James River Coal Company Reports Fourth Quarter and Full Year 2011 Operating Results
- Annual Coal Sales Revenue Reach a Record of $1.1 billion
- Q-4 Adjusted EBITDA of $44.2 Million
- Q-4 Cash Margin of $20.79 Per Ton in Central Appalachia (CAPP)
- Maintaining a Strong Balance Sheet with Available Liquidity of $236.9 Million
- Reached Agreements to Sell 2.8 Million Tons of CAPP Coal at $115.82 a Ton in 2012
- Substantially Sold Out of Thermal Coal for 2012
- Conference Call Slides Posted to the Company Website
RICHMOND, Va., March 1, 2012 /PRNewswire/ -- James River Coal Company
, today announced that it had a net loss of $39.1 million or $1.19 per fully diluted share for the year ended December 31, 2011 and a net loss of $28.5 million or $0.82 per fully diluted share for the fourth quarter of 2011. Included in the year ended December 31, 2011 is an income tax expense adjustment related to a valuation allowance placed on the Company's deferred tax assets of $26.8 million or $0.82 per fully diluted share and $0.77 per fully diluted share for the fourth quarter. This is compared to net income of $78.2 million or $2.82 per fully diluted share for the year ended December 31, 2010 and net income of $25.9 million or $0.93 per fully diluted share for the fourth quarter of 2010. Included in the year ended December 31, 2010 is an income tax benefit related to the reversal of the deferred income tax valuation allowance of $22.1 million, or $0.80 per fully diluted share and $0.79 per fully diluted share for the fourth quarter.Peter T. Socha, Chairman and Chief Executive Officer, commented: '2011 was a year of transformation for James River Coal Company. We continued the process to grow and diversify our company. We expanded our presence in both the metallurgical coal segment and the international coal markets. In the operations area, we achieved industry-leading performance in both safety and regulatory compliance. In the financial area, we strengthened our balance sheet by refinancing all of our funded debt and substantially improving our liquidity position. While we are cautious and realistic about the current soft market conditions, we are also optimistic that James River will be well positioned for improving markets in the future.'
ANNUAL RESULTS
The following tables show selected operating results for the year ended December 31, 2011 compared to the year ended December 31, 2010 (in 000's except per ton amounts).
Total Results Year Ended December 31,
------------- -----------------------
2011 2010
---- ----
Total Per Ton Total Per Ton
----- ------- ----- -------
Company and contractor
production (tons) 10,254 8,782
Coal purchased from other
sources (tons) 1,605 128
----- ---
Total coal available to ship
(tons) 11,859 8,910
11,801 8,919
Coal shipments (tons)
$1,105,370 $93.67 $698,949 $78.45
Coal sales revenue
Freight and handling revenue 72,285 6.13 2,167 0.24
Cost of coal sold 905,482 76.73 512,348 57.44
Freight and handling costs 72,285 6.13 2,167 0.24
Depreciation, depletion, &
amortization 108,914 9.23 64,368 7.22
Gross profit 90,974 7.71 122,233 13.70
Selling, general &
administrative 57,078 4.84 38,347 4.30
Acquisition costs 8,504 0.72 - -
Adjusted EBITDA plus
acquisition costs (1) $154,571 13.10 $156,628 17.56
Adjusted EBITDA plus acquisition costs is defined under 'Reconciliation
(1) of Non-GAAP Measures' in this release.
Adjusted EBITDA is used to determine compliance with financial
covenants in our revolving credit facility.
Segment
Results Year Ended December 31,
------- -----------------------
2011 2010
---- ----
CAPP Midwest CAPP Midwest
---- ------- ---- -------
Per Per Per
Total Per Ton Total Ton Total Ton Total Ton
----- ------- ----- ---- ----- ---- ----- ----
Company
and
contractor
production
(tons) 7,823 2,431 5,962 2,820
Coal
purchased
from
other
sources
(tons) 1,605 - 128 -
----- --- --- ---
Total
coal
available
to
ship
(tons) 9,428 2,431 6,090 2,820
Coal
shipments
(tons)
Steam
(tons) 7,166 2,480 6,109 2,810
Metallurgical
(tons) 2,155 - - -
----- --- --- ---
Total
Shipments
(tons) 9,321 2,480 6,109 2,810
Coal
sales
revenue
Steam 651,016 90.85 105,382 42.49 $585,064 95.77 113,885 40.53
Metallurgical 348,972 161.94 - - - - - -
------- ------ - - - - - -
Total
coal
sales
revenue 999,988 107.28 105,382 42.49 585,064 95.77 113,885 40.53
Freight
and
handling
revenue 69,778 7.49 2,507 1.01 - - 2,167 0.77
Cost
of
coal
sold 811,573 87.07 93,909 37.87 419,564 68.68 92,784 33.02
Freight
and
handling
costs 69,778 7.49 2,507 1.01 - - 2,167 0.77
QUARTERLY RESULTS
The following tables show selected operating results for the quarter ended December 31, 2011 compared to the quarter ended December 31, 2010 (in 000's except per ton amounts).
