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James River Coal Company Reports Second Quarter 2009 Operating Results
- Earnings per Share of $0.59 Compared with ($0.97) in Q-2 2008
- Earnings per Share of $1.61 for the Six Months Ended June 30 Compared with ($1.76) in 2008
- Adjusted EBITDA of $37.0 Million Compared with $3.0 Million in Q-2 2008
- Cash Margin Per Ton in CAPP of $25.55 Compared with $4.14 in Q-2 2008
- Financial Leverage Reduced from 6.1x to 3.4x Since December 31, 2008
- All Customer Shipments are Following Normal Historical Patterns
- Conference Call Slides Posted to Company Website
RICHMOND, Va., Aug. 3 /PRNewswire-FirstCall/ -- James River Coal Company (Nasdaq: JRCC), a producer of steam and industrial-grade coal, today announced that it had net income of $16.2 million or $.59 per fully diluted share for the second quarter of 2009 and net income of $44.3 million or $1.61 per fully diluted share for the six months ended June 30, 2009. This is compared to a net loss of $24.0 million or $.97 per fully diluted share for the second quarter of 2008 and a net loss of $40.7 million or $1.76 per fully diluted share for the six months ended June 30, 2008.
Peter T. Socha, Chairman and Chief Executive Office commented: "This was another solid quarter. We are continuing to generate both net income and free cash flow during a weak period in the economy and the coal markets. We will use this period to strengthen our financial position and to make prudent investments in all aspects of our company. We believe that our shareholders will see significant benefits from these decisions as we move from today's weak coal markets to tomorrow's stronger coal markets."
FINANCIAL RESULTS
The following tables show selected operating results for the quarter ended June 30, 2009 compared to the quarter ended June 30, 2008 (in 000's except per ton amounts).
Total Results Three Months Ended Six Months Ended
June 30, June 30,
2009 2008 2009 2008
Total Total Total Total
Company and contractor
production (tons) 2,486 2,845 5,353 5,647
Coal purchased from other
sources (tons) 26 65 62 198
-- -- -- ---
Total coal available to ship
(tons) 2,512 2,910 5,415 5,845
Coal shipments (tons) 2,407 2,892 5,038 5,814
Coal sales revenue $171,649 $137,703 $363,770 $275,891
Cost of coal sold 127,721 128,867 260,428 254,597
Depreciation, depletion, &
amortization 15,922 17,552 30,395 34,842
Gross profit (loss) 28,006 (8,716) 72,947 (13,548)
Selling, general & administrative 10,559 8,732 19,846 16,066
Adjusted EBITDA (1) $37,036 $3,020 $90,230 $10,675
(1) Adjusted EBITDA 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 June 30,
------------- -------------
2009 2008
---- ----
CAPP Midwest CAPP Midwest
---- ------- ---- -------
Company and contractor production
(tons) 1,677 809 2,083 762
Coal purchased from other sources
(tons) 26 - 65 -
-- -- -- --
Total coal available to ship
(tons) 1,703 809 2,148 762
Coal shipments (tons) 1,601 806 2,161 731
Coal sales revenue $144,853 26,796 $114,218 23,485
Average sales price per ton 90.48 33.25 52.85 32.13
Cost of coal sold $103,952 23,769 $105,252 23,615
Cost of coal sold per ton 64.93 29.49 48.71 32.31
Segment Results Six Months Ended June 30,
------------- --------------
2009 2008
---- ----
CAPP Midwest CAPP Midwest
---- ------- ---- -------
Company and contractor
production (tons) 3,718 1,635 4,170 1,477
Coal purchased from other
sources (tons) 62 - 198 -
-- - --- -
Total coal available to ship
(tons) 3,780 1,635 4,368 1,477
Coal shipments (tons) 3,445 1,593 4,358 1,456
Coal sales revenue $312,488 51,282 $229,697 46,194
Average sales price per ton 90.71 32.19 52.71 31.73
Cost of coal sold $215,436 44,992 $209,362 45,235
Cost of coal sold per ton 62.54 28.24 48.04 31.07
Cost Bridge Q-1 2009 vs. Q-2 2009
CAPP Midwest
---- -------
Beginning cash costs (Q-1 2009) $60.46 26.97
Labor 2.37 0.31
Fixed costs (absorption) 2.44 0.55
Variable costs - 1.40
Other (0.34) 0.26
----- ----
Ending cash costs (Q-2 2009) $64.93 29.49
====== =====
C.K. Lane, Senior Vice President and Chief Operating Officer commented: "Our operations had another excellent quarter in respect to both safety and production. In just the last six quarters, we have cut our NFDL rate (non-fatal days lost) in half. We are also pleased that one of our two mine rescue teams won 1st place in the Kentucky Mining Institute State Mine Rescue Competition held July 30-31 in Lexington, Kentucky. We are very proud of our employees for making James River one of the safest places to work in the coal industry. Our mines continued to perform well even while we reduced our quarterly production by approximately 300,000 tons. This reduction was implemented in order to better manage our inventories and match our contract sales. We were able to make this reduction by eliminating Saturday and third shift production and idling our operations for two additional days during the second quarter."
