James River Coal Company Reports Fourth Quarter and Full Year 2010 Operating Results

Mar 06, 2011, 18:00 ET from James River Coal Company

RICHMOND, Va., March 6, 2011 /PRNewswire/ --

  • Earnings Per Share of $0.93 in Q-4 2010 Compared with Net Loss of $0.12 Per Share in Q-4 2009
  • 2010 Earnings Per Share of $2.82 Compared with $1.85 in 2009
  • Net Income of  $78.2 Million in 2010 Compared with $51.0 Million in 2009
  • Cash Margin in Central Appalachia (CAPP) of $27.09 Per Ton in 2010
  • Met Mines are Producing as Expected; All Future Met Production is Currently Unpriced
  • Conference Call Slides Posted to the Company Website

James River Coal Company (Nasdaq: JRCC), a producer of steam and industrial-grade coal, today announced that it had net income of $78.2 million or $2.82 per fully diluted share for the year ended December 31, 2010 and net income of  $25.9 million or $0.93 per fully diluted share for the fourth quarter of 2010.  Included in the fourth quarter 2010 is an income tax benefit related to the reversal of the deferred income tax valuation allowance of $22.1 million, or $0.79 per fully diluted share in the fourth quarter and a $0.80 per fully diluted share for the year.  This is compared to net income of $51.0 million or $1.85 per fully diluted share for the year ended December 31, 2009 and net loss of $3.2 million or $0.12 per fully diluted share for the fourth quarter of 2009.

Peter T. Socha, Chairman and Chief Executive Officer, commented: "This was another very profitable year for James River Coal Company.  We are particularly pleased that we have been able to generate these profits during a soft coal market and a general economic recession.  We are now seeing clear signs of an improving coal market and an improving economy.  We have invested in our Company during the downturn, and are looking forward to seeing the benefit of these investments during the months and years to come."

ANNUAL RESULTS

The following tables show selected operating results for the year ended December 31, 2010 compared to the year ended December 31, 2009 (in 000's except per ton amounts).  

Total Results

Year Ended December 31,

2010

2009

Total

Per Ton

Total

Per Ton

Company and contractor production (tons)

8,782

9,770

Coal purchased from other sources (tons)

128

107

Total coal available to ship (tons)

8,910

9,877

Coal shipments (tons)

8,919

9,623

Coal sales revenue

$      701,116

78.61

$      681,558

70.83

Cost of coal sold

514,515

57.69

508,888

52.88

Depreciation, depletion, & amortization

64,368

7.22

62,078

6.45

Gross profit

122,233

13.70

110,592

11.49

Selling, general & administrative

38,347

4.30

39,720

4.13

Adjusted EBITDA (1)

$      156,628

17.56

$      146,099

15.18

(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 senior secured credit facilities.

Segment Results

Year Ended December 31,

2010

2009

CAPP

Midwest

CAPP

Midwest

Company and Contractor Production (tons)

5,962

2,820

6,643

3,127

Coal purchased from other sources (tons)

128

-

107

-

Total coal available to ship (tons)

6,090

2,820

6,750

3,127

Coal shipments (tons)

6,109

2,810

6,525

3,098

Coal sales revenue

$      585,064

116,052

$      579,108

102,450

Average sales price per ton

95.77

41.30

88.75

33.07

Cost of coal sold

$      419,564

94,951

$      416,721

92,167

Cost of coal sold per ton

68.68

33.79

63.87

29.75

QUARTERLY RESULTS

The following tables show selected operating results for the quarter ended December 31, 2010 compared to the quarter ended December 31, 2009 (in 000's except per ton amounts).  

