Walter Energy Announces Second Quarter 2011 Results -- Sells Record 2.7 Million Metric Tons of Metallurgical Coal; Up 73.6 Percent-- Generates GAAP Earnings per Share of $1.71; $2.36 per Diluted Share When Adjusted for Purchase Accounting and One-Tim
-- Sells Record 2.7 Million Metric Tons of Metallurgical Coal; Up 73.6 Percent
-- Generates GAAP Earnings per Share of $1.71; $2.36 per Diluted Share When Adjusted for Purchase Accounting and One-Time Charges
-- Achieves Record Quarterly Consolidated Revenues of $773.0 Million From Continuing Operations, 88.3 Percent Increase From Second Quarter 2010
-- Delivers 37.8 Percent EBITDA Growth to $267.6 Million
-- Anticipates Second Half 2011 Metallurgical Coal Sales of Approximately 5.9 Million Metric Tons
-- Expects 50 Percent Annual Metallurgical Coal Sales Volume Expansion by End of 2013
BIRMINGHAM, AL -- (Marketwire) -- 08/03/11 -- Walter Energy (NYSE: WLT) (TSX: WLT), the world's leading, publicly traded 'pure play' producer of metallurgical coal for the global steel industry, today announced net income of $107.4 million for the quarter ended June 30, 2011 compared to $116.2 million in the second quarter 2010. Diluted earnings per share of $1.71 in the second quarter 2011 compares to earnings of $2.16 in the same period last year. Results for the prior-year period exclude results from the Company's Western Coal Corp. ('Western') and North River Mine operations, as these were not acquired until the second quarter 2011. Western had operations in Canada, the United Kingdom and West Virginia. The North River Mine is located in Alabama.
The acquisitions completed in this quarter of Western and the North River Mine resulted in the allocations of cost to acquired property, mineral interests and inventories in amounts in excess of the historical cost value of these assets. Depreciation and depletion of these costs, and the costs included in acquired inventories sold during the quarter, net of tax, totaled $44.2 million, partially offset by a $15.0 million, net of tax, gain on the initial investment in Western in the first quarter 2011. Non-recurring costs associated with the acquisitions incurred during the quarter amounted to $11.8 million, net of tax. Adjusted net income was $148.4 million, or $2.36 per diluted share after excluding the above-described costs.
'Walter Energy continues to execute on its long-term strategic plan to grow its met coal production base, highlighted by the acquisition of Western in April and our execution of lease agreements on 68 million metric tons of Blue Creek coal reserves in May,' said Joe Leonard, interim chief executive officer. 'Those initiatives are beginning to show positive results as we increased met coal sales to a record 2.7 million metric tons in the quarter, and we expect to grow total met coal sales volumes by an additional 50 percent by the end of 2013. In addition, we have further organic and bolt-on growth opportunities in our pipeline to continue increasing and diversifying our metallurgical coal production footprint over the course of this decade to carry on our outstanding track record of creating value for our shareholders.'
'During the quarter, we experienced difficult geology in Alabama and weather-related challenges at both our Alabama and Northeast British Columbia operations, which adversely affected production and sales results. We are putting these production issues behind us and expect to finish 2011 with second half met coal sales of approximately 5.9 million metric tons.'
Segment Presentation
The Company is reporting results in three segments. The U.S. Operations segment includes Walter Energy's historical Underground Mining, Surface Mining and Walter Coke operating segments as well as the West Virginia mining operations acquired through the acquisition of Western on April 1, 2011 and, since May 7, 2011, the North River Mine. The Canadian and U.K. Operations segment includes mining operations in northeast British Columbia (Canada) and in South Wales (United Kingdom). These operations were also acquired through the acquisition of Western. The Other segment primarily includes corporate expenses.
Second Quarter 2011 Consolidated Financial and Operating Results
Consolidated revenues for the second quarter 2011 totaled $773.0 million, an 88.3 percent increase over the prior-year period. Revenue improvements were generated primarily by the addition of the Canada, West Virginia, U.K. and North River operations, and higher average metallurgical coal pricing at the U.S. operations.
