James River Coal Company Reports Second Quarter 2012 Operating Results -- Maintaining a Strong Balance Sheet with Available Liquidity of $191.9 Million

-- Q-2 Adjusted EBITDA of $22.3 Million; Capital Expenditures of $23.0 Million

-- Reached Agreements to Ship Approximately 816,000 Tons of Thermal/Industrial and Metallurgical Coal in 2012 at an Average Sales Price of $114.83 Per Ton

-- Received 5 New Surface Mining Permits from State and Federal Regulatory Agencies

-- Confirming All Current 2012 Operating and Financial Guidance; Capital Expenditures Remain Under Review

-- Conference Call Slides Posted to Company Website

RICHMOND, Va., Aug. 9, 2012 /PRNewswire/ -- James River Coal Company (NASDAQ: JRCC),  today announced that it had net loss of $25.8 million or $0.74 per diluted share for the second quarter of 2012 and net loss of $41.4 million or $1.19 per diluted share for the six months ended June 30, 2012.  The 2012 results are compared to net income of $0.8 million or $0.02 per diluted share for the second quarter of 2011 and net loss of $6.8 million or $0.22 per diluted share for the six months ended June 30, 2011.

Peter T. Socha, Chairman and Chief Executive Officer commented: "We are both pleased and cautious this quarter.  In the operations area, we are very pleased to report that we have received five significant permits for our surface mining operations.  Our operations team has put a tremendous amount of time and effort into obtaining these permits.  They showed flexibility and creativity in working with state and federal regulatory authorities in finding solutions that would meet the needs of all parties.  Our operations team has also continued to demonstrate their ability to quickly adapt to changing market conditions.  Both the met and the thermal coal markets are in a state of transition.  The met market has softened recently due to global macroeconomic concerns and a slight oversupply situation.  We are cautious about the met market in the short term, but continue to be very enthusiastic about the demand for these coals going forward.  The construction of global infrastructure is continuing.  The thermal market is just beginning to show signs of recovery.  We believe that this is due to production cutbacks throughout the industry as well as improved demand for both coal and natural gas due to warmer than normal temperatures.  Our sales and marketing team has done a great job of shipping coal under existing contracts and finding pockets of opportunity in difficult markets. We continue to be pleased with our balanced approach to operating assets, customer markets, and financial stability."

FINANCIAL RESULTS

The following tables show selected operating results for the quarter and six months ended June 30, 2012 compared to the quarter and six months ended June 30, 2011 (in 000's except per ton amounts). 

 

Total Results

Three Months Ended June 30, 


Six Months Ended June 30,


2012


2011


2012


2011


Total


Per Ton


Total


Per Ton


Total


Per Ton


Total


Per Ton

















Company and contractor production (tons)

2,539




2,640




5,342




4,762



Coal purchased from other sources (tons)

434




566




797




612



Total coal available to ship (tons)

2,973




3,206




6,139




5,374



















Coal shipments (tons)

2,910




3,261




5,961




5,334



Coal sales revenue

$   259,628


89.22


$   328,182


100.64


$   539,391


90.49


$   492,037


92.25

Freight and handling revenue

17,730


6.09


23,855


7.32


39,952


6.70


24,582


4.61

Cost of coal sold

224,314


77.08


264,108


80.99


461,203


77.37


396,927


74.41

Freight and handling costs

17,730


6.09


23,855


7.32


39,952


6.70


24,582


4.61

Depreciation, depletion, & amortization

32,514


11.17


28,210


8.65


62,634


10.51


44,245


8.29

Gross profit 

2,800


0.96


35,864


11.00


15,554


2.61


50,865


9.54

Selling, general & administrative 

15,266


5.25


14,811


4.54


30,832


5.17


24,181


4.53

Acquisition costs

-




3,859




-




8,504



















Adjusted EBITDA plus acquisition costs (1)

$     22,345


7.68


$     54,449


16.70


$     52,082


8.74


$     78,151


14.65

















(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

Three Months Ended June 30, 


Six Months Ended June 30, 


2012


2011


2012

2011

CAPP

Total


Per Ton


Total


Per Ton


Total


Per Ton


Total


Per Ton

















Company and contractor production (tons)

1,932




2,023




4,177




3,478



Coal purchased from other sources (tons)

434




566




797




612



Total coal available to ship (tons)

2,366




2,589




4,974




4,090



Coal shipments (tons)
















     Steam (tons)

1,412




1,893




3,176




3,274



    Metallurgical (tons)

897




727




1,625




761



Total Shipments (tons)

