Peabody Energy Announces Results for the Quarter Ended March 31, 2012
- Australian revenues increase 48%, driving 17% rise in consolidated revenues to $2.04 billion
- EBITDA rises 18% to $513 million
- Operating profit increases 11% to $350 million and operating cash flows rise 79% to $396 million
- Diluted EPS from continuing operations totals $0.64 with adjusted diluted EPS of $0.67
- Peabody reduces 2012 U.S. production targets in response to market demand; Australian production targets remain 30% - 40% above prior year
ST. LOUIS, April 19, 2012 /PRNewswire/ -- Peabody Energy
today reported first quarter 2012 EBITDA of $512.6 million, an 18 percent increase over prior year levels. Income from continuing operations totaled $182.3 million, with diluted earnings per share from continuing operations of $0.64. Adjusted diluted earnings per share totaled $0.67, compared with $0.72 in the prior year.'Peabody delivered increased contributions from both Australian and U.S. mining operations,' said Peabody Energy Chairman and Chief Executive Officer Gregory H. Boyce. 'Our operations contributed higher revenues and margins per ton in all regions, demonstrating the strength of our diverse platform in the face of challenging conditions. Looking forward, our U.S. coal position remains fully priced for 2012, Australian thermal coal demand remains strong, and recent data suggest that metallurgical coal markets have stabilized with upside potential in the second half.'
RESULTS FROM CONTINUING OPERATIONS
First quarter revenues rose 17 percent to $2.04 billion, driven by a 27 percent increase in Australian revenues per ton and a 7 percent rise in U.S. revenues per ton. Sales volumes of 61.7 million tons were above prior year sales of 61.2 million tons.
Revenues in Australia climbed 48 percent on higher realized pricing for both metallurgical and thermal coal and an 18 percent increase in sales volumes. Australia shipments totaled 6.6 million tons, including 2.9 million tons of metallurgical coal and 2.6 million tons of seaborne thermal coal.
U.S. revenues rose 5 percent, driven by higher realized prices in both the Midwestern and Western regions. U.S. shipments were largely in line with 2011 as the company only shipped to meet contractual commitments.
EBITDA rose 18 percent to $512.6 million, compared with $435.3 million in the prior year.
-- Australian Mining EBITDA increased 41 percent to $295.6 million on
higher volumes and increased revenues per ton. Australian EBITDA
benefited from additional volumes due to the Macarthur Coal acquisition.
Australian results were impacted by approximately $41 million in
weather-related effects on metallurgical coal sales and production in
late March.
-- U.S. Mining EBITDA rose 10 percent to $317.3 million due to higher
revenues and increased per-ton margins in both the West and Midwest.
Operating profit increased 11 percent to $350.2 million and operating cash flows rose 79 percent to $395.5 million.
Income from continuing operations totaled $182.3 million, compared with $194.6 million in the prior year, declining due to higher acquisition-related interest expense and depreciation, depletion and amortization. Adjusted income from continuing operations totaled $191.2 million. Diluted earnings per share from continuing operations totaled $0.64 while adjusted diluted earnings per share totaled $0.67.
Summary of Adjusted Income and
Diluted Earnings Per Share
(Unaudited)
Quarter Ended
-------------
(Dollars in Millions, Except Per Share
Data) March March
2012 2011
---- ----
Income from Continuing Operations $182.3 $194.6
Remeasurement Expense Related to
Foreign Income Tax Accounts 8.9 6.4
--- ---
Adjusted Income from Continuing
Operations (1) $191.2 $201.0
====== ======
Diluted EPS $0.64 $0.70
Remeasurement Expense Related to
Foreign Income Tax Accounts 0.03 0.02
---- ----
Adjusted Diluted EPS (1) $0.67 $0.72
===== =====
(1) Represents non-GAAP financial
measures defined at the end of this
release and illustrated in the
reconciliation of EBITDA tables after
this release.
GLOBAL COAL MARKETS AND PEABODY'S POSITION
'Near-term markets reflect the strength of Asia re-emerging as the leader of global economic growth and increased coal consumption. China's steel production rebounded in March, China's coal imports are running at a record pace, significant new global generation is coming on line, and we look for a 10 percent increase in seaborne coal demand in 2012,' said Boyce.