Total Results Three Months Ended December 31,
------------- -------------------------------
2011 2010
---- ----
Total Per Ton Total Per Ton
----- ------- ----- -------
Company and contractor
production (tons) 2,675 2,085
Coal purchased from other
sources (tons) 709 74
--- ---
Total coal available to
ship (tons) 3,384 2,159
3,304 2,069
Coal shipments (tons)
$321,758 97.38 $161,473 78.04
Coal sales revenue
Freight and handling
revenue 35,420 10.72 577 0.28
Cost of coal sold 263,315 79.70 125,677 60.74
Freight and handling costs 35,420 10.72 577 0.28
Depreciation, depletion, &
amortization 33,435 10.12 16,087 7.78
Gross profit 25,008 7.57 19,709 9.53
Selling, general &
administrative 16,553 5.01 9,400 4.54
Adjusted EBITDA plus
acquisition costs (1) $44,155 13.36 $28,479 13.76
Adjusted EBITDA plus acquisition costs is defined under
(1) 'Reconciliation of Non-GAAP Measures' in this release.
Adjusted EBITDA is used to determine compliance with financial covenants
in our senior secured credit facilities.
Segment
Results Three Months Ended December 31,
------- -------------------------------
2011 2010
---- ----
CAPP Midwest CAPP Midwest
---- ------- ---- -------
Per Per Per
Total Per Ton Total Ton Total Ton Total Ton
----- ------- ----- ---- ----- ---- ----- ----
Company
and
contractor
production
(tons) 2,120 555 1,372 713
Coal
purchased
from
other
sources
(tons) 709 - 74 -
--- --- --- ---
Total
coal
available
to
ship
(tons) 2,829 555 1,446 713
Coal
shipments
(tons)
Steam
(tons) 1,909 583 1,362 707
Metallurgical
(tons) 812 - - -
--- --- --- ---
Total
Shipments
(tons) 2,721 583 1,362 707
Coal
sales
revenue
Steam $173,274 90.77 24,590 42.18 $133,465 97.99 28,008 39.61
Metallurgical 123,894 152.58 - - - - - -
------- ------ - - - - - -
Total
coal
sales
revenue 297,168 109.21 24,590 42.18 133,465 97.99 28,008 39.61
Freight
and
handling
revenue 34,705 12.75 715 1.23 - - 577 0.82
Cost
of
coal
sold 240,598 88.42 22,717 38.97 102,345 75.14 23,332 33.00
Freight
and
handling
costs 34,705 12.75 715 1.23 - - 577 0.82
SAFETY
During the fourth quarter our Rockhouse Creek No. 8 and No. 2 Mines won the Mountaineer Guardian Award, presented by the West Virginia Coal Association in recognition of the outstanding safety record. 'We are very proud of our employees who work very hard to make James River a safe place to work,' commented C.K. Lane, Chief Operating Officer. 'James River Coal Company's 2011 Non Fatal Days Lost (NFDL) rate was 17% lower than our 2010 rate and 39% below the national average. In addition, we had 14 operations receive Sentinel of Safety Awards for not having a lost time accident in a year.'
LIQUIDITY AND CASH FLOW
As of December 31, 2011, the Company had available liquidity of $236.9 million calculated as follows (in millions):
Unrestricted Cash $199.7
Availability under the revolver 100.0
Letters of Credit Issued under the
Revolver (62.8)
-----
$236.9
Available Liquidity ======
Restricted Cash $29.5
Capital Expenditures for the fourth quarter were $43.3 million and were $138.5 million for twelve months ended December 31, 2011.