2,309




2,620




4,801




4,035



Coal sales revenue
















     Steam

$    117,229


83.02


$    169,977


89.79


$    269,095


84.73


$    303,417


92.67

     Metallurgical

115,581


128.85


130,499


179.50


218,755


134.62


134,644


176.93

Total coal sales revenue

232,810


100.83


300,476


114.69


487,850


101.61


438,061


108.57

Freight and handling revenue

17,426


7.55


23,316


8.90


38,470


8.01


23,316


5.78

Cost of coal sold

$    202,476


87.69


$    240,794


91.91


$    416,305


86.71


$    349,493


86.62

Freight and handling costs

17,426


7.55


23,316


8.90


38,470


8.01


23,316


5.78








































Three Months Ended June 30, 


Six Months Ended June 30, 




2012

2011


2012

2011

Midwest

Total


Per Ton


Total


Per Ton


Total


Per Ton


Total


Per Ton



















Company and contractor production (tons)

607




617




1,165




1,284



Coal purchased from other sources (tons)

-




-




-




-



Total coal available to ship (tons)

607




617




1,165




1,284



Coal shipments (tons)

601




641




1,160




1,299



Coal sales revenue

$      26,818


44.62


$      27,706


43.22


$      51,541


44.43


$      53,976


41.55

Freight and handling revenue

304


0.51


539


0.84


1,482


1.28


1,266


0.97

Cost of coal sold

$      21,838


36.34


$      23,314


36.37


$      44,898


38.71


$      47,434


36.52

Freight and handling costs

304


0.51


539


0.84


1,482


1.28


1,266


0.97

 

PERMITS

C.K. Lane, Senior Vice President and Chief Operating Officer commented: "James River Coal is continuing to use innovative approaches to permit design, along with working cooperatively with the Environmental Protection Agency (EPA), the Corp. of Engineer's (COE) and State agencies to adapt to the realities of today's permitting environment.  As a result we are pleased to announce that we have received 5 surface mining permits that will allow us to extend existing operations for several years."  Below is a recap of the five permits:

  • The Freelandville COE 404 permit allows the mining of approximately 4.2 million tons of surface coal currently under lease at Triad's Freelandville mine.  There are additional leases that could be acquired to add on additional tonnage.  
  • The Rough Creek Surface Mining Control and Reclamation Act (SMCRA) permit which will allow Triad to surface mine Indiana No. 5 reserves at our Log Creek Complex that were originally slated to be mined by underground methods. In addition to the increased extraction of the Indiana No. 5 coal, additional reserves in the Indiana No. 6 and Indiana No. 5B will also be available.   Total reserves associated with this permit are approximately 5.8 million tons.
  • The Stacy Branch COE 404 permit has been received.  This is one of the few hollow fill permits issued in the Central Appalachian region in the last five years.  This will open up approximately 3.4 million tons of high quality coal. 
  • The Kentucky Department of Natural Resources permit for the Wolfpen mine has been received.  This will extend the life of our lowest cost surface operation, Frasure Branch.  The Wolfpen permit gives access to 2.9 million tons of high quality low sulfur coal.
  • The Canebrake permit has been approved by the EPA and is awaiting minor revisions by the West Virginia Department of Environmental Protection to accommodate a change in mine plans that is better suited for today's market.  This permit opens up approximately 1.9 million tons of low cost metallurgical coal.

LIQUIDITY AND CASH FLOW

As of June 30, 2012, the Company had available liquidity of $191.9 million calculated as follows (in millions):

Unrestricted Cash

$

164.8

Availability under the Revolver


86.5

Letters of Credit Issued under the Revolver


(59.4)




Available Liquidity

$

191.9




Restricted Cash

$

29.6

Availability under the $100 million Revolver was lower at June 30, 2012 than at March 31, 2012 due to minor disruptions in late June CAPP shipments.  The disruptions were caused by the timing of the annual miners' vacation period and annual rail maintenance.  Capital expenditures for the second quarter were $23.0 million and $45.9 million for the six months ended June 30, 2012.