'Lower U.S. coal-fueled generation related to mild weather and coal-to-gas switching has reduced U.S. coal demand. During March, industry shipment reductions accelerated after a number of industry production curtailments were announced. Additional reductions are likely. Peabody is negotiating with select customers regarding reduced 2012 shipments and is lowering planned U.S. production.'
Peabody believes it is best positioned in the industry with sustained increases in Australian coal production and the leading position in low-cost U.S. regions. Australian coal is expected to experience strong demand growth due to its quality and proximity to the growing Asian coal markets. In the United States, Peabody has the leading position in the two regions with the best demand growth potential and lowest cost structure - the Powder River and Illinois basins. These regions also stand to benefit from expanding U.S. export capacity in coming years, much of which is expected to come from the Gulf and West coasts.
According to Boyce, 'Global industry and economic data continues to support a coal supercycle, with sustained increases in coal demand from expanding international electricity generation and steel production, growing seaborne coal imports and constrained coal supplies. This is primarily driven by urbanization and industrialization in China, India and emerging Asia, which are likely to account for more than 90 percent of the increase in global coal demand over the next 25 years. At the same time, Australia is expected to supply much of the world's rise in seaborne coal.'
Within global coal markets:
-- Growing global electricity generation and rising steel production
capacity utilization are driving record global coal imports, which are
expected to increase 10 percent in 2012.
-- China's net coal imports through February totaled 58 million tonnes, an
81 percent increase over the prior year, to meet rising coastal demand
for both metallurgical and thermal coal. China steel production
accelerated throughout the first quarter and electricity generation is
up 7 percent over the prior year. In 2012, China's domestic coal
production is targeted to grow at half the rate of electricity
generation, leading to strong import growth.
-- India's coal generation has increased 9 percent year to date, and coal
imports are expected to set another new record in 2012 led by rising
thermal coal demand. India also has eliminated its tariff on imported
coal to encourage greater imports.
-- Japan is increasing thermal coal imports due to high seaborne natural
gas prices and nuclear generation that has been reduced to just one
active plant.
-- Global coal supply faces constraints around the world, including rising
costs of supply and transportation challenges in China, ongoing
production shortfalls in India, limited rail and port capacity in
multiple countries, and cost, labor and weather-related challenges in a
number of regions.
Peabody expects these global trends to continue for years, as China and India lead the global buildout of coal-fueled generation. Nearly 90 gigawatts of new coal-fueled generation are expected to come on line in 2012 representing more than 300 million tonnes of additional thermal coal demand. And over the next five years, Peabody expects new coal-fueled generation to grow by 385 gigawatts, which would require more than 1.3 billion tonnes of additional thermal coal. Peabody expects China's coal consumption to grow by more than 1 billion tonnes by 2015, to approximately 5 billion tonnes per year. In India, approximately 70 gigawatts of coal-fueled generation are expected to start up in the next five years, requiring nearly 250 million tonnes of additional coal, much of which is expected to be supplied through increased imports.
Global steel production is expected to increase as emerging nations continue to urbanize and industrialize. Peabody anticipates global metallurgical coal demand growth of approximately 50 million tonnes per year every year over the next five-plus years.
Newcastle thermal coal contracts settled at $115 per tonne for April 1 settlements, which is within 15 percent of record levels. Metallurgical coal prices for high quality hard coking coal and low-vol PCI are being settled at $210 and $153 per tonne, respectively, for April 1 quarterly contracts.
In Australia, Peabody is settling second quarter metallurgical coal shipments in line with recent settlements, with essentially all metallurgical coal production unpriced for the remainder of the year. The company continues to target total 2012 metallurgical coal sales of 14 to 15 million tons. Peabody is also settling thermal coal contracts in line with recent settlements. Seaborne thermal volumes are targeted at 12 to 13 million tons for 2012, with 20 to 25 percent remaining to be priced later in the year.