SALES POSITION
As of February 29, 2012, we had the following priced sales position:
2012 Priced
-----------
As of November 7, As of February 29,
2011 2012 Change
------------------ ------------------- ------
Tons Avg Price Tons Avg Price Tons Avg Price
---- --------- ---- --------- ---- ---------
Per Ton Per Ton Per Ton
------- ------- -------
CAPP (1) 5,104 $82.55 7,917 $94.37 2,813 $115.82
--------
Midwest (2) 2,776 $44.16 2,776 $44.16 - $-
----------- ----- ------ ----- ------ --- ---
2013 Priced
-----------
As of November 7, As of February 29,
2011 2012 Change
------------------ ------------------- ------
Tons Avg Price Tons Avg Price Tons Avg Price
---- --------- ---- --------- ---- ---------
Per Ton Per Ton Per Ton
------- ------- -------
CAPP (1) 1,337 $80.45 1,337 $80.45 - $-
--------
Midwest (2) 2,140 $45.35 2,140 $45.35 - $-
----------- ----- ------ ----- ------ --- ---
2014 Priced
-----------
As of November 7, As of February 29,
2011 2012 Change
------------------ ------------------- ------
Tons Avg Price Tons Avg Price Tons Avg Price
---- --------- ---- --------- ---- ---------
Per Ton Per Ton Per Ton
------- ------- -------
CAPP (1) 300 $75.75 300 $75.75 - $-
--------
Midwest (2) 700 $49.00 700 $49.00 - $-
----------- --- ------ --- ------ --- ---
(1) Priced Tons in CAPP do not include approximately 700,000
tons of met coal that has been sold but not yet priced
(2) The prices for the Midwest are minimum base price
amounts adjusted for projected fuel escalators.
2012 GUIDANCE
The guidance contained below represents forecasts, which indicate a range of possible outcomes and are provided to assist investors with the development of earnings estimates. While James River believes that these forecasts represent the best current estimate of management as to future events, actual events will differ from these forecasts, and such differences could be material. These forecasts are subject to risks identified under 'forward-looking statements' below.
Guidance By Segment
(In 000's except per ton amount)
Tons Shipped (1) Cash Cost (2)
Central Appalachia
------------------
Thermal, Stoker and
PCI 6,700 $74.00 - 76.00
Metallurgical 2,800 $108.00 - 112.00
Midwest 2,700 - 2,800 $34.00 - 38.00
-------
(1) Substantially all the CAPP tons that are currently
unsold or unpriced consist of met, PCI, and industrial
stoker.
(2) Cash costs per produced ton excludes purchase coal.
Total JRCC Operations
(In 000's except tax rate)
Depreciation, Depletion and
Amortization $132,000
Tax Rate 0%
Capital Expenditures
Maintenance and Safety Capital $110,000
Completion of Ongoing Projects 15,000
------
$125,000
MISCELLANEOUS
The following additional items had an impact on our results of operations and balance sheet during the fourth quarter of 2011:
-- Due to changes in the current coal markets, we reduced the book value of
our deferred tax asset. This resulted in a $26.8 million adjustment to
income tax expense in the fourth quarter.
-- We recorded additional expense of a net of $1.3 million during the
quarter related to workers' compensation. This amount included $3.5
million of increased expense due to a reduction in the discount rate,
due to lower market interest rates. This was partially offset by a $2.2
million positive impact due to improved safety performance at the mines
and the management of the workers' compensation claim process.
-- We recorded an increase in our pension obligation and black lung
benefits obligation of $19.6 million and $10.2 million, respectively, in
the fourth quarter. These increases are primarily attributed to a
decrease in discount rates, due to lower market interest rates. These
adjustments had no income statement impact.
CONFERENCE CALL, WEBCAST AND REPLAY: The Company will hold a conference call with management to discuss the fourth quarter earnings on March 1, 2012 at 11:00 a.m. Eastern Time. The conference call can be accessed by dialing 877-340-2553, or through the James River Coal Company website at http://www.jamesrivercoal.com. International callers, please dial 678-224-7860. A replay of the conference call will be available on the Company's website and also by telephone, at 855-859-2056 for domestic callers. International callers, please dial 404-537-3406: pass code 41616568.