LIQUIDITY AND CASH FLOW
As of June 30, 2009, the Company had available liquidity of $36.9 million calculated as follows (in millions):
Cash and Cash Equivalents $1.9
Availability under the Revolver 35.0
Drawn under the Revolver -
-----
Available Liquidity $36.9
=====
Effective July 1, 2009, the Company is no longer required to maintain the $10.0 million minimum liquidity as defined under its senior secured credit facilities. The Company was in compliance with all of the covenants in its senior secured credit facilities as of June 30, 2009.
Major cash flow items during the quarter include $17.9 million for capital expenditures, $9.0 million to pay down our revolving credit facility and $7.0 million for a semi-annual interest payment on our bonds.
Financial Leverage, calculated as Total Liabilities divided by Shareholders Equity, has been reduced from 6.1x at December 31, 2008 to 3.4x at June 30, 2009. This calculation is not used in any of our existing credit facilities and is provided for informational purposes only.
SALES POSITION AND MARKET COMMENTS
As of July 31, 2009, we had the following agreements to ship coal at a fixed and known price (in 000's except per ton amounts):
2009 Priced (1)
---------------
As of April 30, 2009 As of July 31, 2009 Change
Tons Avg Price Tons Avg Price Tons Avg Price
Per Ton Per Ton Per Ton
---- -------- ---- --------- ---- ---------
CAPP 6,655 $ 89.34 6,946 $ 88.63 291 $ 72.47
-------- ----- ------- ----- ------- --- -------
Midwest(2) 3,561 $ 34.27 3,537 $ 34.11 - $-
--------- ----- ------- ----- ------- --- -------
2010 Priced
-----------
As of April 30, 2009 As of July 31, 2009 Change
Tons Avg Price Tons Avg Price Tons Avg Price
Per Ton Per Ton Per Ton
---- --------- ---- --------- ---- ---------
CAPP 4,600 $101.74 4,782 $100.60 182 $ 71.65
-------- ----- ------- ----- ------- --- -------
Midwest(2) 813 $ 43.61 2,642 $ 41.47 1,829 $ 40.52
-------- ----- ------- ----- ------- --- -------
2011 Priced
-----------
As of April 30, 2009 As of July 31, 2009 Change
Tons Avg Price Tons Avg Price Tons Avg Price
Per Ton Per Ton Per Ton
---- ---------- ---- ---------- ---- ---------
CAPP 2,350 $122.51 2,350 $122.51 - $-
-------- ----- ------- ----- ------- --- ------
Midwest(2) - $- 375 $45.47 375 $45.47
--------- ----- ------- ----- ------- --- ------
2012 Priced
-----------
As of April 30, 2009 As of July 31, 2009 Change
Tons Avg Price Tons Avg Price Tons Avg Price
Per Ton Per Ton Per Ton
---- --------- ---- --------- ---- ---------
CAPP 350 $108.31 350 $108.31 - $-
------- ---- ------- ---- ------- ---- -----
(1) 2009 includes all tons that have been shipped and tons with
agreements for fixed prices for the remainder of the year,
including carryover tons.
(2) The prices for the Midwest in years 2009 and 2010 are minimum base
price amounts adjusted for projected fuel escalators.
