Canadian and U.K.
Operations 127,905 217,334 515,901 476,552
Other 454 258 2,684 1,629
----------- ----------- ----------- -----------
Revenues $ 611,974 $ 688,747 $ 1,921,111 $ 1,868,352
=========== =========== =========== ===========
OPERATING INCOME (LOSS)
BEFORE IMPAIRMENT
CHARGES:
U.S. Operations $ 92,053 $ 120,078 $ 306,279 $ 432,184
Canadian and U.K.
Operations (44,256) 52,361 (82,490) 71,161
Other (2) (12,847) (14,412) (36,790) (61,088)
----------- ----------- ----------- -----------
Operating income
(loss) before
impairment charges $ 34,950 $ 158,027 $ 186,999 $ 442,257
=========== =========== =========== ===========
OPERATING INCOME (LOSS):
U.S. Operations $ (22,228) $ 120,078 $ 191,998 $ 432,184
Canadian and U.K.
Operations (1,036,690) 52,361 (1,074,924) 71,161
Other (2) (12,847) (14,412) (36,790) (61,088)
----------- ----------- ----------- -----------
Operating income
(loss) $(1,071,765) $ 158,027 $ (919,716) $ 442,257
=========== =========== =========== ===========
DEPRECIATION AND
DEPLETION:
U.S. Operations $ 44,789 $ 43,546 $ 130,635 $ 110,750
Canadian and U.K.
Operations 37,305 13,408 91,976 46,651
Other 466 190 901 571
----------- ----------- ----------- -----------
Depreciation and
depletion $ 82,560 $ 57,144 $ 223,512 $ 157,972
=========== =========== =========== ===========
CAPITAL EXPENDITURES:
U.S. Operations $ 41,670 $ 41,435 $ 121,633 $ 126,543
Canadian and U.K.
Operations 43,419 115,426 205,776 166,837
Other 195 99 3,931 (3)
----------- ----------- ----------- -----------
Capital expenditures $ 85,284 $ 156,960 $ 331,340 $ 293,377
=========== =========== =========== ===========
(1) Includes the results of Western Coal since the April 1, 2011 date of
acquisition. Certain previously reported three and nine months ended
September 30, 2011 balances have been recast to reflect the effects of
finalizing the allocation of the Western Coal purchase price during the
2012 first quarter.
(2) Amounts for the three and nine months ended September 30, 2011 include
$6.1 million and $23.1 million, respectively, of costs associated with
the April 1, 2011 acquisition of Western Coal.
WALTER ENERGY, INC. AND SUBSIDIARIES
QUARTERLY STATISTICAL RESULTS BY OPERATING SEGMENT AND MAJOR PRODUCT
(Ton information in thousand metric tons and dollars in USD)
Consolidated Statistical Information by Major Product
3 months
3 months ended
ended September 30, 3 months
September 30, 2011, Recast ended June
2012 (1) 30, 2012
------------- ------------- -------------
Total Metallurgical
Sales Metric Tons 2,623 2,153 2,842
Production Metric Tons 3,325 2,266 2,910
Average Net Selling Price $ 191.34 $ 249.84 $ 193.31
Average Cash Cost per Ton (2)(3) $ 133.55 $ 135.76 $ 135.15
Hard Coking
Sales Metric Tons 2,183 1,588 2,290
Production Metric Tons 2,362 1,678 2,190
Production Metric Tons -
Willow Creek (4) 90 - 14
Production Metric Tons - All
other 2,272 1,678 2,176
Average Net Selling Price $ 197.58 $ 262.89 $ 200.50
Average Cash Cost per Ton (2)(3) $ 122.06 $ 132.00 $ 115.29
Average Cash Cost per Ton -
Willow Creek (2)(3)(4) $ 329.41 $ - $ -
Average Cash Cost per Ton -
All other (2)(3) $ 117.52 $ 132.00 $ 115.29
Low Vol PCI
Sales Metric Tons 440 565 552
Production Metric Tons 963 587 720
Production Metric Tons -
Willow Creek (4) 198 216 154
Production Metric Tons - All
other 765 371 566
Average Net Selling Price $ 160.37 $ 213.13 $ 163.51
Average Cash Cost per Ton (2)(3) $ 182.76 $ 146.34 $ 217.50