SALES POSITION AND MARKET COMMENTS

As of August 8, 2012, we had the following agreements to ship coal at a fixed and known price (in 000's except per ton amounts):


2012 Priced


As of May 2, 2012

As of August 8, 2012

Change


Tons

Avg Price

Per Ton

Tons

Avg Price

Per Ton

Tons

Avg Price

Per Ton

CAPP  (1)

8,618

$       94.83

9,434

$       96.56

816

$        114.83

Midwest (3)

2,776

$       44.16

2,776

$       44.16

-

$                 -









2013 Priced


As of May 2, 2012

As of August 8, 2012

Change


Tons

Avg Price

Per Ton

Tons

Avg Price

Per Ton

Tons

Avg Price

Per Ton

CAPP (2)

1,337

$       80.45

1,337

$       79.32

-

$                 -

Midwest (3)

2,140

$       45.35

2,140

$       45.35

-

$                 -









2014 Priced


As of May 2, 2012

As of August 8, 2012

Change


Tons

Avg Price

Per Ton

Tons

Avg Price

Per Ton

Tons

Avg Price

Per Ton

CAPP

300

$       75.75

300

$       75.75

-

$                 -

Midwest (3)

700

$       49.00

700

$       49.00

-

$                 -








(1)      Priced tons in CAPP in 2012 do not include approximately 300,000 tons of met coal that have been sold but not yet priced.

(2)      Priced tons in CAPP in 2013 do not include approximately 900,000 tons of met coal that have been sold but not yet priced.

(3)      The prices for the Midwest  are minimum base price amounts adjusted for projected fuel escalators.

 

2012 GUIDANCE

We are reaffirming 2012 guidance with the exception of Capital Expenditure guidance which was withdrawn on May 3, 2012.  The Company is in the process of assessing its capital needs for the remainder of the year.

CONFERENCE CALL, WEBCAST AND REPLAY:  The Company will hold a conference call with management to discuss the second quarter earnings August 9, 2012 at 11:00 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.  A replay of the conference call will be available on the Company's website and also by telephone, at 855-859-2056 for domestic callers.  International callers, please dial 404-537-3406: pass code 95471315.

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; our ability to successfully integrate International Resource Partners LP and its related entities (IRP); 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; 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)




















June 30, 2012


December 31, 2011

Assets


(unaudited)



Current assets:






Cash and cash equivalents

$

164,835


199,711


Trade receivables


99,870


107,557


Inventories:







Coal


59,224


52,717



Materials and supplies


18,377


17,800






Total inventories


77,601


70,517


Prepaid royalties


8,809


8,465


Other current assets


9,387


11,461






Total current assets


360,502


397,711

Property, plant, and equipment, net


889,978


909,294

Goodwill


26,492


26,492

Restricted cash and short term investments


29,579


29,510

Other assets


35,790


41,575






Total assets

$

1,342,341


1,404,582












Liabilities and Shareholders' Equity 





Current liabilities:






Accounts payable

$

77,533


110,557


Accrued salaries, wages, and employee benefits


13,859


12,996


Workers' compensation benefits


9,200


9,200


Black lung benefits


2,512


2,512


Accrued taxes


5,680


7,563


Other current liabilities


23,308


27,861






Total current liabilities


132,092


170,689

Long-term debt, less current maturities 


589,519


582,193

Other liabilities:






Noncurrent portion of workers' compensation benefits


63,100


60,721


Noncurrent portion of black lung benefits


57,894


56,152


Pension obligations


27,146


29,121


Asset retirement obligations


99,211


94,654


Other


13,287


14,390






Total other liabilities


260,638


255,038






Total liabilities


982,249


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 35,888,611 and 35,671,953 shares as of June 30, 2012 and December 31, 2011


359


357


Paid-in-capital


543,769


541,362


Accumulated deficit


(139,104)


(97,682)


Accumulated other comprehensive loss


(44,932)


(47,375)






Total shareholders' equity


360,092


396,662







Total liabilities and shareholders' equity 

$

1,342,341


1,404,582

 

JAMES RIVER COAL COMPANY
AND SUBSIDIARIES
Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)








Three Months Ended


Six Months Ended



June 30, 2012


June 30, 2011


June 30, 2012


June 30, 2011

Revenues










Coal sales revenue

$

259,628


328,182


539,391


492,037


Freight and handling revenue


17,730


23,855


39,952


24,582




Total revenue


277,358


352,037


579,343


516,619

Cost of sales:










Cost of coal sold


224,314


264,108


461,203


396,927


Freight and handling costs


17,730


23,855


39,952


24,582


Depreciation, depletion and amortization


32,514


28,210


62,634


44,245




Total cost of sales


274,558


316,173


563,789


465,754




Gross profit 


2,800


35,864


15,554


50,865

Selling, general and administrative expenses


15,266


14,811


30,832


24,181

Acquisition costs


-


3,859


-


8,504




Total operating income (loss)


(12,466)


17,194


(15,278)


18,180

Interest expense


13,527


15,607


26,912


23,458

Interest income


(171)


(128)


(385)


(183)

