Peabody Energy Announces Results for the Year Ended December 31, 2008
today reported record full-year 2008 EBITDA from continuing operations of
continuing operations totaled
significantly exceeding comparable 2007 levels of
million
billion
“Peabody delivered record financial results, driven by a series of
strategic actions taken in recent years to expand access to high-margin global
markets and increase the productivity and reliability of the operating base,”
said Peabody Chairman and Chief Executive Officer
performed very well and are in an excellent position to unlock the full
benefits of our global platform when world economies rebound and high growth
in energy demand resumes. Amid challenging near-term markets, we enter 2009
with a sound financial position and will pursue opportunities to further
strengthen the portfolio.”
RESULTS FROM CONTINUING OPERATIONS
Full-year 2008 revenues grew 45 percent to a record
million tons. Higher revenues reflect increased volumes and improved prices
throughout
States
reflecting the higher-priced metallurgical and thermal coal associated with
annual contracts that commenced
Full-year EBITDA totaled
2007. Contributions from U.S. operations increased 8 percent to
million
million
mines and higher prices. Trading and Brokerage and Resource Management
activities added
Operating cash flows totaled
year levels. Income from continuing operations of
doubled year-ago levels, with earnings per share of
income totaled
“Our results demonstrate the capability of our operating platform to
deliver substantial cash flows,” said Executive Vice President and Chief
Financial Officer
economic downturn with nearly
balances and lines of credit.”
Awards and Recognition
2008 marked the safest in Peabody’s 125-year history, with a worldwide
incidence rate nearly 30 percent below prior-year levels. Operations earned
11 safety awards in
received five awards related to environmental stewardship and sustainability.
In the fourth quarter, the company received the New South Wales Minerals
Council Environmental Excellence Award for restoration of the Waratah waterway
and recognition of its strategic partnership benefiting indigenous people.
In December, Peabody was honored at the 10th Global Energy Awards, winning
the ‘Award of Excellence’ marking Peabody’s industry leadership, and receiving
the first-ever ‘Strategic Energy Investment of the Year’ award recognizing the
company’s global transformation to capitalize on high-growth, high-margin
markets.
GLOBAL COAL MARKETS AND PEABODY’S POSITION
“We are seeing a sharp global supply response to temporarily reduced
demand, through voluntary coal supply and capital spending reductions,” said
Peabody President and Chief Commercial Officer
has trimmed production targets in both
enters 2009 with a highly committed book of business. We believe the ultimate
recovery could be strong, as global economic and electricity generation growth
resumes, at the same time that geologic and regulatory hurdles and lack of
available capital limit a supply response.”
Global coal demand increased 2.0 percent in 2008 to meet growth in
electricity demand, primarily in emerging economies. 2009 coal demand will be
impacted by the global pullback in steel production and moderate softness in
global electricity generation, offset by growth from new generation and
increased market share for coal. In response to current economic conditions,
global coal production cuts have been accelerating, with more than 70 million
tons of known thermal and metallurgical production reductions already
announced.
International Markets
Thermal Coal: Growing 2008 electricity generation in the Pacific markets
led to increased demand for seaborne thermal coal. Nearly all major coal-
importing nations increased imports, with the fastest-growing again being
shipments declining 15 percent as the nation moves toward greater self-
sufficiency. In the Atlantic markets,
coal exports by 10 million tons, offsetting declines in coal supply from
Africa
2009 global electricity demand will continue to be driven by
just 26 million tonnes of initial coal export quotas for 2009, nearly 20
percent lower than the initial 2008 period. Global coal supplies are expected
to be limited due to a combination of growing domestic needs for electricity
generation, voluntary production cuts and supply limitations related to
production challenges, and limited access to capital.
Peabody has 5 to 6 million tons of Australian-sourced seaborne thermal
coal available to be priced for the last three quarters of 2009 and 10 to 11
million tons for 2010.
Globally, 200 gigawatts of coal plants are currently under construction,
representing 700 million tons of annual coal demand expected to come on line
in the next several years.
