Walter Energy Announces Fourth Quarter and Full Year 2012 Results
BIRMINGHAM, AL -- (Marketwire) -- 02/20/13 -- 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 fourth quarter ended December 31, 2012 that reflect cost control initiatives, aggressive production management and disciplined capital spending, in light of significantly lower global pricing levels.
Revenues were $479 million in the fourth quarter of 2012, down from $703 million in the fourth quarter of 2011 primarily due to reduced demand and pricing for met coal. The realized price of met coal declined 39% compared with the fourth quarter of 2011. The Company reported a net loss for the quarter of $71 million or $1.13 loss per diluted share. This loss includes impairment and restructuring charges of $6.8 million primarily in connection with a reduction in spending at the Aberpergwm mine in the United Kingdom. Excluding these charges, adjusted net loss and adjusted earnings before interest, taxes, depreciation and amortization (adjusted EBITDA) for the quarter were $66 million and $7 million, respectively. Results for the quarter also included a $71 million tax benefit.
For the year, the Company recorded revenues of $2.4 billion and a net loss of $1.1 billion including impairment and restructuring charges of $1.1 billion. Excluding these charges, the Company's adjusted net income was $31 million and adjusted EBITDA was $412 million.
2012 Achievements
During 2012, the Company:
- Achieved record metallurgical coal production of 11.7* million metric tons (MMTs)
- Improved cash cost per ton of production of met coal by 6%
- Enhanced liquidity and extended its debt maturities by issuing $500 million of senior notes due 2020
- Improved the total reportable injury rate by 26% as compared with 2011
"Walter Energy made solid operational progress during 2012, in the face of challenging market conditions. We safely increased our production of met coal to a record 11.7* MMTs, strengthened our senior management team and put in place a highly competitive operating platform that reduced our cost of production," said Walter Scheller, Chief Executive Officer. "In the fourth quarter, we responded to the lower pricing and demand environment by executing the strategy announced last quarter to reconfigure our Canadian operations in order to lower production and reduce costs. Further, we reduced spending at the Aberpergwm mine in the United Kingdom."
Mr. Scheller continued, "Although there are clear signs of improving trends in global demand and pricing for met coal, our current outlook for 2013 remains cautious and we are focused on driving further efficiency in our business. We currently expect sales and production of met coal in 2013 to be in line with 2012. However, we are extremely well positioned to increase sales and production to capitalize on anticipated improvements in pricing and demand when market conditions warrant."
Production
In the fourth quarter of 2012, Walter Energy produced 2.5 MMTs of met coal, down from a record third quarter 2012 production of 3.3 MMTs but an increase from the 2.3 MMTs produced in the fourth quarter of 2011.
Hard coking coal production decreased to 2.0 MMTs in the fourth quarter 2012 as compared with 2.4 MMTs in the third quarter 2012 and 1.8 MMTs in the fourth quarter 2011. Fourth quarter pulverized coal injection (PCI) production of 476,000 metric tons (MTs) decreased 51%, as compared to the 963,000 MTs produced in the third quarter of 2012 and 3% from the 489,000 MTs produced in the fourth quarter 2011.
Sales Volume and Price
In 2012, Walter Energy sold 10.4 MMTs of met coal, up 19% from 8.7 MMTs of met coal sales in 2011. Fourth quarter 2012 met coal sales volume totaled 2.5 MMTs as compared with 2.6 MMTs sold in the third quarter 2012 and 2.4 MMTs sold in the fourth quarter of 2011.
Met coal prices averaged $149 per MT in the quarter, a decrease of 22% from the average of $191 per MT in the third quarter of 2012 and a 39% decrease as compared with the $242 per MT of the fourth quarter 2011.
Cash Cost of Sales
The consolidated cash cost of sales for met coal was $135 per MT in the fourth quarter of 2012, as compared with $132 per MT in the third quarter of 2012 and $139 per MT in the fourth quarter of 2011.
In the U.S. operations, the cash cost of sales for met coal was $118 per MT in the fourth quarter of 2012 as compared with $119 per MT in the third quarter of 2012 and the fourth quarter of 2011.
