James River Coal Company Reports Fourth Quarter and Full Year 2012 Operating Results
RICHMOND, Va., March 7, 2013 /PRNewswire/ —
- Major Restructuring of Mine Operations in Q-4 2012 and Early Q-1 2013
- Closed or Idled Production Capacity of 3 Million Tons in Central Appalachia (CAPP)
- Reduced Workforce by Approximately 400 Employees and Contractors
- Significant Impact on Productivity and Costs in Q-4 2012
- Thermal Coal Markets Continue to Be Weak; Met Coal Markets are Slowly Improving
- Continuing to Evaluate Options to Strengthen the Balance Sheet and Improve Liquidity
- Conference Call Slides Posted to the Company Website
James River Coal Company (NASDAQ: JRCC), today announced that it had a net loss of $138.9 million or $3.99 per fully diluted share for the year ended December 31, 2012 and a net loss of $76.9 million or $2.21 per fully diluted share for the fourth quarter of 2012. This is compared to 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. Our results were impacted by the items in “Reconciliation of Adjusted Net Income (Loss) to Net Income (Loss)” in this release below which include a goodwill impairment charge and a gain from the repurchase of outstanding debt. These adjustments had a negative per share impact on our results of $0.03 and $0.62 in the full year and fourth quarter ended December 31, 2012, respectively, and $0.98 and $0.76 in the full year and fourth quarter ended December 31, 2011, respectively.
Peter T. Socha, Chairman and Chief Executive Officer, commented: “The year 2012 will be remembered as one of the most difficult years in the history of the U.S. coal industry. The domestic thermal coal market went through a third consecutive year of soft market conditions due to weak economic conditions and competitive pressures from natural gas production. The met coal market collapsed during the middle of the year due to weak international markets in both Asia and Europe. As we look ahead to 2013, both of these markets are showing some marginal improvement. The thermal market, although still weak, is starting to improve due primarily to reduced production by the coal industry and slightly better weather conditions. The met market is seeing clear signs of increased demand from Asia.
“At James River Coal Company, we are adjusting to the changing market conditions throughout our organization. We have closed and idled mines, reduced working hours at the remaining mines, reviewed and changed the purchasing process for nearly every item that we buy, and lowered our SG&A headcount and expenses. Many of these decisions have been difficult but necessary. Our mine operations are in better shape today than at any time in the past 10 years. We are beginning to see the positive results from the changes, and we are cautiously optimistic that our changed operating model and improving markets for several of our products will lead to a brighter future in 2013.”
ANNUAL RESULTS
The following tables show selected operating results for the year ended December 31, 2012 compared to the year ended December 31, 2011 (in 000′s except per ton amounts).
Total Results Year Ended December 31,
------------- -----------------------
2012 2011
---- ----
Total Per Ton Total Per Ton
----- ------- ----- -------
Company and contractor production (tons) 9,499 10,254
Coal purchased from other sources (tons) 1,995 1,605
----- -----
Total coal available to ship (tons) 11,494 11,859
Coal shipments (tons) 11,728 11,801
Coal sales revenue $1,018,433 $86.84 $1,105,370 $93.67
Freight and handling revenue 81,176 6.92 72,285 6.13
Cost of coal sold 911,681 77.74 905,482 76.73
Freight and handling costs 81,176 6.92 72,285 6.13
Depreciation, depletion, & amortization 131,779 11.24 108,914 9.23
Gross profit (loss) (25,027) (2.13) 90,974 7.71
Selling, general & administrative 59,922 5.11 57,078 4.84
Goodwill impairment 26,492 2.26 - -
Acquisition costs - - 8,504 0.72