Long-term coal demand fundamentals remain strong. The International
Energy Agency’s World Energy Outlook estimates world primary energy will grow
45 percent between 2006 and 2030 with demand for coal rising more than any
other fuel, accounting for over a third of the increase in energy use.
and
Metallurgical Coal: The global recession and credit crisis led to a
significant reduction in fourth quarter steel demand, which was matched by
sharp cuts in steel production. This in turn is driving adjustments in
seaborne met coal, with more than 30 million tonnes of announced production
cuts so far, representing about 15 percent of total seaborne met coal supply.
The company expects met coal demand growth to resume following steel
producer destocking activities and a resumption of higher steel mill
utilization rates. High-quality met coal products are expected to remain in
solid demand given their limited availability. Market dynamics will likely
extend negotiations for annual contracts commencing
quarter of 2009.
Peabody has 4 to 5 million tons of Australian-based metallurgical coal
available to be priced for the last three quarters of 2009, reflecting as much
as 2 million tons of production cuts due to expected softer demand, and 7 to 8
million tons available to be priced for 2010.
U.S. Markets
U.S. coal production increased more than 20 million tons in 2008 to
accommodate a similar increase in U.S. exports. U.S. electricity demand
declined 1 percent, primarily related to the economic downturn and cooler
summer weather. Customer coal inventories at year end averaged 56 days of
burn compared with 50 days last year.
Because of high customer inventories, Peabody is targeting a 10 million
ton reduction in 2009 Powder River Basin production compared with 2008
volumes. The company’s U.S. production is essentially sold out for 2009, and
the company capitalized on the strong markets in mid-2008 to price
approximately 75 percent of its 2010 U.S. production. The company has 45 to
55 million tons of unpriced U.S. production for 2010.
U.S. coal demand in 2009 is expected to remain soft, primarily due to the
recession-driven decline in electricity demand and the reduced need for coal
exports. Coal-based generators will be working through high inventory levels
amid the temporarily suppressed natural gas price environment. The
anticipated market softness is expected to be offset by higher energy use
related to colder winter weather, potential economic improvement in late 2009
or early 2010, and significant production cuts. To date, more than 40 million
tons of U.S. coal supply cuts have been announced by companies representing
about half of the U.S. production base.
U.S. coal demand will also benefit longer term from new coal-fueled
generation coming on line. Between now and 2012, a number of new coal-fueled
generating plants are expected to begin operation. Currently, 30 units are
under construction in 19 states, representing more than 16,500 MW of capacity
and approximately 70 million tons of annual coal use.
The company looks forward to working with the new U.S. Administration,
which has expressed strong support for clean coal investments and has proposed
five first-of-kind major advanced coal initiatives to commercialize carbon
capture and storage technologies.
Longer term, the U.S. Energy Information Administration expects that coal
will power more growth in U.S. electricity generation through 2030 than any
other fuel. And support is growing for greater public-private investments in
large-scale projects that would demonstrate coal gasification with carbon
capture and storage.
APPROACH AND OUTLOOK
“While the world faces significant near-term economic challenges,
Peabody’s middle- to long-term outlook remains positive,” said Boyce. “We
believe that inventories will rebalance, steel demand will recover, new coal
plants will come on line and existing plants will run at higher utilization,
while difficult geology and lack of capital access will deplete supply and
limit infrastructure development. As recent global outlooks have forecast,
nations will continue to turn to coal in increasing quantities, and Peabody
remains best positioned in the industry to serve this growing demand.”
Regarding key priorities for 2009, Peabody intends to:
— Continue to focus on strong cost control and productivity improvements;
increase contributions from high-margin operations; and exercise tight capital
discipline;
— Evaluate opportunistic transactions in key growth markets amid
distressed conditions; and pursue global operating, trading, infrastructure
and joint venture opportunities; and
— Continue as a long-term leader in clean coal solutions, advancing Btu
Conversion and low-carbon initiatives primarily through multi-company
alliances.