In Canada, the cash costs of sales for met coal was $161 per MT in the fourth quarter of 2012, as compared with $166 per MT in the third quarter and $168 per MT in the fourth quarter of 2011.
Cash Cost of Production
The consolidated cash cost of production for met coal in the fourth quarter of 2012 was $95 per MT, a 20% improvement as compared with $119 per MT in the fourth quarter of 2011.
The cash cost of production for low-volatility hard coking coal improved to $74 per MT in the fourth quarter of 2012 from $77 per MT in the third quarter 2012 and $78 per MT in the fourth quarter of 2011. The cash cost of production for mid-volatility hard coking coal was $102 per MT in the fourth quarter of 2012 as compared with $95 per MT in the third quarter of 2012 and $113 per MT in the fourth quarter of 2011. The cash cost of production for low-volatility PCI was $125 per MT in the fourth quarter of 2012 as compared with $96 per MT in the third quarter of 2012 and $204 per MT in the fourth quarter of 2011.
Capital Expenditures
The Company's capital expenditures were $60 million for the fourth quarter 2012 and $392 million for the year, compared with $121 million and $415 million, respectively in the prior year periods. For 2013, the Company continues to expect capital expenditures of approximately $220 million.
Liquidity
At the end of 2012, available liquidity was $445 million, consisting of cash and cash equivalents of $117 million plus $328 million of availability under the Company's $375 million revolving credit facility. During the quarter, the Company issued $500 million in senior notes due in 2020 to enhance liquidity and improve our debt maturity profile.
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 decreased by 26% in 2012 as compared with 2011.
During 2012, Walter Energy earned safety awards in Canada, West Virginia and in our Alabama operations including the Sentinels of Safety Award sponsored by the National Mining Association, the Edward Prior Safety Award from the Office of the Chief Inspector of Mines from the Ministry of Natural Resource Operations in British Columbia, Canada and a Surface Mine Reclamation Award co-sponsored by the West Virginia Coal Association and the West Virginia Department of Environmental Protection.
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 fourth quarter and full year 2012 results on Thursday, February 21, 2013, at 9 a.m. EST. 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 the global steel 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 4,100 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: unfavorable economic, financial and business conditions; the global economic crisis; market conditions beyond our control; prolonged decline in the price of coal; decline in global coal or steel demand; prolonged or dramatic shortages or difficulties in coal production; our customer's refusal to honor or renew contracts; our ability to collect payments from our customers; inherent risks in coal mining such as weather patterns and conditions affecting production, geological conditions, equipment failure and other operational risks associated with mining; title defects preventing us from (or resulting in additional costs for) mining our mineral interests; concentration of our mining operations in limited number of areas; a significant reduction of, or loss of purchases by, our largest customers; unavailability of cost-effective transportation for our coal; significant increase in competitive pressures and foreign currency fluctuations; significant cost increases and delays in the delivery of raw materials, mining equipment and purchased components; availability of adequate skilled employees and other labor relations matters; inaccuracies in our estimates of our coal reserves; greater than anticipated costs incurred for compliance with environmental liabilities or limitations on our abilities to produce or sell coal; our ability to attract and retain key personnel; future regulations that increase our costs or limit our ability to produce coal; new laws and regulations to reduce greenhouse gas emissions that impact the demand for our coal reserves; adverse rulings in current or future litigation; inability to access needed capital; availability of licenses, permits, and other authorizations may be subject to challenges; risks associated with our reclamation and mine closure obligations; failure to meet project development and expansion targets; risks associated with operating in foreign jurisdictions; risks related to our indebtedness and our ability to generate cash for our financial obligations; downgrade in our credit rating; our ability to identify suitable acquisition candidates to promote growth; our ability to successfully integrate acquisitions; volatility in the price of our common stock; our ability to pay regular dividends to stockholders; costs related to our post-retirement benefit obligations and workers' compensation obligations; our exposure to litigation; and other risks and uncertainties including those described in our filings with the SEC. Forward-looking statements made by us in this release, or elsewhere, speak only as of the date on which the statements were made. You are advised to read the risk factors in our most recently filed Annual Report on Form 10-K and subsequent filings with the SEC, which are available on our website at www.walterenergy.com and on the SEC's website at www.sec.gov. 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. All data presented herein is as of the date of this release unless otherwise noted.