U.S. coal markets experienced first quarter declines in both consumption and production, with sharp declines in U.S. coal-fueled generation due to coal-to-gas switching, mild winter weather and low economic growth. Peabody estimates that first quarter U.S. coal shipments declined 7 percent. Reductions accelerated throughout the quarter to an estimated 13 percent in March, which would equate to more than 140 million tons on an annualized basis.
The company estimates that U.S. coal-fueled electricity demand could decrease in excess of 100 million tons in 2012, with net U.S. coal exports increasing approximately 15 million tons to more than 110 million tons. Based on announced projects, U.S. export capacity could increase by more than 75 percent over the next five years to 250 million tons.
Peabody has reduced its targeted 2012 U.S. sales volume to 185 to 195 million tons, with production fully priced. The company has 40 to 50 percent of planned production unpriced for 2013.
OPERATIONS AND PROJECT UPDATE
Since the beginning of 2012, Peabody has continued to progress its key operations initiatives and mine projects.
-- The company advanced improvement activities and increased equipment
utilization at the Coppabella and Moorvale mines, which were acquired in
October 2011;
-- Employees at the high quality hard coking coal mine, North Goonyella,
overwhelmingly accepted a new employee bargaining agreement;
-- Peabody favorably resolved a dispute regarding the MDL 162 project in
Queensland, and now retains a 90 percent equity ownership position in
the development license.
Peabody continued to generate strong cash flows during the quarter, while investing in key projects to meet rising Australian volume targets for 2012 and beyond. The combination of cash flow generation and modest sustaining capital expenditures gives Peabody the ability to fund previously approved organic growth projects and reduce debt.
First quarter capital investments totaled $238.6 million, and the company has reduced its planned capital spending to $1.1 to $1.3 billion in 2012. Since the beginning of the year, Peabody:
-- Continued development of the low-vol PCI Codrilla Mine, which is
expected to produce first coal in late 2013 and reach approximately 3.5
million tons per year (2.6 million tons attributable) at full
production;
-- Shipped first coal from the Middlemount Mine through Abbot Point port.
Middlemount sales are expected to reach 4.4 million tons per year (2.2
million tons attributable) at full production;
-- Advanced expansions at Millennium, Burton and Metropolitan metallurgical
coal mines, which are expected to contribute an additional 3 to 4
million tons at full production; and
-- Continued the conversion of Wilpinjong and Millennium mines in Australia
from contract mining to owner operations.
OUTLOOK
Peabody is targeting second quarter 2012 EBITDA in the range of $450 to $550 million and adjusted diluted earnings per share of $0.40 to $0.65. Second quarter targets reflect expected lower realized metallurgical and thermal coal pricing along with reduced U.S. shipments.
For 2012, the company is maintaining Australian sales targets of 33 to 36 million tons and reducing U.S. volume targets to 185 to 195 million tons. Total sales are now targeted at 235 to 255 million tons, with the remainder from Trading and Brokerage activities.
Peabody Energy is the world's largest private-sector coal company and a global leader in sustainable mining and clean coal solutions. The company serves metallurgical and thermal coal customers in more than 25 countries on six continents. For further information, go to PeabodyEnergy.com and CoalCanDoThat.com.
Certain statements in this press release are forward-looking as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on numerous assumptions that the company believes are reasonable, but they are open to a wide range of uncertainties and business risks that may cause actual results to differ materially from expectations as of April 19, 2012. These factors are difficult to accurately predict and may be beyond the company's control. The company does not undertake to update its forward-looking statements. Factors that could affect the company's results include, but are not limited to: global demand for coal, including the seaborne thermal and metallurgical coal markets; price volatility, particularly in higher-margin products and in our trading and brokerage businesses; impact of alternative energy sources, including natural gas and renewables; impact of weather and natural disasters on demand, production and transportation; reductions and/or deferrals of purchases by major customers and ability to renew sales contracts; credit and performance risks associated with customers, suppliers, contract miners, co-shippers, and trading, banks and other financial counterparties; geologic, equipment, permitting and operational risks related to mining; transportation availability, performance and costs; availability, timing of delivery and costs of key supplies, capital equipment or commodities such as diesel fuel, steel, explosives and tires; integration of the newly acquired Macarthur Coal operations; successful implementation of business strategies; negotiation of labor contracts, employee relations and workforce availability; changes in postretirement benefit and pension obligations and funding requirements; replacement and development of coal reserves; availability, access to and related cost of capital and financial markets; effects of changes in interest rates and currency exchange rates (primarily the Australian dollar); effects of acquisitions or divestitures; economic strength and political stability of countries in which we have operations or serve customers; legislation, regulations and court decisions or other government actions, including new environmental and mine safety requirements; changes in income tax regulations or other regulatory taxes; litigation, including claims not yet asserted; and other risks detailed in the company's reports filed with the Securities and Exchange Commission (SEC).