Peabody’s full-year 2009 production volume is targeted at 190 to 195
million in
sales are expected to be in the range of 230 to 250 million tons. Volumes
reflect the recently announced production cuts planned for Australian
metallurgical coal and the Powder River Basin.
Given global economic uncertainty and the timing of international coal
price settlements, Peabody will defer issuing EBITDA and EPS targets until
later in the year.
Peabody Energy is the world’s largest private-sector coal company. Its
coal products fuel approximately 10 percent of all U.S. electricity generation
and more than 2 percent of worldwide electricity.
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
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: the outcome of commercial negotiations
involving sales contracts or other transactions; credit and performance risk
associated with customers, suppliers, trading and financial counterparties;
the availability, timing of delivery and cost of key equipment and
commodities; transportation availability, performance and costs including
demurrage; geologic, equipment and operational risks associated with mining;
our ability to replace coal reserves; worldwide economic and political
conditions; labor availability and relations; the effects of mergers,
acquisitions and divestitures; legislative and regulatory developments,
including mercury and carbon dioxide-related limitations; the outcome of
pending or future litigation; coal and power market conditions; impact of
weather on demand, production and transportation; availability and costs of
competing energy resources; risks associated with our Btu Conversion
initiatives; global currency exchange and interest rate fluctuation; liquidity
and access to capital; wars and acts of terrorism or sabotage; political
risks, including expropriation; and other risks detailed in the company’s
reports filed with the Securities and Exchange Commission (SEC).
This information includes certain non-GAAP financial measures as defined
by SEC regulations. We have included reconciliations of these measures to the
most directly comparable GAAP measures in this release. EBITDA (also called
Adjusted EBITDA) is defined as income from continuing operations before
deducting net interest expense, income taxes, minority interests, asset
retirement obligation expense, and depreciation, depletion and amortization.
EBITDA, which is not calculated identically by all companies, is not a
substitute for operating income, net income and cash flow as determined in
accordance with generally accepted accounting principles. Management uses
EBITDA as a key measure of operating performance and also believes it is a
useful indicator of its ability to meet debt service and capital expenditure
requirements.
CONTACT:
Vic Svec
(314) 342-7768
Condensed Income Statements
For the Quarters Ended
2008
(Dollars in Millions, Except Per Share Data)
Quarter Ended Year Ended
(Unaudited) (Unaudited) (Unaudited)
Dec. Dec. Dec. Dec.
2008 2007 (1) 2008 2007 (1)
Revenues $1,880.8 $1,168.1 $6,593.4 $4,545.1
Operating Costs and
Expenses 1,301.8 882.6 4,617.2 3,532.5
Depreciation, Depletion
and Amortization 114.9 92.5 406.2 352.2
Asset Retirement
Obligation Expense 16.4 9.1 48.2 23.7
Selling and
Administrative Expenses 63.6 50.1 201.8 147.1
Other Operating (Income)
Loss:
Net Gain on Disposal
or Exchange of Assets (5.1) (12.3) (72.9) (88.6)
(Income) Loss from
Equity Affiliates 3.0 (5.0) - (14.5)
Operating Profit 386.2 151.1 1,392.9 592.7
Interest Income (3.0) (1.3) (10.1) (7.1)
Interest Expense:
Debt-Related Interest 53.5 59.5 220.5 231.1
Surety Bond and Letter
of Credit Fees 1.7 0.7 5.7 3.9
Income from Continuing
Operations Before Income
Taxes and Minority
Interests 334.0 92.2 1,176.8 364.8
Income Tax Provision
(Benefit) 37.9 (107.6) 185.8 (72.9)
Minority Interests 0.5 (3.6) 6.2 (2.3)
Income from Continuing
Operations 295.6 203.4 984.8 440.0
Loss from Discontinued
Operations, Net of Tax (2.3) (167.6) (31.3) (175.7)
Net Income $293.3 $35.8 $953.5 $264.3
Diluted EPS (2):
Income from Continuing
Operations $1.11 $0.75 $3.63 $1.63
Loss from Discontinued
Operations (0.01) (0.62) (0.12) (0.65)
Net Income $1.10 $0.13 $3.51 $0.98
EBITDA $517.5 $252.7 $1,847.3 $968.6
(1) Prior-period amounts have been adjusted to reflect operations
reclassified to discontinued operations during 2008.