* Inclusive of an approximate 200,000 favorable impact from the re-alignment of methodology for accounting for production between the US and Canada performed in the second quarter 2012."
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 For the years
ended December 31, ended December 31,
------------------------ ------------------------
2012 2011(1) 2012 2011(1)
----------- ----------- ----------- -----------
Revenues:
Sales $ 473,347 $ 707,433 $ 2,381,760 $ 2,562,325
Miscellaneous income
(loss) 5,437 (4,427) 18,135 9,033
----------- ----------- ----------- -----------
478,784 703,006 2,399,895 2,571,358
----------- ----------- ----------- -----------
Costs and expenses:
Cost of sales
(exclusive of
depreciation and
depletion) 430,608 455,888 1,796,991 1,561,112
Depreciation and
depletion 92,720 72,709 316,232 230,681
Selling, general and
administrative (2) 28,889 33,224 133,467 165,749
Postretirement
benefits 13,213 10,011 52,852 40,385
Asset impairment and
restructuring (3) 9,109 - 49,070 -
Goodwill impairment (2,345) - 1,064,409 -
----------- ----------- ----------- -----------
572,194 571,832 3,413,021 1,997,927
----------- ----------- ----------- -----------
Operating income (loss) (93,410) 131,174 (1,013,126) 573,431
Interest expense (49,640) (33,575) (139,356) (96,820)
Interest income 73 250 804 606
Other income (loss)
(4) 774 6,246 (13,081) 17,606
----------- ----------- ----------- -----------
Income (loss) from
continuing operations
before income tax
expense (142,203) 104,095 (1,164,759) 494,823
Income tax expense
(benefit) (71,232) 23,843 (99,204) 131,225
----------- ----------- ----------- -----------
Income (loss) from
continuing operations (70,971) 80,252 (1,065,555) 363,598
Income from discontinued
operations (5) - - 5,180 -
----------- ----------- ----------- -----------
Net income (loss) $ (70,971) $ 80,252 $(1,060,375) $ 363,598
=========== =========== =========== ===========
Basic income (loss) per
share:
Income (loss) from
continuing operations $ (1.13) $ 1.29 $ (17.04) $ 6.03
Income from
discontinued
operations - - 0.08 -
----------- ----------- ----------- -----------
Net income (loss) $ (1.13) $ 1.29 $ (16.96) $ 6.03
=========== =========== =========== ===========
Weighted average number
of shares outstanding
(6) 62,577,184 62,441,694 62,536,239 60,257,029
=========== =========== =========== ===========
Diluted income (loss)
per share:
Income (loss) from
continuing operations $ (1.13) $ 1.28 $ (17.04) $ 6.00
Income from
discontinued
operations - - 0.08 -
----------- ----------- ----------- -----------
Net income (loss) $ (1.13) $ 1.28 $ (16.96) $ 6.00
=========== =========== =========== ===========
Weighted average number
of diluted shares
outstanding (6) 62,577,184 62,738,135 62,536,239 60,611,154
=========== =========== =========== ===========
Comprehensive income
(loss) $ (123,331) $ 17,449 $(1,101,749) $ 306,510
=========== =========== =========== ===========
(1) Includes the results of Western Coal since the April 1, 2011 date of
acquisition. Certain previously reported three months ended and year ended
December 31, 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 three months ended net income
decreased by $3.5 million and diluted earnings per share decreased by
$0.06 per share. Previously reported year ended December 31, 2011 net
income increased by $14.4 million and diluted earnings per share increased
by $0.24 per share.
(2) The year ended December 31, 2011 includes $23.2 million of costs
associated with the acquisition of Western Coal.
(3) The three months ended December 31, 2012 includes asset impairment and
severance charges of $9.1 million in connection with plans to reduce
development spending at the Aberpergwm underground mine in the U.K. and
the year ended December 31, 2012 also includes an impairment charge of
$40.0 million associated with the abandonment of a natural gas exploration
project.