Total Results

Three Months Ended December 31,

2010

2009

Total

Per Ton

Total

Per Ton

Company and contractor production (tons)

2,085

2,027

Coal purchased from other sources (tons)

74

28

Total coal available to ship (tons)

2,159

2,055

Coal shipments (tons)

2,069

2,146

Coal Sales Revenue

$      162,050

78.32

$      149,468

69.65

Cost of coal sold

126,254

61.02

120,099

55.96

Depreciation, depletion, & amortization

16,087

7.78

16,111

7.51

Gross profit

19,709

9.53

13,258

6.18

Selling, general & administrative

9,400

4.54

9,608

4.48

Adjusted EBITDA (1)

$        28,479

13.76

$        22,700

10.58

(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 senior secured credit facilities.

Segment Results

Three Months Ended December 31,

2010

2009

CAPP

Midwest

CAPP

Midwest

Company and Contractor production (tons)

1,372

713

1,319

708

Coal purchased from other sources (tons)

74

-

28

-

Total coal available to ship (tons)

1,446

713

1,347

708

Coal Shipments (tons)

1,362

707

1,433

713

Coal sales revenue

$     133,465

28,585

$     125,249

24,219

Average sales price per ton

97.99

40.43

87.40

33.97

Cost of coal sold

$     102,345

23,909

$       97,339

22,760

Cost of coal sold per ton

75.14

33.82

67.93

31.92

LIQUIDITY AND CASH FLOW

As of December 31, 2010, the Company had available liquidity of $186.6 million calculated as follows (in millions):

Unrestricted Cash

$                    180.4

Availability under revolver

65.0

Letters of Credit Issued under the Revolver

(58.8)

Available Liquidity

$                    186.6

Capital Expenditures for the fourth quarter were $35.7 million and $95.4 million for twelve months ended December 31, 2010.  Capital Expenditures for the fourth quarter included approximately $15.5 million for growth projects and compliance with MSHA safety mandates.

SALES POSITION

As of February 24, 2011, we had the following priced sales position:

2011 Priced

As of November 2, 2010

As of February 24, 2011

Change

Tons

Avg Price Per Ton

Tons

Avg Price Per Ton

Tons

Avg Price Per Ton

CAPP

4,344

$   100.15

5,117

$     97.01

773

$   79.36

Midwest (1)

2,496

$     43.23

2,609

$     42.84

113

$   34.23

2012 Priced

As of November 2, 2010

As of February 24, 2011

Change

Tons

Avg Price Per Ton

Tons

Avg Price Per Ton

Tons

Avg Price Per Ton

CAPP

350

$   108.31

350

$   108.31

-

$        -

Midwest (1)

1,560

$     43.42

1,560

$     43.42

-

$        -

2013 Priced

As of November 2, 2010

As of February 24, 2011

Change

Tons

Avg Price Per Ton

Tons

Avg Price Per Ton

Tons

Avg Price Per Ton

CAPP

-

$          -

-

$          -

-

$        -

Midwest (1)

990

$     44.10

990

$     44.10

-

$        -

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

GUIDANCE

The Company intends to issue 2011 guidance following the closing of the pending acquisition of International Resource Partners and Logan and Kanawha.

CONFERENCE CALL, WEBCAST AND REPLAY:  The Company will hold a conference call with management to discuss the fourth quarter earnings on March 7, 2011 at 9:00 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 800-642-1687 for domestic callers.  International callers, please dial 706-645-9291: pass code 49584534.

James River Coal Company mines, processes and sells bituminous steam and industrial-grade coal primarily to electric utility companies and industrial customers.  The Company's mining operations are managed through six operating subsidiaries located throughout eastern Kentucky and in southern Indiana.