(2) Weighted average diluted shares outstanding were 267.4 million and
270.5 million for the quarters ended Dec. 31, 2008 and 2007,
respectively, and were 271.3 million and 269.2 million for the years
ended Dec. 31, 2008 and 2007, respectively.
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
Years Ended
Quarter Ended Year Ended
Dec. Sept. Dec. Dec. Dec.
2008 2008 2007 2008 2007
Revenue Summary
(Dollars in
Millions)
U.S. Mining
Operations $959.6 $930.7 $751.6 $3,687.7 $3,050.3
Australian
Mining
Operations 662.5 789.0 294.9 2,275.2 1,138.9
Trading and
Brokerage
Operations 248.8 181.5 109.0 601.8 320.7
Other 9.9 4.5 12.6 28.7 35.2
Total (1) $1,880.8 $1,905.7 $1,168.1 $6,593.4 $4,545.1
Tons Sold (In
Millions)
Midwestern U.S.
Mining
Operations 7.9 7.8 7.2 30.7 29.6
Western U.S.
Mining
Operations 45.4 42.8 42.5 169.7 161.4
Australian
Mining
Operations 5.9 7.0 5.4 23.9 21.0
Trading and
Brokerage
Operations 10.2 8.1 7.8 31.2 24.1
Total 69.4 65.7 62.9 255.5 236.1
Revenues per
Ton - Mining
Operations
Midwestern
U.S. $39.32 $38.18 $32.98 $37.55 $33.33
Western U.S. 14.82 14.59 12.75 14.93 12.83
Total - U.S. 18.44 18.23 15.71 18.40 15.97
Australia 114.89 113.43 53.98 94.92 54.06
Operating Costs
per Ton -
Mining
Operations (2)
Midwestern
U.S. $32.83 $32.16 $26.14 $31.78 $26.54
Western U.S. 10.77 10.96 8.84 10.92 9.14
Total - U.S. 14.03 14.23 11.38 14.12 11.80
Australia 54.31 52.59 45.48 52.49 46.17
Gross Margin per
Ton - Mining
Operations (2)
Midwestern
U.S. $6.49 $6.02 $6.84 $5.77 $6.79
Western U.S. 4.05 3.63 3.91 4.01 3.69
Total - U.S. 4.41 4.00 4.33 4.28 4.17
Australia 60.58 60.84 8.50 42.43 7.89
Operating Profit
per Ton $5.56 $7.46 $2.40 $5.45 $2.51
Quarter Ended Year Ended
Dollars in Dec. Sept. Dec. Dec. Dec.
Millions 2008 2008 2007 2008 2007
EBITDA - U.S.
Mining
Operations $247.4 $198.6 $219.5 $858.6 $795.4
EBITDA -
Australian
Mining
Operations 349.4 423.1 46.5 1,017.0 166.1
EBITDA -
Trading and
Brokerage
Operations 36.5 52.7 34.1 218.9 116.6
EBITDA -
Resource
Management (3) (10.5) 2.4 13.2 55.4 96.1
Selling and
Administrative
Expenses (63.6) (44.2) (50.1) (201.8) (147.1)
Other Operating
Costs, Net (4) (41.7) (22.8) (10.5) (100.8) (58.5)
EBITDA 517.5 609.8 252.7 1,847.3 968.6
Depreciation,
Depletion and
Amortization (114.9) (103.8) (92.5) (406.2) (352.2)
Asset
Retirement
Obligation
Expense (16.4) (15.8) (9.1) (48.2) (23.7)
Operating Profit 386.2 490.2 151.1 1,392.9 592.7
Operating Cash
Flow from
Continuing
Operations 630.9 462.0 (77.7) 1,413.9 452.6
Coal Reserve
Lease
Expenditures - 55.0 - 178.5 178.2
Capital
Expenditures
(Excludes
Acquisitions) 104.5 74.3 80.5 307.1 467.6
(1) Metallurgical sales totaled 1.8 million tons, 2.5 million tons, and
2.2 million tons for the quarters ended Dec. 31, 2008, Sept. 30, 2008,
and Dec. 31, 2007, respectively, as well as 8.3 million
tons for the years ended Dec. 31, 2008 and 2007. Total non-U.S.
