James River Coal Company Reports Third Quarter 2011 Operating Results
-- 2 Vessels (165,000 Tons) of Met Coal Were Moved From Q-3 (Jul-Sep) into Q-4 (Oct-Dec)
-- Reached Agreements to Ship 2.4 Million Tons of Central Appalachian (CAPP) and Midwest Coal in 2012
-- Integration of IRP and Logan & Kanawha is Substantially Complete
-- Continuing to Maintain a Strong Balance Sheet With a Cash Balance of $209 Million and Available Liquidity of $248 Million
-- Conference Call Slides Posted to Company Website
RICHMOND, Va., Nov. 8, 2011 /PRNewswire/ -- James River Coal Company
, today announced that it had net loss of $3.7 million or $0.11 per diluted share for the third quarter of 2011 and net loss of $10.5 million or $0.33 per diluted share for the nine months ended September 30, 2011. The nine months ended September 30, 2011 results include $9.8 million or $0.30 per share of after tax charges related to the International Resource Partners LP (IRP) acquisition and refinancing of our debt. The 2011 results are compared to net income of $9.2 million or $0.33 per diluted share for the third quarter of 2010 and net income of $52.3 million or $1.89 per diluted share for the nine months ended September 30, 2010.Peter T. Socha, Chairman and Chief Executive Officer commented: 'We were generally pleased with our progress this quarter. Obviously, we were disappointed to miss a couple of very valuable metallurgical coal shipments, but this was only an issue of timing not market conditions. Our operations team continues to successfully adjust our mines to the new regulatory environment. We were particularly pleased to receive several safety awards this quarter from both federal and state regulatory authorities. Lastly, we were pleased to complete several new metallurgical and thermal coal sales contracts during a period of market uncertainty.'
FINANCIAL RESULTS
The following tables show selected operating results for the quarter and nine months ended September 30, 2011 compared to the quarter and nine months ended September 30, 2010 (in 000's except per ton amounts).
Total Results Three Months Ended Nine Months Ended
------------- September 30, September 30,
------------- -------------
2011 2010 2011 2010
---- ---- ---- ----
Total Total Total Total
----- ----- ----- -----
Company and
contractor
production
(tons) 2,816 2,136 7,578 6,697
Coal
purchased
from other
sources
(tons) 284 24 896 54
--- --- --- ---
Total coal
available to
ship (tons) 3,100 2,160 8,474 6,751
Coal
shipments
(tons) 3,163 2,167 8,497 6,850
Coal sales
revenue $291,575 $170,907 $783,612 $537,476
Freight and
handling
revenue 12,283 513 36,865 1,590
Cost of coal
sold 245,240 129,693 642,167 386,671
Freight and
handling
costs 12,283 513 36,865 1,590
Depreciation,
depletion, &
amortization 31,234 15,714 75,479 48,281
Gross profit 15,101 25,500 65,966 102,524
Selling,
general &
administrative 16,344 9,805 40,525 28,947
Acquisition
costs - - 8,504 -
Adjusted
EBITDA plus
acquisition
costs (1) $32,265 $33,519 $110,416 $128,149
(1) Adjusted EBITDA plus acquisition costs is defined
under 'Reconciliation of Non-GAAP Measures' in this
release.
Adjusted EBITDA is used to determine compliance with
financial covenants in our revolving credit facility.
