James River Coal Company Reports First Quarter 2012 Operating Results

-- Adjusted EBITDA of $29.7 Million; Capital Expenditures of $22.9 Million; Cash Interest Payments of $3.6 Million

-- Withdrawing Guidance for 2012 Capital Expenditures of $125 Million

-- Maintaining a Strong Balance Sheet With Available Liquidity of $208.5 Million

-- Reached Agreements to Ship 701,000 Tons of Thermal/Industrial and Metallurgical Coal in 2012 at an Average Sales Price of $100.02

-- Total Shipments of 3.1 Million Tons With a Cash Margin of $14.05 per ton

-- Conference Call Slides Posted to the Company Website

News provided by

James River Coal Company

May 03, 2012, 06:55 ET

RICHMOND, Va., May 3, 2012 /PRNewswire/ -- James River Coal Company (NASDAQ: JRCC), today announced that it had net loss of $15.7 million or $0.45 per fully diluted share for the first quarter of 2012.    This is compared to net loss of $7.6 million or $0.28 per fully diluted share for the first quarter of 2011.

Peter T. Socha, Chairman and Chief Executive Officer commented: "We are very pleased with the way that our entire organization has responded to an extremely weak coal market.  Our operations team has made a number of changes to our mine portfolio to both control our cash costs and preserve capital.  Our sales and trading teams have spent a great deal of time understanding the needs of our customer base and selectively adding new contract opportunities.  We want to thank both our customers and our employees for their assistance in helping us during these challenging times in the world coal markets."

QUARTERLY RESULTS

The following tables show selected operating results for the quarter ended March 31, 2012 compared to the quarter ended March 31, 2011 (in 000's except per ton amounts). 

Total Results

Three Months Ended March 31, 



2012

2011



Total

Per Ton

Total

Per Ton











Company and contractor production (tons)

2,803


2,123


Coal purchased from other sources (tons)

362


46


Total coal available to ship (tons)

3,165


2,169


Coal shipments (tons)

3,051


2,073


Coal sales revenue

$         279,763

91.70

$      163,855

79.04

Freight and handling revenue

22,222

7.28

727

0.35











Cost of coal sold

236,889

77.64

132,819

64.07

Freight and handling costs

22,222

7.28

727

0.35











Depreciation, depletion, & amortization

30,120

9.87

16,035

7.74

Gross profit 

12,754

4.18

15,001

7.24

Selling, general & administrative 

15,566

5.10

9,370

4.52

Acquisition costs

-

-

4,645

2.24











Adjusted EBITDA plus acquisition costs (1)

$           29,737

9.75

$        23,702

11.43











(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 March 31, 

2012

2011

CAPP

Total

Per Ton

Total

Per Ton









Company and contractor production (tons)

2,244



1,455

Coal purchased from other sources (tons)

362



46

Total coal available to ship (tons)

2,606



1,501

Coal shipments (tons)








     Steam (tons)

1,764



1,415

    Metallurgical (tons)

728



-

Total Shipments (tons)

2,492



1,415

Coal sales revenue








     Steam

$     151,866

86.09

$     137,586

97.23

     Metallurgical

103,174

141.72

-

-

Total coal sales revenue

255,040

102.34

137,586

97.23

Freight and handling revenue

21,044

8.44

-

-

Cost of coal sold

$     213,829

85.81

$     108,699

76.82

Freight and handling costs

21,044

8.44

-

-























Three Months Ended March 31, 

2012

2011

Midwest

Total

Per Ton

Total

Per Ton









Company and contractor production (tons)

559



668

Coal purchased from other sources (tons)

-



-

Total coal available to ship (tons)

559



668

Coal shipments (tons)








     Steam (tons)

559



658

    Metallurgical (tons)

-



-

Total Shipments (tons)

559



658

Coal sales revenue








     Steam

$       24,723

44.23

$       26,269

39.92

     Metallurgical

-

-

-

-

Total coal sales revenue

24,723

44.23

26,269

39.92

Freight and handling revenue

1,178

2.11

727

1.10

Cost of coal sold

$       23,060

41.25

$       24,120

36.66

Freight and handling costs

1,178

2.11

727

1.10

C.K. Lane, Chief Operating Officer commented: "We are working very hard at controlling our costs and conserving capital in this very volatile market.  In particular, we were pleased to have both reduced our capital expenditures below expected levels and maintained our cash costs at the CAPP thermal and met mines within historical levels."

