James River Coal Company Reports Second Quarter 2011 Operating Results

Aug 09, 2011, 06:55 ET from James River Coal Company

RICHMOND, Va., Aug. 9, 2011 /PRNewswire/ --

  • Earnings Per Share of $0.31 for the Second Quarter, Before Acquisition and Recapitalization Expenses

  • Adjusted EBITDA plus acquisition costs of $54.4 Million for the Second Quarter

  • Conference Call Slides Posted to Company Website

James River Coal Company (NASDAQ: JRCC),  today announced that it had net income of $0.8 million or $0.02 per diluted share for the second quarter of 2011 and net loss of $6.8 million or $0.22 per diluted share for the six months ended June 30, 2011. Second quarter and the six months ended June 30, 2011 results include $10.4 million or $0.29 per share and $14.4 million or $0.47 per share, respectively, of after tax charges related to the International Resource Partners LP (IRP)acquisition and refinancing of our debt.   The 2011 results are compared to net income of $19.9 million or $0.71 per diluted share for the second quarter of 2010 and net income of $43.1 million or $1.56 per diluted share for the six months ended June 30, 2010.

Peter T. Socha, Chairman and Chief Executive Officer commented: "We are very pleased with our progress this quarter.  We completed the acquisition of International Resource Partners LP and its subsidiary Logan & Kanawha in mid-April.  The integration of these acquisitions has gone very well.  We also successfully managed several positive changes to our balance sheet.  The mines had a better quarter and are continuing to adjust to several regulatory changes.  Lastly, we are beginning to see much more sales and contracting activity in both Central Appalachia and the Midwest."

FINANCIAL RESULTS

The following tables show selected operating results for the quarter and six months ended June 30, 2011 compared to the quarter and six months ended June 30, 2010 (in 000's except per ton amounts).  

Total Results

Three Months Ended June 30,

Six Months Ended June 30,

2011

2010

2011

2010

Total

Total

Total

Total

Company and contractor production (tons)

2,640

2,256

4,762

4,561

Coal purchased from other sources (tons)

566

11

612

30

Total coal available to ship (tons)

3,206

2,267

5,374

4,591

Coal shipments (tons)

3,261

2,283

5,334

4,683

Coal sales revenue

$  328,182

$  182,550

$  492,037

$  366,569

Freight and handling revenue

23,855

495

24,582

1,077

Cost of coal sold

264,108

128,243

396,927

256,978

Freight and handling costs

23,855

495

24,582

1,077

Depreciation, depletion, & amortization

28,210

16,209

44,245

32,567

Gross profit

35,864

38,098

50,865

77,024

Selling, general & administrative

14,811

9,823

24,181

19,142

Acquisition costs

3,859

-

8,504

-

Adjusted EBITDA plus acquisition costs (1)

$    54,449

$    46,506

$    78,151

$    94,630

(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 June 30,

2011

2010

CAPP

Midwest

CAPP

Midwest

Total

Per Ton

Total

Per Ton

Total

Per Ton

Total

Per Ton

Company and contractor production (tons)

2,023

617

1,568

688

Coal purchased from other sources (tons)

566

-

11

-

Total coal available to ship (tons)

2,589

617

1,579

688

Coal shipments (tons)

    Steam (tons)

1,893

641

1,585

698

    Metallurgical (tons)

727

-

-

-

Total Shipments (tons)

2,620

641

1,585

698

Coal sales revenue

    Steam

169,977

89.79

27,706

43.22

$

153,560

96.88

28,990

41.53

    Metallurgical

130,499

179.50

-

-

-

-

-

-

Total coal sales revenue

300,476

114.69

27,706

43.22

153,560

96.88

28,990

41.53

Freight and handling revenue

23,316

8.90

539

0.84

-

-

495

0.71

Cost of coal sold

240,794

91.91

23,314

36.37

104,455

65.90

23,788

34.08

Freight and handling costs

23,316

8.90

539

0.84

-

-

495

0.71

Segment Results

Six Months Ended June 30,

2011

2010

CAPP

Midwest

CAPP

Midwest

Total

Per Ton

Total

Per Ton

Total

Per Ton

Total

Per Ton

Company and contractor production (tons)

3,478

1,284

3,118

1,443

Coal purchased from other sources (tons)

612

-

30

-

Total coal available to ship (tons)

4,090

1,284

3,148

1,443

Coal shipments (tons)

    Steam (tons)

3,274

1,299

3,247

1,436

    Metallurgical (tons)

761

-

-

-

Total Shipments (tons)