(4) The year ended December 31, 2012 includes losses on the sale and
remeasurement to fair value of equity investments. The year ended December
31, 2011 includes a gain recognized on April 1, 2011 of $20.6 million as a
result of remeasuring to fair value Western Coal shares acquired from
Audley Capital in January 2011, partially offset by a net loss on the sale
and remeasurement to fair value of our other equity investments.
(5) Discontinued operations includes the gain on the sale of our closed
Kodiak operations, net of tax.
(6) In periods of net loss, the number of shares used to calculate diluted
earnings per share is the same as that used to calculate basic earnings
per share.
WALTER ENERGY, INC. AND SUBSIDIARIES
RESULTS BY OPERATING SEGMENT
($ in thousands)
Unaudited
For the three months For the years
ended December 31, ended December 31,
------------------------ ------------------------
2012 2011(1) 2012 2011(1)
----------- ----------- ----------- -----------
REVENUES:
U.S. Operations $ 325,837 $ 481,011 $ 1,728,363 $ 1,871,182
Canadian and U.K.
Operations 152,412 221,502 668,313 698,054
Other 535 493 3,219 2,122
----------- ----------- ----------- -----------
Revenues $ 478,784 $ 703,006 $ 2,399,895 $ 2,571,358
=========== =========== =========== ===========
OPERATING INCOME (LOSS)
BEFORE IMPAIRMENTS AND
RESTRUCTURING CHARGES:
U.S. Operations $ (3,302) $ 129,351 $ 302,977 $ 561,370
Canadian and U.K.
Operations (76,903) 16,335 (159,393) 86,538
Other (2) (6,441) (14,512) (43,231) (74,477)
----------- ----------- ----------- -----------
Operating income
(loss) before
impairment and
restructuring charges $ (86,646) $ 131,174 $ 100,353 $ 573,431
=========== =========== =========== ===========
OPERATING INCOME (LOSS):
U.S. Operations $ (3,302) $ 129,351 $ 188,696 $ 561,370
Canadian and U.K.
Operations (83,667) 16,335 (1,158,591) 86,538
Other (2) (6,441) (14,512) (43,231) (74,477)
----------- ----------- ----------- -----------
Operating income
(loss) $ (93,410) $ 131,174 $(1,013,126) $ 573,431
=========== =========== =========== ===========
DEPRECIATION AND
DEPLETION:
U.S. Operations $ 42,505 $ 44,952 $ 173,140 $ 155,702
Canadian and U.K.
Operations 49,737 27,553 141,713 74,203
Other 478 204 1,379 776
----------- ----------- ----------- -----------
Depreciation and
depletion $ 92,720 $ 72,709 $ 316,232 $ 230,681
=========== =========== =========== ===========
CAPITAL EXPENDITURES:
U.S. Operations $ 40,902 $ 23,453 $ 162,535 $ 149,996
Canadian and U.K.
Operations 18,807 97,639 224,583 264,476
Other 463 97 4,394 94
----------- ----------- ----------- -----------
Capital expenditures $ 60,172 $ 121,189 $ 391,512 $ 414,566
=========== =========== =========== ===========
(1) Includes the results of Western Coal since the April 1, 2011 date of
acquisition. Certain previously reported three months and year ended
December 31, 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 year ended December 31, 2011 include $23.2 million of
costs associated with the April 1, 2011 acquisition of Western Coal.
WALTER ENERGY, INC. AND SUBSIDIAIRES
SUPPLEMENTAL FNANCIAL DATA
(Ton information in 000's metric tons and dollars in USD)
Unaudited
3 Months Ended
December 31, 2012
------------------------------
Canadian
and U.K.