Operating income totaled $153.6 million for the quarter compared to $170.2 million in the prior-year period. Operating income was lower than in the prior year, primarily as a result of the one-time charges mentioned above and higher per ton production costs, partially offset by operating income from the Canada, West Virginia and U.K. operations.
EBITDA for the second quarter 2011 was $267.6 million, compared to $194.1 million in the second quarter 2010. EBITDA improved in the current period primarily as a result of higher earnings acquired through the acquisition of Western and a gain in the value of the initial stock investment in Western acquired by the Company on January 20, 2011.
Walter Energy sold a record 2.7 million metric tons of metallurgical coal compared to 1.5 million metric tons of metallurgical coal sold in the previous year. Total metallurgical coal production volumes improved 58.7 percent to 2.5 million metric tons compared to the second quarter 2010. The increases in sales and production were primarily the result of tons from the Canada, West Virginia and Wales operations.
U.S. Operations
The U.S. Operations segment reported revenues of $506.9 million in the second quarter 2011, compared to $410.0 million in the prior-year period. Operating income was $168.7 million, down $13.4 million from the prior-year period. Revenues were higher primarily due to the addition of the West Virginia and North River mining operations and higher average metallurgical coal selling prices, partially offset by lower sales volumes from the underground Alabama operations. Operating income was lower primarily due to higher cost per ton associated with lower metallurgical production volumes in Alabama and increased freight expense, partially offset by higher average metallurgical coal pricing.
Metallurgical coal sales volumes from the U.S. operations totaled 1.5 million metric tons in the second quarter 2011, essentially even with the prior-year period. Sales volumes in the current period were constrained by metallurgical coal availability resulting from production impacts related to a geological 'squeeze' at Mine No. 7 and issues related to the April 27 Alabama tornadoes. Second quarter 2011 metallurgical coal sales prices at the U.S. operations averaged $236.37 per metric ton, up from $213.13 per metric ton in the prior-year period. Average pricing improvements were primarily the result of higher average second quarter contract pricing, partially offset by sales of 706,000 carryover tons with lower first quarter pricing in the current period. U.S. Operations produced 1.6 million metric tons of metallurgical coal in the quarter, up 4.7 percent from the second quarter 2010, as the addition of metallurgical coal production from West Virginia more than offset the impacts of production issues in Alabama. U.S. production costs were $75.16 per metric ton, up 13.2 percent from the second quarter 2010, primarily as a result of lower production volumes from the Alabama underground operations.
Canadian and U.K. Operations
The Company's Canadian and U.K. Operations segment reported operating income of $12.4 million for the second quarter 2011 on revenues of $265.6 million. Operating income was adversely impacted by the purchase accounting adjustments described previously.
This segment sold 1.1 million metric tons of metallurgical coal in the second quarter 2011 at an average sales price of $231.54 per metric ton. The Canadian and U.K. Operations segment produced 0.9 million metric tons of metallurgical coal in the quarter at an average cost of $137.35 per metric ton. Challenging weather conditions and permit delays in Northeast British Columbia impacted sales and production volumes, as well as production costs, in the quarter. The permits have subsequently been received.
Other
The Other segment reported $15.6 million in higher operating losses from the prior-year period, primarily due to Western and North River acquisition costs.
Liquidity and Capital Expenditures
At June 30, 2011, the Company had available liquidity of approximately $424.0 million, consisting of cash, cash equivalents and marketable securities of $134.2 million, plus $289.7 million available under the Company's $375 million revolver.
Capital expenditures for the quarter were $92.1 million, compared to $30.7 million for the second quarter last year. The increase in capital spending in the second quarter was primarily related to the expansion of the Canadian operations, with $51.7 million in spending at the Canadian and U.K. operations and $13.9 million in additional spending at the U.S. operations compared to the prior year.