4,035

1,299

3,247

1,436

Coal sales revenue

    Steam

303,417

92.67

53,976

41.55

$ 309,124

95.20

57,445

40.00

    Metallurgical

134,644

176.93

-

-

-

-

-

-

Total coal sales revenue

438,061

108.57

53,976

41.55

309,124

95.20

57,445

40.00

Freight and handling revenue

23,316

5.78

1,266

0.97

-

-

1,077

0.75

Cost of coal sold

349,493

86.62

47,434

36.52

211,195

65.04

45,783

31.88

Freight and handling costs

23,316

5.78

1,266

0.97

-

-

1,077

0.75

LIQUIDITY AND CASH FLOW

As of June 30, 2011, the Company had available liquidity of $229.7 million calculated as follows (in millions):

Unrestricted Cash

$

204.7

Availability under the Revolver

88.6

Letters of Credit Issued under the Revolver

(63.6)

Available Liquidity

$

229.7

Restricted Cash

$

29.5

Capital expenditures for the second quarter were $38.2 million and $58.3 million for the six months ended June 30, 2011.  Additionally, a payment of $516.0 million was made for the IRP acquisition.  The base purchase price of $475.0 million for the IRP acquisition was increased by working capital (as defined in the agreement) that exceeded $18.5 million.  Included in the working capital of IRP were the following: $116.9 million of accounts receivable, $16.1 million inventory and $54.6 million of accounts payable. The accounts receivable balance was collected in the normal course of business.

SALES POSITION AND MARKET COMMENTS

As of August 8, 2011, we had the following agreements to ship coal at a fixed and known price (in 000's except per ton amounts):

2011 Priced

As of May 9, 2011

As of August 8, 2011

Change

Tons

Avg Price Per Ton

Tons

Avg Price Per Ton

Tons

Avg Price Per Ton

CAPP (3)

9,550

$               110.75

10,289

$               110.12

739

$               101.98

Midwest (1) (2)

2,609

$                 42.84

2,660

$                 42.76

51

$                 38.67

2012 Priced

As of May 9, 2011

As of August 8, 2011

Change

Tons

Avg Price Per Ton

Tons

Avg Price Per Ton

Tons

Avg Price Per Ton

CAPP

1,665

$                 92.87

3,993

$                 83.66

2,328

$                 77.07

Midwest (1) (2)

1,560

$                 43.42

1,524

$                 43.49

(36)

$                 40.46

2013 Priced

As of May 9, 2011

As of August 8, 2011

Change

Tons

Avg Price Per Ton

Tons

Avg Price Per Ton

Tons

Avg Price Per Ton

CAPP

-

$                      -

1,337

$                 79.52

1,337

$                 79.52

Midwest (1)

990

$                 44.10

990

$                 44.10

-

$                      -

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

(2)     36,000 tons moved from 2012 to 2011

(3)     The CAPP numbers include the commitments of IRP (excluding transportation and hauling revenue) including a proforma amount in 2011 to include the period prior to acquisition

2011 GUIDANCE

The guidance contained below represents forecasts, which indicate a range of possible outcomes and are provided to assist investors with the development of earnings estimates.  While James River believes that these forecasts represent the best estimate of management as to future events, actual events will differ from these forecasts, and such differences could be material.  These forecasts are subject to risks identified under "forward-looking statements" below.

Six Months

Guidance

Total 2011

Ended June 30, 2011

(July - December, 2011)

Total JRCC Operations

(In 000's except tax rate)

Adjusted EBITDA plus acquisition cost (1)

$

78,151

$

95,000

to

105,000

$

173,151

to

183,151

Selling, General and Administrative

$

24,181

$

28,000

$

52,181

Depreciation, Depletion and Amortization

$

44,245

$

60,000

$

104,245

Interest Expense

$

23,458

$

28,000

$

51,458

Tax Rate

$

$

15%

$

15%

Capital Expenditures

$

58,306

$

85,000

(2)

$

143,306

(1) Adjusted EBITDA plus acquisition cost 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.

(2) Includes both maintenance and growth capital expenditures.

2011 Guidance by Segment

(In 000's except per ton amounts)

Shipments

CAPP

Midwest

Tonnage

Tonnage

Thermal

7,000

-

7,300

2,600

-

2,700

Metallurgical

2,000

-

2,200

-

-

-

9,000

-

9,500

2,600

-

2,700

Cash Costs (1)

CAPP

Midwest

$  87.00

-

90.00

$  36.00

-

37.00

(1)  Cash Costs in CAPP include metallurgical coal purchased for blending purposes

CONFERENCE CALL, WEBCAST AND REPLAY:  The Company will hold a conference call with management to discuss the quarterly results on August 9, 2011 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 86763538.