Average Cash Cost per Ton -
Willow Creek (2)(3)(4) $ 289.67 $ 149.88 $ 258.86
Average Cash Cost per Ton -
All other (2)(3) $ 129.19 $ 144.48 $ 203.32
Thermal
Sales Metric Tons 937 1,337 891
Production Metric Tons 813 1,359 925
Average Net Selling Price $ 67.51 $ 72.31 $ 69.40
Average Cash Cost per Ton (2)(3) $ 56.05 $ 63.51 $ 66.17
US Segment Statistical Information by Major Product
3 months
3 months ended
ended September 30, 3 months
September 30, 2011, Recast ended June
2012 (1) 30, 2012
------------- ------------- -------------
Hard Coking
Sales Metric Tons 1,880 1,232 1,784
Production Metric Tons 1,721 1,307 1,724
Average Net Selling Price $ 196.41 $ 261.76 $ 194.10
Average Cash Cost per Ton (2)(3) $ 118.91 $ 125.07 $ 107.15
Thermal
Sales Metric Tons 927 1,302 871
Production Metric Tons 805 1,329 908
Average Net Selling Price $ 67.00 $ 71.17 $ 68.11
Average Cash Cost per Ton (2)(3) $ 55.27 $ 61.58 $ 65.33
Canada and UK Segment Statistical Information by Major Product
3 months
3 months ended
ended September 30, 3 months
September 30, 2011, Recast ended June
2012 (1) 30, 2012
------------- ------------- -------------
Total Metallurgical
Sales Metric Tons 743 921 1,058
Production Metric Tons 1,605 958 1,187
Average Net Selling Price $ 178.49 $ 233.90 $ 191.99
Average Cash Cost per Ton (2)(3) $ 165.98 $ 150.07 $ 182.34
Hard Coking
Sales Metric Tons 303 356 506
Production Metric Tons 641 371 466
Production Metric Tons -
Willow Creek (4) 90 - 14
Production Metric Tons - All
other 551 371 452
Average Net Selling Price $ 204.82 $ 266.81 $ 223.06
Average Cash Cost per Ton (2)(3) $ 141.58 $ 155.98 $ 143.98
Average Cash Cost per Ton -
Willow Creek (2)(3)(4) $ 329.41 $ - $ -
Average Cash Cost per Ton -
All other (2)(3) $ 107.27 $ 155.98 $ 143.98
Low Vol PCI
Sales Metric Tons 440 565 552
Production Metric Tons 963 587 552
Production Metric Tons -
Willow Creek (4) 198 216 154
Production Metric Tons - All
other 765 371 566
Average Net Selling Price $ 160.37 $ 213.13 $ 163.51
Average Cash Cost per Ton (2)(3) $ 182.76 $ 146.34 $ 217.50
Average Cash Cost per Ton -
Willow Creek (2)(3)(4) $ 289.67 $ 149.88 $ 258.86
Average Cash Cost per Ton -
All other (2)(3) $ 129.19 $ 144.48 $ 203.32
Thermal
Sales Metric Tons 10 35 20
Production Metric Tons 9 30 17
Average Net Selling Price $ 117.55 $ 115.07 $ 126.61
Average Cash Cost per Ton (2)(3) $ 131.48 $ 136.46 $ 103.40
(1) Certain previously reported three months ended September 30, 2011
statistical information have been recast to reflect the effects of
finalizing the allocation of the Western Coal purchase price during the
2012 first quarter.
(2) Average Cash Cost per Ton is based on reported Cost of Sales and
includes items such as freight, royalties, manpower, fuel and other
similar production and sales cost items but excludes depreciation,
depletion and post retirement benefits. Average Cash Cost per Ton is a
non-GAAP financial measure which is not calculated in conformity with
U.S. Generally Accepted Accounting Principles (GAAP) and should be
considered supplemental to, and not as a substitute or superior to
financial measures calculated in conformity with GAAP. We believe Cash
Cost per Ton is a useful measure as our management uses that as a
measure of performance and we believe it aids some investors and
analysts in comparing us against other companies to help analyze our
current and future potential performance.