Business Outlook
The Company anticipates second half 2011 metallurgical coal sales of approximately 5.9 million metric tons. Going forward, the Company expects annual metallurgical coal sales volume to grow by approximately 50 percent by the end of 2013.
Use of Non-GAAP Measures
This release contains the use of certain non-GAAP (U.S. Generally Accepted Accounting Principles) measures such as 'adjusted earnings per diluted share' and 'adjusted net income' as well as EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization). These non-GAAP measures are provided as supplemental to, and not as replacement of nor equal to, financial measures prepared in accordance with GAAP. Management feels that these non-GAAP measures provide additional insights into the performance of the Company that they believe are helpful to investors and they reflect how management analyzes Company performance and compares that performance against other Companies. A reconciliation of non-GAAP to GAAP measures is provided in the financial section of this release.
Conference Call Web Cast
Interim Chief Executive Officer Joe Leonard, President - U.S. Operations Walt Scheller, President - Canadian and U.K. Operations Neil Winkelmann, Chief Accounting Officer Robert Kerley and other members of the Company's leadership team will discuss Walter Energy's second quarter results, its outlook and other general business matters during a conference call and live Web cast to be held Thursday, August 4, 2011, at 9 a.m. Eastern Daylight Time. To listen to the event live or in archive, visit the Company Web site at 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. The Company also produces thermal coal and industrial coal, anthracite, metallurgical coke and coal bed methane gas. The Company has strategic access to high-growth steel markets in Asia, South America and Europe. 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 the company website at 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 2010 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. All data presented herein is as of the date of this release unless otherwise noted.
- WLT -
WALTER ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ in thousands, except per share and share amounts)
Unaudited
For the three months
ended June 30,
----------------------------
2011 (1) 2010
------------- -------------
Revenues:
Sales $ 766,716 $ 405,709
Miscellaneous income 6,284 4,913
------------- -------------
773,000 410,622
------------- -------------
Costs and expenses:
Cost of sales (exclusive of depreciation and
depletion) 462,061 184,086
Depreciation and depletion 89,426 23,885
Selling, general and administrative (2) 57,521 22,057
Postretirement benefits 10,343 10,361
------------- -------------
619,351 240,389
------------- -------------
Operating income 153,649 170,233
Interest expense (32,047) (4,164)
Interest income 160 277
Other income (3) 24,503 -
------------- -------------
Income from continuing operations before
income taxes 146,265 166,346
Income tax expense 38,907 50,236
------------- -------------
Income from continuing operations 107,358 116,110
Discontinued operations (4) - 53
------------- -------------
Net income $ 107,358 $ 116,163
============= =============
Basic income per share:
Income from continuing operations $ 1.72 $ 2.18
Discontinued operations - -
------------- -------------
Net income $ 1.72 $ 2.18
============= =============
Weighted average number of shares outstanding
(5) 62,312,691 53,363,356
============= =============
Diluted income per share:
Income from continuing operations $ 1.71 $ 2.16
Discontinued operations - -
------------- -------------
Net income $ 1.71 $ 2.16
============= =============
Weighted average number of diluted shares
outstanding (5) 62,706,063 53,869,762
============= =============
(1) Includes the results of Western since the date of acquisition of April
1, 2011 as well as the effect of related purchase accounting as detailed
within the Supplemental Information exhibits.
(2) The 2011 second quarter includes $7.2 million of costs associated with
the acquisition of Western.
(3) The 2011 second quarter includes a gain recognized on April 1, 2011 of
$20.6 million as a result of remeasuring to fair value Western shares
acquired from Audley Capital in January 2011.
(4) Discontinued operations includes the results of our closed Homebuilding
and Kodiak operations for the second quarter 2010.
(5) The 2011 second quarter weighted average number of shares outstanding
includes the issuance of 8,951,558 common shares on April 1, 2011 in
connection with the acquisition of Western.
