Patriot Coal Announces Results for the Quarter Ended March 31, 2009
Highlights:
- EBITDA of
- Production adjusted to match market conditions
- Redeployment of equipment to minimize capital expenditures
Operating costs and expenses in the 2009 first quarter were reduced by
“In January, our management team began executing a hands-on, comprehensive Action Plan to guide our way through the challenges posed by depressed coal markets. The goal is to have Patriot emerge a stronger company when economic conditions and coal markets rebound,” said Patriot Chief Executive Officer
Financial Overview
Tons sold in the first quarter included 7.1 million tons of thermal and 1.4 million tons of metallurgical coal. The total of 8.5 million tons represented an increase of 3.4 million tons from the prior year, largely a result of Central Appalachia thermal coal sales from the acquired Magnum mines. Metallurgical volumes were impacted by customer deferrals in the 2009 first quarter, brought about by sustained weakness in global steel production.
Revenues in the 2009 first quarter were
EBITDA improved to
“Our first quarter 2009 EBITDA was significantly higher than the 2008 fourth quarter, as we realized improvements at our Federal and Panther mines. In fact, Segment Adjusted EBITDA per ton more than doubled sequentially in the 2009 first quarter,” noted Patriot Senior Vice President and Chief Financial Officer
Credit and Capital
As of
Total debt was
“We ended the 2009 first quarter with more than
Safety and Environmental Awards
Maintaining safe operations continues to be a top priority at Patriot. During the quarter, four of the Company’s facilities received Mountaineer Guardian Safety Awards from the West Virginia Coal Association – the Federal No. 2 mine, the Westridge surface mine, the Big Mountain preparation plant and the Harris preparation plant. Additionally, Patriot’s Guyan and Colony Bay surface mines each received reclamation awards from the West Virginia Coal Association.
Market Overview
Global economic activity remained weak during the 2009 first quarter. Reduced U.S. industrial activity led to a 2.9 percent decline in electricity consumption. Lower natural gas prices caused further declines in coal demand, as some utilities chose to burn natural gas in preference to coal.
Demand for steel continued at a reduced level through the 2009 first quarter. Utilization at U.S. steel mills fluctuated from 40 to 45 percent during the first quarter, after peaking at 85 to 90 percent in 2008. Globally, blast furnace iron production decreased 17 percent in the first quarter from a year ago, but remained flat compared to the 2008 fourth quarter. As a result, domestic and global demand for metallurgical coal has stabilized, although at significantly lower levels than during the first nine months of 2008.
Because of lower coal-fueled generation, at the end of the first quarter, eastern U.S. utility coal inventories were approximately 6 million tons higher than a year ago. Due to the reduced demand and higher inventory levels, traded U.S. thermal coal prices decreased nearly 10 percent during the quarter.
Coal production has decreased in response to weak demand and lower prices. In total, the Company believes 2009 U.S. production will be reduced by 80 to 100 million tons from 2008 levels. This supply response should position the coal sector for stronger pricing as the global economy improves. Government stimulus plans should lead the recovery, particularly as infrastructure projects are initiated, thereby increasing demand for steel and industrial goods. Low-cost electricity fueled by coal remains essential to global and U.S. economies.