Included in our release of financial information accounted for in accordance with generally accepted accounting principles (GAAP) are certain non-GAAP financial measures, as defined by SEC regulations. We have defined below the non-GAAP financial measures that we use and have included in the following tables of this release reconciliations of these measures to the most directly comparable GAAP measures.
EBITDA (also called Adjusted EBITDA) is defined as income from continuing operations before deducting net interest expense, income taxes, asset retirement obligation expense, depreciation, depletion and amortization, and amortization of basis difference associated with equity method investments. EBITDA, which is not calculated identically by all companies, is not a substitute for operating income, net income or cash flow as determined in accordance with United States generally accepted accounting principles. Management uses EBITDA as a key measure of operating performance and also believes it is a useful indicator of the company's ability to meet debt service and capital expenditure requirements.
Adjusted Income from Continuing Operations and Adjusted EPS are defined as income from continuing operations and diluted earnings per share excluding the impact of the remeasurement of foreign income tax accounts. Management has included these measures because, in management's opinion, excluding such impact is a better indicator of the company's ongoing effective tax rate and diluted earnings per share, and is therefore more useful in comparing the company's results with prior and future periods.
CONTACT:
Vic Svec
(314) 342-7768
Condensed Consolidated Statements of Income (Unaudited)
For the Quarters Ended March 31, 2012 and 2011
----------------------------------------------
(Dollars in Millions, Except Per Share Data)
Quarter Ended
-------------
March
March
2011
2012
----
Tons Sold (In
Millions) 61.7 61.2
==== ====
Revenues $2,038.6 $1,743.1
Operating Costs and
Expenses 1,438.6 1,247.2
Depreciation,
Depletion and
Amortization 144.9 107.7
Asset Retirement
Obligation Expense 15.2 13.3
Selling and
Administrative
Expenses 71.0 61.6
Other Operating
(Income) Loss:
Net Gain on Disposal
or Exchange of
Assets (4.0) (4.0)
Loss from Equity
Affiliates:
20.4 3.0
Results of
Operations
2.3 -
Amortization of
Basis Difference
22.7 3.0
Loss from Equity
Affiliates
Operating Profit 350.2 314.3
(8.1) (4.1)
Interest Income
102.0 51.0
Interest Expense
Income from
Continuing
Operations Before
Income Taxes 256.3 267.4
Income Tax
Provision:
65.1 66.4
Provision
8.9 6.4
Remeasurement
Expense Related to
Foreign Income Tax
Accounts
74.0 72.8
Income Tax Provision
Income from
Continuing
Operations, Net of
Income Taxes 182.3 194.6
Loss from
Discontinued
Operations, Net of
Income Taxes (4.0) (15.9)
---- -----
Net Income 178.3 178.7
Less: Net Income
Attributable to
Noncontrolling
Interests 5.6 2.2
--- ---
Net Income
Attributable to
Common Stockholders $172.7 $176.5
====== ======
Diluted EPS (1):
Income (Loss)
Attributable to
Common
Stockholders:
Continuing
Operations (2) $0.64 $0.70
(0.01) (0.05)
Discontinued
Operations
Net Income
Attributable to
Common Stockholders $0.63 $0.65
===== =====
EBITDA $512.6 $435.3
====== ======
Adjusted Diluted EPS
(1):
Adjusted Income from
Continuing
Operations:
Continuing
Operations (2) $0.64 $0.70
0.03 0.02
Remeasurement
Expense Related to
Foreign Income Tax
Accounts
Adjusted Income from
Continuing
Operations $0.67 $0.72
===== =====
Weighted
average
diluted shares
outstanding
were 270.9
million and
272.8 million
for the
quarters ended
March 31, 2012
and 2011,
respectively.