(3) Reconciliation of Cash Cost per Ton to Cost of Sales as disclosed (in
thousands USD):
3 months
3 months ended 3 months
ended September 30, ended June
September 30, 2011 Actual, 30, 2012
2012 Actual Recast (1) Actual
------------- ------------- -------------
Cash Costs as calculated from
above (sales tons times average
cash cost per ton) $ 399,382 $ 377,172 $ 443,023
Cash Costs of other products 49,383 43,518 43,061
------------- ------------- -------------
Total Cost of Sales $ 448,765 $ 420,690 $ 486,084
============= ============= =============
(4) Production and Average Cash Cost per Ton for our Willow Creek mining
operations are separately provided for the current quarter as the Willow
Creek mine is in the development stage and is experiencing higher
average cash cost per ton than the other Canada mines.
(5) During the current quarter, in our Canadian and U.K. operations certain
metrics around tons included production were realigned to align with how
we account for production in the U.S. operations. Historically, the
Canadian and U.K. operations were not recording tons produced until they
were deemed finished goods. We have revised this methodology to include
all tons mined, no matter if in process or finished, as produced based
on a clean coal tonnage equivalent. The reconciliation below provides a
comparison of production statistics of the earlier methodology as
compared with the realigned methodology from the Western Coal
acquisition date of April 1, 2011 through June 30, 2012 (in thousands
UD):
3 3 3
months months months
ended 3 months 3 months ended ended
June ended ended March June Post
30, September December 31, 30, Acquisition
As reported 2011 30, 2011 31, 2011 2012 2012 Cumulative
------ --------- -------- ------ ------ -----------
Hard Coking Coal
Production Metric
Tons
Production Metric
Tons - Willow
Creek (4) - - - - - -
Production Metric
Tons - All other 347 371 391 408 466 1,983
Low Vol PCI
Production Metric
Tons
Production Metric
Tons - Willow
Creek (4) 178 216 156 120 154 824
Production Metric
Tons - All other 317 371 411 466 566 2,131
------ --------- -------- ------ ------ -----------
Total Metallurgical 842 958 958 994 1,186 4,938
------ --------- -------- ------ ------ -----------
As restated
Hard Coking Coal
Production Metric
Tons
Production Metric
Tons - Willow
Creek (4) - - - - - -
Production Metric
Tons - All other 347 374 389 414 536 2,060
Low Vol PCI
Production Metric
Tons
Production Metric
Tons - Willow
Creek (4) 181 213 155 116 154 819
Production Metric
Tons - All other 481 461 334 495 286 2,057
------ --------- -------- ------ ------ -----------
Total Metallurgical 1,009 1,048 878 1,025 976 4,936
------ --------- -------- ------ ------ -----------
Difference in
production metric
tons reported 167 90 (80) 31 (210) (2)
====== ========= ======== ====== ====== ===========
WALTER ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in thousands)
Unaudited
As of
----------------------------
Recast
September 30, December 31,
2012 2011(1)
------------- -------------
ASSETS
Cash and cash equivalents $ 129,922 $ 128,430
Receivables, net 229,725 313,343
Inventories 374,239 240,437
Deferred income taxes 43,468 61,079
Prepaid expenses 67,066 49,974
Other current assets 22,096 45,649
------------- -------------
Total current assets 866,516 838,912
Mineral interests, net 2,980,924 3,056,258
Property, plant and equipment, net 1,745,225 1,631,333
Deferred income taxes 144,604 109,300
Goodwill - 1,066,754
Other long-term assets 135,720 153,951
------------- -------------
TOTAL ASSETS $ 5,872,989 $ 6,856,508
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current debt $ 69,327 $ 56,695
Accounts payable 188,741 112,661
Accrued expenses 239,934 229,067
Accumulated postretirement benefits obligation 28,648 27,247
Other current liabilities 42,188 63,757
------------- -------------
Total current liabilities 568,838 489,427
Long-term debt 2,278,214 2,269,020
Deferred income taxes 951,835 1,029,336
Accumulated postretirement benefits obligation 559,438 550,671
Other long-term liabilities 374,463 381,537
------------- -------------
TOTAL LIABILITIES 4,732,788 4,719,991
STOCKHOLDERS' EQUITY 1,140,201 2,136,517
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 5,872,989 $ 6,856,508
============= =============
(1) The December 31, 2011 balance sheet has been recast to reflect the
effects of finalizing the allocation of the Western Coal purchase price
during the 2012 first quarter. Retained earnings, a component of
stockholders' equity, was increased by $14.4 million, primarily due to a
decrease in mineral interests depletion net of income tax expense
related to 2011.
