James River Coal Company Reports Third Quarter 2013 Operating Results -- Reduced Mining Costs in CAPP (Central Appalachia) From $87.15 in Q-3 2012 to $77.80 in Q-3 2013

-- In Response to Continued Weak Coal Markets; Idled Four Mines in CAPP on November 6th; Furloughed Approximately 200 Employees and Contractors

-- Completed Exchange Transactions in 2013, Which Reduced Principal Amount of Debt by $143 Million

-- Continuing to Evaluate Options to Strengthen the Balance Sheet and Improve Liquidity

-- Conference Call Slides Posted to Company Website

RICHMOND, Va., Nov. 7, 2013 /PRNewswire/ -- James River Coal Company (NASDAQ: JRCC),  today announced that it had net loss of $25.5 million or $0.73 per diluted share for the third quarter of 2013 and net loss of $15.0 million or $0.43 per diluted share for the nine months ended September 30, 2013.  Third quarter and the nine months ended September 30, 2013 results include $23.9 million or $0.68 per share and $125.1 million or $3.58 per share, respectively, of pre-tax gain related to the Exchange Transactions.  The 2013 results are compared to 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 and nine months ended September 30, 2012 results is a gain of $22.2 million from the repurchase of outstanding notes in open market purchases.

Peter T. Socha, Chairman and Chief Executive Officer commented: "The mines are doing great.  They have continued to exceed our expectations for both cost control and capital control.  They have done an incredible job of adjusting to the soft market conditions and the high levels of uncertainty and concern that surround the coal industry of Central Appalachia.  We have made another set of painful, but necessary, production adjustments this week.  This involved idling four additional mines in eastern Kentucky.  We are hopeful that these idlings can be reversed in the first half of 2014.  The coal markets have stabilized during the past several weeks.  Prices are still very low, but they are finally moving in a better direction.  Finally, we are making progress, but have not finished our project to deleverage our balance sheet and improve our liquidity."

FINANCIAL RESULTS

The following tables show selected operating results for the quarter and nine months ended September 30, 2013 compared to the quarter and nine months ended September 30, 2012 (in 000's except per ton amounts). 

Total Results


Three Months Ended September 30,


Nine Months Ended September 30,




2013


2012


2013


2012




Total


Per Ton


Total


Per Ton


Total


Per Ton


Total


Per Ton



















Company and contractor production (tons)

1,902




2,229




6,115




7,571



Coal purchased from other sources (tons)

287




631




993




1,428



Total coal available to ship (tons)

2,188




2,860




7,108




8,999





















Coal shipments (tons)


2,087




3,164




6,663




9,125



Coal sales revenue


$ 143,338


68.68


$ 264,633


83.64


$ 469,796


70.51


$ 804,024


88.11

Freight and handling revenue


6,824


3.27


23,469


7.42


33,822


5.08


63,421


6.95

Cost of coal sold


138,897


66.55


244,365


77.23


444,852


66.76


705,568


77.32

Freight and handling costs


6,824


3.27


23,469


7.42


33,822


5.08


63,421


6.95

Depreciation, depletion, & amortization

28,520


13.67


35,518


11.23


86,725


13.02


98,152


10.76

Gross profit (loss)


(24,079)


(11.54)


(15,250)


(4.82)


(61,781)


(9.27)


304


0.03

Selling, general & administrative


13,260


6.35


14,672


4.64


40,917


6.14


45,504


4.99



















Adjusted EBITDA (1)


$ (6,979)


(3.34)


$ 7,556


2.39


$ (10,122)


(1.52)


$ 59,638


6.54



















(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 revolving credit facility.