U.S. Operations
Operations (4) Total
---------- ----------- -------
Total Metallurgical
Sales Metric Tons 1,506 1,040 2,546
Production Metric Tons 1,542 924 2,466
Average Net Selling Price $ 153.64 $ 141.07 $148.51
Average Cash Cost of Sales per Ton (2)(3) $ 118.05 $ 160.50 $135.39
Average Cash Cost of Production per Ton
(2) $ 86.62 $ 107.84 $ 94.57
Low Vol Hard Coking
Sales Metric Tons 828 4 832
Production Metric Tons 998 50 1,048
Average Net Selling Price $ 162.39 $ 210.40 $162.63
Average Cash Cost of Sales per Ton not
(2)(3) $ 98.86 meaningful $111.30
Average Cash Cost of Production per
Ton (2) $ 70.21 $ 146.93 $ 73.89
Mid Vol Hard Coking
Sales Metric Tons 467 528 995
Production Metric Tons 358 398 756
Average Net Selling Price $ 143.43 $ 153.28 $148.65
Average Cash Cost of Sales per Ton
(2)(3) $ 143.22 $ 120.10 $130.97
Average Cash Cost of Production per
Ton (2) $ 122.47 $ 82.99 $101.70
High Vol Hard Coking
Sales Metric Tons 211 - 211
Production Metric Tons 186 - 186
Average Net Selling Price $ 130.67 $ - $130.67
Average Cash Cost of Sales per Ton
(2)(3) $ 139.10 $ - $139.10
Average Cash Cost of Production per
Ton (2) $ 105.48 $ - $105.48
Low Vol PCI
Sales Metric Tons - 508 508
Production Metric Tons - 476 476
Average Net Selling Price $ - $ 127.83 $127.83
Average Cash Cost of Sales per Ton
(2)(3) $ - $ 181.38 $181.38
Average Cash Cost of Production per
Ton (2) $ - $ 124.50 $124.50
Thermal
Sales Metric Tons 655 9 664
Production Metric Tons 552 7 559
Average Net Selling Price $ 64.33 $ 124.44 $ 65.14
Average Cash Cost of Sales per Ton (2)(3) $ 55.83 $ 70.31 $ 56.03
Average Cash Cost of Production per Ton
(2) $ 64.99 $ - $ 64.17
3 Months Ended
December 31, 2011 (1)
-----------------------------
Canadian
and U.K.
U.S. Operations
Operations (4) Total
---------- ---------- -------
Total Metallurgical
Sales Metric Tons 1,390 1,011 2,401
Production Metric Tons 1,449 878 2,327
Average Net Selling Price $ 242.61 $ 241.70 $242.23
Average Cash Cost of Sales per Ton (2)(3) $ 118.88 $ 167.62 $139.41
Average Cash Cost of Production per Ton
(2) $ 81.77 $ 180.21 $118.91
Low Vol Hard Coking
Sales Metric Tons 775 - 775
Production Metric Tons 838 1 839
Average Net Selling Price $ 265.19 $ - $265.19
Average Cash Cost of Sales per Ton
(2)(3) $ 121.79 $ - $121.79
Average Cash Cost of Production per
Ton (2) $ 77.72 $ 182.78 $ 77.77
Mid Vol Hard Coking
Sales Metric Tons 317 488 805
Production Metric Tons 385 389 774
Average Net Selling Price $ 277.88 $ 273.21 $275.05
Average Cash Cost of Sales per Ton
(2)(3) $ 127.14 $ 169.94 $153.08
Average Cash Cost of Production per
Ton (2) $ 74.87 $ 150.29 $112.76
High Vol Hard Coking
Sales Metric Tons 298 - 298
Production Metric Tons 225 - 225
Average Net Selling Price $ 149.42 $ - $149.42
Average Cash Cost of Sales per Ton
(2)(3) $ 127.22 $ - $127.22
Average Cash Cost of Production per
Ton (2) $ 108.69 $ - $108.69
Low Vol PCI
Sales Metric Tons - 523 523
Production Metric Tons - 489 489
Average Net Selling Price $ - $ 212.29 $212.29
Average Cash Cost of Sales per Ton
(2)(3) $ - $ 165.44 $165.44
Average Cash Cost of Production per
Ton (2) $ - $ 204.03 $204.03
Thermal
Sales Metric Tons 1,036 32 1,068
Production Metric Tons 965 28 993
Average Net Selling Price $ 60.74 $ 106.94 $ 62.13
Average Cash Cost of Sales per Ton (2)(3) $ 66.92 $ 149.08 $ 69.40
Average Cash Cost of Production per Ton
(2) $ 55.43 $ - $ 53.84
3 Months Ended
September 30, 2012
-----------------------------
Canadian
and U.K.