UPDATED GUIDANCE
The Company has previously issued forecasts of certain operating measures for 2009. These forecasts are revised as indicated below. In many cases they represent a range of possible outcomes and are provided to assist investors with the development of annual earnings estimates. While the Company 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 the risks identified under Forward-Looking Statements below.
2009
----
Original Guidance New Guidance
----------------- ------------
Total JRCC Operations
(In 000's except EPS and tax rate)
Adjusted EBITDA (1) $190,000 to $200,000 $140,000 to $150,000
Selling, General and
Administrative $35,000 $38,000
Depreciation, Depletion and
Amortization $65,000 $64,000
Tax Rate 15% 2% to 5%
Earnings Per Share $3.30 to $3.80 $2.25 to $2.60
Capital Expenditures
Maintenance Capital $55,000 $51,000
Federal and State Safety
Mandates 10,000 10,000
Upgrade Existing Equipment
Fleet 10,000 10,000
------ ------
$75,000 $71,000
Central Appalachia Operations
(In 000's except per ton amounts)
Shipments (tons) 7,400 to 7,600 7,000 to 7,100
Cash Cost (per ton) $60.00 63.00
Midwest Operations
(In 000's except per ton amounts)
Shipments (tons) 3,561 3,100 to 3,200
Cash Cost (per ton) $31.00 $31.00
(1) Adjusted EBITDA 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
Mr. Socha continued: "We are updating our 2009 guidance for two primary reasons.
"First, we announced an amendment to a sales contract on May 1. The amendment moved some higher priced tons from 2009 to 2011-12. The amendment also priced some new tons at $70 per ton for 2009-10. The new lower priced 2009 tons began shipping on April 1. The net effect on our 2009 financial performance is a $26.8 million reduction in gross profit. It should be emphasized that our higher priced tons were moved into later years, not cancelled.
"Second, we have reduced our 2009 CAPP production guidance due to the soft coal market. Beyond our existing contract portfolio, at current market prices, we would lose money on every additional ton sold. This is not acceptable. However, running the mines at a less than optimal level will cause an increase in our cash costs per ton. We expect this increase to be temporary and to be reversed as we increase production in the future."
CONFERENCE CALL, WEBCAST AND REPLAY: The Company will hold a conference call with management to discuss the second quarter earnings on August 3, 2009 at 11:00 a.m. Eastern Time. The conference call can be accessed by dialing 877-440-5785, or through the James River Coal Company website at http://www.jamesrivercoal.com. International callers, please dial 719-325-4873. A replay of the conference call will be available on the Company's website and also by telephone, at 888-203-1112 for domestic callers. International callers, please dial 719-457-0820: pass code 2415912.
James River Coal Company mines, processes and sells bituminous steam and industrial-grade coal primarily to electric utility companies and industrial customers. The Company's mining operations are managed through six operating subsidiaries located throughout eastern Kentucky and in southern Indiana.
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. These forward-looking statements, particularly the information in the "Updated Guidance" section of this release, are subject to a number of risks and uncertainties. These risks and uncertainties include, but are not limited to, the following: changes in the demand for coal by electric utility customers; the loss of one or more of our largest customers; inability to secure new coal supply agreements or to extend existing coal supply agreements at market prices; failure to diversity our operations; failure to exploit additional coal reserves; the risk that reserve estimates are inaccurate; increased capital expenditures; encountering difficult mining conditions; increased costs of complying with mine health and safety regulations; our dependency on one railroad for transportation of a large percentage of our products; bottlenecks or other difficulties in transporting coal to our customers; delays in the development of new mining projects; increased costs of raw materials; lack of availability of financing sources; our compliance with debt covenants; the effects of litigation, regulation and competition; 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)