sales were 11.5 million tons, 10.8 million tons, and 7.7 million tons
for the quarters ended Dec. 31, 2008, Sept. 30, 2008, and
Dec. 31, 2007, respectively, and 40.3 million tons and 30.9
million tons for the years ended Dec. 31, 2008 and 2007,
respectively.
(2) 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 activities.
(3) Includes asset sales, property management costs and revenues, and coal
royalty expense.
(4) Includes generation and Btu Conversion development costs, costs
associated with post-mining activities, and income from an equity
interest in a Venezuelan joint venture.
This information is intended to be reviewed in conjunction with the
company’s filings with the Securities and Exchange Commission.
Condensed Balance Sheets
Dec. 31, 2008, Sept. 30, 2008, and Dec. 31, 2007
(Dollars in Millions)
(Unaudited) (Unaudited)
Dec. 31, Sept. 30, Dec. 31,
2008 2008 2007
Cash and Cash Equivalents $449.7 $104.0 $45.3
Receivables 383.6 412.9 256.9
Inventories 277.7 275.1 264.7
Assets from Coal Trading
Activities (1) 662.8 710.7 349.8
Deferred Income Taxes 1.7 87.4 58.8
Other Current Assets 195.8 228.5 335.0
Total Current Assets 1,971.3 1,818.6 1,310.5
Net Property, Plant & Equipment 7,315.2 7,364.4 7,297.9
Deferred Income Taxes 118.4 - -
Investments and Other Assets 417.5 453.8 482.8
Total Assets $9,822.4 $9,636.8 $9,091.2
Current Maturities of Debt $17.0 $44.2 $134.4
Liabilities from Coal Trading
Activities (1) 304.2 549.1 301.8
Accounts Payable and Accruals 1,535.0 1,340.3 1,134.0
Total Current Liabilities 1,856.2 1,933.6 1,570.2
Long-Term Debt 3,139.2 3,107.6 3,138.7
Deferred Income Taxes - 133.5 354.8
Other Long-Term Liabilities 1,921.8 1,526.7 1,507.1
Total Liabilities 6,917.2 6,701.4 6,570.8
Minority Interests 1.4 1.3 0.7
Stockholders' Equity 2,903.8 2,934.1 2,519.7
Total Liabilities and
Stockholders' Equity $9,822.4 $9,636.8 $9,091.2
(1) Assets and liabilities from coal trading activities have been
presented on a net counterparty aggregation basis consistent with
accounting guidance effective Jan. 1, 2008. Dec. 31, 2007
amounts have been conformed to this presentation requirement.
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 (Unaudited)
For the Quarters Ended Dec. 31, 2008 and 2007 and Years Ended Dec. 31,
2008 and 2007
(Dollars in Millions)
Quarter Ended Year Ended
Dec. Dec. Dec. Dec.
2008 2007 2008 2007
EBITDA $517.5 $252.7 $1,847.3 $968.6
Depreciation,
Depletion and
Amortization 114.9 92.5 406.2 352.2
Asset Retirement
Obligation Expense 16.4 9.1 48.2 23.7
Interest Income (3.0) (1.3) (10.1) (7.1)
Interest Expense 55.2 60.2 226.2 235.0
Income Tax Provision
(Benefit) 37.9 (107.6) 185.8 (72.9)
Minority Interests 0.5 (3.6) 6.2 (2.3)
Income from Continuing
Operations $295.6 $203.4 $984.8 $440.0
This information is intended to be reviewed in conjunction with the
company’s filings with the Securities and Exchange Commission.
SOURCE Peabody Energy