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 contract mine production, costs market improvements, and industry demand.  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: a change in the demand for coal by electric utility customers, as well as the perceived benefits of alternative sources of energy; the loss of one or more of our largest customers; inability to secure new coal supply agreements or to extend existing coal supply agreements at market prices; our dependency on one railroad for transportation of a large percentage of our products; failure to exploit additional coal reserves; the risk that reserve estimates and pension and post-retirement benefit liabilities are inaccurate; failure to diversify our operations; increased capital expenditures; encountering difficult mining conditions; inherent complexities associated with mining in Central Appalachia including special dangers and risks of underground mining; increased costs of complying with mine health and safety regulations; bottlenecks or other difficulties in transporting coal to our customers; delays in the development of new mining projects; increased costs of raw materials; the effects of litigation, regulation, permits and competition; lack of availability of financing sources; our compliance with debt covenants; the risk that we are unable to successfully integrate acquired assets into our business; 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)

December 31, 2010

December 31, 2009

Assets

Current assets:

Cash and cash equivalents

$

180,376

107,931

Trade receivables

59,970

43,289

Inventories:

Coal

23,305

22,727

Materials and supplies

13,690

10,462

Total inventories

36,995

33,189

Prepaid royalties

6,039

6,045

Other current assets

5,991

3,552

Total current assets

289,371

194,006

Property, plant, and equipment, at cost:

Land

7,751

7,194

Mineral rights

231,681

231,919

Buildings, machinery and equipment

423,617

362,654

Mine development costs

48,301

41,069

Total property, plant, and equipment

711,350

642,836

Less accumulated depreciation, depletion, and amortization

325,698

288,748

Property, plant and equipment, net

385,652

354,088

Goodwill

26,492

26,492

Restricted cash and short term investments

23,500

62,042

Other assets

59,554

32,684

Total assets

$

784,569

669,312

JAMES RIVER COAL COMPANY

AND SUBSIDIARIES

Consolidated Balance Sheets

(in thousands, except share data)

December 31, 2010

December 31, 2009

Liabilities and Shareholders' Equity

Current liabilities:

Accounts payable

$

57,300

46,472

Accrued salaries, wages, and employee benefits

7,744

6,982

Workers' compensation benefits

9,000

8,950

Black lung benefits

2,282

1,782

Accrued taxes

4,924

4,383

Other current liabilities

16,496

15,439

Total current liabilities

97,746

84,008

Long-term debt, less current maturities

284,022

278,268

Other liabilities:

Noncurrent portion of workers' compensation benefits

55,944

50,385

Noncurrent portion of black lung benefits

43,443

31,017

Pension obligations

11,968

14,827

Asset retirement obligations

43,398

39,843

Other

665

622

Total other liabilities

155,418

136,694

Total liabilities

537,186

498,970

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 27,779,351 and 27,544,878 shares

as of December 31, 2010 and 2009, respectively

278

275

Paid-in-capital

324,705

320,079

Accumulated deficit

(58,593)

(136,758)

Accumulated other comprehensive loss

(19,007)

(13,254)

Total shareholders' equity

247,383

170,342

Total liabilities and shareholders' equity

$

784,569

669,312

JAMES RIVER COAL COMPANY

AND SUBSIDIARIES

Consolidated Statements of Operations

(in thousands, except per share data)

Year

Year

Year

Ended

Ended

Ended

December 31,

December 31,

December 31,

2010

2009

2008

Revenues

$

701,116

681,558

568,507

Cost of sales:

Cost of coal sold

514,515

508,888

527,888

Depreciation, depletion, and amortization

64,368

62,078

70,277

Total cost of sales

578,883

570,966

598,165

Gross profit (loss)

122,233

110,592

(29,658)

Selling, general, and administrative expenses

38,347

39,720

34,992

Total operating income (loss)

83,886

70,872

(64,650)

Interest expense

29,943

17,057

17,746

Interest income

(683)

(60)

(469)

Charges associated with repayment and amendment of debt

-

1,643

15,618

Miscellaneous expense (income), net

27

(281)

(1,279)

Total other expenses, net

29,287

18,359

31,616

Income (loss) before income taxes

54,599

52,513

(96,266)

Income tax expense (benefit)

(23,566)

1,559

(273)

Net income (loss)

$

78,165

50,954

(95,993)

Income (loss) per common share

Basic income (loss) per common share

$

2.82

1.85

(3.91)

Diluted income (loss) per common share

$

2.82

1.85

(3.91)

