James River Coal Company Reports Third Quarter 2012 Operating Results
RICHMOND, Va., Nov. 7, 2012 /PRNewswire/ -- James River Coal Company (NASDAQ: JRCC), today announced that it had net loss of $20.6 million or $0.59 per diluted share for the third quarter of 2012 and net loss of $62.0 million or $1.78 per diluted share for the nine months ended September 30, 2012. Included in the third quarter results is a gain of $22.2 million from the repurchase of outstanding notes in open market purchases. The 2012 results are compared to net loss of $3.7 million or $.11 per diluted share for the third quarter of 2011 and net loss of $10.5 million or $0.33 per diluted share for the nine months ended September 30, 2011.
Peter T. Socha, Chairman and Chief Executive Officer commented: "We are very pleased to have the uncertainty of the U.S. presidential election behind us. We believe that this issue caused a temporary slowdown in economic growth both in the United States and globally. The slowdown in growth, combined with warm weather last winter, has contributed to an unusually weak market for thermal and metallurgical coal. Hopefully, this condition will be corrected shortly.
"Despite the soft coal markets, we continue to be pleased with the performance of our mine operations team. They made a series of adjustments to their operating plans in response to the current markets. In the financial area, we decided to take the opportunity to reduce our debt at very advantageous market prices due to external events. We believe that we were able to successfully balance our desire for a strong and liquid balance sheet with a window of opportunity that was available to us."
FINANCIAL RESULTS
The following tables show selected operating results for the quarter and nine months ended September 30, 2012 compared to the quarter and nine months ended September 30, 2011 (in 000's except per ton amounts).
Total Results | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||||
Total | Per Ton | Total | Per Ton | Total | Per Ton | Total | Per Ton | ||||||||||
Company and contractor production (tons) | 2,229 | 2,816 | 7,571 | 7,578 | |||||||||||||
Coal purchased from other sources (tons) | 631 | 284 | 1,428 | 896 | |||||||||||||
Total coal available to ship (tons) | 2,860 | 3,100 | 8,999 | 8,474 | |||||||||||||
Coal shipments (tons) | 3,164 | 3,163 | 9,125 | 8,497 | |||||||||||||
Coal sales revenue | $ 264,633 | 83.64 | $ 291,575 | 92.18 | $ 804,024 | 88.11 | $ 783,612 | 92.22 | |||||||||
Freight and handling revenue | 23,469 | 7.42 | 12,283 | 3.88 | 63,421 | 6.95 | 36,865 | 4.34 | |||||||||
Cost of coal sold | 244,365 | 77.23 | 245,240 | 77.53 | 705,568 | 77.32 | 642,167 | 75.58 | |||||||||
Freight and handling costs | 23,469 | 7.42 | 12,283 | 3.88 | 63,421 | 6.95 | 36,865 | 4.34 | |||||||||
Depreciation, depletion, & amortization | 35,518 | 11.23 | 31,234 | 9.87 | 98,152 | 10.76 | 75,479 | 8.88 | |||||||||
Gross profit (loss) | (15,250) | (4.82) | 15,101 | 4.77 | 304 | 0.03 | 65,966 | 7.76 | |||||||||
Selling, general & administrative | 14,672 | 4.64 | 16,344 | 5.17 | 45,504 | 4.99 | 40,525 | 4.77 | |||||||||