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, 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: a change in the demand for coal by electric utility and industrial customers; 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 railroads for transportation of a large percentage of our products; failure to exploit additional coal reserves; the risk that reserve estimates are inadequate; failure to diversify our operations; increased capital expenditures; encountering difficult mining conditions; 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 cost of raw materials; the effects of litigation, regulation 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 the business; our cash flows, results of operation or financial condition; the consummation of acquisition, disposition or financing transactions and the effect thereof on our business; governmental policies and regulatory actions; legal and administrative proceedings, settlements, investigations and claims; weather conditions or catastrophic weather-related damage; our production capabilities; availability of transportation; 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; our ability to integrate successfully operations that we have or may acquire or develop in the future, including those of IRP, or the risk that any such integration could be more difficult, time-consuming or costly than expected; the consummation of financing transactions, acquisitions or dispositions and the related effects on our business; uncertainty of our expected financial performance following completion of the IRP acquisition; disruption from the IRP acquisition making it more difficult to maintain relationships with customers, employees or suppliers; 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)

June 30, 2011

December 31, 2010

Assets

(unaudited)

Current assets:

Cash and cash equivalents

$

204,683

180,376

Trade receivables

138,032

59,970

Inventories:

Coal

48,600

23,305

Materials and supplies

17,754

13,690

Total inventories

66,354

36,995

Prepaid royalties

6,387

6,039

Other current assets

14,313

5,991

Total current assets

429,769

289,371

Property, plant, and equipment, net

889,982

385,652

Goodwill

26,492

26,492

Restricted cash and short term investments

29,510

23,500

Other assets

52,370

59,554

Total assets

$

1,428,123

784,569

Liabilities and Shareholders' Equity

Current liabilities:

Accounts payable

$

126,214

57,300

Accrued salaries, wages, and employee benefits

13,473

7,744

Workers' compensation benefits

9,000

9,000

Black lung benefits

2,282

2,282

Accrued taxes

8,401

4,924

Other current liabilities

22,476

16,496

Total current liabilities

181,846

97,746

Long-term debt, less current maturities

575,205

284,022

Other liabilities:

Noncurrent portion of workers' compensation benefits

57,881

55,944

Noncurrent portion of black lung benefits

45,040

43,443

Pension obligations

10,602

11,968

Asset retirement obligations

96,776

43,398

Other

7,298

665

Total other liabilities

217,597

155,418

Total liabilities

974,648

537,186

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

35,598,065 and 27,779,351 shares as of June 30, 2011 and December 31, 2010

356

278

Paid-in-capital

537,211

324,705

Accumulated deficit

(65,408)

(58,593)

Accumulated other comprehensive loss

(18,684)

(19,007)

Total shareholders' equity

453,475

247,383

Total liabilities and shareholders' equity

$

1,428,123

784,569

JAMES RIVER COAL COMPANY

AND SUBSIDIARIES

Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)

Three Months

Three Months

Ended

Ended

June 30, 2011

June 30, 2010

Revenues

Coal sales revenue

$

328,182

182,550

Freight and handling revenue

23,855

495

352,037

183,045

Cost of sales:

Cost of coal sold

264,108

128,243

Freight and handling costs

23,855

495

Depreciation, depletion and amortization

28,210

16,209

316,173

144,947

35,864

38,098

Selling, general and administrative expenses

14,811

9,823

Acquisition costs

3,859

-

17,194

28,275

Interest expense

15,607

7,455

Interest income

(128)

(12)

Charges associated with repayment of debt

740

-

Miscellaneous (income) expense, net

(181)

238

16,038

7,681

1,156

20,594

Income tax expense

367

744

Net income

$

789

19,850

Earnings per common share

Basic earnings per common share

$

0.02

0.72

Diluted earnings per common share

$

0.02

0.71

JAMES RIVER COAL COMPANY

AND SUBSIDIARIES

Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)

Six Months

Six Months

Ended

Ended

June 30, 2011

June 30, 2010

Revenues

Coal sales revenue

$

492,037

366,569

Freight and handling revenue

24,582

1,077

Total revenue

516,619

367,646

Cost of sales:

Cost of coal sold

396,927

256,978

Freight and handling costs

24,582

1,077

Depreciation, depletion and amortization

44,245

32,567

Total cost of sales

465,754

290,622

Gross profit

50,865

77,024

Selling, general and administrative expenses

24,181

19,142

Acquisition costs

8,504

-

Total operating income

18,180

57,882

Interest expense

23,458

14,836

Interest income

(183)