Segment Results


Three Months Ended September 30, 


Nine Months Ended September 30, 




2013


2012


2013

2012

CAPP


Total


Per Ton


Total


Per Ton


Total


Per Ton


Total


Per Ton



















Company and contractor production (tons)

1,312




1,607




4,340




5,784



Coal purchased from other sources (tons)

287




631




993




1,428



Total coal available to ship (tons)

1,599




2,238




5,333




7,212



Coal shipments (tons)

















     Steam (tons)


1,088




1,540




3,236




4,716



    Metallurgical (tons)


412




1,007




1,662




2,632



Total Shipments (tons)


1,500




2,547




4,898




7,348



Coal sales revenue

















     Steam


$      79,185


72.78


$    122,116


79.30


$    237,093


73.27


$    391,211


82.95

     Metallurgical


37,764


91.66


115,104


114.30


153,178


92.16


333,859


126.85

Total coal sales revenue


116,949


77.97


237,220


93.14


390,271


79.68


725,070


98.68

Freight and handling revenue


6,658


4.44


23,105


9.07


33,278


6.79


61,575


8.38

Cost of coal sold


$    116,703


77.80


$    221,961


87.15


$    378,730


77.32


$    638,266


86.86

Freight and handling costs


6,658


4.44


23,105


9.07


33,278


6.79


61,575


8.38








































Three Months Ended September 30, 


Nine Months Ended September 30, 




2013


2012


2013

2012

Midwest


Total


Per Ton


Total


Per Ton


Total


Per Ton


Total


Per Ton



















Company and contractor production (tons)

590




622




1,775




1,787



Coal purchased from other sources (tons)

-




-




-




-



Total coal available to ship (tons)

590




622




1,775




1,787



Coal shipments (tons)


587




617




1,765




1,777



Coal sales revenue


$      26,389


44.96


$      27,413


44.43


$      79,525


45.06


$      78,954


44.43

Freight and handling revenue


166


0.28


364


0.59


544


0.31


1,846


1.04

Cost of coal sold


$      22,194


37.81


$      22,404


36.31


$      66,122


37.46


$      67,302


37.87

Freight and handling costs


166


0.28


364


0.59


544


0.31


1,846


1.04

 

MARKET ADJUSTMENTS

Due to the continued weakness in the coal market, the Company idled coal production at its McCoy Elkhorn operations, Bledsoe Coal operations and Long Branch Surface operations.  Approximately 525 employees were originally furloughed, and on October 16, WARN notices were issued to a majority of those employees after determining that the date of re-opening these operations was unknown.  As a result of these actions, the Company anticipates paying approximately $5.8 million in severance related costs during the fourth quarter of 2013. 

On November 6, 2013, we idled two underground and two surface mines at our Buckeye complex.  Approximately 200 employees and contractors were furloughed.  We expect the Buckeye complex, which produced 1.0 million tons in the first nine months of 2013, to restart in 2014 depending on market conditions. 

SAFETY AWARDS

James River had two mines that were recognized by the Kentucky Office of Mine Safety and Licensing and the Kentucky Coal Association.   Bell County Coal Corporation's Garmeda #2 mine was selected to receive an Underground Safety Award in recognition of the best safety record in the Barbourville District Office.

James River Coal Service's Buckeye Surface Mine was selected to receive a Surface Safety Award in recognition of the best safety record in the Hazard District Office.

C.K. Lane, Chief Operating Officer Commented: "We are very proud of receiving these awards recognizing the hard work of our employees in making James River a safe place to work, especially in these difficult times in the coal industry."

LIQUIDITY AND CASH FLOW

As of September 30, 2013, the Company had available liquidity of $71.0 million calculated as follows (in millions):







Unrestricted Cash

$

60.2







Availability under the Revolver


75.5







Letters of Credit Issued under the Revolver


(64.7)
















Available Liquidity

$

71.0
















Restricted Cash

$

36.7

 

Other significant items impacting liquidity in the quarter:








Capital expenditures


$

(10.2)








Increase in accounts receivable



(13.5)








Increase in coal inventories



(7.4)








Interest payments



(0.9)








Increase in accounts payable



4.3

 

EXCHANGE TRANSACTIONS

In September 2013, the Company issued $19.3 million principal amount of 10.0% convertible senior notes due 2018 (the 10.0% Convertible Senior Notes) in exchange for $3.9 million principal amount of our 4.5% Convertible Senior Notes and $38.3 million principal amount of our 3.125% Convertible Senior Notes (the Public Exchange Transactions). The Public Exchange Transactions resulted in a gain of $23.9 million, which includes the write-off of $0.6 million of unamortized financing costs.  The Company recorded $1.0 million of financing costs associated with Public Exchange Transactions. 