WALTER ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ in thousands, except per share and share amounts)
Unaudited
For the six months
ended June 30,
----------------------------
2011 (1) 2010
------------- -------------
Revenues:
Sales $ 1,173,291 $ 713,819
Miscellaneous income 8,443 8,852
------------- -------------
1,181,734 722,671
------------- -------------
Costs and expenses:
Cost of sales (exclusive of depreciation and
depletion) 680,521 373,597
Depreciation and depletion 117,784 46,054
Selling, general and administrative (2) 89,403 40,750
Postretirement benefits 20,610 20,730
------------- -------------
908,318 481,131
------------- -------------
Operating income 273,416 241,540
Interest expense (35,603) (8,941)
Interest income 316 458
Other income (3) 24,503 -
------------- -------------
Income from continuing operations before
income taxes 262,632 233,057
Income tax expense 73,461 74,252
------------- -------------
Income from continuing operations 189,171 158,805
Discontinued operations (4) - (1,091)
------------- -------------
Net income $ 189,171 $ 157,714
============= =============
Basic income per share:
Income from continuing operations $ 3.24 $ 2.98
Discontinued operations - (0.02)
------------- -------------
Net income $ 3.24 $ 2.96
============= =============
Weighted average number of shares outstanding
(5) 58,389,805 53,365,768
============= =============
Diluted income per share:
Income from continuing operations $ 3.22 $ 2.94
Discontinued operations - (0.02)
------------- -------------
Net income $ 3.22 $ 2.92
============= =============
Weighted average number of diluted shares
outstanding (5) 58,759,784 53,949,123
============= =============
(1) Includes the results of Western since the date of acquisition of April
1, 2011 as well as the effect of related purchase accounting as detailed
within the Supplemental Information exhibits.
(2) The 2011 period includes $17.1 million of costs associated with the
acquisition of Western.
(3) The 2011 period includes a gain recognized on April 1, 2011 of $20.6
million as a result of remeasuring to fair value Western shares acquired
from Audley Capital in January 2011.
(4) Discontinued operations includes the results of our closed Homebuilding
and Kodiak operations for the 2010 period.
(5) The 2011 period weighted average number of shares outstanding includes
the issuance of 8,951,558 common shares on April 1, 2011 in connection
with the acquisition of Western.
WALTER ENERGY, INC. AND SUBSIDIARIES
RESULTS BY OPERATING SEGMENT
($ in thousands)
Unaudited
For the three months For the six months
ended June 30, ended June 30,
---------------------- ----------------------
2011 2010 2011 2010
---------- ---------- ---------- ----------
REVENUES: (1)
U.S. Operations $ 506,852 $ 410,034 $ 914,788 $ 721,305
Canadian and U.K. Operations 265,575 - 265,575 -
Other 573 588 1,371 1,366
---------- ---------- ---------- ----------
Revenues $ 773,000 $ 410,622 $1,181,734 $ 722,671
========== ========== ========== ==========
OPERATING INCOME (LOSS): (1)
U.S. Operations $ 168,671 $ 182,067 $ 307,644 $ 261,492
Canadian and U.K. Operations 12,448 - 12,448 -
Other (2) (27,470) (11,834) (46,676) (19,952)
---------- ---------- ---------- ----------
Operating income $ 153,649 $ 170,233 $ 273,416 $ 241,540
========== ========== ========== ==========
DEPRECIATION AND DEPLETION:
(1)
U.S. Operations $ 39,269 $ 23,798 $ 67,438 $ 45,890
Canadian and U.K. Operations 49,965 - 49,965 -
Other 192 87 381 164
---------- ---------- ---------- ----------
Depreciation and Depletion $ 89,426 $ 23,885 $ 117,784 $ 46,054
========== ========== ========== ==========
CAPITAL EXPENDITURES: (1)
U.S. Operations $ 40,684 $ 26,784 $ 84,820 $ 40,861
Canadian and U.K. Operations 51,699 - 51,699 -
Other (259) 3,919 (102) 4,179
---------- ---------- ---------- ----------
Capital Expenditures $ 92,124 $ 30,703 $ 136,417 $ 45,040
========== ========== ========== ==========
(1) Beginning in the second quarter of 2011 the Company reports all
operations located in the U.S. under the U.S. Operations segment which
includes Walter Energy's historical operating segments of Underground
Mining, Surface Mining and Walter Coke along with the West Virginia
mining operations acquired through the acquisition of Western on April
1, 2011. The Company reports its mining operations located in northeast
British Columbia (Canada) and South Wales (United Kingdom), both
acquired through the Western Coal acquisition, under the Canadian and
U.K. Operations segment. The Other segment primarily includes corporate
expenses.