We compute EPS
using a two-
class method
using an
earnings
allocation
method that
determines EPS
separately for
common stock
and
participating
securities. As
a result, it
may not be
possible to
recalculate
EPS as
presented in
our condensed
consolidated
statements of
income. For
the quarters
ended March
31, 2012 and
2011, there
was no
dilutive
impact of our
Convertible
Junior
Subordinated
Debentures on
(1) diluted EPS.
Reflects income
from
continuing
operations,
net of income
taxes less net
income
attributable
to
noncontrolling
(2) interests.
This information is intended to be reviewed in
conjunction with the company's filings with the
Securities and Exchange Commission.
Supplemental Financial Data (Unaudited)
For the Quarters Ended March 31, 2012 and 2011
----------------------------------------------
Quarter Ended
-------------
March March
2012 2011
---- ----
Revenue Summary (Dollars in Millions)
------------------------------------
U.S. Mining Operations $1,126.6 $1,070.7
Australian Mining Operations 854.1 578.8
Trading and Brokerage
Operations 52.5 83.9
Other 5.4 9.7
Total $2,038.6 $1,743.1
======== ========
Tons Sold (In Millions)
----------------------
Midwestern U.S. Mining
Operations 7.0 7.6
Western U.S. Mining Operations 43.4 43.8
Australian Mining Operations 6.6 5.6
Trading and Brokerage
Operations 4.7 4.2
Total (1) 61.7 61.2
Revenues per Ton - Mining Operations
------------------------------------
Midwestern U.S. $52.30 $48.36
Western U.S. 17.54 16.07
Total - U.S. 22.36 20.84
Australia 130.34 103.01
Operating Costs per Ton - Mining Operations(2)
---------------------------------------------
Midwestern U.S. $36.51 $33.88
Western U.S. 12.77 11.97
Total - U.S. 16.06 15.21
Australia 85.23 65.71
Gross Margin per Ton - Mining Operations(2)
------------------------------------------
Midwestern U.S. $15.79 $14.48
Western U.S. 4.77 4.10
Total - U.S. 6.30 5.63
Australia 45.11 37.30
Operating Profit per Ton $5.68 $5.14
Quarter Ended
-------------
March March
(Dollars in Millions) 2012 2011
-------------------- ---- ----
EBITDA - U.S. Mining Operations $317.3 $289.3
EBITDA - Australian Mining Operations 295.6 209.6
EBITDA - Trading and Brokerage Operations 28.1 26.8
EBITDA - Resource Management (3) 0.9 2.2
Selling and Administrative Expenses (71.0) (61.6)
Other Operating Costs, Net (4) (58.3) (31.0)
EBITDA 512.6 435.3
Depreciation, Depletion and Amortization (144.9) (107.7)
Asset Retirement Obligation Expense (15.2) (13.3)
Amortization of Basis Difference Related to Equity
Affiliates (2.3) -
Operating Profit 350.2 314.3
Operating Cash Flows 395.5 220.6
Capital Expenditures 238.6 102.5
Metallurgical coal
sales totaled 2.9
million and 2.1
million tons for
the quarters ended
March 31, 2012 and
2011,
(1) respectively.
Includes revenue-
based production
taxes and
royalties;
excludes
depreciation,
depletion and
amortization;
asset retirement
obligation
expense; selling
and administrative
expenses; and
certain other
costs related to
post-mining
(2) activities.
Includes certain
asset sales,
property
management costs
and revenues, and
coal royalty
(3) expense.
Includes Generation
Development and
Btu Conversion
costs, costs
associated with
post-mining
activities,
(income) losses
from equity
interests and
provisions for
certain
(4) litigation.
This information is intended to be reviewed in conjunction
with the company's filings with the Securities and Exchange
Commission.
