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RICHMOND, Va., Nov 06, 2008 /PRNewswire-FirstCall via COMTEX News Network/ -- James River Coal Company (Nasdaq: JRCC), a producer of steam and industrial-grade coal, today announced that it had a net loss of $21.7 million or $0.86 per fully diluted share for the third quarter of 2008 and a net loss of $62.4 million or $2.62 per fully diluted share for the nine months ended September 30, 2008. This is compared to a net loss of $9.7 million or $.60 per fully diluted share for the third quarter of 2007 and a net loss of $35.6 million or $2.23 per fully diluted share for the nine months ended September 30, 2007. The results for the third quarter of 2007 and the nine months ended September 30, 2007 include a $6.1 million gain on curtailment of the Company's defined benefit pension plan. The $6.1 million gain on curtailment is included as a reduction in the calculation of Adjusted EBITDA.
Peter T. Socha, Chairman and Chief Executive Officer commented: "This was a mixed quarter. Our costs in Central Appalachia were higher than we would like. This was partially due to changes in the regulatory environment and higher costs for raw materials. We were able to successfully resolve several of the regulatory issues and price escalation for raw materials appears to be easing. Our Midwest operations had a good quarter and the mines were able to perform at a very high level. We were also successful with our contracting activities in the Midwest this quarter.
We are finally near the end of our low priced Central Appalachian (CAPP) coal supply contracts for 2007 and 2008. Our new higher priced CAPP contracts beginning in the first quarter of 2009 will, in many cases, be at prices that are double the level of this year. A substantial portion of our Midwest production currently under low priced contracts will be available for repricing at market as we approach the end of those contracts in 2009."
FINANCIAL RESULTS
The following tables show selected operating results for the three and nine month periods ended September 30, 2008 compared to the corresponding periods ended September 30, 2007 (in 000's except per ton amounts).
Three Months Ended Nine Months Ended
Total Results September 30, September 30,
2008 2007 2008 2007
Total Total Total Total
Company and Contractor production
(tons) 2,731 2,826 8,379 8,524
Coal purchased from other sources
(tons) 30 248 227 723
Total coal available to ship (tons) 2,761 3,074 8,606 9,247
Coal Shipments (tons) 2,777 3,039 8,591 9,135
Revenues
Coal Sales $151,842 128,457 427,733 388,959
Synfuel Handling - 1,595 - 5,464
Cost of Coal Sold 138,873 119,251 393,470 355,295
Gain on curtailment of pension
plan - (6,091) - (6,091)
Depreciation, Depletion, &
Amortization 17,158 17,358 52,000 54,621
Gross Profit (Loss) (4,189) (466) (17,737) (9,402)
Selling, General & Administrative 9,057 8,062 25,123 23,225
Adjusted EBITDA (1) $7,099 5,229 17,774 22,969
(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 September 30,
2008 2007
CAPP Midwest CAPP Midwest
Company and Contractor production (tons) 1,892 839 2,019 807
Coal purchased from other sources (tons) 30 - 237 11
Total coal available to ship (tons) 1,922 839 2,256 818
Coal Shipments (tons) 1,932 845 2,224 815
Coal Sales Revenue $123,691 28,151 104,924 23,533
Average Sales Price per ton 64.02 33.31 47.18 28.87
Cost of Coal Sold $113,187 25,686 99,979 19,272
Cost of Coal Sold per ton 58.59 30.40 44.95 23.65
Nine Months Ended September 30,
2008 2007
CAPP Midwest CAPP Midwest
Company and Contractor production (tons) 6,063 2,316 6,155 2,369
Coal purchased from other sources (tons) 227 - 712 11
Total coal available to ship (tons) 6,290 2,316 6,867 2,380
Coal Shipments (tons) 6,290 2,301 6,775 2,360
Coal Sales Revenue $353,388 74,345 320,960 67,999
Average Sales Price per ton 56.18 32.31 47.37 28.81
Cost of Coal Sold $322,549 70,921 299,801 55,494
Cost of Coal Sold per ton 51.28 30.82 44.25 23.51
Mr. Socha continued, "Our costs in CAPP were higher than normal this quarter. This was due to regulatory compliance matters, some minor issues with geology, and the abnormally high cost of several raw materials. The regulatory issues were primarily specific items that included the approval of ground control plans at two of our surface mines and enhanced roof control and seal construction at two of our underground mines. These items have been resolved. The areas of difficult geology have improved during the past several weeks. Finally, we are beginning to see some improvement in the cost of our raw materials. We have returned to normal mine operations in CAPP."
LIQUIDITY
As of September 30, 2008, the Company had available liquidity of $60.1 million calculated as follows (in millions):
Cash and Cash Equivalents $45.1
Availability under the Revolver 15.0
Available Liquidity $60.1
Our available liquidity was reduced by $24.2 million in early October 2008 as a result of our repayment of the Term Facility and funding of the Letter of Credit Facility and the payment of accrued interest and financing fees. The Term Facility has been paid in full.