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, projected fuel escalators and all guidance figures. These forward-looking statements are subject to a number of risks and uncertainties. These risks and uncertainties include, but are not limited to, the following: our cash flows, results of operation or financial condition; the consummation of acquisition, disposition or financing transactions and the effect thereof on our business; our ability to successfully integrate International Resource Partners LP and its related entities (IRP); governmental policies, regulatory actions and court decisions affecting the coal industry or our customers' coal usage; legal and administrative proceedings, settlements, investigations and claims; our ability to obtain and renew permits necessary for our existing and planned operation in a timely manner; environmental concerns related to coal mining and combustion and the cost and perceived benefits of alternative sources of energy; inherent risks of coal mining beyond our control, including weather and geologic conditions or catastrophic weather-related damage; our production capabilities; availability of transportation; our ability to timely obtain necessary supplies and equipment; market demand for coal, electricity and steel; competition; our relationships with, and other conditions affecting, our customers; employee workforce factors; our assumptions concerning economically recoverable coal reserve estimates; future economic or capital market conditions; our plans and objectives for future operations and expansion or consolidation; and the other risks detailed in our reports filed with the Securities and Exchange Commission (SEC). Management believes that these forward-looking statements are reasonable; however, you should not place undue reliance on such statements. These statements are based on current expectations and speak only as of the date of such statements. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of future events, new information or otherwise.
CONTACT: James River Coal Company
Elizabeth M. Cook
Director of Investor Relations
(804) 780-3000
JAMES RIVER COAL COMPANY
AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except share data)
December 31, December 31,
2011 2010
------------- -------------
Assets
Current assets:
Cash and cash equivalents $199,711 180,376
Trade receivables 107,557 59,970
Inventories:
Coal 52,717 23,305
Materials and supplies 17,800 13,690
------ ------
Total inventories 70,517 36,995
Prepaid royalties 8,465 6,039
Other current assets 11,461 5,991
------ -----
Total current assets 397,711 289,371
Property, plant, and equipment, net 909,294 385,652
Goodwill 26,492 26,492
Restricted cash and short term investments 29,510 23,500
Other assets 41,575 59,554
------ ------
Total assets $1,404,582 784,569
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $110,557 57,300
Accrued salaries, wages, and employee benefits 12,996 7,744
Workers' compensation benefits 9,200 9,000
Black lung benefits 2,512 2,282
Accrued taxes 7,563 4,924
Other current liabilities 27,861 16,496
------ ------
Total current liabilities 170,689 97,746
Long-term debt, less current maturities 582,193 284,022
Other liabilities:
Noncurrent portion of workers' compensation benefits 60,721 55,944
Noncurrent portion of black lung benefits 56,152 43,443
Pension obligations 29,121 11,968
Asset retirement obligations 94,654 43,398
Other 14,390 665
------ ---
Total other liabilities 255,038 155,418
Total liabilities 1,007,920 537,186
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
35,671,953 and 27,779,351 shares as of December 31, 2011 and
December 31, 2010 357 278
Paid-in-capital 541,362 324,705
Accumulated deficit (97,682) (58,593)
Accumulated other comprehensive loss (47,375) (19,007)
------- -------
Total shareholders' equity 396,662 247,383
Total liabilities and shareholders' equity $1,404,582 784,569
========== =======
JAMES RIVER COAL COMPANY
AND SUBSIDIARIES
Consolidated Statements of Operations
(in thousands, except share data)
Year Ended December 31,
-----------------------
2011 2010 2009
---- ---- ----
Revenues
Coal sales
revenue $1,105,370 698,949 678,562
Freight and
handling revenue 72,285 2,167 2,996
------ ----- -----
Total revenue 1,177,655 701,116 681,558
Cost of sales:
Cost of coal sold 905,482 512,348 505,892
Freight and
handling costs 72,285 2,167 2,996
Depreciation,
depletion and
amortization 108,914 64,368 62,078
------- ------ ------
Total cost of sales 1,086,681 578,883 570,966
--------- ------- -------
Gross profit 90,974 122,233 110,592
Selling, general
and administrative
expenses 57,078 38,347 39,720
Acquisition costs 8,504 - -
----- --- ---
Total operating
income 25,392 83,886 70,872
------ ------ ------