Acquisition costs | - | - | - | 8,504 | |||||||||||||
Adjusted EBITDA plus acquisition costs (1) | $ 7,556 | 2.39 | $ 32,265 | 10.20 | $ 59,638 | 6.54 | $ 110,416 | 12.99 | |||||||||
(1) | Adjusted EBITDA plus acquisition costs is defined under "Reconciliation of Non-GAAP Measures" in this release. | ||||||||||||||||
Adjusted EBITDA is used to determine compliance with financial covenants in our revolving credit facility. | |||||||||||||||||
Segment Results | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||||
CAPP | Total | Per Ton | Total | Per Ton | Total | Per Ton | Total | Per Ton | |||||||||
Company and contractor production (tons) | 1,607 | 2,225 | 5,784 | 5,703 | |||||||||||||
Coal purchased from other sources (tons) | 631 | 284 | 1,428 | 896 | |||||||||||||
Total coal available to ship (tons) | 2,238 | 2,509 | 7,212 | 6,599 | |||||||||||||
Coal shipments (tons) | |||||||||||||||||
Steam (tons) | 1,540 | 1,983 | 4,716 | 5,257 | |||||||||||||
Metallurgical (tons) | 1,007 | 582 | 2,632 | 1,343 | |||||||||||||
Total Shipments (tons) | 2,547 | 2,565 | 7,348 | 6,600 | |||||||||||||
Coal sales revenue | |||||||||||||||||
Steam | $ 122,116 | 79.30 | $ 174,325 | 87.91 | $ 391,211 | 82.95 | $ 477,742 | 90.88 | |||||||||
Metallurgical | 115,104 | 114.30 | 90,434 | 155.38 | 333,859 | 126.85 | 225,078 | 167.59 | |||||||||
Total coal sales revenue | 237,220 | 93.14 | 264,759 | 103.22 | 725,070 | 98.68 | 702,820 | 106.49 | |||||||||
Freight and handling revenue | 23,105 | 9.07 | 11,757 | 4.58 | 61,575 | 8.38 | 35,073 | 5.31 | |||||||||
Cost of coal sold | $ 221,961 | 87.15 | $ 221,482 | 86.35 | $ 638,266 | 86.86 | $ 570,975 | 86.51 | |||||||||
Freight and handling costs | 23,105 | 9.07 | 11,757 | 4.58 | 61,575 | 8.38 | 35,073 | 5.31 | |||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||||
Midwest | Total | Per Ton | Total | Per Ton | Total | Per Ton | Total | Per Ton | |||||||||
Company and contractor production (tons) | 622 | 591 | 1,787 | 1,875 | |||||||||||||
Coal purchased from other sources (tons) | - | - | - | - | |||||||||||||
Total coal available to ship (tons) | 622 | 591 | 1,787 | 1,875 | |||||||||||||
Coal shipments (tons) | 617 | 598 | 1,777 | 1,897 | |||||||||||||
Coal sales revenue | $ 27,413 | 44.43 | $ 26,816 | 44.84 | $ 78,954 | 44.43 | $ 80,792 | 42.59 | |||||||||
Freight and handling revenue | 364 | 0.59 | 526 | 0.88 | 1,846 | 1.04 | 1,792 | 0.94 | |||||||||
Cost of coal sold | $ 22,404 | 36.31 | $ 23,758 | 39.73 | $ 67,302 | 37.87 | $ 71,192 | 37.53 | |||||||||
Freight and handling costs | 364 | 0.59 | 526 | 0.88 | 1,846 | 1.04 | 1,792 | 0.94 | |||||||||
LIQUIDITY AND CASH FLOW
As of September 30, 2012, the Company had available liquidity of $171.7 million calculated as follows (in millions):
Unrestricted Cash | $ | 151.4 | ||
Availability under the Revolver | 81.2 | |||
Letters of Credit Issued under the Revolver | (60.9) | |||
Available Liquidity | $ | 171.7 | ||
Restricted Cash | $ | 29.6 | ||
Capital expenditures for the third quarter were $20.6 million and $66.5 million for the nine months ended September 30, 2012.