U.S. Operations
Operations (4) Total
---------- ---------- -------
Total Metallurgical
Sales Metric Tons 1,880 743 2,623
Production Metric Tons 1,721 1,604 3,325
Average Net Selling Price $ 196.41 $ 178.49 $191.34
Average Cash Cost of Sales per Ton (2)(3) $ 118.91 $ 165.98 $132.24
Average Cash Cost of Production per Ton
(2) $ 85.45 $ 94.08 $ 89.61
Low Vol Hard Coking
Sales Metric Tons 939 47 986
Production Metric Tons 1,015 90 1,105
Average Net Selling Price $ 213.80 $ 243.30 $215.14
Average Cash Cost of Sales per Ton
(2)(3) $ 101.84 $ 329.41 $112.18
Average Cash Cost of Production per
Ton (2) $ 68.56 $ 170.50 $ 76.86
Mid Vol Hard Coking
Sales Metric Tons 678 256 934
Production Metric Tons 473 551 1,024
Average Net Selling Price $ 191.99 $ 197.79 $193.58
Average Cash Cost of Sales per Ton
(2)(3) $ 135.74 $ 107.27 $127.94
Average Cash Cost of Production per
Ton (2) $ 113.60 $ 78.59 $ 94.74
High Vol Hard Coking
Sales Metric Tons 263 - 263
Production Metric Tons 233 - 233
Average Net Selling Price $ 138.28 $ - $138.28
Average Cash Cost of Sales per Ton
(2)(3) $ 135.02 $ - $135.02
Average Cash Cost of Production per
Ton (2) $ 101.93 $ - $101.93
Low Vol PCI
Sales Metric Tons - 440 440
Production Metric Tons - 963 963
Average Net Selling Price $ - $ 160.37 $160.37
Average Cash Cost of Sales per Ton
(2)(3) $ - $ 182.76 $182.76
Average Cash Cost of Production per
Ton (2) $ - $ 95.81 $ 95.81
Thermal
Sales Metric Tons 927 10 937
Production Metric Tons 805 9 814
Average Net Selling Price $ 67.00 $ 117.55 $ 67.51
Average Cash Cost of Sales per Ton (2)(3) $ 55.27 $ 131.48 $ 56.05
Average Cash Cost of Production per Ton
(2) $ 57.21 $ - $ 56.60
(1) Certain previously reported three months ended December 31, 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 of Sales 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 of Production per Ton is
based on period costs of mining and includes items such as manpower, fuel
and other similar production items but excludes depreciation, depletion and
post retirement benefits. Average Cash Cost per Ton are non-GAAP financial
measures which are 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 Average Cash Cost per Ton are useful
measures 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. Average Cash Costof Sales per Ton may not be
comparable to similarly titled measures used by other companies.
(3) Reconciliation of Cash Costs of Sales per Ton to Cost of Sales as
disclosed (in thousands USD):
Quarter Ended
Quarter Ended December 31, Quarter Ended
December 31, 2011 Actual, Sept. 30,
2012 Actual Recast (1) 2012 Actual
------------- ------------- -------------
Cash Costs of Sales as calculated
from above (sales tons times
average cash cost per ton) $ 381,907 $ 408,843 $ 399,382
Cash Costs of other products 48,701 47,045 49,383
------------- ------------- -------------
Total Cost of Sales $ 430,608 $ 455,888 $ 448,765
============= ============= =============
(4) During the third quarter of 2012, in our Canadian and U.K. operations
certain metrics around tons included in 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 revised this methodology to include all
tons mined, no matter if in process or finished, as produced based on a
clean coal tonnage equivalent. Our Form 8-K filed on November 5, 2012,
includes a reconciliation of production statistics previously presented as
compared with the realigned methodology from the Western Coal acquisition
date of April 1, 2011 through June 30, 2012.