Adjusted EBITDA plus acquisition costs (1) $54,668 4.66 $154,571 13.10
(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 Year Ended December 31,
--------------- -----------------------
2012 2011
---- ----
CAPP Midwest CAPP Midwest
---- ------- ---- -------
Total Per Ton Total Per Ton Total Per Ton Total Per Ton
----- ------- ----- ------- ----- ------- ----- -------
Company and contractor production (tons) 7,183 2,316 7,823 2,431
Coal purchased from other sources (tons) 1,995 - 1,605 -
----- --- ----- ---
Total coal available to ship (tons) 9,178 2,316 9,428 2,431
Coal shipments (tons)
Steam (tons) 5,787 2,327 7,166 2,480
Metallurgical (tons) 3,614 - 2,155 -
----- --- ----- ---
Total Shipments (tons) 9,401 2,327 9,321 2,480
Coal sales revenue
Steam $476,101 82.27 103,078 44.30 651,016 90.85 105,382 42.49
Metallurgical 439,254 121.54 - - 348,972 161.94 - -
------- --- ------- ---
Total coal sales revenue 915,355 97.37 103,078 44.30 999,988 107.28 105,382 42.49
Freight and handling revenue 78,983 8.40 2,193 0.94 69,778 7.49 2,507 1.01
Cost of coal sold 821,278 87.36 90,403 38.85 811,573 87.07 93,909 37.87
Freight and handling costs 78,983 8.40 2,193 0.94 69,778 7.49 2,507 1.01
QUARTERLY RESULTS
The following tables show selected operating results for the quarter ended December 31, 2012 compared to the quarter ended December 31, 2011 (in 000′s except per ton amounts).
Total Results Three Months Ended December 31,
------------- -------------------------------
2012 2011
---- ----
Total Per Ton Total Per Ton
----- ------- ----- -------
Company and contractor production (tons) 1,928 2,675
Coal purchased from other sources (tons) 567 709
--- ---
Total coal available to ship (tons) 2,495 3,384
Coal shipments (tons) 2,603 3,304
Coal sales revenue $214,409 82.37 $321,758 97.38
Freight and handling revenue 17,755 6.82 35,420 10.72
Cost of coal sold 206,113 79.18 263,315 79.70
Freight and handling costs 17,755 6.82 35,420 10.72
Depreciation, depletion, & amortization 33,627 12.92 33,435 10.12
Gross profit (loss) (25,331) (9.73) 25,008 7.57
Selling, general & administrative 14,418 5.54 16,553 5.01
Adjusted EBITDA plus acquisition costs (1) $(4,970) (1.91) $44,155 13.36
(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 senior secured credit facilities.
Segment Results Three Months Ended December 31,
--------------- -------------------------------
2012 2011
---- ----
CAPP Midwest CAPP Midwest
---- ------- ---- -------
Total Per Ton Total Per Ton Total Per Ton Total Per Ton
----- ------- ----- ------- ----- ------- ----- -------
Company and contractor production (tons) 1,399 529 2,120 555
Coal purchased from other sources (tons) 567 - 709 -
--- --- --- ---
Total coal available to ship (tons) 1,966 529 2,829 555
Coal shipments (tons)
Steam (tons) 1,071 550 1,909 583
Metallurgical (tons) 982 - 812 -
--- --- --- ---
Total Shipments (tons) 2,053 550 2,721 583
Coal sales revenue
Steam $84,890 79.26 24,124 43.86 173,274 90.77 24,590 42.18
Metallurgical 105,395 107.33 - - 123,894 152.58 - -
------- --- ------- ---
Total coal sales revenue 190,285 92.69 24,124 43.86 297,168 109.21 24,590 42.18
Freight and handling revenue 17,408 8.48 347 0.63 34,705 12.75 715 1.23
Cost of coal sold 183,012 89.14 23,101 42.00 240,598 88.42 22,717 38.97
Freight and handling costs 17,408 8.48 347 0.63 34,705 12.75 715 1.23
MARKET ADJUSTMENTS
Due to the continuing downturn in the coal market, the Company has idled five underground mines (Abner Branch, Mine 16, Mine 6A, Mine 31, Jellico), two preparation plants (BL1 Plant and Burke), one load out (Sunny Knot) and reduced production at three surface mines (Frasure, Buckeye, Montgomery Creek). These and previous changes reduce our production capacity by 3 million tons and impact approximately 400 employees and contractors. We project that these changes will lower our operating costs and better match our production to our current market view.