During the third quarter of 2012, the Company repurchased $53.7 million of its outstanding debt, consisting of $5.0 million principal amount of the 2019 Senior Notes, $19.9 million principal amount of the 2018 Convertible Senior Notes and $28.8 million principal amount of the 2015 Convertible Senior Notes. The debt repurchases were made at a cost of $20.9 million, plus accrued interest of $0.8 million, in open market purchases. The repurchases resulted in a gain of $22.2 million, which includes the write-off of $0.9 million of financing costs. Additionally, in October 2012, the Company repurchased an additional $7.7 million its outstanding debt at a cost of $2.9 million, in open market purchases, consisting of $5.2 million principal amount of the 2018 Convertible Senior Notes and $2.5 million principal amount of the 2015 Convertible Senior Notes.
SALES POSITION
As of November 6, 2012, we had the following agreements to ship coal at a fixed and known price (in 000's except per ton amounts):
2013 Priced | ||||||||
As of August 8, 2012 | As of November 6, 2012 | Change | ||||||
Tons | Avg Price Per Ton | Tons | Avg Price Per | Tons | Avg Price Per | |||
CAPP (1) | 1,337 | $ 79.32 | 3,405 | $ 74.04 | 2,068 | $ 70.63 | ||
Midwest (2) | 2,140 | $ 45.35 | 2,342 | $ 45.25 | 202 | $ 44.19 | ||
2014 Priced | ||||||||
As of August 8, 2012 | As of November 6, 2012 | Change | ||||||
Tons | Avg Price Per Ton | Tons | Avg Price Per | Tons | Avg Price Per | |||
CAPP (1) | 300 | $ 75.75 | 300 | $ 75.75 | - | $ - | ||
Midwest (2)(3) | 700 | $ 49.00 | 900 | $ 47.64 | 200 | $ 42.88 | ||
(1) Priced tons in CAPP in 2013 do not include approximately 1,100,000 tons of met coal that have been sold but not yet priced. | ||||||||
(2) The prices for the Midwest are minimum base price amounts adjusted for projected fuel escalators. | ||||||||
(3) 200,000 tons of 2012 coal moved to 2014. | ||||||||
CONFERENCE CALL, WEBCAST AND REPLAY: The Company will hold a conference call with management to discuss the quarterly earnings November 7, 2012 at 11:00 a.m. Eastern Time. The conference call can be accessed by dialing 877-340-2553, or through the James River Coal Company website at http://www.jamesrivercoal.com/. International callers, please dial 678-224-7860. A replay of the conference call will be available on the Company's website.
James River Coal Company is one of the leading coal producers in Central Appalachia and the Illinois Basin. The company sells metallurgical, bituminous steam and industrial-grade coal to electric utility companies and industrial customers both domestically and internationally. The Company's operations are managed through eight operating subsidiaries located throughout eastern Kentucky, southern West Virginia and southern Indiana. Additional information about James River Coal can be found at its web site www.jamesrivercoal.com
FORWARD-LOOKING STATEMENTS: Certain statements in this press release and other written or oral statements made by or on behalf of us are "forward-looking statements" within the meaning of the federal securities laws. Statements regarding future events and developments and our future performance, as well as management's expectations, beliefs, plans, estimates or projections relating to the future, are forward-looking statements within the meaning of these laws. Forward looking statements include, without limitation, statements regarding future sales and contracting activity, and projected fuel escalators. These forward-looking statements are subject to a number of risks and uncertainties. These risks and uncertainties include, but are not limited to, the following: our cash flows, results of operation or financial condition; the consummation of acquisition, disposition or financing transactions and the effect thereof on our business; our ability to successfully integrate International Resource Partners LP and its related entities (IRP); governmental policies, regulatory actions and court decisions affecting the coal industry or our customers' coal usage; legal and administrative proceedings, settlements, investigations and claims; our ability to obtain and renew permits necessary for our existing and planned operation in a timely manner; environmental concerns related to coal mining and combustion and the cost and perceived benefits of alternative sources of energy; inherent risks of coal mining beyond our control, including weather and geologic conditions or catastrophic weather-related damage; our production capabilities; availability of transportation; our ability to timely obtain necessary supplies and equipment; 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 other risks detailed in our reports filed with the Securities and Exchange Commission (SEC). Management believes that these forward-looking statements are reasonable; however, you should not place undue reliance on such statements. These statements are based on current expectations and speak only as of the date of such statements. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of future events, new information or otherwise.