Outlook
For 2009, the Company now anticipates sales volume in the range of 34.0 to 36.0 million tons, including 25.5 to 27.5 million tons for the April to December period. Full-year cost per ton is expected to be in the range of
Average selling prices of currently priced tons for the remainder of 2009 and 2010 are as follows:
(tons in millions) 2009 2010
Tons Price per ton Tons Price per ton
Appalachia - thermal 17.1 $58 15.4 $61
Illinois Basin - thermal 5.9 $38 6.5 $38
Appalachia - met 4.3 $105 0.5 $86
Total 27.3 22.4
As of
Of expected 2010 volumes, up to 5.0 million tons of metallurgical coal and up to 8.0 million tons of thermal coal remained unpriced as of
Conference Call
Management will hold a conference call to discuss the first quarter results on
About Patriot Coal
Patriot Coal Corporation is the third largest producer and marketer of coal in the eastern
Forward Looking Statements
Certain statements in this press release are forward-looking as defined in the Private Securities Litigation Reform Act of 1995. These statements involve certain risks and uncertainties that may be beyond our control and may cause our actual future results to differ materially from expectations. We do not undertake to update our forward-looking statements. Factors that could affect our results include, but are not limited to: geologic, equipment and operational risks associated with mining; changes in general economic conditions, including coal and power market conditions; availability and costs of credit; reductions of purchases or deferral of deliveries by major customers; customer performance and credit risks; the outcome of commercial negotiations involving sales contracts or other transactions; legislative and regulatory developments; risks associated with environmental laws and compliance; coal mining laws and regulations; economic strength and political stability of countries in which we serve customers; downturns in consumer and company spending; supplier and contract miner performance and the availability and cost of key equipment and commodities; availability and costs of transportation; worldwide economic and political conditions; labor availability and relations; the Company’s ability to replace coal reserves; the effects of mergers, acquisitions and divestitures; our ability to respond to changing customer preferences; price volatility and demand, particularly in higher margin products; failure to comply with debt covenants; the outcome of pending or future litigation; weather patterns affecting energy demand; changes in postretirement benefit obligations; changes in contribution requirements to multi-employer benefit funds; and the availability and costs of competing energy resources. The Company undertakes no obligation (and expressly disclaims any such obligation) to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. For additional information concerning factors that could cause actual results to materially differ from those projected herein, please refer to the Company’s Form 10-K.
Condensed Consolidated Statements of Operations (Unaudited)
For the Quarter Ended March 31, 2009 and 2008
(Dollars and tons in thousands, except share and per share data)
Quarter Ended March 31,
-----------------------
2009 2008
---- ----
Tons sold 8,458 5,085
===== =====
Revenues
Sales $522,838 $279,101
Other revenues 6,098 5,233
----- -----
Total revenues 528,936 284,334
Costs and expenses
Operating costs and expenses 417,401 259,118
Depreciation, depletion and
amortization 54,979 18,610
Asset retirement
obligation expense 6,451 3,416
Selling and administrative
expenses 12,886 8,289
Net gain on disposal or exchange
of assets (30) (194)
--- ----
Operating profit (loss) 37,249 (4,905)
Interest expense 8,593 2,322
Interest income (3,487) (3,249)
Income tax benefit - (912)
--- ----
Net income (loss) $32,143 $(3,066)
======= =======
Weighted average shares
outstanding
Basic 77,906,152 53,518,744
Effect of dilutive securities 93,095 -
------ ---
Diluted 77,999,247 53,518,744
========== ==========
Earnings (loss) per share
Basic $0.41 $(0.06)
===== ======
Diluted $0.41 $(0.06)
===== ======
EBITDA $21,872 $17,121
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 Quarter Ended March 31, 2009 and 2008
Quarter Ended
March 31,
-------------
2009 2008
---- ----
Tons Sold (In thousands)
------------------------
Appalachia Mining Operations 6,639 3,180
Illinois Basin Mining Operations 1,819 1,905
----- -----
Total 8,458 5,085
===== =====
Revenue Summary (Dollars in thousands)
--------------------------------------
Appalachia Mining Operations $453,456 $212,762
Illinois Basin Mining Operations 69,382 66,339
Appalachia Other 6,098 5,233
----- -----
Total $528,936 $284,334
======== ========
Revenues per Ton - Mining Operations
------------------------------------
Appalachia $68.30 $66.91
Illinois Basin 38.14 34.82
Total 61.82 54.89
Operating Costs per Ton - Mining Operations (1)
-----------------------------------------------
Appalachia $58.50 $55.18
Illinois Basin 36.47 32.02
Total 53.76 46.50
Segment Adjusted EBITDA per Ton - Mining Operations
---------------------------------------------------
Appalachia $9.80 $11.73
Illinois Basin 1.67 2.80
Total 8.06 8.39
Dollars in
thousands
-----------
Past Mining Obligation Expense $37,800 $22,121
Capital Expenditures (Excludes Acquisitions) 19,042 12,030
(1) Operating costs are the direct costs of our mining operations,
excluding costs for past mining obligations, asset retirement
obligations, depreciation, depletion and amortization and net sales
contract accretion excluding back-to-back coal purchase and sales
contracts.