LIQUIDITY AND CASH FLOW
As of December 31, 2012, the Company had available liquidity of $135.9 million calculated as follows (in millions):
Unrestricted Cash $127.4
Availability under the revolver 69.3
Letters of Credit Issued under
the Revolver (60.8)
-----
Available Liquidity $135.9
======
Restricted Cash $36.6
Capital Expenditures for the fourth quarter were $15.1 million and were $81.6 million for twelve months ended December 31, 2012.
During the fourth quarter of 2012, the Company completed its previously announced repurchase of $7.7 million of its outstanding debt consisting of $2.5 million principal amount of the 2015 Convertible Senior Notes and $5.2 million principal amount of the 2018 Convertible Senior Notes. The debt repurchases were made at a cost of $2.9 million, in open market purchases. The repurchases resulted in a gain of $3.0 which includes the write-off of $ 0.1 million of financing costs.
Mr. Socha commented: “As discussed during our most recent conference call in November, we are looking at options to strengthen our balance sheet and improve our liquidity during the prolonged soft market conditions. Since November, we have looked at a wide variety of potential options. This process is continuing and we expect to complete our review in a timely manner.”
SALES POSITION
As of March 6, 2013, we had the following priced sales position (in 000′s except per ton amounts):
2013 Priced
-----------
As of November 6, 2012 As of March 6, 2013 Change
Tons Avg Price Tons Avg Price Tons Avg Price
Per Ton Per Ton Per Ton
--- ---
CAPP (1) 3,405 $74.04 5,012 $81.39 1,607 $96.97
-------
Midwest (2) 2,342 $45.25 2,544 $45.04 202 $42.61
---------- ----- ------ ----- ------ --- ------
2014 Priced
-----------
As of November 6, 2012 As of March 6, 2013 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) 900 $47.64 900 $47.64 - $ -
---------- --- ------ --- ------ --- ------------
(1) Priced Tons in CAPP do not include approximately 264,000 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.
2013 GUIDANCE
Mr. Socha continued: “We will not be issuing production or cost guidance at this time. There are just too many moving pieces. The changes to the mine operations were sweeping and all encompassing. While we are pleased with the results thus far, it is still early.
“In addition, the thermal and met coal markets continue to evolve. These changes will have an impact on our production plans for 2013.
“Based on these two factors, we believe that it is prudent to defer production and cost guidance at this time, but we are providing the following projections:”
Total JRCC Operations
(In 000's except tax rate)
Depreciation, Depletion and
Amortization $130,000
Tax Rate 0%
Capital Expenditures
Maintenance and Safety Capital $65,000
Completion of Ongoing Projects 5,000
-----
$70,000
MISCELLANEOUS
The following additional items had an impact on our results of operations and balance sheet during the fourth quarter of 2012:
- We recorded an additional net expense of $2.3 million during the quarter related to workers’ compensation. This amount resulted from $4.5 million of increased expense due to a reduction in the discount rate, due to lower market interest rates, which was 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.
- The Company wrote off $26.5 million of goodwill in the Midwest segment. Subsequent to this write-off the Company has no remaining goodwill.
CONFERENCE CALL AND WEBCAST: The Company will hold a conference call with management to discuss the fourth quarter earnings on March 7, 2013 at 10:00 a.m. Eastern Time. The conference call can be accessed by dialing 877-340-2553, or through the James River Coal Company website at http://www.jamesrivercoal.com. International callers, please dial 678-224-7860.