Segment
Results Three Months Ended September 30,
-------- --------------------------------
2011 2010
---- ----
CAPP Midwest CAPP Midwest
---- ------- ---- -------
Per Per Per Per
Total Ton Total Ton Total Ton Total Ton
----- ---- ----- ---- ----- ---- ----- ----
Company and
contractor
production
(tons) 2,225 591 1,472 664
Coal purchased
from other
sources (tons) 284 - 24 -
--- --- --- ---
Total coal
available to
ship (tons) 2,509 591 1,496 664
Coal shipments
(tons)
Steam (tons) 1,983 598 1,500 667
Metallurgical
(tons) 582 -
--- --- --- ---
Total Shipments
(tons) 2,565 598 1,500 667
Coal sales
revenue
Steam $174,325 87.91 26,816 44.84 $142,475 94.98 28,432 42.63
Metallurgical 90,434 155.38 - - - - - -
------ ------
Total coal
sales revenue 264,759 103.22 26,816 44.84 142,475 94.98 28,432 42.63
Freight and
handling
revenue 11,757 4.58 526 0.88 - - 513 0.77
Cost of coal
sold 221,482 86.35 23,758 39.73 106,024 70.68 23,669 35.49
Freight and
handling costs 11,757 4.58 526 0.88 - - 513 0.77
Segment
Results Nine Months Ended September 30,
------- -------------------------------
2011 2010
---- ----
CAPP Midwest CAPP Midwest
---- ------- ---- -------
Per Per Per Per
Total Ton Total Ton Total Ton Total Ton
----- ---- ----- ---- ----- ---- ----- ----
Company
and
contractor
production
(tons) 5,703 1,875 4,590 2,107
Coal
purchased
from
other
sources
(tons) 896 - 54 -
--- --- --- ---
Total
coal
available
to
ship
(tons) 6,599 1,875 4,644 2,107
Coal
shipments
(tons)
Steam
(tons) 5,257 1,897 4,747 2,103
Metallurgical
(tons) 1,343 - - -
----- --- --- ---
Total
Shipments
(tons) 6,600 1,897 4,747 2,103
Coal
sales
revenue
Steam $477,742 90.88 80,792 42.59 $451,599 95.13 85,877 40.84
Metallurgical 225,078 167.59 - - - - - -
------- ------
Total
coal
sales
revenue 702,820 106.49 80,792 42.59 451,599 95.13 85,877 40.84
Freight
and
handling
revenue 35,073 5.31 1,792 0.94 - - 1,590 0.76
Cost
of
coal
sold 570,975 86.51 71,192 37.53 317,219 66.83 69,452 33.03
Freight
and
handling
costs 35,073 5.31 1,792 0.94 - - 1,590 0.76
SAFETY
During the quarter our McCoy Elkhorn Coal Corporation's Bevins Branch Processing Plant received the prestigious Sentinels of Safety Award for outstanding safety performance in the Large Coal Processing Facility Group. Employees at the plant worked 142,049 manhours without a lost time accident.
Sentinels of Safety Awards are co-sponsored by the National Mining Association and the Mine Safety and Health Administration. These awards are presented annually to those mines and facilities with the best safety records in the country.
Bledsoe Coal Corporation's Tan Trough Mine won first place as the safest large underground mine in MSHA District 7. The Kentucky Office of Mine Safety and the Kentucky Coal Association sponsor this award.
Triad Mining had three mines which won the Holmes Safety Awards for the third quarter for the lowest reportable injuries in MSHA District 8.
C.K. Lane, Chief Operating Officer commented: 'We are very proud to have received these distinguished awards. Our employees have worked very hard to make safety our number one priority.'
LIQUIDITY AND CASH FLOW
As of September 30, 2011, the Company had available liquidity of $247.6 million calculated as follows (in millions):
Unrestricted Cash $208.6
Availability under the Revolver 97.8
Letters of Credit Issued under
the Revolver (58.8)
-----
Available Liquidity $247.6
======
Restricted Cash $29.5
=====
Capital expenditures for the third quarter were $36.8 million and $95.1 million for the nine months ended September 30, 2011.
SALES POSITION AND MARKET COMMENTS
As of November 7, 2011, we had the following agreements to ship coal at a fixed and known price (in 000's except per ton amounts):
2012 Priced
-----------
As of August 8, As of November 7,
2011 2011 Change
---------------- ------------------ ------
Tons Avg Price Tons Avg Price Tons Avg Price
---- Per Ton ---- Per Ton ---- Per Ton
CAPP 3,993 $83.66 5,104 $82.55 1,111 $78.56
Midwest (1) 1,524 $43.49 2,776 $44.16 1,252 $44.98
----------- ----- ------ ----- ------ ----- ------
2013 Priced
-----------
As of August 8, As of November 7,
2011 2011 Change
---------------- ------------------ ------
Tons Avg Price Tons Avg Price Tons Avg Price
---- Per Ton ---- Per Ton ---- Per Ton
CAPP 1,337 $79.52 1,337 $80.45 - $-
Midwest (1) 990 $44.10 2,140 $45.35 1,150 $46.43
----------- --- ------ ----- ------ ----- ------
2014 Priced
-----------
As of August 8, As of November 7,
2011 2011 Change
---------------- ------------------ ------
Tons Avg Price Tons Avg Price Tons Avg Price
---- Per Ton ---- Per Ton ---- Per Ton
CAPP - $- - $- - $-
Midwest (1) - $- 700 $49.00 700 $49.00
----------- --- --- --- ------ --- ------
(1) 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 quarterly results on November 8, 2011 at 11:00 a.m. Eastern Time. The conference call can be accessed by dialing 877-340-2553, or through the James River Coal Company website at http://www.jamesrivercoal.com. International callers, please dial 678-224-7860. A replay of the conference call will be available on the Company's website and also by telephone, at 855-859-2056 for domestic callers. International callers, please dial 404-537-3406: pass code 22258898.