JAMES RIVER COAL COMPANY | ||||||||||
September 30, 2012 | December 31, 2011 | |||||||||
Assets | (unaudited) | |||||||||
Current assets: | ||||||||||
Cash and cash equivalents | $ | 151,435 | 199,711 | |||||||
Trade receivables | 95,318 | 107,557 | ||||||||
Inventories: | ||||||||||
Coal | 37,268 | 52,717 | ||||||||
Materials and supplies | 17,754 | 17,800 | ||||||||
Total inventories | 55,022 | 70,517 | ||||||||
Prepaid royalties | 8,371 | 8,465 | ||||||||
Other current assets | 12,315 | 11,461 | ||||||||
Total current assets | 322,461 | 397,711 | ||||||||
Property, plant, and equipment, net | 877,203 | 909,294 | ||||||||
Goodwill | 26,492 | 26,492 | ||||||||
Restricted cash and short term investments | 29,624 | 29,510 | ||||||||
Other assets | 33,442 | 41,575 | ||||||||
Total assets | $ | 1,289,222 | 1,404,582 | |||||||
Liabilities and Shareholders' Equity | ||||||||||
Current liabilities: | ||||||||||
Accounts payable | $ | 75,755 | 110,557 | |||||||
Accrued salaries, wages, and employee benefits | 15,304 | 12,996 | ||||||||
Workers' compensation benefits | 9,200 | 9,200 | ||||||||
Black lung benefits | 2,512 | 2,512 | ||||||||
Accrued taxes | 6,594 | 7,563 | ||||||||
Other current liabilities | 27,055 | 27,861 | ||||||||
Total current liabilities | 136,420 | 170,689 | ||||||||
Long-term debt, less current maturities | 549,070 | 582,193 | ||||||||
Other liabilities: | ||||||||||
Noncurrent portion of workers' compensation benefits | 64,110 | 60,721 | ||||||||
Noncurrent portion of black lung benefits | 58,590 | 56,152 | ||||||||
Pension obligations | 26,461 | 29,121 | ||||||||
Asset retirement obligations | 100,105 | 94,654 | ||||||||
Other | 12,592 | 14,390 | ||||||||
Total other liabilities | 261,858 | 255,038 | ||||||||
Total liabilities | 947,348 | 1,007,920 | ||||||||
Commitments and contingencies | ||||||||||
Shareholders' equity: | ||||||||||
Preferred stock, $1.00 par value. Authorized 10,000,000 shares | - | - | ||||||||
Common stock, $.01 par value. Authorized 100,000,000 shares; issued and outstanding | ||||||||||
35,887,611 and 35,671,953 shares as of September 30, 2012 and December 31, 2011 | 359 | 357 | ||||||||
Paid-in-capital | 544,881 | 541,362 | ||||||||
Accumulated deficit | (159,656) | (97,682) | ||||||||
Accumulated other comprehensive loss | (43,710) | (47,375) | ||||||||
Total shareholders' equity | 341,874 | 396,662 | ||||||||
Total liabilities and shareholders' equity | $ | 1,289,222 | 1,404,582 | |||||||
JAMES RIVER COAL COMPANY | ||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||
September 30, | September 30, | |||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||
Revenues | ||||||||||||||
Coal sales revenue | $ | 264,633 | 291,575 | 804,024 | 783,612 | |||||||||
Freight and handling revenue | 23,469 | 12,283 | 63,421 | 36,865 | ||||||||||
Total revenue | 288,102 | 303,858 | 867,445 | 820,477 | ||||||||||
Cost of sales: | ||||||||||||||
Cost of coal sold | 244,365 | 245,240 | 705,568 | 642,167 | ||||||||||
Freight and handling costs | 23,469 | 12,283 | 63,421 | 36,865 | ||||||||||
Depreciation, depletion, and amortization | 35,518 | 31,234 | 98,152 | 75,479 | ||||||||||
Total cost of sales | 303,352 | 288,757 | 867,141 | 754,511 | ||||||||||
Gross profit (loss) | (15,250) | 15,101 | 304 | 65,966 | ||||||||||