WALTER ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in thousands)
Unaudited
December 31, December 31,
2012 2011(1)
------------- -------------
ASSETS
Cash and cash equivalents $ 116,601 $ 128,430
Receivables, net 256,967 313,343
Inventories 306,018 240,437
Deferred income taxes 58,526 61,079
Prepaid expenses 53,776 49,974
Other current assets 23,928 45,649
------------- -------------
Total current assets 815,816 838,912
Mineral interests, net 2,965,557 3,056,258
Property, plant and equipment, net 1,732,131 1,631,333
Deferred income taxes 160,422 109,300
Goodwill - 1,066,754
Other long-term assets 94,494 153,951
------------- -------------
TOTAL ASSETS $ 5,768,420 $ 6,856,508
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current debt $ 18,793 $ 56,695
Accounts payable 114,913 112,661
Accrued expenses 184,875 229,067
Accumulated postretirement benefits obligation 29,200 27,247
Other current liabilities 206,473 63,757
------------- -------------
Total current liabilities 554,254 489,427
Long-term debt 2,397,372 2,269,020
Deferred income taxes 921,687 1,029,336
Accumulated postretirement benefits obligation 633,264 550,671
Other long-term liabilities 251,272 381,537
------------- -------------
TOTAL LIABILITIES 4,757,849 4,719,991
STOCKHOLDERS' EQUITY (1) 1,010,571 2,136,517
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 5,768,420 $ 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 $14.4 million, primarily due to a
decrease in mineral interests depletion net of income tax expense
applicable to 2011.
WALTER ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 2012
($ in thousands, except per share amounts)
Unaudited
Retained Accumulated
Capital in Earnings Other
Common Excess of (Accumulated Comprehensive
Total Stock Par Value Deficit)(1) Income (Loss)
----------- ------ ---------- ------------ -------------
Balance at
December 31,
2011, recast
(1) $ 2,136,517 $ 624 $1,620,430 $ 744,939 $ (229,476)
Net loss (1,060,375) (1,060,375)
Other
comprehensive
income, net of
tax (41,374) (41,374)
Stock issued
upon the
exercise of
stock options 161 1 160
Dividends paid,
$0.50 per share (31,246) (31,246)
Stock-based
compensation 7,437 7,437
Excess tax
benefits from
stock-based
compensation
arrangements 217 217
Other (766) - - (766)
----------- ------ ---------- ------------ -------------
Balance at
December 31,
2012 $ 1,010,571 $ 625 $1,628,244 $ (347,448) $ (270,850)
=========== ====== ========== ============ =============
(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 $14.4 million primarily due to a
decrease in mineral interests depletion net of income tax expense
applicable to 2011.
WALTER ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in thousands)
Unaudited
For the years ended
December 31,
------------------------
2012 2011(1)
----------- -----------
OPERATING ACTIVITIES
Net income (loss) $(1,060,375) $ 363,598
Less income from discontinued operations (5,180) -
----------- -----------
Income (loss) from continuing operations (1,065,555) 363,598
Adjustments to reconcile net income (loss) to net
cash flows provided by (used in) operating
activities:
Depreciation and depletion 316,232 230,681
Deferred income tax provision (credit) (132,220) 66,803
Gain on investment in Western Coal Corp. - (20,553)
Impairment charges 1,107,512 -
Other (36,801) 30,989
Decrease (increase) in current assets, net of
effect of business acquisitions:
Receivables 44,378 (1,605)
Inventories (62,630) (1,885)
Prepaid expenses and other current assets 11,702 18,929
Increase in current liabilities, net of effect
of business acquisitions:
Accounts payable 34,594 13,676
Accrued expenses and other current liabilities 112,695 6,233
----------- -----------
Cash flows provided by operating activities 329,907 706,866
----------- -----------
INVESTING ACTIVITIES
Additions to property, plant and equipment (391,512) (436,705)
Acquisition of Western Coal Corp., net of cash
acquired - (2,432,693)
Proceeds from sales of investments 13,239 27,325
Other 898 1,413
----------- -----------
Cash flows used in investing activities (377,375) (2,840,660)
----------- -----------
FINANCING ACTIVITIES
Proceeds from issuance of debt 496,510 2,350,000
Borrowings under revolving credit agreement 510,650 71,259
Repayments on revolving credit agreement (519,453) (61,259)
