The North American Coal Corporation Announces Acquisition of Reed Companies
DALLAS, Aug. 31, 2012 /PRNewswire/ -- The North American Coal Corporation announced today that it acquired, through a wholly owned subsidiary, four related companies - Reed Minerals, Inc., Reed Hauling Inc., C&H Mining Company, Inc. and Reed Management, L.L.C. - from members of and entities controlled by the Reed family. These companies, which will be known as Reed Minerals, are based in Jasper, Alabama and are involved in the mining of bituminous coal.
The acquisition, which was funded using borrowings under North American Coal's existing credit facility, was completed for a preliminary purchase price of approximately $62.5 million, less certain amounts specified in the purchase agreement to complete the transaction on a "cash-free, debt-free" basis. The terms of the transaction also include an earn-out contingent on the average coal selling price received on the first 15 million tons of coal sold by North American Coal from the Reed Minerals operations. The earn-out payments will be paid quarterly and, if payable, will commence in the third quarter of 2012.
The acquired operations mine and market steam coal and mid-to-high volatile metallurgical coal for sale primarily into the power generation and steel markets. Steam coal is primarily sold to a cooperative association which provides fuel under a long-term contract with a significant U.S. utility. Metallurgical coal is sold to several customers. The acquired companies operate three mines on leased reserves in Central Alabama. For the year ended December 31, 2011, the Reed Minerals companies sold 0.9 million tons of coal and had revenue of approximately $86.0 million and net income of approximately $4.0 million. North American Coal expects the acquisition to be accretive to earnings immediately.
"The acquisition of the Reed family's mining business in Alabama provides North American Coal with an opportunity to expand our established surface mining business into bituminous coal markets," said Bob Benson, president and chief executive officer of North American Coal. "North American Coal has been looking for opportunities to grow. The Reed Minerals' coal reserves, established reputation and location offer us that opportunity. The eight-year steam coal sales contract provides a stable revenue, profit and cash flow base while we further develop a metallurgical coal business platform. We believe this combination will offer the company, its customers and its employees a number of substantial benefits, which we expect will lead to significant opportunities for future growth and profitability," Benson said.
About The North American Coal Corporation
The North American Coal Corporation mines and markets steam and metallurgical coal for use in power generation and steel production and provides selected value-added mining services for other natural resources companies. North American Coal is headquartered in Dallas, Texas and is a wholly owned subsidiary of NACCO Industries, Inc. (NYSE: NC).
Forward-looking Statements Disclaimer
The statements contained in the news release that are not historical facts are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements are made subject to certain risks and uncertainties, which could cause actual results to differ materially from those presented. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Neither The North American Coal Corporation nor NACCO undertake any obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof. Among the factors that could cause plans, actions and results to differ materially from current expectations are, without limitation: (1) the successful integration of the Reed Minerals acquisition, (2) changes in the demand for and market prices of metallurgical coal produced in the Reed Minerals' mines, (3) changes in tax laws or regulatory requirements, including changes in power plant emission regulations and health, safety or environmental legislation, (4) changes in costs related to geological conditions, repairs and maintenance, new equipment and replacement parts, fuel or other similar items, (5) regulatory actions, changes in mining permit requirements or delays in obtaining mining permits that could affect deliveries to customers, (6) weather conditions, extended power plant outages or other events that would change the level of customers' coal or limerock requirements, which would have an adverse effect on results of operations, (7) weather or equipment problems that could affect deliveries to customers, (8) changes in the power industry that would affect demand for North American Coal's reserves, (9) changes in the costs to reclaim current North American Coal mining areas, (10) costs to pursue and develop new mining opportunities, (11) the outcome of legal challenges to the regulatory approvals necessary to construct the Liberty Mine and the Ratcliffe Plant in Mississippi and (12) increased competition, including consolidation within the industry.
SOURCE The North American Coal Corporation