Selling, general and administrative expenses | 14,672 | 16,344 | 45,504 | 40,525 | ||||||||||
Acquisition costs | - | - | - | 8,504 | ||||||||||
Total operating income (loss) | (29,922) | (1,243) | (45,200) | 16,937 | ||||||||||
Interest expense | 13,200 | 13,215 | 40,112 | 36,673 | ||||||||||
Interest income | (217) | (173) | (602) | (356) | ||||||||||
(Gain) loss on debt transactions | (22,231) | - | (22,231) | 740 | ||||||||||
Miscellaneous income, net | (147) | (271) | (580) | (573) | ||||||||||
Total other (income) expense, net | (9,395) | 12,771 | 16,699 | 36,484 | ||||||||||
Net loss before income taxes | (20,527) | (14,014) | (61,899) | (19,547) | ||||||||||
Income tax expense (benefit) | 25 | (10,282) | 75 | (9,000) | ||||||||||
Net loss | $ | (20,552) | (3,732) | (61,974) | (10,547) | |||||||||
Earnings (loss) per common share | ||||||||||||||
Basic earnings (loss) per common share | $ | (0.59) | (0.11) | (1.78) | (0.33) | |||||||||
Diluted earnings (loss) per common share | $ | (0.59) | (0.11) | (1.78) | (0.33) | |||||||||
JAMES RIVER COAL COMPANY AND SUBSIDIARIES | ||||||||||||||
Nine Months Ended | ||||||||||||||
September 30, | ||||||||||||||
2012 | 2011 | |||||||||||||
Cash flows from operating activities: | ||||||||||||||
Net loss | $ | (61,974) | (10,547) | |||||||||||
Adjustments to reconcile net loss to net cash provided by operating activities | ||||||||||||||
Depreciation, depletion, and amortization | 98,152 | 75,479 | ||||||||||||
Accretion of asset retirement obligations | 3,948 | 3,215 | ||||||||||||
Amortization of debt discount and issue costs | 12,914 | 10,479 | ||||||||||||
Stock-based compensation | 3,808 | 3,948 | ||||||||||||
Deferred income tax benefit | - | (10,026) | ||||||||||||
Gain on sale or disposal of property, plant and equipment | (121) | - | ||||||||||||
(Gain) loss on debt transactions | (22,231) | 740 | ||||||||||||
Changes in operating assets and liabilities: | ||||||||||||||
Receivables | 12,239 | 93,449 | ||||||||||||
Inventories | 16,084 | (1,294) | ||||||||||||
Prepaid royalties and other current assets | (760) | 3,972 | ||||||||||||
Restricted cash | (114) | (6,010) | ||||||||||||
Other assets | 5,202 | (2,808) | ||||||||||||
Accounts payable | (34,802) | (44,431) | ||||||||||||
Accrued salaries, wages, and employee benefits | 2,308 | 3,851 | ||||||||||||
Accrued taxes | (1,256) | (525) | ||||||||||||
Other current liabilities | (1,014) | 9,594 | ||||||||||||
Workers' compensation benefits | 3,389 | 2,960 | ||||||||||||
Black lung benefits | 3,596 | 2,640 | ||||||||||||
Pension obligations | (153) | (1,335) | ||||||||||||
Asset retirement obligations | (495) | (3,807) | ||||||||||||
Other liabilities | (224) | (149) | ||||||||||||
Net cash provided by operating activities | 38,496 | 129,395 | ||||||||||||
Cash flows from investing activities: | ||||||||||||||
Additions to property, plant, and equipment | (66,466) | (95,118) | ||||||||||||
Payment for acquisition, net of cash acquired | - | (515,962) | ||||||||||||
Proceeds from sale of property, plant and equipment | 610 | - | ||||||||||||
Net cash used in investing activities | (65,856) | (611,080) | ||||||||||||
Cash flows from financing activities: | ||||||||||||||
Proceeds from issuance of long-term debt | - | 505,000 | ||||||||||||
Repayment of long-term debt | (20,916) | (150,000) | ||||||||||||