WALTER ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012
($ in thousands, except per share amounts)
Unaudited
Retained Accumulated
Capital in Earnings Other
Common Excess of (Accumulated Comprehensive
Total Stock Par Value Deficit) Income (Loss)
---------- ------ ---------- ------------ -------------
Balance at
December 31,
2011, recast (1) $2,136,517 $ 624 $1,620,430 $ 744,939 $ (229,476)
Net loss (989,404) (989,404)
Other
comprehensive
income, net of
tax 10,986 10,986
Stock issued upon
the exercise of
stock options 140 1 139
Dividends paid,
$0.375 per share (23,432) (23,432)
Stock-based
compensation 5,356 5,356
Excess tax
benefits from
stock-based
compensation
arrangements 805 805
Other (767) - - (767)
---------- ------ ---------- ------------ -------------
Balance at
September 30,
2012 $1,140,201 $ 625 $1,626,730 $ (268,664) $ (218,490)
========== ====== ========== ============ =============
(1) Retained earnings as of December 31, 2011 has been recast to reflect the
effects of finalizing the allocation of the Western Coal purchase price.
The balance was increased by $14.4 million primarily due to a decrease
in mineral interests depletion net of income tax expense related to
2011.
WALTER ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in thousands)
Unaudited
For the nine months ended
September 30,
----------------------------
Recast
2012 2011(1)
------------- -------------
OPERATING ACTIVITIES
Net income (loss) $ (989,404) $ 283,346
Less income from discontinued operations (5,180) -
------------- -------------
Income (loss) from continuing operations (994,584) 283,346
Adjustments to reconcile net income (loss) to
net cash flows provided by (used in)
operating activities:
Depreciation and depletion 223,512 157,972
Deferred income tax credit (100,419) (16,901)
Gain on investment in Western Coal Corp. - (20,553)
Impairment charges 1,106,715 -
Other 41,022 8,349
Decrease (increase) in current assets, net
of effect of business acquisitions:
Receivables 79,310 30,655
Inventories (113,601) 21,856
Prepaid expenses and other current assets (8,412) 19,496
Increase in current liabilities, net of
effect of business acquisitions:
Accounts payable 91,349 24,645
Accrued expenses and other current
liabilities 8,114 764
------------- -------------
Cash flows provided by operating
activities 333,006 509,629
------------- -------------
INVESTING ACTIVITIES
Additions to property, plant and equipment (331,340) (293,377)
Acquisition of Western Coal Corp., net of
cash acquired - (2,432,693)
Proceeds from sales of investments 12,382 27,325
Other 1,076 814
------------- -------------
Cash flows used in investing activities (317,882) (2,697,931)
------------- -------------
FINANCING ACTIVITIES
Proceeds from issuance of debt - 2,350,000
Borrowings under revolving credit agreement 272,926 41,461
Repayments on revolving credit agreement (125,396) (41,461)
Retirements of debt (128,450) (165,024)
Dividends paid (23,432) (22,236)
Net consideration paid upon exercise of
warrants (11,535) -
Debt issuance costs (6,376) (80,027)
Other 178 (1,197)
------------- -------------
Cash flows provided by (used in) financing
activities (22,085) 2,081,516
------------- -------------
Cash flows used in continuing operations (6,961) (106,786)
------------- -------------
CASH FLOWS FROM DISCONTINUED OPERATIONS
Cash flows provided by investing activities 9,500 -
------------- -------------
EFFECT OF FOREIGN EXCHANGE RATES ON CASH (1,047) (2,013)
------------- -------------
Net increase (decrease) in cash and cash
equivalents $ 1,492 $ (108,799)
============= =============
Cash and cash equivalents at beginning of
period $ 128,430 $ 293,410
Add: Cash and cash equivalents of discontinued
operations at beginning of period - 535
Net increase (decrease) in cash and cash
equivalents 1,492 (108,799)
------------- -------------
Cash and cash equivalents at end of period $ 129,922 $ 185,146
============= =============
(1) Includes the results of Western Coal since the April 1, 2011 date of
acquisition. Certain previously reported nine months ended September 30,
2011 balances have been recast to reflect the effects of finalizing the
allocation of the Western Coal purchase price during the 2012 first
quarter.
