James River Coal Company Reports Second Quarter 2013 Operating Results
PR Newswire
RICHMOND, Va., Aug. 9, 2013
RICHMOND, Va., Aug. 9, 2013 /PRNewswire/ --
- Mine Operations Continue to Adjust to Soft Coal Market Conditions
- Available Liquidity at June 30, 2013 of $108.8 Million Compared to $107.2 Million at March 31, 2013
- Capital Expenditures of $11.9 Million in Q-2, 2013
- Completed Private Exchange Transactions, Which Reduced Principal Amount of Debt by $120.1 Million
- Continuing to Evaluate Options to Strengthen the Balance Sheet and Improve Liquidity
- Conference Call Slides Posted to Company Website
James River Coal Company (NASDAQ: JRCC), today announced that it had net income of $52.6 million or $1.16 per diluted share for the second quarter of 2013 and net income of $10.5 million or $0.29 per diluted share for the six months ended June 30, 2013. Second quarter and the six months ended June 30, 2013 results include $101.2 million or $2.20 per share and $2.82 per share, respectively, of pre-tax gain related to the Private Exchange Transactions. The 2013 results are compared to net loss of $25.8 million or $0.74 per diluted share for the second quarter of 2012 and net loss of $41.4 million or $1.19 per diluted share for the six months ended June 30, 2012.
Peter T. Socha, Chairman and Chief Executive Officer commented: "Things are still interesting in the coal industry. We continue to be pleased with our mine operations. They are doing an excellent job of managing their people, costs, capital, and assets during a difficult time in the coal industry. The coal markets have continued to be soft. The thermal markets are still weak, but we can see several factors that may lead to improvement later this year and into 2014. The met markets have clearly weakened during the past several months. We are a little more cautious about met than we had been earlier this year. We have started to take definitive action to strengthen our balance sheet and improve our liquidity position during this period of soft coal markets. We have been very encouraged by the input and support that we have received from many parties during this difficult process."
FINANCIAL RESULTS
The following tables show selected operating results for the quarter and six months ended June 30, 2013 compared to the quarter and six months ended June 30, 2012 (in 000's except per ton amounts).
| Total Results | Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||
| 2013 | 2012 | 2013 | 2012 | |||||||||||||||
| Total | Per Ton | Total | Per Ton | Total | Per Ton | Total | Per Ton | |||||||||||
| Company and contractor production (tons) | 2,059 | 2,539 | 4,213 | 5,342 | ||||||||||||||
| Coal purchased from other sources (tons) | 194 | 434 | 707 | 797 | ||||||||||||||
| Total coal available to ship (tons) | 2,253 | 2,973 | 4,920 | 6,139 | ||||||||||||||
| Coal shipments (tons) | 2,159 | 2,910 | 4,576 | 5,961 | ||||||||||||||
| Coal sales revenue | $ 150,525 | 69.72 | $ 259,628 | 89.22 | $ 326,458 | 71.34 | $ 539,391 | 90.49 | ||||||||||
| Freight and handling revenue | 9,626 | 4.46 | 17,730 | 6.09 | 26,998 | 5.90 | 39,952 | 6.70 | ||||||||||
| Cost of coal sold | 142,572 | 66.04 | 224,314 | 77.08 | 305,955 | 66.86 | 461,203 | 77.37 | ||||||||||
| Freight and handling costs | 9,626 | 4.46 | 17,730 | 6.09 | 26,998 | 5.90 | 39,952 | 6.70 | ||||||||||
| Depreciation, depletion, & amortization | 29,668 | 13.74 | 32,514 | 11.17 | 58,205 | 12.72 | 62,634 | 10.51 | ||||||||||
| Gross profit (loss) | (21,715) | (10.06) | 2,800 | 0.96 | (37,702) | (8.24) | 15,554 | 2.61 | ||||||||||
| Selling, general & administrative | 13,690 | 6.34 | 15,266 | 5.25 | 27,657 | 6.04 | 30,832 | 5.17 | ||||||||||