Retirements of debt (392,851) (290,630)
Dividends paid (31,246) (30,042)
Net consideration paid upon exercise of warrants (11,535) -
Debt issuance costs (24,532) (80,027)
Other (388) 12,646
----------- -----------
Cash flows provided by financing activities 27,155 1,971,947
----------- -----------
Cash flows used in continuing operations (20,313) (161,847)
----------- -----------
CASH FLOWS FROM DISCONTINUED OPERATIONS
Cash flows provided by investing activities 9,500 -
----------- -----------
EFFECT OF FOREIGN EXCHANGE RATES ON CASH (1,016) (3,668)
----------- -----------
Net increase (decrease) in cash and cash
equivalents $ (11,829) $ (165,515)
=========== ===========
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 (11,829) (165,515)
----------- -----------
Cash and cash equivalents at end of period $ 116,601 $ 128,430
=========== ===========
(1) Includes the results of Western Coal since the April 1, 2011 date of
acquisition. Certain previously reported year ended December 31, 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
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
Unaudited
RECONCILIATION OF EBITDA FROM CONTINUING OPERATIONS, EBITDA AND ADJUSTED
EBITDA TO AMOUNTS REPORTED UNDER US GAAP:
For the three months
ended For the years ended
December 31, December 31,
------------------------ ------------------------
($ in thousands) 2012 2011(1) 2012 2011(1)
----------- ----------- ----------- -----------
Income (loss) from
continuing operations $ (70,971) $ 80,252 $(1,065,555) $ 363,598
Add: interest expense 49,640 33,575 139,356 96,820
Less: interest income (73) (250) (804) (606)
Add: income tax
expense (benefit) (71,232) 23,843 (99,204) 131,225
Add: depreciation and
depletion expense 92,720 72,709 316,232 230,681
----------- ----------- ----------- -----------
Earnings from continuing
operations before
interest, income taxes,
and depreciation and
depletion (EBITDA from
continuing operations)
(2) 84 210,129 (709,975) 821,718
Add: pretax income from
discontinued operations - - 8,282 -
----------- ----------- ----------- -----------
Earnings before
interest, income taxes,
and depreciation and
depletion (EBITDA) (3) 84 210,129 (701,693) 821,718
Add: goodwill impairment (2,345) - 1,064,409 -
Add: asset impairment
and restructuring
charges 9,109 - 49,070 -
----------- ----------- ----------- -----------
Adjusted EBITDA (4) $ 6,848 $ 210,129 $ 411,786 $ 821,718
=========== =========== =========== ===========
RECONCILIATION OF ADJUSTED NET INCOME (LOSS) TO AMOUNTS REPORTED UNDER US
GAAP:
For the three months
ended For the years ended
December 31, December 31,
------------------------ ------------------------
($ in thousands)
2012 2011(1) 2012 2011(1)
----------- ----------- ----------- -----------
Net income (loss) $ (70,971) $ 80,252 $(1,060,375) $ 363,598
Less: income from
discontinued operations - - (5,180) -
Add: asset impairment
and restructuring
charges, net of tax
($2.2 million and $17.2
million for three
months and year ended
December 31, 2012,
respectively) 6,877 - 31,868 -
Add: goodwill impairment (2,345) - 1,064,409 -
----------- ----------- ----------- -----------
Adjusted net income
(loss) (5) $ (66,439) $ 80,252 $ 30,722 $ 363,598
=========== =========== =========== ===========
(1) Includes the results of Western Coal since the April 1, 2011 date of
acquisition. Certain previously reported three months and year ended
December 31, 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 from
continuing operations before interest expense, interest income, income
taxes, and depreciation and depletion expense. EBITDA from continuing
operations 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
companies.
(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. 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
companies.
(4) Adjusted EBITDA is defined as EBITDA further adjusted to exclude
goodwill impairment and asset impairment and restructuring charges.
Adjusted EBITDA is not a measure of financial performance in accordance
with GAAP, 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, goodwill impairment and
asset impairment and restructuring charges, net of tax. 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
results of operations. 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