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: a change in the demand for coal by electric utility and industrial customers; the loss of one or more of our largest customers; inability to secure new coal supply agreements or to extend existing coal supply agreements at market prices; our dependency on railroads for transportation of a large percentage of our products; failure to exploit additional coal reserves; the risk that reserve estimates are inadequate; failure to diversify our operations; increased capital expenditures; encountering difficult mining conditions; increased costs of complying with mine health and safety regulations; bottlenecks or other difficulties in transporting coal to our customers; delays in the development of new mining projects; increased cost of raw materials; the effects of litigation, regulation and competition; lack of availability of financing sources; our compliance with debt covenants; the risk that we are unable to successfully integrate acquired assets into the business; 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 and regulatory actions; legal and administrative proceedings, settlements, investigations and claims; weather conditions or catastrophic weather-related damage; our production capabilities; availability of transportation; market demand for coal, electricity and steel; competition; our relationships with, and other conditions affecting, our customers; employee workforce factors; our assumptions concerning economically recoverable coal reserve estimates; future economic or capital market conditions; our plans and objectives for future operations and expansion or consolidation; our ability to integrate successfully operations that we have or may acquire or develop in the future, including those of IRP, or the risk that any such integration could be more difficult, time-consuming or costly than expected; the consummation of financing transactions, acquisitions or dispositions and the related effects on our business; uncertainty of our expected financial performance following completion of the IRP acquisition; disruption from the IRP acquisition making it more difficult to maintain relationships with customers, employees or suppliers; and the other risks detailed in our reports filed with the Securities and Exchange Commission (SEC). Management believes that these forward-looking statements are reasonable; however, you should not place undue reliance on such statements. These statements are based on current expectations and speak only as of the date of such statements. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of future events, new information or otherwise.
JAMES RIVER COAL COMPANY
AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except share data)
September 30, December 31,
2011 2010
-------------- -------------
Assets (unaudited)
Current assets:
Cash and cash equivalents $208,568 180,376
Trade receivables 83,151 59,970
Inventories:
Coal 38,731 23,305
Materials and supplies 18,443 13,690
------ ------
Total inventories 57,174 36,995
Prepaid royalties 5,385 6,039
Other current assets 10,465 5,991
------ -----
Total current assets 364,743 289,371
Property, plant, and equipment, net 897,617 385,652
Goodwill 26,492 26,492
Restricted cash and short term investments 29,510 23,500
Other assets 62,470 59,554
------ ------
Total assets $1,380,832 784,569
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $69,271 57,300
Accrued salaries, wages, and employee benefits 15,955 7,744
Workers' compensation benefits 9,000 9,000
Black lung benefits 2,282 2,282
Accrued taxes 7,897 4,924
Other current liabilities 29,251 16,496
------ ------
Total current liabilities 133,656 97,746
Long-term debt, less current maturities 578,649 284,022
Other liabilities:
Noncurrent portion of workers' compensation benefits 58,904 55,944
Noncurrent portion of black lung benefits 45,656 43,443
Pension obligations 10,041 11,968
Asset retirement obligations 95,438 43,398
Other 7,219 665
----- ---
Total other liabilities 217,258 155,418
Total liabilities 929,563 537,186
Commitments and contingencies
Shareholders' equity:
Preferred stock, $1.00 par value. Authorized 10,000,000 shares - -
Common stock, $.01 par value. Authorized 100,000,000 shares;
issued and outstanding
35,648,065 and 27,779,351 shares as of September 30, 2011 and
December 31, 2010 356 278
Paid-in-capital 538,511 324,705
Accumulated deficit (69,140) (58,593)
Accumulated other comprehensive loss (18,458) (19,007)
------- -------
Total shareholders' equity 451,269 247,383
Total liabilities and shareholders' equity $1,380,832 784,569
JAMES RIVER COAL COMPANY
AND SUBSIDIARIES
Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
Three Months Three Months
Ended Ended