JAMES RIVER COAL COMPANY

AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(in thousands)

Year

Year

Year

Ended

Ended

Ended

December 31,

December 31,

December 31,

2010

2009

2008

Cash flows from operating activities:

Net income (loss)

$

78,165

50,954

(95,993)

Adjustments to reconcile net income (loss) to net cash

provided by operating activities

Depreciation, depletion, and amortization

of property, plant, and equipment

64,368

62,078

70,277

Accretion of asset retirement obligations

3,334

3,212

2,768

Amortization of debt discount and issue costs

8,066

1,813

1,411

Stock-based compensation

5,400

5,967

5,130

Deferred income tax benefit

(22,236)

180

4

Loss (gain) on sale or disposal of property, plant, and equipment

307

(61)

(163)

Write-off of deferred financing costs

-

-

2,383

Changes in operating assets and liabilities:

Receivables

(16,681)

(9,988)

7,745

Inventories

(3,680)

(15,025)

(2,236)

Prepaid royalties and other current assets

(2,433)

(1,440)

100

Restricted cash and short term investments

38,542

(56,820)

(5,222)

Other assets

(2,060)

(4,233)

(4,403)

Accounts payable

10,828

(10,596)

9,762

Accrued salaries, wages, and employee benefits

762

340

632

Accrued taxes

(303)

(1,787)

(2,251)

Other current liabilities

1,066

(3,626)

8,702

Workers' compensation benefits

5,609

3,558

2,185

Black lung benefits

3,018

1,657

538

Pension obligations

(2,244)

2,144

(1,395)

Asset retirement obligations

(809)

(861)

(1,082)

Other liabilities

43

93

(468)

Net cash provided by (used in) operating activities

169,062

27,559

(1,576)

Cash flows from investing activities:

Additions to property, plant, and equipment

(95,426)

(72,159)

(74,697)

Proceeds from sale of property, plant and equipment

82

149

1,108

Net cash used in investing activities

(95,344)

(72,010)

(73,589)

Cash flows from financing activities:

Proceeds from issuance of long-term debt

-

172,500

-

Repayment of long-term debt

-

-

(38,800)

Proceeds from Revolver

-

12,500

26,500

Repayments of Revolver

-

(30,500)

(8,500)

Net proceeds from issuance of common stock

-

-

93,820

Debt issuance costs

(1,346)

(5,517)

(486)

Proceeds from exercise of stock options

73

75

542

Net cash provided by (used in) financing activities

(1,273)

149,058

73,076

Increase (decrease) in cash and cash equivalents

72,445

104,607

(2,089)

Cash and cash equivalents at beginning of period

107,931

3,324

5,413

Cash and cash equivalents at end of period

$

180,376

107,931

3,324

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 the amount used in several of the covenants in our revolving credit facility.  Adjusted EBITDA is defined as EBITDA further adjusted for certain cash and non-cash charges.  Adjusted EBITDA is used to determine compliance with financial covenants and our ability to engage in certain activities such as incurring additional debt and making certain payments.

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 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 and cash margin per ton may not be comparable to other similarly titled measures of other companies.  Additionally, EBITDA, Adjusted EBITDA or 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.  The following table reconciles Net Income to EBITDA and Adjusted EBITDA:

Three Months Ended

Twelve Months Ended

December 31

December 31

December 31

December 31

2010

2009

2010

2009

Net income

$

25,870

(3,203)

78,165

50,954

Income tax expense (benefit)

(22,892)

42

(23,566)

1,559

Interest expense

7,516

5,267

29,943

17,057

Interest income

(83)

(5)

(683)

(60)

Depreciation, depletion, and amortization

16,087

16,111

64,368

62,078

EBITDA (before adjustments)

$

26,498

18,212

148,227

131,588

Other adjustments specified

in our current debt agreement:

1,981

4,488

8,401

14,511

Adjusted EBITDA

$

28,479

22,700

156,628

146,099

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/