Interest expense 50,096 29,943 17,057
Interest income (494) (683) (60)
Charges associated
with repayment of
debt 740 - 1,643
Miscellaneous
(income) expense,
net (812) 27 (281)
---- --- ----
Total other
expense, net 49,530 29,287 18,359
------ ------ ------
Income (loss)
before income
taxes (24,138) 54,599 52,513
Income tax expense
(benefit) 14,951 (23,566) 1,559
------ ------- -----
Net income (loss) $(39,089) 78,165 50,954
Earnings (loss) per
common share
Basic earnings
(loss) per
common share $(1.19) 2.82 1.85
Diluted earnings
(loss) per
common share $(1.19) 2.82 1.85
JAMES RIVER COAL COMPANY
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(in thousands)
Year Year Year
Ended Ended Ended
December December December
31, 31, 31,
2011 2010 2009
---- ---- ----
Cash flows from operating activities:
Net income (loss) $(39,089) 78,165 50,954
Adjustments to reconcile net income (loss) to net cash
provided by
operating activities
Depreciation, depletion, and amortization 108,914 64,368 62,078
Accretion of asset retirement obligations 4,477 3,334 3,212
Amortization of debt discount and issue costs 14,684 8,066 1,813
Stock-based compensation 5,283 5,400 5,967
Deferred income tax expense (benefit) 14,139 (22,236) 180
Loss (gain) on sale or disposal of property, plant, and
equipment (59) 307 (61)
Write-off of deferred financing costs 740 - -
Changes in operating assets and liabilities:
Receivables 69,043 (16,681) (9,988)
Inventories (13,967) (3,680) (15,025)
Prepaid royalties and other current assets (104) (2,433) (1,440)
Restricted cash and short term investments (6,010) 38,542 (56,820)
Other assets 566 (2,060) (4,233)
Accounts payable (3,145) 10,828 (10,596)
Accrued salaries, wages, and employee benefits 892 762 340
Accrued taxes (889) (303) (1,787)
Other current liabilities 7,497 1,066 (3,626)
Workers' compensation benefits 4,977 5,609 3,558
Black lung benefits 3,420 3,018 1,657
Pension obligations (1,696) (2,244) 2,144
Asset retirement obligations (5,204) (809) (861)
Other liabilities (697) 43 93
Net cash provided by operating activities 163,772 169,062 27,559
Cash flows from investing activities:
Additions to property, plant, and equipment (138,455) (95,426) (72,159)
Payment for acquisition, net of cash acquired (515,962) - -
Proceeds from sale of property, plant and equipment 103 82 149
--- --- ---
Net cash used in investing activities (654,314) (95,344) (72,010)
Cash flows from financing activities:
Proceeds from issuance of long-term debt 505,000 - 172,500
Repayment of long-term debt (150,000) - -
Proceeds from Revolver - - 12,500
Repayments of Revolver - - (30,500)
Net proceeds from issuance of common stock 170,545 - -
Debt issuance costs (15,668) (1,346) (5,517)
Proceeds from exercise of stock options - 73 75
--- --- ---
Net cash provided by (used in) financing
activities 509,877 (1,273) 149,058
Increase in cash and cash equivalents 19,335 72,445 104,607
Cash and cash equivalents at beginning of period 180,376 107,931 3,324
------- ------- -----
Cash and cash equivalents at end of period $199,711 180,376 107,931
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 Twelve Months Ended
------------------ -------------------
December December December December
31 31 31 31
2011 2010 2011 2010
---- ---- ---- ----
Net income (loss) $(28,542) 25,870 (39,089) 78,165
Income tax expense
(benefit) 23,951 (22,892) 14,951 (23,566)
Interest expense 13,423 7,516 50,096 29,943
Interest income (138) (83) (494) (683)
Depreciation,
depletion, and
amortization 33,435 16,087 108,914 64,368
EBITDA (before
adjustments) $42,129 26,498 134,378 148,227
------- ------ ------- -------
Other adjustments
specified
in our current debt
agreement:
Direct acquisition
costs - - 8,504 -
Charges associated
with repayment of
debt - - 740 -
Other 2,026 1,981 8,200 8,401
----- ----- ----- -----
Adjusted EBITDA $44,155 28,479 151,822 156,628
Write-up of IRP
Inventory - - 2,749 -
Adjusted EBITDA
plus acquisition
costs $44,155 28,479 154,571 156,628
======= ====== ======= =======
In addition, in this press release we are presenting below our earnings per share before acquisition and refinancing expenses for the fourth quarter and year ending December 31, 2011. 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 Twelve months
ended ended
December 31, December 31,
2011 2011
------------- -------------
Acquisition costs - 8,504
Charges associated with repayment of debt - 740
Amortization of contracts included in
depreciation,
depletion and amortization 2,418 5,935
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
Total IRP acquisition and recapitalization
expenses $2,418 20,272
====== ======
Earnings per share impact $0.07 0.62
===== ====
James River Coal Company
Web site: http://www.jamesrivercoal.com/