September 30, September 30,
2011 2010
-------------- --------------
Revenues
Coal sales revenue $291,575 170,907
Freight and handling revenue 12,283 513
------ ---
Total revenue 303,858 171,420
Cost of sales:
Cost of coal sold 245,240 129,693
Freight and handling costs 12,283 513
Depreciation, depletion and
amortization 31,234 15,714
------ ------
Total cost of sales 288,757 145,920
Gross profit 15,101 25,500
Selling, general and administrative
expenses 16,344 9,805
------ -----
Total operating income
(loss) (1,243) 15,695
Interest expense 13,215 7,591
Interest income (173) (584)
Miscellaneous income, net (271) (67)
---- ---
Total other expense,
net 12,771 6,940
Income (loss) before
income taxes (14,014) 8,755
Income tax benefit (10,282) (445)
------- ----
Net income (loss) $(3,732) 9,200
======= =====
Earnings (loss) per common share
Basic earnings (loss) per common
share $(0.11) 0.33
Diluted earnings (loss) per common
share $(0.11) 0.33
JAMES RIVER COAL COMPANY
AND SUBSIDIARIES
Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
Nine Months Nine Months
Ended Ended
September 30, September 30,
2011 2010
-------------- --------------
Revenues
Coal sales revenue $783,612 537,476
Freight and handling revenue 36,865 1,590
------ -----
Total revenue 820,477 539,066
Cost of sales:
Cost of coal sold 642,167 386,671
Freight and handling costs 36,865 1,590
Depreciation, depletion and
amortization 75,479 48,281
Total cost of sales 754,511 436,542
------- -------
Gross profit 65,966 102,524
Selling, general and
administrative expenses 40,525 28,947
Acquisition costs 8,504 -
----- ---
Total operating income 16,937 73,577
------ ------
Interest expense 36,673 22,427
Interest income (356) (600)
Charges associated with
repayment of debt 740 -
Miscellaneous (income)
expense, net (573) 129
Total other expense, net 36,484 21,956
------ ------
Income (loss) before income
taxes (19,547) 51,621
Income tax benefit (9,000) (674)
------ ----
Net income (loss) $(10,547) 52,295
Earnings (loss) per common share
Basic earnings (loss) per
common share $(0.33) 1.89
Diluted earnings (loss) per
common share $(0.33) 1.89
JAMES RIVER COAL COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Nine Nine
Months Months
Ended Ended
September September
30, 30,
2011 2010
---- ----
Cash flows from operating
activities:
Net income (loss) $(10,547) 52,295
Adjustments to reconcile
net income to net cash
provided by operating
activities
Depreciation, depletion,
and amortization 75,479 48,281
Accretion of asset
retirement obligations 3,215 2,484
Amortization of debt
discount and issue costs 10,479 5,972
Stock-based compensation 3,948 4,185
Deferred income tax
benefit (10,026) -
Loss on sale or disposal
of property, plant and
equipment - 314
Write-off of deferred
financing costs 740 -
Changes in operating
assets and liabilities:
Receivables 93,449 (16,253)
Inventories (1,294) 2,366
Prepaid royalties and other current
assets 3,972 (469)
Restricted cash (6,010) 38,542
Other assets (2,808) 2,516
Accounts payable (44,431) (1,594)
Accrued salaries, wages, and employee
benefits 3,851 2,927
Accrued taxes (525) 962
Other current liabilities 9,594 3,630
Workers' compensation benefits 2,960 2,181
Black lung benefits 2,640 2,916
Pension obligations (1,335) (2,097)
Asset retirement obligations (3,807) (812)
Other liabilities (149) 22
Net cash provided by operating
activities 129,395 148,368
------- -------
Cash flows from investing
activities:
Additions to property,
plant, and equipment (95,118) (59,681)
Payment for acquisition,
net of cash acquired (515,962) -
-------- ---
Net cash used in investing activities (611,080) (59,681)
-------- -------
Cash flows from financing
activities:
Proceeds from issuance of
long-term debt 505,000 -
Repayment of long-term
debt (150,000) -
Net proceeds from
issuance of common stock 170,545 -
Debt issuance costs (15,668) (1,346)
------- ------
Net cash provided by (used in)
financing activities 509,877 (1,346)
------- ------
Increase in cash 28,192 87,341
Cash and cash equivalents
at beginning of period 180,376 107,931
------- -------
Cash and cash equivalents
at end of period $208,568 195,272
======== =======
JAMES RIVER COAL COMPANY
AND SUBSIDIARIES
Reconciliation of Non GAAP Measures
(in thousands)
(unaudited)
EBITDA is used by management to measure operating performance. We define EBITDA as net income or loss plus interest expense (net), income tax expense (benefit) and depreciation, depletion and amortization (EBITDA), to better measure our operating performance. We regularly use EBITDA to evaluate our performance as compared to other companies in our industry that have different financing and capital structures and/or tax rates. In addition, we use EBITDA in evaluating acquisition targets.