Condensed Consolidated Balance Sheets
March 31, 2012 and Dec. 31, 2011
--------------------------------
(Dollars in Millions)
(Unaudited)
March 31, 2012 Dec. 31, 2011
-------------- -------------
Cash and Cash Equivalents $952.4 $799.1
Receivables, Net 748.1 922.5
Inventories 514.9 446.3
Assets from Coal Trading Activities, Net 43.3 44.6
Deferred Income Taxes 24.3 27.3
Other Current Assets 746.7 766.1
----- -----
Total Current
Assets 3,029.7 3,005.9
Net Property, Plant, Equipment and Mine Development 11,969.1 11,362.7
Investments and Other Assets 1,938.3 2,364.4
------- -------
Total Assets $16,937.1 $16,733.0
========= =========
Current Maturities of Debt $114.6 $101.1
Liabilities from Coal Trading Activities, Net 14.6 10.3
Accounts Payable and Accruals 1,502.8 1,712.3
------- -------
Total Current
Liabilities 1,632.0 1,823.7
Long-Term Debt 6,538.4 6,556.4
Deferred Income Taxes 590.8 554.2
Other Long-Term Liabilities 2,363.1 2,282.9
------- -------
Total
Liabilities 11,124.3 11,217.2
Stockholders' Equity 5,812.8 5,515.8
------- -------
Total Liabilities and
Stockholders' Equity $16,937.1 $16,733.0
========= =========
This information is intended to be reviewed in conjunction with the company's filings with the Securities and Exchange Commission.
Reconciliation of EBITDA to Income from Continuing Operations, Net of Income Taxes (Unaudited)
For the Quarters Ended March 31, 2012 and 2011
----------------------------------------------
(Dollars in Millions) Quarter Ended
-------------
March March
2012 2011
---- ----
EBITDA $512.6 $435.3
Depreciation, Depletion and
Amortization 144.9 107.7
Asset Retirement Obligation Expense 15.2 13.3
Amortization of Basis Difference
Related to Equity Affiliates 2.3 -
Interest Income (8.1) (4.1)
Interest Expense 102.0 51.0
Income Tax Provision Before
Remeasurement of Foreign Income Tax
Accounts 65.1 66.4
Adjusted Income from Continuing
Operations (1) 191.2 201.0
Remeasurement Expense Related to
Foreign Income Tax Accounts 8.9 6.4
Income from Continuing Operations, Net
of Income Taxes $182.3 $194.6
====== ======
Net Income Attributable to
Noncontrolling Interests $5.6 $2.2
==== ====
Reconciliation of EBITDA to Income from Continuing Operations, Net of Income Taxes -Targets for the Quarter Ending
June 30, 2012 (Unaudited)
------------------------------------------------------------------------------------------------------------------
(Dollars in Millions) Quarter Ending June 30, 2012
Targeted Results
----------------
Low High
--- ----
EBITDA $450 $550
Depreciation, Depletion and
Amortization 176 188
Asset Retirement Obligation Expense 20 17
Interest Income (4) (7)
Interest Expense 108 103
Income Tax Provision Before
Remeasurement of Foreign Income Tax
Accounts 35 62
Adjusted Income from Continuing
Operations (1) 115 187
Remeasurement Expense Related to
Foreign Income Tax Accounts - -
Income from Continuing Operations, Net
of Income Taxes $115 $187
==== ====
Net Income Attributable to
Noncontrolling Interests $5 $8
=== ===
Adjusted Diluted EPS:
Adjusted Income from Continuing
Operations:
Continuing Operations (2) $0.40 $0.65
Remeasurement Expense Related to
Foreign Income Tax Accounts - -
Adjusted Income from Continuing
Operations $0.40 $0.65
===== =====
In order to
arrive at the
numerator used
to calculate
adjusted
diluted EPS,
it is
necessary to
deduct net
income
attributable
to
noncontrolling
interests from
(1) this amount.
Reflects income
from
continuing
operations,
net of income
taxes less net
income
attributable
to
noncontrolling
(2) interests.
This information is intended to be reviewed in
conjunction with the company's filings with the
Securities and Exchange Commission.
Peabody Energy
Web site: http://www.peabodyenergy.com/