Charges associated with repayment of debt


-


740


-


740

Miscellaneous income, net


(90)


(181)


(433)


(302)




Total other expense, net


13,266


16,038


26,094


23,713




Net income (loss) before income taxes


(25,732)


1,156


(41,372)


(5,533)

Income tax expense


31


367


50


1,282

Net income (loss)

$

(25,763)


789


(41,422)


(6,815)

Earnings (loss) per common share 










Basic earnings (loss) per common share

$

(0.74)


0.02


(1.19)


(0.22)


Diluted earnings (loss) per common share

$

(0.74)


0.02


(1.19)


(0.22)

 

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,



2012


2011

Cash flows from operating activities:






Net loss

$

(41,422)


(6,815)


Adjustments to reconcile net loss to net cash provided by operating activities







Depreciation, depletion, and amortization 


62,634


44,245



Accretion of asset retirement obligations


2,617


1,975



Amortization of debt discount and issue costs


8,667


6,383



Stock-based compensation


2,696


2,648



Deferred income tax benefit


-


2,236



Gain on sale or disposal of property, plant and equipment


(122)


-



Write-off of deferred financing costs


-


740



Changes in operating assets and liabilities:








Receivables


7,687


38,568




Inventories


(3,724)


(10,156)




Prepaid royalties and other current assets


1,730


(878)




Restricted cash


(69)


(6,010)




Other assets


4,417


(4,991)




Accounts payable


(33,024)


12,512




Accrued salaries, wages, and employee benefits


863


1,369




Accrued taxes


(2,170)


(21)




Other current liabilities


(4,691)


4,339




Workers' compensation benefits


2,379


1,937




Black lung benefits


2,514


1,881




Pension obligations


(304)


(971)




Asset retirement obligations


(96)


(2,123)




Other liabilities


(157)


(70)





Net cash provided by operating activities


10,425


86,798

Cash flows from investing activities:






Additions to property, plant, and equipment


(45,881)


(58,306)


Payment for acquisition, net of cash acquired


-


(515,962)


Proceeds from sale of property, plant and equipment


580


-





Net cash used in investing activities


(45,301)


(574,268)

Cash flows from financing activities:






Proceeds from issuance of long-term debt


-


505,000


Repayment of long-term debt


-


(150,000)


Net proceeds from issuance of common stock


-


170,545


Debt issuance costs


-


(13,768)





Net cash provided by financing activities


-


511,777





Increase (decrease) in cash


(34,876)


24,307

Cash and cash equivalents at beginning of period


199,711


180,376

Cash and cash equivalents at end of period

$

164,835


204,683


 

JAMES RIVER COAL COMPANY
AND SUBSIDIARIES
Reconciliation of Non GAAP Measures
(in thousands)
(unaudited)

EBITDA is 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 defined as EBITDA as further adjusted for certain cash and non-cash charges as specified in our revolving credit facility and is used in several of the covenants in that facility.  Adjusted EBITDA plus acquisition costs further adjusts Adjusted EBITDA to add back certain non-recurring costs incurred in connection with the IRP acquisition that may not reflect the trend of future results.  We believe that Adjusted EBITDA plus acquisition cost presents a useful measure of our ability to service and incur debt on an ongoing basis. 

EBITDA, Adjusted EBITDA, Adjusted EBITDA plus acquisition costs 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, Adjusted EBITDA plus acquisition costs may not be comparable to other similarly titled measures of other companies.  Additionally, EBITDA, Adjusted EBITDA, Adjusted EBITDA plus acquisition costs 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









2012


2011


2012


2011
















Net income (loss)

$

(25,763)


789


(41,422)


(6,815)

Income tax expense 


31


367


50


1,282

Interest expense 


13,527


15,607


26,912


23,458

Interest income


(171)


(128)


(385)


(183)

Depreciation, depletion, and amortization


32,514


28,210


62,634


44,245

EBITDA (before adjustments)

$

20,138


44,845


47,789


61,987

Other adjustments specified 









     in our current debt agreement









     Direct acquisition costs


-


3,859


-


8,504

     Charges associated with repayment of debt

-


740


-


740

     Other 


2,207


2,256


4,293


4,171

Adjusted EBITDA

$

22,345


51,700


52,082


75,402

Write-up of IRP inventory


-


2,749




2,749

Adjusted EBITDA plus acquisition costs

$

22,345


54,449


52,082


78,151

 

CONTACT:

James River Coal Company
Elizabeth M. Cook
Director of Investor Relations
(804) 780-3000

SOURCE James River Coal Company



RELATED LINKS
http://www.jamesrivercoal.com

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