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, 2009 and December 31, 2008
(Dollars in thousands)
March 31, December 31,
2009 2008
---- ----
(Unaudited)
Cash and cash equivalents $6,200 $2,872
Receivables 182,346 163,556
Inventories 90,314 80,953
Below market purchase contracts acquired 6,665 8,543
Other current assets 17,814 12,529
------ ------
Total current assets 303,339 268,453
Net property, plant, equipment and mine
development 3,152,823 3,160,676
Notes receivable 132,653 131,066
Investments and other assets (1) 55,150 62,125
------ ------
Total assets $3,643,965 $3,622,320
========== ==========
Current portion of debt $70,271 $28,170
Accounts payable and accrued liabilities 414,993 413,790
Below market sales contracts acquired 281,210 324,407
------- -------
Total current liabilities 766,474 766,367
Long-term debt, less current maturities (1) 175,901 176,123
Below market sales contracts acquired,
noncurrent 279,660 316,707
Other noncurrent liabilities 1,542,249 1,522,942
--------- ---------
Total liabilities 2,764,284 2,782,139
Common stock, paid-in capital and retained
earnings (1) 988,006 952,462
Accumulated other comprehensive loss (108,325) (112,281)
-------- --------
Total stockholders' equity 879,681 840,181
------- -------
Total liabilities and stockholders'
equity $3,643,965 $3,622,320
========== ==========
(1) In accordance with FASB Staff Position APB 14-1, we retrospectively
applied the impact of this guidance to our December 31, 2008 balance
sheet. Staff Position APB 14-1 requires us to record our convertible
notes at fair value, excluding the conversion feature, with the difference
between fair value and the face value recorded to paid-in capital. Our
nonconvertible debt borrowing rate is 8.85% and resulted in an adjusted
debt balance of $159.6 million at December 31, 2008 as compared to the
$200 million face value of the notes.
This information is intended to be reviewed in conjunction with the
Company's filings with the Securities and Exchange Commission.
Reconciliation of Net Income (Loss) to EBITDA
For the Quarter Ended March 31, 2009 and 2008
(Dollars in thousands)
(Unaudited)
Quarter Ended
March 31,
-------------
Reconciliation of net income (loss) to
EBITDA: 2009 2008
---- ----
Net income (loss) $32,143 $(3,066)
Depreciation, depletion and amortization 54,979 18,610
Sales contract accretion (76,807) -
Asset retirement obligation expense 6,451 3,416
Interest expense 8,593 2,322
Interest income (3,487) (3,249)
Income tax benefit - (912)
---- ----
EBITDA $21,872 $17,121
======= =======
EBITDA is defined as net income (loss) before deducting interest income
and expense, income taxes, asset retirement obligation expense,
depreciation, depletion and amortization and net sales contract accretion
excluding back-to-back coal purchase and sales contracts. We have
included information concerning EBITDA because we believe that in our
industry such information is a relevant measurement of a company's
operating financial performance. Because EBITDA is not calculated
identically by all companies, our calculation may not be comparable to
similarly titled measures of other companies. The table above reflects
the Company's calculation of EBITDA.
This information is intended to be reviewed in conjunction with the
Company's filings with the Securities and Exchange Commission.
SOURCE Patriot Coal Corporation