(2) Amounts for the three and six months ended June 30, 2011 include $7.2
million and $17.1 million, respectively, of costs associated with the
April 1, 2011 acquisition of Western.
WALTER ENERGY, INC. AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
Unaudited
For the three months For the six months
ended June 30, ended June 30,
--------------------- ---------------------
2011 (1) 2010 2011 (1) 2010
---------- ---------- ---------- ----------
Operating Data (per metric ton):
U.S. Operations:
Metallurgical Coal
Tons of coal sold (in
thousands) 1,549 1,542 3,036 3,156
Average selling price per
ton $ 236.37 $ 213.13 $ 224.97 $ 175.94
Tons of coal produced (in
thousands) 1,648 1,574 3,148 3,133
Coal production costs per
ton (2) $ 75.16 $ 66.37 $ 75.77 $ 65.24
Thermal Coal
Tons of coal sold (in
thousands) 1,014 288 1,335 573
Average selling price per
ton $ 73.69 $ 80.82 $ 78.73 $ 82.68
Tons of coal produced (in
thousands) 881 275 1,150 532
Coal production costs per
ton (2) $ 63.15 $ 77.17 $ 67.43 $ 70.18
Canadian and U.K. Operations:
Metallurgical Coal
Tons of coal sold (in
thousands) 1,128 - 1,128 -
Average selling price per
ton $ 231.54 $ - $ 231.54 $ -
Tons of coal produced (in
thousands) 850 - 850 -
Coal production costs per
ton (2) $ 137.35 $ - $ 137.35 $ -
Combined Mining Operations:
Tons of metallurgical coal
sold (in thousands) (3) 2,677 1,542 4,164 3,156
Tons of metallurgical coal
produced (in thousands) (3) 2,498 1,574 3,998 3,133
Tons of thermal coal sold
(in thousands) (3) 1,033 288 1,354 573
Tons of thermal coal
produced (in thousands) (3) 906 275 1,175 532
(1) Includes results of Western since the date of acquisition, April 1,
2011.
(2) Coal production costs per ton are a component of inventoriable costs,
including depreciation. Other costs not included in coal production
costs per ton include depletion of mineral interests, Company-paid
outbound freight, postretirement benefits, asset retirement obligation
expenses, royalties, and Black Lung excise taxes.
(3) Combined mining operations include thermal coal tons sold of 19,000 and
25,000 produced from the Canadian and U.K. Operations segment for the
three and six month periods ended June 30, 2011.
WALTER ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in thousands)
Unaudited
As of
------------------------------
June 30, December 31,
2011 (1) (2) 2010
-------------- --------------
ASSETS
Cash and cash equivalents $ 134,211 $ 293,410
Receivables, net 332,512 143,238
Inventories 200,885 97,631
Deferred income taxes 46,338 62,371
Prepaid expenses 67,909 28,179
Investments 70,060 -
Other current assets 47,209 10,710
-------------- --------------
Total current assets 899,124 635,539
Mineral interests, net 4,393,313 17,305
Property, plant and equipment, net 1,453,112 772,696
Deferred income taxes - 149,520
Goodwill 251,035 -
Other long-term assets 153,766 82,705
-------------- --------------
TOTAL ASSETS $ 7,150,350 $ 1,657,765
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current debt $ 81,976 $ 13,903
Accounts payable 134,162 70,692
Accrued expenses 217,836 52,399
Accumulated postretirement benefits
obligation 25,379 24,753
Other current liabilities 42,844 32,100
-------------- --------------
Total current liabilities 502,197 193,847
Long-term debt 2,386,769 154,570
Deferred income taxes 1,409,412 -
Accumulated postretirement benefits
obligation 463,917 451,348
Other long-term liabilities 363,030 262,934
-------------- --------------
TOTAL LIABILITIES 5,125,325 1,062,699
STOCKHOLDERS' EQUITY 2,025,025 595,066
-------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 7,150,350 $ 1,657,765
============== ==============
(1) Includes accounts of Western acquired on April 1, 2011. The purchase
price has been preliminarily allocated to the assets acquired and
liabilities assumed based upon their estimated fair values at the date
of acquisition. A full and detailed valuation of the assets and
liabilities is being completed and certain information and analysis
remains pending at this time. Accordingly, the allocation is preliminary
and is expected to change as additional information becomes available
and is assessed by the Company. The impact of such changes may be
material.