James River Coal Company is one of the leading coal producers in Central Appalachia and the Illinois Basin. The company sells metallurgical, bituminous steam and industrial-grade coal to electric utility companies and industrial customers both domestically and internationally. The Company’s operations are managed through eight operating subsidiaries located throughout eastern Kentucky, southern West Virginia and southern Indiana. Additional information about James River Coal can be found at its web site www.jamesrivercoal.com.
FORWARD-LOOKING STATEMENTS: Certain statements in this press release and other written or oral statements made by or on behalf of us are “forward-looking statements” within the meaning of the federal securities laws. Statements regarding future events and developments and our future performance, as well as management’s expectations, beliefs, plans, estimates or projections relating to the future, are forward-looking statements within the meaning of these laws. Forward looking statements include, without limitation, statements regarding future sales and contracting activity, 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; governmental policies, regulatory actions and court decisions affecting the coal industry or our customers’ coal usage; legal and administrative proceedings, settlements, investigations and claims; our ability to obtain and renew permits necessary for our existing and planned operation in a timely manner; environmental concerns related to coal mining and combustion and the cost and perceived benefits of alternative sources of energy; inherent risks of coal mining beyond our control, including weather and geologic conditions or catastrophic weather-related damage; our production capabilities; availability of transportation; our ability to timely obtain necessary supplies and equipment; market demand for coal, electricity and steel; competition, including competition from alternative sources such as natural gas; our relationships with, and other conditions affecting, our customers; employee workforce factors; our assumptions concerning economically recoverable coal reserve estimates; future economic or capital market conditions; our plans and objectives for future operations and expansion or consolidation; and the other risks detailed in our reports filed with the Securities and Exchange Commission (SEC). Management believes that these forward-looking statements are reasonable; however, you should not place undue reliance on such statements. These statements are based on current expectations and speak only as of the date of such statements. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of future events, new information or otherwise.
JAMES RIVER COAL COMPANY
AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except share data)
December 31, 2012 December 31, 2011
----------------- -----------------
Assets
Current assets:
Cash and cash equivalents $127,386 199,711
Trade receivables 89,816 107,557
Inventories:
Coal 26,598 52,717
Materials and supplies 16,699 17,800
Total inventories 43,297 70,517
------ ------
Prepaid royalties 8,623 8,465
Other current assets 9,127 11,461
Total current assets 278,249 397,711
------- -------
Property, plant, and equipment, net 855,217 909,294
Goodwill - 26,492
Restricted cash and short term investments 36,558 29,510
Other assets 34,097 41,575
Total assets $1,204,121 1,404,582
========== =========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $72,861 110,557
Accrued salaries, wages, and employee benefits 10,996 12,996
Workers' compensation benefits 9,900 9,200
Black lung benefits 2,508 2,512
Accrued taxes 8,382 7,563
Other current liabilities 22,124 27,861
Total current liabilities 126,771 170,689
------- -------
Long-term debt, less current maturities 546,407 582,193
Other liabilities:
Noncurrent portion of workers' compensation benefits 66,953 60,721
Noncurrent portion of black lung benefits 62,834 56,152
Pension obligations 35,325 29,121
Asset retirement obligations 99,177 94,654
Other 12,027 14,390
Total other liabilities 276,316 255,038
Total liabilities 949,494 1,007,920
------- ---------
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
35,866,549 and 35,671,953 shares as of December 31, 2012 and December 31,
2011 359 357
Paid-in-capital 546,289 541,362
Accumulated deficit (236,588) (97,682)
Accumulated other comprehensive loss (55,433) (47,375)
Total shareholders' equity 254,627 396,662
------- -------
Total liabilities and shareholders' equity $1,204,121 1,404,582
========== =========
JAMES RIVER COAL COMPANY
AND SUBSIDIARIES