| Adjusted EBITDA (1) | $ (3,724) | (1.72) | $ 22,345 | 7.68 | $ (3,143) | (0.69) | $ 52,082 | 8.74 | ||||||||||
| (1) | Adjusted EBITDA 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 June 30, | Six Months Ended June 30, | ||||||||||||||||
| 2013 | 2012 | 2013 | 2012 | |||||||||||||||
| CAPP | Total | Per Ton | Total | Per Ton | Total | Per Ton | Total | Per Ton | ||||||||||
| Company and contractor production (tons) | 1,461 | 1,932 | 3,027 | 4,177 | ||||||||||||||
| Coal purchased from other sources (tons) | 194 | 434 | 707 | 797 | ||||||||||||||
| Total coal available to ship (tons) | 1,655 | 2,366 | 3,734 | 4,974 | ||||||||||||||
| Coal shipments (tons) | ||||||||||||||||||
| Steam (tons) | 1,052 | 1,412 | 2,148 | 3,176 | ||||||||||||||
| Metallurgical (tons) | 506 | 897 | 1,250 | 1,625 | ||||||||||||||
| Total Shipments (tons) | 1,558 | 2,309 | 3,398 | 4,801 | ||||||||||||||
| Coal sales revenue | ||||||||||||||||||
| Steam | $ 75,695 | 71.95 | $ 117,229 | 83.02 | $ 157,908 | 73.51 | $ 269,095 | 84.73 | ||||||||||
| Metallurgical | 47,446 | 93.77 | 115,581 | 128.85 | 115,414 | 92.33 | 218,755 | 134.62 | ||||||||||
| Total coal sales revenue | 123,141 | 79.04 | 232,810 | 100.83 | 273,322 | 80.44 | 487,850 | 101.61 | ||||||||||
| Freight and handling revenue | 9,424 | 6.05 | 17,426 | 7.55 | 26,620 | 7.83 | 38,470 | 8.01 | ||||||||||
| Cost of coal sold | $ 120,436 | 77.30 | $ 202,476 | 87.69 | $ 262,027 | 77.11 | $ 416,305 | 86.71 | ||||||||||
| Freight and handling costs | 9,424 | 6.05 | 17,426 | 7.55 | 26,620 | 7.83 | 38,470 | 8.01 | ||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||
| 2013 | 2012 | 2013 | 2012 | |||||||||||||||
| Midwest | Total | Per Ton | Total | Per Ton | Total | Per Ton | Total | Per Ton | ||||||||||
| Company and contractor production (tons) | 598 | 607 | 1,186 | 1,165 | ||||||||||||||
| Coal purchased from other sources (tons) | - | - | - | - | ||||||||||||||
| Total coal available to ship (tons) | 598 | 607 | 1,186 | 1,165 | ||||||||||||||
| Coal shipments (tons) | 601 | 601 | 1,178 | 1,160 | ||||||||||||||
| Coal sales revenue | $ 27,384 | 45.56 | $ 26,818 | 44.62 | $ 53,136 | 45.11 | $ 51,541 | 44.43 | ||||||||||
| Freight and handling revenue | 202 | 0.34 | 304 | 0.51 | 378 | 0.32 | 1,482 | 1.28 | ||||||||||
| Cost of coal sold | $ 22,136 | 36.83 | $ 21,838 | 36.34 | $ 43,928 | 37.29 | $ 44,898 | 38.71 | ||||||||||
| Freight and handling costs | 202 | 0.34 | 304 | 0.51 | 378 | 0.32 | 1,482 | 1.28 | ||||||||||
LIQUIDITY AND CASH FLOW
As of June 30, 2013, the Company had available liquidity of $108.8 million calculated as follows (in millions):
| Unrestricted Cash | $ | 94.6 | |||
| Availability under the Revolver | 77.6 | ||||
| Letters of Credit Issued under the Revolver | (63.4) | ||||
| Available Liquidity | $ | 108.8 | |||
| Restricted Cash | $ | 36.7 | |||
Other significant items impacting liquidity in the quarter:
| Capital expenditures | $ | (11.9) | |
| Seasonal increase in coal inventories | (3.6) | ||
| Reduction in accounts receivable | 40.3 | ||
| Reduction in accounts payable | (7.0) | ||
PRIVATE EXCHANGE TRANSACTIONS
In May 2013, the Company issued $123.3 million principal amount of 10.0% Convertible Senior Notes due 2018 (the 10.0% Convertible Senior Notes) in exchange for $90.0 million principal amount of our 4.5% Convertible Senior Notes due 2015 and $153.4 million principal amount of our 3.125% Convertible Senior Notes due 2018 (the Private Exchange Transactions). The Private Exchange Transactions resulted in a gain of $101.2 million, which includes the write-off of $3.6 million of unamortized financing costs. The Company recorded $4.6 million of financing costs associated with the issuance of the 10.0% Convertible Senior Notes.