(2) In January 2011, we acquired approximately 25.3 million common shares of
Western from funds advised by Audley Capital for $293.7 million in cash.
On April 1, 2011 we acquired the remaining common shares of Western for
$3.4 billion, funded through $2.2 billion in long-term debt and the
issue of approximately 9.0 million common shares of Walter Energy, Inc.
valued at $1.2 billion.
WALTER ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
AND COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2011
($ in thousands)
Unaudited
Accumulated
Other
Capital in Compre- Compre-
Common Excess of hensive Retained hensive
Total Stock Par Value Income Earnings Loss
---------- ------- ---------- ---------- -------- ----------
Balance at
December 31,
2010 $ 595,066 $ 531 $ 355,540 $411,383 $ (172,388)
Comprehensive
income:
Net income 189,171 $ 189,171 189,171
Other
comprehensive
income, net
of tax:
Change in
pension and
post-
retirement
benefit
plans 6,234 6,234 6,234
Change in
unrealized
loss on
investment (4,494) (4,494) (4,494)
Change in
unrealized
loss on
hedges (713) (713) (713)
Change in
foreign
currency
translation
adjustment (1,101) (1,101) (1,101)
----------
Comprehensive
income $ 189,097
==========
Stock issued
upon the
exercise of
stock options 5,924 3 5,921
Dividends
paid, $0.25
per share (14,434) (14,434)
Stock-based
compensation 5,328 5,328
Excess tax
benefit from
stock-based
compensation
arrangements 8,780 8,780
Issuance of
common stock
in connection
with the
Western
acquisition 1,224,126 90 1,224,036
Replacement
stock options
and warrants
issued in
connection
with the
Western
acquisition 16,302 - 16,302
Other (5,164) - (5,164)
---------- ------- ---------- -------- ----------
Balance at
June 30, 2011 $2,025,025 $ 624 $1,610,743 $586,120 $ (172,462)
========== ======= ========== ======== ==========
WALTER ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in thousands)
Unaudited
For the six months ended
June 30,
----------------------------
2011 (1) 2010
------------- -------------
OPERATING ACTIVITIES
Net income $ 189,171 $ 157,714
Loss from discontinued operations - 1,091
------------- -------------
Income from continuing operations 189,171 158,805
Adjustments to reconcile income from
continuing operations to net cash flows
provided by operating activities:
Depreciation and depletion 117,784 46,054
Deferred income tax (14,840) 73,108
Gain on investment in Western Coal Corp. (20,553) -
Other 27,521 5,485
Decrease (increase) in assets, net of effect
of business acquisitions:
Receivables (61,301) (65,865)
Inventories 14,660 19,562
Other current assets 30 4,555
Increase (decrease) in liabilities, net of
effect of business acquisitions:
Accounts payable (29,612) 18,879
Accrued expenses and other current
liabilities 36,769 98
------------- -------------
Cash flows provided by operating
activities 259,629 260,681
------------- -------------
INVESTING ACTIVITIES
Additions to property, plant and equipment (136,417) (45,040)
Acquisition of Western Coal Corp., net of
cash acquired (2,432,693) -
Acquisition of HighMount Exploration &
Production Alabama, LLC - (209,964)
Other 5,286 (5,236)
------------- -------------
Cash flows used in investing activities (2,563,824) (260,240)
------------- -------------
FINANCING ACTIVITIES
Proceeds from issuance of debt 2,370,725 -
Borrowings under revolving credit agreement 41,461 -
Repayment on revolving credit agreement (20,725) -
Retirements of debt (174,035) (8,727)
Dividends paid (14,434) (12,044)
Purchases of stock under stock repurchase
program - (53,543)