LIQUIDITY

As of March 31, 2012, the Company had available liquidity of $208.5 million calculated as follows (in millions):

Unrestricted Cash (1)

$

169.4




Availability under the Revolver

100.0




Letters of Credit issued under the Revolver

(60.9)












Available Liquidity

$

208.5












Restricted Cash and short term investments

$

29.6












(1) Unrestricted cash does not include $19.4 million of accounts receivable that were collected in the ordinary

      course on April 2, 2012.  The collection of this receivable did not reduce the Company's availability under the revolver.

Capital Expenditures for the first quarter of 2012 were $22.9 million.


SALES POSITION AND MARKET COMMENTS

As of May 2, 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 February 29, 2012

As of May 2, 2012

Change


Tons

Avg Price Per
Ton

Tons

Avg Price
Per Ton

Tons

Avg Price Per
Ton

CAPP  (1)

7,917

$       94.37

8,618

$       94.83

701

$     100.02

Midwest (2)

2,776

$       44.16

2,776

$       44.16

-

$             -











2013 Priced


As of February 29, 2012

As of May 2, 2012

Change


Tons

Avg Price Per
Ton

Tons

Avg Price
Per Ton

Tons

Avg Price Per
Ton

CAPP

1,337

$       80.45

1,337

$       80.45

-

$             -

Midwest (2)

2,140

$       45.35

2,140

$       45.35

-

$             -











2014 Priced


As of February 29, 2012

As of May 2, 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 (2)

700

$       49.00

700

$       49.00

-

$             -










(1)      Priced tons in CAPP do not include approximately 600,000 tons of met coal that has been sold but not yet priced.

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

GUIDANCE

Due to unusual volatility in the coal markets and changes to our operating structure, the Company is withdrawing guidance for 2012 Capital Expenditures of $125 million.

CONFERENCE CALL, WEBCAST AND REPLAY:  The Company will hold a conference call with management to discuss the first quarter earnings May 3, 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 72023497.

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 http://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)










March 31, 2012

December 31, 2011

Assets

(unaudited)

Current assets:




Cash and cash equivalents

$

169,385

199,711

Trade receivables

108,620

107,557

Inventories:





Coal

57,298

52,717

Materials and supplies

18,047

17,800

Total inventories

75,345

70,517

Prepaid royalties

8,692

8,465

Other current assets

8,442

11,461

Total current assets

370,484

397,711

Property, plant, and equipment, net

900,094

909,294

Goodwill

26,492

26,492

Restricted cash and short term investments 

29,579

29,510

Other assets

41,842

41,575

Total assets

$

1,368,491

1,404,582




Liabilities and Shareholders' Equity 



Current liabilities:




Accounts payable

$

78,999

110,557

Accrued salaries, wages, and employee benefits

11,026

12,996

Workers' compensation benefits

9,200

9,200

Black lung benefits

2,512

2,512

Accrued taxes

8,624

7,563

Other current liabilities

29,860

27,861

Total current liabilities

140,221

170,689

Long-term debt, less current maturities 

585,804

582,193

Other liabilities:




Noncurrent portion of workers' compensation benefits

62,163

60,721

Noncurrent portion of black lung benefits

57,000

56,152

Pension obligations

28,436

29,121

Asset retirement obligations

97,273

94,654

Other

14,021

14,390

Total other liabilities

258,893

255,038

Total liabilities

984,918

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




35,982,605 and 35,671,953 shares as of March 31, 2012 and December 31, 2011

360

357

Paid-in-capital

542,707

541,362

Accumulated deficit

(113,341)

(97,682)

Accumulated other comprehensive loss

(46,153)

(47,375)

Total shareholders' equity

383,573

396,662

Total liabilities and shareholders' equity 

$

1,368,491

1,404,582


JAMES RIVER COAL COMPANY

AND SUBSIDIARIES

Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)





Three Months

Three Months

Ended

Ended

March 31, 2012

March 31, 2011

Revenues




Coal sales revenue

$

279,763

163,855

Freight and handling revenue

22,222

727

Total revenue

301,985

164,582

Cost of sales:




Cost of coal sold

236,889

132,819

Freight and handling costs

22,222

727

Depreciation, depletion and amortization

30,120

16,035

Total cost of sales

289,231

149,581

Gross profit 

12,754

15,001

Selling, general and administrative expenses

15,566

9,370

Acquisition costs

-

4,645

Total operating income (loss)

(2,812)

986

Interest expense

13,385

7,851

Interest income

(214)

(55)

Miscellaneous income, net

(343)

(121)

Total other expense, net

12,828

7,675

Loss before income taxes

(15,640)

(6,689)

Income tax expense

19

915

Net loss

$

(15,659)

(7,604)

Earnings (loss) per common share 




Basic earnings (loss) per common share

$

(0.45)

(0.28)

Diluted earnings (loss) per common share

$

(0.45)

(0.28)

JAMES RIVER COAL COMPANY

AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)























Three Months

Three Months









Ended

Ended









March 31,

March 31,









2012

2011

Cash flows from operating activities:





Net loss





$

(15,659)

(7,604)

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




Depreciation, depletion, and amortization 

30,120

16,035

Accretion of asset retirement obligations

1,307

801

Amortization of debt discount and issue costs

4,277

2,119

Stock-based compensation

1,348

1,178

Deferred income tax benefit

-

944

Gain on sale or disposal of property, plant and equipment

(126)

-

Changes in operating assets and liabilities:








Receivables

(1,063)

11,528



Inventories

(1,940)

(11,077)



Prepaid royalties and other current assets

4,269

244



Restricted cash

(69)

-



Other assets

(947)

1,323



Accounts payable

(31,558)

(11,118)



Accrued salaries, wages, and employee benefits

(1,970)

7



Accrued taxes

(416)

1,023



Other current liabilities

1,930

3,808



Workers' compensation benefits

1,442

1,062



Black lung benefits

1,234

1,043



Pension obligations

151

(764)



Asset retirement obligations

(218)

(460)



Other liabilities

(79)

(19)




Net cash provided by (used in) operating activities

(7,967)

10,073

Cash flows from investing activities:





Additions to property, plant, and equipment

(22,885)

(20,094)

Proceeds from sale of property, plant and equipment

526

-




Net cash used in investing activities

(22,359)

(20,094)

Cash flows from financing activities:





Proceeds from issuance of long-term debt

-

505,000

Proceeds of Senior Notes held in escrow

-

(278,860)

Net proceeds from issuance of common stock

-

170,610

Debt issuance costs



-

(13,768)




Net cash provided by financing activities

-

382,982




Increase (decrease) in cash

(30,326)

372,961

Cash and cash equivalents at beginning of period

199,711

180,376

Cash and cash equivalents at end of period

$

169,385

553,337

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 costs presents a useful measure of our ability to service and incur debt on an ongoing basis. 

Cash margin per ton is calculated as coal sales revenue per ton less cost of coal sold per ton.  Although cash margin per ton is not a measure of performance calculated in accordance with GAAP, management believes that it is useful to an investor because it is widely used in the coal industry as a measure to evaluate a company's profitability from tons sold.

EBITDA, Adjusted EBITDA, Adjusted EBITDA plus acquisition costs, and cash margin per ton 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, and cash margin per ton may not be comparable to other similarly titled measures of other companies.  Additionally, EBITDA, Adjusted EBITDA, Adjusted EBITDA plus acquisition costs, and cash margin per ton 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






March 31

March 31






2012

2011









Net loss



$

(15,659)

(7,604)

Income tax expense 


19

915

Interest expense 


13,385

7,851

Interest income



(214)

(55)

Depreciation, depletion, and amortization

30,120

16,035

EBITDA (before adjustments)

$

27,651

17,142

Other adjustments specified




in our current debt agreement:




Other




2,086

1,915

Adjusted EBITDA

$

29,737

19,057

Acquisition costs


-

4,645

Adjusted EBITDA plus acquisition costs

$

29,737

23,702

CONTACT:

James River Coal Company

Elizabeth M. Cook


Director of Investor Relations

(804) 780-3000

SOURCE James River Coal Company