June 30, 2009 December 31, 2008
------------- -----------------
Assets (unaudited)
Current assets:
Cash and cash equivalents $1,908 3,324
Receivables:
Trade 43,058 33,086
Other 227 475
--- ---
Total receivables 43,285 33,561
------ ------
Inventories:
Coal 29,568 6,847
Materials and supplies 11,190 9,581
------ -----
Total inventories 40,758 16,428
------ ------
Prepaid royalties 5,210 2,803
Other current assets 4,652 5,094
----- -----
Total current assets 95,813 61,210
------ ------
Property, plant, and equipment, at cost:
Land 7,114 6,693
Mineral rights 230,932 229,841
Buildings, machinery and equipment 335,631 320,982
Mine development costs 39,960 39,596
------ ------
Total property, plant, and
equipment 613,637 597,112
Less accumulated depreciation,
depletion, and amortization 270,679 252,264
------- -------
Property, plant and
equipment, net 342,958 344,848
Goodwill 26,492 26,492
Other assets 26,394 30,996
------ ------
Total assets $491,657 463,546
======== =======
JAMES RIVER COAL COMPANY
AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except share data)
June 30, December 31,
2009 2008
-------- -----------
Liabilities and Shareholders' Equity (unaudited)
Current liabilities:
Current maturities of long-term debt $ - 18,000
Accounts payable 55,698 57,068
Accrued salaries, wages, and employee
benefits 9,144 6,642
Workers' compensation benefits 9,300 9,300
Black lung benefits 1,539 1,539
Accrued taxes 5,403 4,457
Other current liabilities 12,156 19,165
------ ------
Total current liabilities 93,240 116,171
------ -------
Long-term debt, less current maturities 150,000 150,000
Other liabilities:
Noncurrent portion of workers' compensation
benefits 48,629 46,477
Noncurrent portion of black lung benefits 29,698 29,029
Pension obligations 19,962 19,693
Asset retirement obligations 37,498 36,409
Other 619 529
--- ---
Total other liabilities 136,406 132,137
------- -------
Total liabilities 379,646 398,308
------- -------
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
27,551,964 and 27,393,493 shares as of
June 30, 2009 and December 31, 2008,
respectively 276 274
Paid-in-capital 273,985 272,366
Accumulated deficit (143,363) (187,712)
Accumulated other comprehensive loss (18,887) (19,690)
------- -------
Total shareholders' equity 112,011 65,238
------- ------
Total liabilities and
shareholders' equity $491,657 463,546
======== =======
JAMES RIVER COAL COMPANY
AND SUBSIDIARIES
Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
Three Months Three Months
Ended Ended
June 30, 2009 June 30, 2008
------------- -------------
Revenues $171,649 137,703
Cost of sales:
Cost of coal sold 127,721 128,867
Depreciation, depletion and
amortization 15,922 17,552
Total cost of sales 143,643 146,419
------- -------
Gross profit (loss) 28,006 (8,716)
Selling, general and administrative
expenses 10,559 8,732
Total operating income
(loss) 17,447 (17,448)
------ -------
Interest expense 3,814 4,186
Interest income (25) (174)
Charges associated with repayment and
amendment of debt - 3,013
Miscellaneous income, net (90) (467)
--- ----
Total other expense, net 3,699 6,558
----- -----
Income (loss) before
income taxes 13,748 (24,006)
Income tax expense (benefit) (2,430) -
Net income (loss) $16,178 (24,006)
======= =======
Earnings (loss) per common share
Basic earnings (loss) per common
share $0.59 (0.97)
===== =====
Diluted earnings (loss) per common
share $0.59 (0.97)
===== =====
JAMES RIVER COAL COMPANY
AND SUBSIDIARIES
Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
Six Months Six Months
Ended Ended
June 30, 2009 June 30, 2008
------------- -------------
Revenues $363,770 275,891
Cost of sales:
Cost of coal sold 260,428 254,597
Depreciation, depletion and amortization 30,395 34,842
Total cost of sales 290,823 289,439
------- -------
Gross profit (loss) 72,947 (13,548)
Selling, general and administrative expenses 19,846 16,066
Total operating income (loss) 53,101 (29,614)
------ -------
Interest expense 7,867 9,075
Interest income (50) (262)
Charges associated with repayment and amendment of
debt - 3,013
Miscellaneous income, net (144) (746)
---- ----
Total other expense, net 7,673 11,080
----- ------
Income (loss) before income taxes 45,428 (40,694)
Income tax expense 1,079 -
----- -----
Net income (loss) $44,349 (40,694)
======= =======
Earnings (loss) per common share
Basic earnings (loss) per common share $1.61 (1.76)
===== =====