SALES POSITION AND MARKET COMMENTS
As of August 8, 2013, 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 April 30, 2013 | As of August 8, 2013 | Change | ||||||
| Tons | Avg Price Per Ton | Tons | Avg Price Per Ton | Tons | Avg Price Per Ton | |||
| CAPP (1) | 5,870 | $ 81.05 | 6,487 | $ 80.24 | 617 | $ 72.53 | ||
| Midwest (2) | 2,544 | $ 45.04 | 2,544 | $ 45.04 | - | $ - | ||
| 2014 Priced | ||||||||
| As of April 30, 2013 | As of August 8, 2013 | Change | ||||||
| Tons | Avg Price Per Ton | Tons | Avg Price Per Ton | Tons | Avg Price Per Ton | |||
| CAPP (1) | 300 | $ 75.75 | 300 | $ 75.75 | - | $ - | ||
| Midwest (2) | 900 | $ 47.64 | 900 | $ 47.64 | - | $ - | ||
| (1) | Priced tons in CAPP in 2013 do not include approximately 264,000 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. | ||||||||
CONFERENCE CALL, WEBCAST AND REPLAY: The Company will hold a conference call with management to discuss the second quarter earnings August 9, 2013 at 10:00 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.
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; 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, including competition from alternative sources such as natural gas; 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.
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JAMES RIVER COAL COMPANY AND SUBSIDIARIES Consolidated Balance Sheets (in thousands, except share data)
| ||||||||||
| June 30, 2013 | December 31, 2012 | |||||||||
| Assets | (unaudited) | |||||||||
| Current assets: | ||||||||||
| Cash and cash equivalents | $ | 94,579 | 127,386 | |||||||
| Trade receivables | 38,687 | 89,816 | ||||||||
| Inventories: | ||||||||||
| Coal | 54,863 | 26,598 | ||||||||
| Materials and supplies | 16,164 | 16,699 | ||||||||
| Total inventories | 71,027 | 43,297 | ||||||||
| Prepaid royalties | 8,829 | 8,623 | ||||||||
| Other current assets | 5,481 | 9,127 | ||||||||
| Total current assets | 218,603 | 278,249 | ||||||||
| Property, plant, and equipment, net | 811,343 | 855,217 | ||||||||
| Restricted cash and short term investments | 36,681 | 36,558 | ||||||||
| Other assets | 32,090 | 34,097 | ||||||||
| Total assets | $ | 1,098,717 | 1,204,121 | |||||||
| Liabilities and Shareholders' Equity | ||||||||||
| Current liabilities: | ||||||||||
| Accounts payable | $ | 49,514 | 72,861 | |||||||
| Accrued salaries, wages, and employee benefits | 11,653 | 10,996 | ||||||||
| Workers' compensation benefits | 9,900 | 9,900 | ||||||||
| Black lung benefits | 2,508 | 2,508 | ||||||||
| Accrued taxes | 10,813 | 8,382 | ||||||||
| Other current liabilities | 19,987 | 22,124 | ||||||||
| Total current liabilities | 104,375 | 126,771 | ||||||||
| Long-term debt, less current maturities | 447,896 | 546,407 | ||||||||
| Other liabilities: | ||||||||||
| Noncurrent portion of workers' compensation benefits | 67,935 | 66,953 | ||||||||
| Noncurrent portion of black lung benefits | 63,839 | 62,834 | ||||||||
| Pension obligations | 32,872 | 35,325 | ||||||||
| Asset retirement obligations | 100,772 | 99,177 | ||||||||
| Other | 10,758 | 12,027 | ||||||||
| Total other liabilities | 276,176 | 276,316 | ||||||||
| Total liabilities | 828,447 | 949,494 | ||||||||