Adjusted EBITDA is defined as EBITDA as further adjusted for certain cash and non-cash charges as specified in our revolving credit facility and is used in several of the covenants in that facility. Adjusted EBITDA plus acquisition costs further adjusts Adjusted EBITDA to add back certain non-recurring costs incurred in connection with the IRP acquisition that may not reflect the trend of future results. We believe that Adjusted EBITDA plus acquisition costs presents a useful measure of our ability to service and incur debt on an ongoing basis.
EBITDA, Adjusted EBITDA, and Adjusted EBITDA plus acquisition costs are not recognized terms under GAAP and are not an alternative to net income, operating income or any other performance measures derived in accordance with GAAP or an alternative to cash flow from operating activities as a measure of operating liquidity. Because not all companies use identical calculations, this presentation of EBITDA, Adjusted EBITDA, and Adjusted EBITDA plus acquisition costs may not be comparable to other similarly titled measures of other companies. Additionally, EBITDA, Adjusted EBITDA, and Adjusted EBITDA plus acquisition costs are not intended to be a measure of free cash flow for management's discretionary use, as they do not reflect certain cash requirements such as tax payments, interest payments and other contractual obligations.
Three Months Ended Nine Months Ended
------------------ -----------------
September September September September
30 30 30 30
2011 2010 2011 2010
---- ---- ---- ----
Net income (loss) $(3,732) 9,200 (10,547) 52,295
Income tax expense
(benefit) (10,282) (445) (9,000) (674)
Interest expense 13,215 7,591 36,673 22,427
Interest income (173) (584) (356) (600)
Depreciation,
depletion, and
amortization 31,234 15,714 75,479 48,281
EBITDA (before
adjustments) $30,262 31,476 92,249 121,729
------- ------ ------ -------
Other adjustments
specified
in our current debt
agreement
Direct acquisition
costs - - 8,504 -
Charges associated
with repayment of
debt - - 740 -
Other 2,003 2,043 6,174 6,420
----- ----- ----- -----
Adjusted EBITDA $32,265 33,519 107,667 128,149
Write-up of IRP
inventory - - 2,749 -
Adjusted EBITDA plus
acquisition costs $32,265 33,519 110,416 128,149
======= ====== ======= =======
In addition, in this press release we have presented our earnings per share before acquisition and refinancing expenses. As we do not routinely engage in transactions of the magnitude of the IRP acquisition or the refinancing of our debt, and consequently do not regularly incur transaction-related expenses of similar size, we believe presenting earnings per share excluding acquisition and refinancing expenses provides investors with an additional measure of our core operating performance. Charges related to the IRP acquisition and refinancing of our debt included in our results of operations are as follows:
Three months Nine months
ended ended
September 30, September 30,
2011 2011
-------------- --------------
Acquisition costs - 8,504
Charges associated with repayment of
debt - 740
Amortization of contracts included in
depreciation,
depletion and amortization 1,088 3,517
Write-up to Fair Market Value of
IRP's inventory at acquisition - 2,749
Interest on repaid Senior Notes after
new financing completed - 2,344
Estimated tax impact (490) (8,034)
Total IRP acquisition and
recapitalization expenses $598 9,820
==== =====
Earnings per share impact $0.02 0.30
===== ====
CONTACT: James River Coal Company
Elizabeth M. Cook
Director of Investor Relations
(804) 780-3000
James River Coal Company
Web site: http://www.jamesrivercoal.com//