James River Coal Company Reports Third Quarter 2012 Operating Results -- Maintaining a Strong Balance Sheet with Available Liquidity of $172 Million

-- Through October 12, 2012, Repurchased $61.4 Million Principal Amount of Debt for $23.9 Million (Average of $0.39 on the Dollar)

-- Conference Call Slides Posted to Company Website

RICHMOND, Va., Nov. 7, 2012 /PRNewswire/ -- James River Coal Company (NASDAQ: JRCC), today announced that it had net loss of $20.6 million or $0.59 per diluted share for the third quarter of 2012 and net loss of $62.0 million or $1.78 per diluted share for the nine months ended September 30, 2012.  Included in the third quarter results is a gain of $22.2 million from the repurchase of outstanding notes in open market purchases.  The 2012 results are compared to net loss of $3.7 million or $.11 per diluted share for the third quarter of 2011 and net loss of $10.5 million or $0.33 per diluted share for the nine months ended September 30, 2011.

Peter T. Socha, Chairman and Chief Executive Officer commented: "We are very pleased to have the uncertainty of the U.S. presidential election behind us.  We believe that this issue caused a temporary slowdown in economic growth both in the United States and globally.  The slowdown in growth, combined with warm weather last winter, has contributed to an unusually weak market for thermal and metallurgical coal.  Hopefully, this condition will be corrected shortly.

"Despite the soft coal markets, we continue to be pleased with the performance of our mine operations team.  They made a series of adjustments to their operating plans in response to the current markets. In the financial area, we decided to take the opportunity to reduce our debt at very advantageous market prices due to external events.  We believe that we were able to successfully balance our desire for a strong and liquid balance sheet with a window of opportunity that was available to us."

FINANCIAL RESULTS

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

Total Results


Three Months Ended September 30, 


Nine Months Ended September 30,




2012


2011


2012


2011




Total


Per Ton


Total


Per Ton


Total


Per Ton


Total


Per Ton



















Company and contractor production (tons)

2,229




2,816




7,571




7,578



Coal purchased from other sources (tons)

631




284




1,428




896



Total coal available to ship (tons)


2,860




3,100




8,999




8,474





















Coal shipments (tons)


3,164




3,163




9,125




8,497



Coal sales revenue


$   264,633


83.64


$   291,575


92.18


$     804,024


88.11


$   783,612


92.22

Freight and handling revenue


23,469


7.42


12,283


3.88


63,421


6.95


36,865


4.34

Cost of coal sold


244,365


77.23


245,240


77.53


705,568


77.32


642,167


75.58

Freight and handling costs


23,469


7.42


12,283


3.88


63,421


6.95


36,865


4.34

Depreciation, depletion, & amortization


35,518


11.23


31,234


9.87


98,152


10.76


75,479


8.88

Gross profit (loss)


(15,250)


(4.82)


15,101


4.77


304


0.03


65,966


7.76

Selling, general & administrative 


14,672


4.64


16,344


5.17


45,504


4.99


40,525


4.77

Acquisition costs


-




-




-




8,504





















Adjusted EBITDA plus acquisition costs (1)

$       7,556


2.39


$     32,265


10.20


$       59,638


6.54


$   110,416


12.99



















(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 September 30, 


Nine Months Ended September 30, 




2012


2011


2012

2011


CAPP


Total


Per Ton


Total


Per Ton


Total


Per Ton


Total


Per Ton



















Company and contractor production (tons)

1,607




2,225




5,784




5,703



Coal purchased from other sources (tons)

631




284




1,428




896



Total coal available to ship (tons)


2,238




2,509




7,212




6,599



Coal shipments (tons)

















     Steam (tons)


1,540




1,983




4,716




5,257



    Metallurgical (tons)


1,007




582




2,632




1,343



Total Shipments (tons)


2,547




2,565




7,348




6,600



Coal sales revenue

















     Steam


$    122,116


79.30


$    174,325


87.91


$    391,211


82.95


$    477,742


90.88

     Metallurgical


115,104


114.30


90,434


155.38


333,859


126.85


225,078


167.59

Total coal sales revenue


237,220


93.14


264,759


103.22


725,070


98.68


702,820


106.49

Freight and handling revenue


23,105


9.07


11,757


4.58


61,575


8.38


35,073


5.31

Cost of coal sold


$    221,961


87.15


$    221,482


86.35


$    638,266


86.86


$    570,975


86.51

Freight and handling costs


23,105


9.07


11,757


4.58


61,575


8.38


35,073


5.31








































Three Months Ended September 30, 


Nine Months Ended September 30, 




2012


2011


2012

2011


Midwest


Total


Per Ton


Total


Per Ton


Total


Per Ton


Total


Per Ton



















Company and contractor production (tons)

622




591




1,787




1,875



Coal purchased from other sources (tons)