Consolidated Statements of Operations
(in thousands, except share data)
Year Ended December 31,
-----------------------
2012 2011 2010
---- ---- ----
Revenues
Coal sales
revenue $1,018,433 1,105,370 698,949
Freight and handling
revenue 81,176 72,285 2,167
1,099,609 1,177,655 701,116
Total revenue
Cost of sales:
Cost of coal
sold 911,681 905,482 512,348
Freight and handling
costs 81,176 72,285 2,167
Depreciation,
depletion and
amortization 131,779 108,914 64,368
1,124,636 1,086,681 578,883
Total cost of
sales
(25,027) 90,974 122,233
Gross profit
(loss)
Selling, general and administrative expenses 59,922 57,078 38,347
Goodwill impairment 26,492 - -
Acquisition costs - 8,504 -
--- ----- ---
(111,441) 25,392 83,886
Total operating
income (loss)
Interest expense 52,666 50,096 29,943
Interest income (799) (494) (683)
(Gain) loss on debt transactions (25,187) 740 -
Miscellaneous (income) expense, net 366 (812) 27
--- ---- ---
27,046 49,530 29,287
Total other
expense, net
(138,487) (24,138) 54,599
Income (loss)
before income
taxes
Income tax expense (benefit) 419 14,951 (23,566)
--- ------ -------
Net income (loss) $(138,906) (39,089) 78,165
========= ======= ======
Earnings (loss) per common share
Basic earnings
(loss) per common
share $(3.99) (1.19) 2.82
Diluted earnings
(loss) per common
share $(3.99) (1.19) 2.82
JAMES RIVER COAL COMPANY
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(in thousands)
Year Ended December 31,
-----------------------
2012 2011 2010
---- ---- ----
Cash flows from operating activities:
Net income (loss) $(138,906) (39,089) 78,165
Adjustments to reconcile net income (loss) to net cash provided by
operating activities
Depreciation, depletion, and amortization 131,779 108,914 64,368
Accretion of asset retirement obligations 5,279 4,477 3,334
Amortization of debt discount and issue costs 16,905 14,684 8,066
Stock-based compensation 5,219 5,283 5,400
Deferred income tax expense (benefit) 62 14,139 (22,236)
Loss (gain) on sale or disposal of property, plant, and
equipment 992 (59) 307
Goodwill impairment 26,492 - -
(Gain) loss on debt transactions (25,187) 740 -
Changes in operating assets and liabilities:
Receivables 17,741 69,043 (16,681)
Inventories 27,401 (13,967) (3,680)
Prepaid royalties and other current assets 2,176 (104) (2,433)
Restricted cash and short term investments (7,048) (6,010) 38,542
Other assets 3,767 566 (2,060)
Accounts payable (37,696) (3,145) 10,828
Accrued salaries, wages, and employee benefits (2,000) 892 762
Accrued taxes 529 (889) (303)
Other current liabilities (4,514) 7,497 1,066
Workers' compensation benefits 6,932 4,977 5,609
Black lung benefits 4,826 3,420 3,018
Pension obligations (2) (1,696) (2,244)
Asset retirement obligations (1,884) (5,204) (809)
Other liabilities (415) (697) 43
Net cash provided by operating activities 32,448 163,772 169,062
------ ------- -------
Cash flows from investing activities:
Additions to property, plant, and equipment (81,556) (138,455) (95,426)
Payment for acquisition, net of cash acquired - (515,962) -
Proceeds from sale of property, plant and equipment 631 103 82
Net cash used in investing activities (80,925) (654,314) (95,344)
------- -------- -------
Cash flows from financing activities:
Proceeds from issuance of long-term debt - 505,000 -
Repayment of long-term debt (23,848) (150,000) -
Net proceeds from issuance of common stock - 170,545 -
Debt issuance costs - (15,668) (1,346)
Proceeds from exercise of stock options - - 73
Net cash provided by (used in) financing
activities (23,848) 509,877 (1,273)
------- ------- ------
Increase (decrease) in cash and cash
equivalents (72,325) 19,335 72,445
Cash and cash equivalents at beginning of period 199,711 180,376 107,931
Cash and cash equivalents at end of period $127,386 199,711 180,376
======== ======= =======
JAMES RIVER COAL COMPANY
AND SUBSIDIARIES
Reconciliation of Non-GAAP Measures
(in thousands)
(unaudited)
In addition to the results prepared in accordance with generally accepted accounting principles in the United States (GAAP) provided throughout this press release, management has presented the following non-GAAP financial measures, which management uses to gauge operating performance: EBITDA, adjusted EBITDA, adjusted EBITDA plus acquisition costs, adjusted net income (loss) and adjusted net income (loss) per share. These non-GAAP financial measures exclude various items detailed in the tables below “Reconciliation of EBITDA, Adjusted EBITDA and Adjusted EBITDA plus Acquisition Costs to Net Income (Loss)” and “Reconciliation of Adjusted Net Income (Loss) to Net Income (Loss).”