| 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 | ||||||||||
| 36,056,869 and 35,866,549 shares as of June 30, 2013 and December 31, 2012 | 361 | 359 | ||||||||
| Paid-in-capital | 548,305 | 546,289 | ||||||||
| Accumulated deficit | (226,075) | (236,588) | ||||||||
| Accumulated other comprehensive loss | (52,321) | (55,433) | ||||||||
| Total shareholders' equity | 270,270 | 254,627 | ||||||||
| Total liabilities and shareholders' equity | $ | 1,098,717 | 1,204,121 | |||||||
| JAMES RIVER COAL COMPANY AND SUBSIDIARIES Consolidated Statements of Operations (in thousands, except per share data) (unaudited)
| ||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||
| June 30, | June 30, | |||||||||||||
| 2013 | 2012 | 2013 | 2012 | |||||||||||
| Revenues | ||||||||||||||
| Coal sales revenue | $ | 150,525 | 259,628 | 326,458 | 539,391 | |||||||||
| Freight and handling revenue | 9,626 | 17,730 | 26,998 | 39,952 | ||||||||||
| Total revenue | 160,151 | 277,358 | 353,456 | 579,343 | ||||||||||
| Cost of sales: | ||||||||||||||
| Cost of coal sold | 142,572 | 224,314 | 305,955 | 461,203 | ||||||||||
| Freight and handling costs | 9,626 | 17,730 | 26,998 | 39,952 | ||||||||||
| Depreciation, depletion, and amortization | 29,668 | 32,514 | 58,205 | 62,634 | ||||||||||
| Total cost of sales | 181,866 | 274,558 | 391,158 | 563,789 | ||||||||||
| Gross profit (loss) | (21,715) | 2,800 | (37,702) | 15,554 | ||||||||||
| Selling, general and administrative expenses | 13,690 | 15,266 | 27,657 | 30,832 | ||||||||||
| Total operating loss | (35,405) | (12,466) | (65,359) | (15,278) | ||||||||||
| Interest expense | 12,372 | 13,527 | 24,882 | 26,912 | ||||||||||
| Interest income | (107) | (171) | (285) | (385) | ||||||||||
| Gain on debt transactions | (101,210) | - | (101,210) | - | ||||||||||
| Miscellaneous income, net | (130) | (90) | (233) | (433) | ||||||||||
| Total other (income) expense, net | (89,075) | 13,266 | (76,846) | 26,094 | ||||||||||
| Net income (loss) before income taxes | 53,670 | (25,732) | 11,487 | (41,372) | ||||||||||
| Income tax expense | 1,041 | 31 | 974 | 50 | ||||||||||
| Net income (loss) | $ | 52,629 | (25,763) | 10,513 | (41,422) | |||||||||
| Earnings (loss) per common share | ||||||||||||||
| Basic earnings (loss) per common share | $ | 1.46 | (0.74) | 0.29 | (1.19) | |||||||||
| Diluted earnings (loss) per common share | $ | 1.16 | (0.74) | 0.29 | (1.19) | |||||||||
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James River Coal Company AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited)
| |||||||||||||
| Six Months Ended June 30, | |||||||||||||
| 2013 | 2012 | ||||||||||||
| Cash flows from operating activities: | |||||||||||||
| Net income (loss) | $ | 10,513 | (41,422) | ||||||||||
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities | |||||||||||||
| Depreciation, depletion, and amortization | 58,205 | 62,634 | |||||||||||
| Accretion of asset retirement obligations | 2,236 | 2,617 | |||||||||||
| Amortization of debt discount and issue costs | 7,532 | 8,667 | |||||||||||
| Stock-based compensation | 2,378 | 2,696 | |||||||||||
| Gain on sale or disposal of property, plant and equipment | (12) | (122) | |||||||||||