Debt issuance costs (80,027) -
Other 21,496 5,953
------------- -------------
Cash flows provided by (used in)
financing activities 2,144,461 (68,361)
------------- -------------
Cash flows used in continuing operations (159,734) (67,920)
------------- -------------
CASH FLOWS FROM DISCONTINUED OPERATIONS
Cash flows used in operating activities - (4,735)
Cash flows provided by investing activities - 2,294
Cash flows provided by (used in) financing
activities - -
------------- -------------
Cash flows used in discontinued
operations - (2,441)
------------- -------------
Net decrease in cash and cash equivalents $ (159,734) $ (70,361)
============= =============
Cash and cash equivalents at beginning of
period $ 293,410 $ 165,279
Add: Cash and cash equivalents of discontinued
operations at beginning of period 535 1,254
Net decrease in cash and cash equivalents (159,734) (70,361)
Less: Cash and cash equivalents of
discontinued operations at end of period - 470
------------- -------------
Cash and cash equivalents at end of period $ 134,211 $ 95,702
============= =============
(1) Includes the results of Western since the date of acquisition, April 1,
2011.
WALTER ENERGY, INC. AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
Unaudited
RECONCILIATION OF EBITDA TO AMOUNTS REPORTED UNDER US GAAP:
For the three months For the six months
ended June 30, ended June 30,
---------------------- ----------------------
($ in thousands) 2011 2010 2011 2010
---------- ---------- ---------- ----------
Net income $ 107,358 $ 116,163 $ 189,171 $ 157,714
Add interest expense 32,047 4,164 35,603 8,941
Less interest income (160) (277) (316) (458)
Add income tax expense 38,907 50,236 73,461 74,252
Add depreciation and
depletion expense 89,426 23,885 117,784 46,054
(Income) loss from
discontinued operations - (53) - 1,091
Earnings from continuing
operations before interest,
income taxes, and
depreciation and depletion
(EBITDA) (1) $ 267,578 $ 194,118 $ 415,703 $ 287,594
========== ========== ========== ==========
RECONCILIATION OF ADJUSTED NET INCOME AND EARNINGS PER SHARE TO AMOUNTS
REPORTED UNDER US GAAP:
For the three Impact on
months ended Fully Diluted
June 30, 2011 Earnings
($ in millions) Per Share
--------------- ---------------
Net income $ 107.4 $ 1.71
Adjustments for purchase accounting and
other one-time items (net of tax):
Add increased depreciation and
depletion on acquisition costs
allocated to property and mineral
interests in excess of historical
costs 27.2 0.43
Add acquisition costs allocated to
inventories acquired and sold in the
period in excess of historical costs 17.0 0.27
Add acquisition and integration costs 8.1 0.13
Less gain on investment in Western
shares (15.0) (0.24)
Add other non-recurring corporate
expenses 3.7 0.06
--------------- ---------------
Total adjustments 41.0 0.65
--------------- ---------------
Adjusted net income and adjusted diluted
earnings per share (2) $ 148.4 $ 2.36
=============== ===============
Weighted average number of diluted shares
outstanding 62,706,063
===============
(1) EBITDA is defined as earnings from continuing operations 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.
(2) Adjusted net income and adjusted diluted earnings per share are
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 that these
measure are useful as some investors and analysts look to compare our
current quarter results against those of past quarters and those of
other companies to help evaluate our overall operating results.
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