The definition of these non-GAAP measures may be changed periodically by management to adjust for significant items important to an understanding of operating trends. These measures are not intended to replace financial performance measures determined in accordance with GAAP. Rather, they are presented as supplemental measures of the Company’s performance that management believes are useful to securities analysts, investors and others in assessing the Company’s performance over time. Additionally, Adjusted EBITDA is used in several of the covenants in our revolving credit facility. Moreover, these measures are not calculated identically by all companies and therefore may not be comparable to similarly titled measures used by other companies. A reconciliation of each of these measures to its most directly comparable GAAP measure is provided in the tables below.
Reconciliation of EBITDA, Adjusted EBITDA and Adjusted EBITDA plus Acquisition Costs to Net Income (Loss)
Three Months Ended Twelve Months Ended
------------------ -------------------
December 31 December 31 December 31 December 31
2012 2011 2012 2011
---- ---- ---- ----
Net income (loss) $(76,932) (28,542) (138,906) (39,089)
Income tax expense 344 23,951 419 14,951
Interest expense 12,554 13,423 52,666 50,096
Interest income (197) (138) (799) (494)
Depreciation, depletion, and amortization 33,627 33,435 131,779 108,914
EBITDA (before adjustments) $(30,604) 42,129 45,159 134,378
-------- ------ ------ -------
Other adjustments specified
in our current debt agreement:
Direct acquisition costs - - 8,504
Goodwill impairment 26,492 - 26,492 -
(Gain) loss on debt
transactions (2,956) - (25,187) 740
Other 2,098 2,026 8,204 8,200
Adjusted EBITDA $(4,970) 44,155 54,668 151,822
Write-up of IRP Inventory - - - 2,749
Adjusted EBITDA plus acquisition costs $(4,970) 44,155 54,668 154,571
======= ====== ====== =======
Reconciliation of Adjusted Net Income (Loss) to Net Income (Loss)
Three Months Ended Twelve Months Ended
------------------ -------------------
December 31, December 31, December 31, December 31,
2012 2011 2012 2011
---- ---- ---- ----
Net Income (loss) $(76,932) (28,542) (138,906) (39,089)
Goodwill impairment 26,492 - 26,492 -
(Gain) loss on debt transactions (2,956) - (25,187) 740
Items Related to IRP Acquisition
Acquisition costs - - - 8,504
Amortization of contracts included in depreciation,
depletion and amortization (2,010) 2,418 (436) 5,935
Write-up to Fair Market Value of inventory at acquisition - - - 2,749
Adjustment of prior year to include only current tax expense (1) - 24,167 - 14,134
Adjusted net income (loss) $(55,406) (1,957) (138,037) (7,027)
Net income (loss) per share (2.21) (0.82) (3.99) (1.19)
===== ===== ===== =====
Adjusted net income (loss) per share $(1.59) (0.06) (3.96) (0.21)
(1) This amount removes the impact of the valuation allowance recorded on the net deferred tax assets.
CONTACT: James River Coal Company
Elizabeth M. Cook
Director of Investor
Relations
(804) 780-3000
SOURCE James River Coal Company