In May 2013, the Company issued $123.3 million principal amount of 10.0% Convertible Senior Notes due 2018 (the 10.0% Convertible Senior Notes) in exchange for $90.0 million principal amount of our 4.5% Convertible Senior Notes due 2015 and $153.4 million principal amount of our 3.125% Convertible Senior Notes due 2018 (the Private Exchange Transactions). The Private Exchange Transactions resulted in a gain of $101.2 million, which includes the write-off of $3.6 million of unamortized financing costs.  The Company recorded $4.8 million of financing costs associated with the issuance of the 10.0% Convertible Senior Notes. 

Upon completion of the Public and Private Exchange Transactions the Company has $142.6 million principal amount of the 10% Convertible Senior Notes Outstanding, $47.3 million principal amount of the 4.5% Convertible Senior Notes Outstanding, and  $13.3 million principal amount of the 3.125% Convertible Senior Notes Outstanding.

SALES POSITION AND MARKET COMMENTS

As of November 6, 2013, we had the following agreements to ship coal at a fixed and known price (in 000's except per ton amounts):


2014 Priced


As of August 8, 2013

As of November 6, 2013

Change


Tons

Avg Price

Per Ton

Tons

Avg Price

Per Ton

Tons

Avg Price

Per Ton

CAPP

300

$       75.75

1,048

$             72.11

748

$            70.65

Midwest (1)

900

$       47.64

1,850

$             44.86

950

$            42.23








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

 

CONFERENCE CALL, WEBCAST AND REPLAY:  The Company will hold a conference call with management to discuss the quarterly earnings November 7, 2013 at 10:00 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. 

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 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.



CONTACT:

James River Coal Company


Elizabeth M. Cook


Director of Investor Relations


(804) 780-3000



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 ability to consummate financing transactions, including transactions to increase liquidity, or acquisition, or disposition transactions, and the effect thereof on our business; 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, including competition from alternative sources such as natural gas; 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, 2013


December 31, 2012







Assets


(unaudited)



Current assets:








Cash and cash equivalents

$

60,207


127,386


Trade receivables



52,209


89,816


Inventories:









Coal





62,247


26,598



Materials and supplies


15,863


16,699





Total inventories


78,110


43,297


Prepaid royalties



8,501


8,623


Other current assets


7,775


9,127





Total current assets


206,802


278,249

Property, plant, and equipment, net


790,698


855,217

Restricted cash and short term investments 


36,681


36,558

Other assets





31,859


34,097






Total assets

$

1,066,040


1,204,121


















Liabilities and Shareholders' Equity 





Current liabilities:








Accounts payable


$

53,849


72,861


Accrued salaries, wages, and employee benefits


12,085


10,996


Workers' compensation benefits


9,900


9,900


Black lung benefits



2,508


2,508


Accrued taxes



10,202


8,382


Other current liabilities


28,342


22,124





Total current liabilities


116,886


126,771

Long-term debt, less current maturities 


425,379


546,407

Other liabilities:








Noncurrent portion of workers' compensation benefits


68,500


66,953


Noncurrent portion of black lung benefits


64,360


62,834


Pension obligations



32,617


35,325


Asset retirement obligations


101,178


99,177


Other






9,778


12,027





Total other liabilities


276,433


276,316






Total liabilities


818,698


949,494

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







36,060,869 and 35,866,549 shares as of September 30, 2013 and December 31, 2012


361


359


Paid-in-capital




549,333


546,289


Accumulated deficit



(251,587)


(236,588)


Accumulated other comprehensive loss


(50,765)


(55,433)






Total shareholders' equity


247,342


254,627






Total liabilities and shareholders' equity 

$

1,066,040


1,204,121

 

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,









2013


2012


2013


2012

Revenues














Coal sales revenue


$

143,338


264,633


469,796


804,024


Freight and handling revenue


6,824


23,469


33,822


63,421




Total revenue


150,162


288,102


503,618


867,445

Cost of sales:













Cost of coal sold



138,897


244,365


444,852


705,568


Freight and handling costs


6,824


23,469


33,822


63,421


Depreciation, depletion, and amortization


28,520


35,518


86,725


98,152




Total cost of sales


174,241


303,352


565,399


867,141




Gross profit  (loss)


(24,079)


(15,250)


(61,781)


304

Selling, general and administrative expenses


13,260


14,672


40,917


45,504




Total operating loss


(37,339)


(29,922)


(102,698)


(45,200)

Interest expense




12,058


13,200


36,940


40,112

Interest income





(88)


(217)


(373)


(602)

Gain on debt transactions 


(23,889)


(22,231)


(125,099)


(22,231)

Miscellaneous income, net


(98)


(147)


(331)


(580)




Total other (income) expense, net


(12,017)


(9,395)


(88,863)


16,699




Net loss before income taxes


(25,322)


(20,527)


(13,835)


(61,899)

Income tax expense 




190


25


1,164


75

Net loss





$

(25,512)


(20,552)


(14,999)


(61,974)

Earnings (loss) per common share 










Basic earnings (loss) per common share

$

(0.73)


(0.59)


(0.43)


(1.78)


Diluted earnings (loss) per common share

$

(0.73)


(0.59)


(0.43)


(1.78)

 

JAMES RIVER COAL COMPANY AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)













Nine Months Ended September 30,












2013


2012

Cash flows from operating activities:







Net loss







$

(14,999)


(61,974)


Adjustments to reconcile net (loss) to net cash provided by (used in) operating activities







Depreciation, depletion, and amortization 


86,725


98,152



Accretion of asset retirement obligations


3,355


3,948



Amortization of debt discount and issue costs


10,180


12,914



Stock-based compensation



3,406


3,808



Gain on sale or disposal of property, plant and equipment


(52)


(121)



Gain on debt transactions



(125,099)


(22,231)



Changes in operating assets and liabilities:








Receivables



37,607


12,239




Inventories



(29,662)


16,084




Prepaid royalties and other current assets


1,474


(760)




Restricted cash



(123)


(114)




Other assets



1,855


5,202




Accounts payable



(19,012)


(34,802)




Accrued salaries, wages, and employee benefits


1,089


2,308




Accrued taxes



1,460


(1,256)




Other current liabilities



5,956


(1,014)




Workers' compensation benefits


1,547


3,389




Black lung benefits



3,136


3,596




Pension obligations



350


(153)




Asset retirement obligations


(1,208)


(495)




Other liabilities



(6)


(224)





Net cash provided by (used in) operating activities


(32,021)


38,496

Cash flows from investing activities:







Additions to property, plant, and equipment


(29,866)


(66,466)


Proceeds from sale of property, plant and equipment


475


610





Net cash used in investing activities


(29,391)


(65,856)

Cash flows from financing activities:







Repayment of long-term debt



(33)


(20,916)


Debt issuance costs





(5,734)


-





Net cash used in financing activities


(5,767)


(20,916)





Decrease in cash and cash equivalents


(67,179)


(48,276)

Cash and cash equivalents at beginning of period


127,386


199,711

Cash and cash equivalents at end of period


$

60,207


151,435

 

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. We believe that Adjusted EBITDA presents a useful measure of our ability to service and incur debt on an ongoing basis.


EBITDA and Adjusted EBITDA 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 and Adjusted EBITDA, 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


Nine Months Ended









September 30


September 30


September 30


September 30









2013


2012


2013


2012
















Net income (loss)



$

(25,512)


(20,552)


(14,999)


(61,974)

Income tax expense 




190


25


1,164


75

Interest expense 




12,058


13,200


36,940


40,112

Interest income





(88)


(217)


(373)


(602)

Depreciation, depletion, and amortization


28,520


35,518


86,725


98,152

EBITDA (before adjustments)

$

15,168


27,974


109,457


75,763

Other adjustments specified 









     in our current debt agreement









     Gain on debt transactions


(23,889)


(22,231)


(125,099)


(22,231)

     Other 






1,742


1,813


3,406


6,106

Adjusted EBITDA



$

(6,979)


7,556


(12,236)


59,638

 

 

SOURCE James River Coal Company



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