Net proceeds from issuance of common stock | - | 170,545 | ||||||||||||
Debt issuance costs | - | (15,668) | ||||||||||||
Net cash (used in) provided by financing activities | (20,916) | 509,877 | ||||||||||||
Increase (decrease) in cash | (48,276) | 28,192 | ||||||||||||
Cash and cash equivalents at beginning of period | 199,711 | 180,376 | ||||||||||||
Cash and cash equivalents at end of period | $ | 151,435 | 208,568 | |||||||||||
|
EBITDA is used by management to measure operating performance. We define EBITDA as net income or loss plus interest expense (net), income tax expense (benefit) and depreciation, depletion and amortization (EBITDA), to better measure our operating performance. We regularly use EBITDA to evaluate our performance as compared to other companies in our industry that have different financing and capital structures and/or tax rates. In addition, we use EBITDA in evaluating acquisition targets.
Adjusted EBITDA is defined as EBITDA as further adjusted for certain cash and non-cash charges as specified in our revolving credit facility and is used in several of the covenants in that facility. Adjusted EBITDA plus acquisition costs further adjusts Adjusted EBITDA to add back certain non-recurring costs incurred in connection with the IRP acquisition that may not reflect the trend of future results. We believe that Adjusted EBITDA plus acquisition cost presents a useful measure of our ability to service and incur debt on an ongoing basis.
EBITDA, Adjusted EBITDA, Adjusted EBITDA plus acquisition costs are not recognized terms under GAAP and are 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 EBITDA, Adjusted EBITDA, Adjusted EBITDA plus acquisition costs may not be comparable to other similarly titled measures of other companies. Additionally, EBITDA, Adjusted EBITDA, Adjusted EBITDA plus acquisition costs are not intended to be a measure of free cash flow for management's discretionary use, as they do not reflect certain cash requirements such as tax payments, interest payments and other contractual obligations.
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30 | September 30 | September 30 | September 30 | ||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||
Net income (loss) | $ | (20,552) | (3,732) | (61,974) | (10,547) | ||||||||||
Income tax expense | 25 | (10,282) | 75 | (9,000) | |||||||||||
Interest expense | 13,200 | 13,215 | 40,112 | 36,673 | |||||||||||
Interest income | (217) | (173) | (602) | (356) | |||||||||||
Depreciation, depletion, and amortization | 35,518 | 31,234 | 98,152 | 75,479 | |||||||||||
EBITDA (before adjustments) | $ | 27,974 | 30,262 | 75,763 | 92,249 | ||||||||||
Other adjustments specified | |||||||||||||||
in our current debt agreement | |||||||||||||||
Direct acquisition costs | - | - | - | 8,504 | |||||||||||
(Gain) loss on debt transactions | (22,231) | - | (22,231) | 740 | |||||||||||
Other | 1,813 | 2,003 | 6,106 | 6,174 | |||||||||||
Adjusted EBITDA | $ | 7,556 | 32,265 | 59,638 | 107,667 | ||||||||||
Write-up of IRP inventory | - | - | - | 2,749 | |||||||||||
Adjusted EBITDA plus acquisition costs | $ | 7,556 | 32,265 | 59,638 | 110,416 | ||||||||||
CONTACT: | |
Elizabeth M. Cook | |
Director of Investor Relations | |
(804) 780-3000 |
SOURCE James River Coal Company