| Gain on debt transactions | (101,210) | - | |||||||||||
| Changes in operating assets and liabilities: | |||||||||||||
| Receivables | 51,129 | 7,687 | |||||||||||
| Inventories | (23,570) | (3,724) | |||||||||||
| Prepaid royalties and other current assets | 3,440 | 1,730 | |||||||||||
| Restricted cash | (123) | (69) | |||||||||||
| Other assets | 1,731 | 4,417 | |||||||||||
| Accounts payable | (23,347) | (33,024) | |||||||||||
| Accrued salaries, wages, and employee benefits | 657 | 863 | |||||||||||
| Accrued taxes | 2,071 | (2,170) | |||||||||||
| Other current liabilities | (2,312) | (4,691) | |||||||||||
| Workers' compensation benefits | 982 | 2,379 | |||||||||||
| Black lung benefits | 2,079 | 2,514 | |||||||||||
| Pension obligations | (415) | (304) | |||||||||||
| Asset retirement obligations | (582) | (96) | |||||||||||
| Other liabilities | (4) | (157) | |||||||||||
| Net cash provided by (used in) operating activities | (8,622) | 10,425 | |||||||||||
| Cash flows from investing activities: | |||||||||||||
| Additions to property, plant, and equipment | (19,620) | (45,881) | |||||||||||
| Proceeds from sale of property, plant and equipment | 19 | 580 | |||||||||||
| Net cash used in investing activities | (19,601) | (45,301) | |||||||||||
| Cash flows from financing activities: | |||||||||||||
| Debt issuance costs | (4,584) | - | |||||||||||
| Net cash used in financing activities | (4,584) | - | |||||||||||
| Decrease in cash and cash equivalents | (32,807) | (34,876) | |||||||||||
| Cash and cash equivalents at beginning of period | 127,386 | 199,711 | |||||||||||
| Cash and cash equivalents at end of period | $ | 94,579 | 164,835 | ||||||||||
| JAMES RIVER COAL COMPANY AND SUBSIDIARIES |
|
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. We believe that Adjusted EBITDA presents a useful measure of our ability to service and incur debt on an ongoing basis.
EBITDA and Adjusted EBITDA 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 and Adjusted EBITDA, may not be comparable to other similarly titled measures of other companies. Additionally, EBITDA and Adjusted EBITDA 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.
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| Three Months Ended | Six Months Ended | |||||||||||||
| June 30 | June 30 | June 30 | June 30 | |||||||||||
| 2013 | 2012 | 2013 | 2012 | |||||||||||
| Net income (loss) | $ | 52,629 | (25,763) | 10,513 | (41,422) | |||||||||
| Income tax expense | 1,041 | 31 | 974 | 50 | ||||||||||
| Interest expense | 12,372 | 13,527 | 24,882 | 26,912 | ||||||||||
| Interest income | (107) | (171) | (285) | (385) | ||||||||||
| Depreciation, depletion, and amortization | 29,668 | 32,514 | 58,205 | 62,634 | ||||||||||
| EBITDA (before adjustments) | $ | 95,603 | 20,138 | 94,289 | 47,789 | |||||||||
| Other adjustments specified | ||||||||||||||
| in our current debt agreement | ||||||||||||||
| Gain on debt transactions | (101,210) | - | (101,210) | - | ||||||||||
| Other | 1,883 | 2,207 | 3,778 | 4,293 | ||||||||||
| Adjusted EBITDA | $ | (3,724) | 22,345 | (3,143) | 52,082 | |||||||||
| CONTACT: | |
| Elizabeth M. Cook | |
| Director of Investor Relations | |
| (804) 780-3000 |
SOURCE James River Coal Company