-




-




-




-



Total coal available to ship (tons)


622




591




1,787




1,875



Coal shipments (tons)


617




598




1,777




1,897



Coal sales revenue


$      27,413


44.43


$      26,816


44.84


$      78,954


44.43


$      80,792


42.59

Freight and handling revenue


364


0.59


526


0.88


1,846


1.04


1,792


0.94

Cost of coal sold


$      22,404


36.31


$      23,758


39.73


$      67,302


37.87


$      71,192


37.53

Freight and handling costs


364


0.59


526


0.88


1,846


1.04


1,792


0.94

LIQUIDITY AND CASH FLOW

As of September 30, 2012, the Company had available liquidity of $171.7 million calculated as follows (in millions):







Unrestricted Cash

$

151.4



Availability under the Revolver


81.2



Letters of Credit Issued under the Revolver


(60.9)








Available Liquidity

$

171.7








Restricted Cash

$

29.6







Capital expenditures for the third quarter were $20.6 million and $66.5 million for the nine months ended September 30, 2012.

During the third quarter of 2012, the Company repurchased $53.7 million of its outstanding debt, consisting of $5.0 million principal amount of the 2019 Senior Notes, $19.9 million principal amount of the 2018 Convertible Senior Notes and $28.8 million principal amount of the 2015 Convertible Senior Notes.  The debt repurchases were made at a cost of $20.9 million, plus accrued interest of $0.8 million, in open market purchases.  The repurchases resulted in a gain of $22.2 million, which includes the write-off of $0.9 million of financing costs.  Additionally, in October 2012, the Company repurchased an additional $7.7 million its outstanding debt at a cost of $2.9 million, in open market purchases, consisting of $5.2 million principal amount of the 2018 Convertible Senior Notes and $2.5 million principal amount of the 2015 Convertible Senior Notes.

SALES POSITION

As of November 6, 2012, we had the following agreements to ship coal at a fixed and known price (in 000's except per ton amounts):












2013 Priced




As of August 8, 2012

As of November 6, 2012

Change




Tons

Avg Price Per Ton

Tons

Avg Price Per
Ton

Tons

Avg Price Per
Ton



CAPP (1)

1,337

$       79.32

3,405

$             74.04

2,068

$            70.63



Midwest (2)

2,140

$       45.35

2,342

$             45.25

202

$            44.19













2014 Priced




As of August 8, 2012

As of November 6, 2012

Change




Tons

Avg Price Per Ton

Tons

Avg Price Per
Ton

Tons

Avg Price Per
Ton



CAPP (1)

300

$       75.75

300

$             75.75

-

$                    -



Midwest (2)(3)

700

$       49.00

900

$             47.64

200

$            42.88












(1)      Priced tons in CAPP in 2013 do not include approximately 1,100,000 tons of met coal that have been sold but not yet priced.



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



(3)      200,000 tons of 2012 coal moved to 2014.


CONFERENCE CALL, WEBCAST AND REPLAY:  The Company will hold a conference call with management to discuss the quarterly earnings November 7, 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.

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, and projected fuel escalators.  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)




















September 30, 2012


December 31, 2011







Assets


(unaudited)



Current assets:









Cash and cash equivalents

$

151,435


199,711


Trade receivables



95,318


107,557


Inventories:









Coal





37,268


52,717



Materials and supplies


17,754


17,800






Total inventories


55,022


70,517


Prepaid royalties



8,371


8,465


Other current assets


12,315


11,461






Total current assets


322,461


397,711

Property, plant, and equipment, net


877,203


909,294

Goodwill






26,492


26,492

Restricted cash and short term investments 


29,624


29,510

Other assets





33,442


41,575






Total assets

$

1,289,222


1,404,582

















Liabilities and Shareholders' Equity 




Current liabilities:








Accounts payable


$

75,755


110,557


Accrued salaries, wages, and employee benefits


15,304


12,996


Workers' compensation benefits


9,200


9,200


Black lung benefits



2,512


2,512


Accrued taxes




6,594


7,563


Other current liabilities


27,055


27,861






Total current liabilities


136,420


170,689

Long-term debt, less current maturities 


549,070


582,193

Other liabilities:








Noncurrent portion of workers' compensation benefits


64,110


60,721


Noncurrent portion of black lung benefits


58,590


56,152


Pension obligations



26,461


29,121


Asset retirement obligations


100,105


94,654


Other






12,592


14,390






Total other liabilities


261,858


255,038






Total liabilities


947,348


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







35,887,611 and 35,671,953 shares as of September 30, 2012 and December 31, 2011

359


357


Paid-in-capital




544,881


541,362


Accumulated deficit



(159,656)


(97,682)


Accumulated other comprehensive loss


(43,710)


(47,375)