(16)

Charges associated with repayment of debt

740

-

Miscellaneous (income) expense, net

(302)

196

Total other expense, net

23,713

15,016

Income (loss) before income taxes

(5,533)

42,866

Income tax (benefit) expense

1,282

(229)

Net income (loss)

$

(6,815)

43,095

Earnings (loss) per common share

Basic earnings (loss) per common share

$

(0.22)

1.56

Diluted earnings (loss) per common share

$

(0.22)

1.56

JAMES RIVER COAL COMPANY AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

Six Months

Six Months

Ended

Ended

June 30,

June 30,

2011

2010

Cash flows from operating activities:

Net income  (loss)

$

(6,815)

43,095

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

Depreciation, depletion, and amortization

44,245

32,567

Accretion of asset retirement obligations

1,975

1,642

Amortization of debt discount and issue costs

6,383

3,935

Stock-based compensation

2,648

2,870

Deferred income tax expense

2,236

-

Loss on sale or disposal of property, plant and equipment

-

318

Write-off of deferred financing costs

740

-

Changes in operating assets and liabilities:

Receivables

38,568

(15,588)

Inventories

(10,156)

4,538

Prepaid royalties and other current assets

(878)

991

Restricted cash

(6,010)

47,042

Other assets

(4,991)

(830)

Accounts payable

12,512

(7,061)

Accrued salaries, wages, and employee benefits

1,369

3,507

Accrued taxes

(21)

1,004

Other current liabilities

4,339

(1,126)

Workers' compensation benefits

1,937

1,505

Black lung benefits

1,881

1,823

Pension obligations

(971)

(1,949)

Asset retirement obligations

(2,123)

(461)

Other liabilities

(70)

11

Net cash provided by operating activities

86,798

117,833

Cash flows from investing activities:

Additions to property, plant, and equipment

(58,306)

(34,113)

Payment for acquisition, net of cash acquired

(515,962)

-

Net cash used in investing activities

(574,268)

(34,113)

Cash flows from financing activities:

Proceeds from issuance of long-term debt

505,000

-

Repayment of long-term debt

(150,000)

Net proceeds from issuance of common stock

170,545

-

Debt issuance costs

(13,768)

(1,346)

Net cash provided by (used in) financing activities

511,777

(1,346)

Increase in cash

24,307

82,374

Cash and cash equivalents at beginning of period

180,376

107,931

Cash and cash equivalents at end of period

$

204,683

190,305

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. 

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

Six Months Ended

June 30

June 30

June 30

June 30

2011

2010

2011

2010

Net income (loss)

$

789

19,850

(6,815)

43,095

Income tax expense (benefit)

367

744

1,282

(229)

Interest expense

15,607

7,455

23,458

14,836

Interest income

(128)

(12)

(183)

(16)

Depreciation, depletion, and amortization

28,210

16,209

44,245

32,567

EBITDA (before adjustments)

$

44,845

44,246

61,987

90,253

Other adjustments specified

    in our current debt agreement

    Direct acquisition costs

3,859

-

8,504

-

    Charges associated with repayment of debt

740

-

740

    Other

2,256

2,260

4,171

4,377

Adjusted EBITDA

$

51,700

46,506

75,402

94,630

Write-up of IRP inventory

2,749

-

2,749

-

Adjusted EBITDA plus acquisition costs

$

54,449

46,506

78,151

94,630

In addition, in this press release we have presented our earnings per share before acquisition and refinancing expenses.  As we do not routinely engage in transactions of the magnitude of the IRP acquisition or the refinancing of our debt, and consequently do not regularly incur transaction-related expenses of correlative size, we believe presenting earnings per share excluding acquisition and refinancing expenses provides investors with an additional measure of our core operating performance.  Charges related to the IRP acquisition and refinancing of our debt included in our results of operations are as follows:

Three months

Six months

ended

ended

June 30, 2011

June 30, 2011

Acquisition costs

3,859

8,504

Charges associated with repayment of debt

740

740

Amortization of contracts included in depreciation,

           depletion and amortization

2,429

2,429

Write-up to Fair Market Value of IRP's inventory at acquisition

2,749

2,749

Interest on repaid Senior Notes after new financing completed

2,344

2,344

Estimated tax impact

(1,697)

(2,347)

Total IRP acquisition and recapitalization expenses

$

10,424

14,419

Earnings per share impact

$

0.29

0.47

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/