WALTER ENERGY, INC. AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
Unaudited
RECONCILIATION OF EBITDA AND ADJUSTED EBITDA TO AMOUNTS REPORTED UNDER US
GAAP:
For the three months For the nine months
ended ended
September 30, September 30,
------------------------ ------------------------
Recast Recast
($ in thousands) 2012 2011(1) 2012 2011(1)
----------- ----------- ----------- -----------
Income (loss) from
continuing operations $(1,061,956) $ 87,080 $ (994,584) $ 283,346
Add interest expense 30,545 27,642 89,716 63,245
Less interest income (113) (40) (731) (356)
Add income tax expense
(benefit) (41,184) 30,202 (27,972) 107,382
Add depreciation and
depletion expense 82,560 57,144 223,512 157,972
Earnings from continuing
operations before
interest, income taxes,
and depreciation and
depletion (EBITDA from
continuing operations)
(2) (990,148) 202,028 (710,059) 611,589
----------- ----------- ----------- -----------
Add pretax income from
discontinued operations - - 8,282 -
----------- ----------- ----------- -----------
Earnings before
interest, income taxes,
and depreciation and
depletion (EBITDA) (3) (990,148) 202,028 (701,777) 611,589
Add impairment charges 1,106,715 - 1,106,715 -
----------- ----------- ----------- -----------
Adjusted EBITDA (4) $ 116,567 $ 202,028 $ 404,938 $ 611,589
=========== =========== =========== ===========
RECONCILIATION OF ADJUSTED NET INCOME TO AMOUNTS REPORTED UNDER US GAAP:
For the three months For the nine months
ended ended
September 30, September 30,
------------------------ ------------------------
Recast Recast
($ in thousands) 2012 2011(1) 2012 2011(1)
----------- ----------- ----------- -----------
Net income (loss) $(1,061,956) $ 87,080 $ (989,404) $ 283,346
Less income from
discontinued
operations, net of tax
($3.1 million) - - (5,180) -
Add impairment charges,
net of tax ($15.0
million) 1,091,745 - 1,091,745 -
----------- ----------- ----------- -----------
Adjusted net income
(loss) (5) $ 29,789 $ 87,080 $ 97,161 $ 283,346
=========== =========== =========== ===========
(1) Includes the results of Western Coal since the April 1, 2011 date of
acquisition. Certain previously reported three and nine months ended
September 30, 2011 balances have been recast to reflect the effects of
finalizing the allocation of the Western Coal purchase price during the
2012 first quarter.
(2) EBITDA from continuing operations is defined as earnings excluding
discontinued operations before interest expense, interest income, income
taxes, and depreciation and depletion expense.
(3) EBITDA is defined as earnings before interest expense, interest income,
income taxes, and depreciation and depletion expense. EBITDA is a
financial measure which is not calculated in conformity with U.S.
Generally Accepted Accounting Principles (GAAP) and should be considered
supplemental to, and not as a substitute or superior to financial
measures calculated in conformity with GAAP. We believe that EBITDA is a
useful measure as some investors and analysts use EBITDA to compare us
against other companies and to help analyze our ability to satisfy
principal and interest obligations and capital expenditure needs. EBITDA
may not be comparable to similarly titled measures used by other
entities.
(4) Adjusted EBITDA is defined as EBITDA excluding impairment charges.
Adjusted EBITDA is not a measure of financial performance in accordance
with generally accepted accounting principles, and items excluded from
Adjusted EBITDA are significant in understanding and assessing our
financial condition. Therefore, Adjusted EBITDA should not be considered
in isolation, nor as an alternative to net income, income from
operations, cash flows from operations or as a measure of our
profitability, liquidity or performance under generally accepted
accounting principles. We believe that Adjusted EBITDA presents a useful
measure of our ability to incur and service debt based on ongoing
operations. Furthermore, analogous measures are used by industry
analysts to evaluate our operating performance. Investors should be
aware that our presentation of Adjusted EBITDA may not be comparable to
similarly titled measures used by other companies.
(5) Adjusted net income (loss) is defined as net income (loss) excluding
income from discontinued operations, net of tax, and impairment charges.
Adjusted net income (loss) is not a measure of financial performance in
accordance with generally accepted accounting principles, and items
excluded from Adjusted net income (loss) are significant in
understanding and assessing our financial condition. Therefore, Adjusted
net income (loss) should not be considered in isolation, nor as an
alternative to net income (loss) under generally accepted accounting
principles.
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Contact:
Paul Blalock
Vice President, Investor Relations
205.745.2627
paul.blalock@walterenergy.com