Total shareholders' equity


341,874


396,662







Total liabilities and shareholders' equity 

$

1,289,222


1,404,582












 

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




















Three Months Ended


Nine Months Ended









September 30,


September 30,









2012


2011


2012


2011

Revenues














Coal sales revenue


$

264,633


291,575


804,024


783,612


Freight and handling revenue


23,469


12,283


63,421


36,865




Total revenue


288,102


303,858


867,445


820,477

Cost of sales:













Cost of coal sold



244,365


245,240


705,568


642,167


Freight and handling costs


23,469


12,283


63,421


36,865


Depreciation, depletion, and amortization


35,518


31,234


98,152


75,479




Total cost of sales


303,352


288,757


867,141


754,511




Gross profit  (loss)


(15,250)


15,101


304


65,966

Selling, general and administrative expenses


14,672


16,344


45,504


40,525

Acquisition costs




-


-


-


8,504




Total operating income (loss)


(29,922)


(1,243)


(45,200)


16,937

Interest expense




13,200


13,215


40,112


36,673

Interest income





(217)


(173)


(602)


(356)

(Gain) loss on debt transactions 


(22,231)


-


(22,231)


740

Miscellaneous income, net


(147)


(271)


(580)


(573)




Total other (income) expense, net


(9,395)


12,771


16,699


36,484




Net loss before income taxes


(20,527)


(14,014)


(61,899)


(19,547)

Income tax expense (benefit)


25


(10,282)


75


(9,000)

Net loss





$

(20,552)


(3,732)


(61,974)


(10,547)

Earnings (loss) per common share 










Basic earnings (loss) per common share

$

(0.59)


(0.11)


(1.78)


(0.33)


Diluted earnings (loss) per common share

$

(0.59)


(0.11)


(1.78)


(0.33)
















 

JAMES RIVER COAL COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)


























Nine Months Ended













September 30,













2012


2011


Cash flows from operating activities:








Net loss







$

(61,974)


(10,547)



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









Depreciation, depletion, and amortization 


98,152


75,479





Accretion of asset retirement obligations


3,948


3,215





Amortization of debt discount and issue costs


12,914


10,479





Stock-based compensation



3,808


3,948





Deferred income tax benefit



-


(10,026)





Gain on sale or disposal of property, plant and equipment


(121)


-





(Gain) loss on debt transactions



(22,231)


740





Changes in operating assets and liabilities:











Receivables



12,239


93,449







Inventories



16,084


(1,294)







Prepaid royalties and other current assets


(760)


3,972







Restricted cash



(114)


(6,010)







Other assets



5,202


(2,808)







Accounts payable



(34,802)


(44,431)







Accrued salaries, wages, and employee benefits


2,308


3,851







Accrued taxes



(1,256)


(525)







Other current liabilities



(1,014)


9,594







Workers' compensation benefits


3,389


2,960







Black lung benefits



3,596


2,640







Pension obligations



(153)


(1,335)







Asset retirement obligations


(495)


(3,807)







Other liabilities



(224)


(149)








Net cash provided by operating activities


38,496


129,395


Cash flows from investing activities:








Additions to property, plant, and equipment


(66,466)


(95,118)



Payment for acquisition, net of cash acquired


-


(515,962)



Proceeds from sale of property, plant and equipment


610


-








Net cash used in investing activities


(65,856)


(611,080)


Cash flows from financing activities:








Proceeds from issuance of long-term debt


-


505,000



Repayment of long-term debt



(20,916)


(150,000)



Net proceeds from issuance of common stock


-


170,545



Debt issuance costs





-


(15,668)








Net cash (used in) provided by financing activities


(20,916)


509,877








Increase (decrease) in cash


(48,276)


28,192


Cash and cash equivalents at beginning of period


199,711


180,376


Cash and cash equivalents at end of period


$

151,435


208,568

















 


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


Nine Months Ended










September 30


September 30


September 30


September 30










2012


2011


2012


2011


















Net income (loss)



$

(20,552)


(3,732)


(61,974)


(10,547)


Income tax expense 




25


(10,282)


75


(9,000)


Interest expense 




13,200


13,215


40,112


36,673


Interest income





(217)


(173)


(602)


(356)


Depreciation, depletion, and amortization


35,518


31,234


98,152


75,479


EBITDA (before adjustments)

$

27,974


30,262


75,763


92,249


Other adjustments specified 










     in our current debt agreement










     Direct acquisition costs


-


-


-


8,504



(Gain) loss on debt transactions


(22,231)


-


(22,231)


740


     Other 






1,813


2,003


6,106


6,174


Adjusted EBITDA



$

7,556


32,265


59,638


107,667


Write-up of IRP inventory


-


-


-


2,749


Adjusted EBITDA plus acquisition costs

$

7,556


32,265


59,638


110,416


















 

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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