Diluted earnings (loss) per common share $1.61 (1.76)
===== =====
JAMES RIVER COAL COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Six Months Six Months
Ended Ended
June 30, June 30,
2009 2008
-------- --------
Cash flows from operating activities:
Net income (loss) $44,349 (40,694)
Adjustments to reconcile net income (loss) to
net cash (used in) provided by operating
activities
Depreciation, depletion, and amortization 30,395 34,842
Accretion of asset retirement obligations 1,586 1,335
Amortization of deferred financing costs 587 753
Stock-based compensation 3,086 2,120
Gain on sale or disposal of property, plant,
and equipment - (206)
Write-off of deferred financing costs - 1,125
Changes in operating assets and liabilities:
Receivables (9,724) (148)
Inventories (22,286) (4,001)
Prepaid royalties and other current assets (1,965) 285
Other assets 4,015 206
Accounts payable (1,370) 1,749
Accrued salaries, wages, and employee
benefits 2,502 1,065
Accrued taxes (594) (1,052)
Other current liabilities (7,246) 744
Workers' compensation benefits 2,152 1,130
Black lung benefits 669 688
Pension obligations 1,072 (1,039)
Asset retirement obligation (491) (733)
Other liabilities 90 97
----- -----
Net cash provided by (used in) operating
activities 46,827 (1,734)
------ ------
Cash flows from investing activities:
Additions to property, plant, and equipment (30,318) (23,483)
Proceeds from sale of property, plant, and
equipment - 1,046
----- -----
Net cash used in investing activities (30,318) (22,437)
------- -------
Cash flows from financing activities:
Borrowings under Revolver 7,500 -
Repayments under Revolver (25,500) -
Repayment of long-term debt - (21,847)
Net proceeds from issuance of common stock - 50,023
Debt issuance costs - (486)
Proceeds from exercise of stock option 75 542
----- -----
Net cash provided by (used in) financing
activities (17,925) 28,232
------- ------
Increase (decrease) in cash (1,416) 4,061
Cash at beginning of period 3,324 5,413
----- -----
Cash at end of period $1,908 9,474
====== =====
JAMES RIVER COAL COMPANY
AND SUBSIDIARIES
Reconciliation of Non-GAPP Measures
(in thousands)
(unaudited)
EBITDA is a measure 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 the amount used in several of the covenants in our senior secured credit facilities. Adjusted EBITDA is defined as EBITDA further adjusted for certain cash and non-cash charges. Adjusted EBITDA is used to determine compliance with financial covenants and our ability to engage in certain activities such as incurring additional debt and making certain payments.
Cash margin per ton and financial leverage are additional measures used by management to better measure our operating performance. Cash margin per ton is a measure to evaluate a company's profitability from produced tons sold. Cash margin per ton is defined as gross profit or loss plus depreciation, depletion and amortization divided by tons sold for the period. Financial leverage provides a measure of our ability to meet financial obligations. Financial leverage is defined as total liabilities divided by total equity.
EBITDA, Adjusted EBITDA and cash margin 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 cash margin may not be comparable to other similarly titled measures of other companies. Additionally, EBITDA and Adjusted EBITDA 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 Six Months Ended
------------------ ----------------
June 30, June 30, June 30, June 30,
2009 2008 2009 2008
---- ---- ---- ----
Net income (loss) $16,178 (24,006) 44,349 (40,694)
Income tax expense (2,430) - 1,079 -
Interest expense 3,814 4,186 7,867 9,075
Interest income (25) (174) (50) (262)
Depreciation, depletion, and
amortization 15,922 17,552 30,395 34,842
------ ------ ------ ------
EBITDA (before adjustments) $33,459 (2,442) 83,640 2,961
------- ------ ------ -----
Other adjustments specified
in our current debt agreement:
Charges associated with
repayment of debt - 3,013 - 3,013
Other adjustments 3,577 2,449 6,590 4,701
----- ----- ----- -----
Adjusted EBITDA $37,036 3,020 90,230 10,675
======= ===== ====== ======
CONTACT: James River Coal Company
Elizabeth M. Cook
Director of Investor Relations
(804) 780-3000
SOURCE James River Coal Company
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http://www.jamesrivercoal.com/
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