The Company was not in compliance with the Adjusted EBITDA and leverage ratio covenants contained in the Revolving Credit Facility and the Letter of Credit Facility as of September 30, 2008. The Company has entered into a waiver and amendment to the Revolving Credit Facility with regard to the non- compliance. The Company has also reached an agreement with the required lenders under the Letter of Credit Facility regarding a waiver and amendment of the non-compliance. The waivers and amendment relate to both the quarter ended September 30, 2008 and the quarter ended December 31, 2008.
SALES COMMITMENTS AND MARKET COMMENTS
As of October 31, 2008, we had the following contractual commitments to ship coal at a fixed and known price (in 000's except per ton amounts):
2008 Priced (c)
As of July 31, 2008 As of October 31, 2008 Change
Avg Price Avg Price Avg Price
Tons Per Ton Tons Per Ton Tons Per Ton
CAPP 8,576 $56.08 8,576 $56.08 - $-
Midwest 3,436 $30.23 3,436 $30.23 - $-
2009 Priced
As of July 31, 2008 As of October 31, 2008 Change
Avg Price Avg Price Avg Price
Tons Per Ton Tons Per Ton Tons Per Ton
CAPP 5,941 $96.19 5,941 $96.19 - $-
Midwest 3,019 $30.56 3,414 $34.54 395 $65.00
2010 Priced
As of July 31, 2008 As of October 31, 2008 Change
Avg Price Avg Price Avg Price
Tons Per Ton Tons Per Ton Tons Per Ton
CAPP 3,800 $108.42 3,800 $108.42 - $-
Midwest 483 $29.98 813 $43.61 330 $63.59
2011 Priced
As of July 31, 2008 As of October 31, 2008 Change
Avg Price Avg Price Avg Price
Tons Per Ton Tons Per Ton Tons Per Ton
CAPP 2,000 $125.00 2,000 $125.00 - $-
Midwest - $- - $- - $-
Mr. Socha continued: "As widely reported, the turmoil in the financial markets has affected the entire energy complex, including coal. We believe that the volatility in financially traded coal contracts has been greatly influenced by factors other than the underlying supply and demand for coal. These factors include tighter credit conditions on several large traders of financial coal contracts. We expect that the impact of these factors will be reduced during the next several months and the fundamentals of the market will, once again, be the dominant driver of future coal prices.
In the contracting area, we are very pleased with our Midwest activities this quarter. We were able to reach multi-year agreements with several of our customers at prices substantially above prior levels.
Our contracting activities in Central Appalachia are still under discussion with our customers. The timing of these discussions is consistent with our experience in November 2007."
SAFETY AWARDS
During the quarter two of James River's mines earned The Sentinels of Safety award. The Sentinels of Safety is the most distinguished safety award in the United States mining industry. It is awarded on an annual basis by the Mine Safety and Health Administration (MSHA) and the National Mining Association (NMA). Blue Diamond Coal Company's Mine #77 earned the award in the category of large underground coal mines and Triad Mining's Freedlandville East Mine earned the award in the category of small surface coal mines.
Bledsoe Coal's Beechfork Mine won the Kentucky Coal Association/Kentucky Environmental and Public Protection Cabinet Safety award for the Barbourville District.
"We are very proud of having received these distinguished awards" said C.K. Lane, Chief Operating Officer. "Our employees have worked very hard and deserve this recognition for their diligent efforts to make safety our number one priority. We will continue to work hard to provide our employees with a safe work environment."
CONFERENCE CALL
The Company will hold a conference call with management to discuss the first quarter earnings on November 6, 2008 at 11:00 a.m. Eastern Time. The Company will be using slides during the opening portion of the conference call. The slides have been posted to the Company website. The conference call can be accessed by dialing 877-852-6579, or through the James River Coal Company website at http://www.jamesrivercoal.com. International callers, please dial 719-325-4771. A replay of the conference call will be available on the Company's website and also by telephone, at 888-203-1112 for domestic callers. International callers, please dial 719-457-0820: pass code 2586941.
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. 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: changes in the demand for coal by electric utility 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; failure to diversify our operations; failure to exploit additional coal reserves; the risk that reserve estimates are inaccurate; increased capital expenditures; encountering difficult mining conditions; increased costs of complying with mine health and safety regulations; our dependency on one railroad for transportation of a large percentage of our products; bottlenecks or other difficulties in transporting coal to our customers; delays in the development of new mining projects; increased costs of raw materials; lack of availability of financing sources; our compliance with debt covenants; the effects of litigation, regulation and competition; 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.
CONTACT: James River Coal Company
Elizabeth M. Cook
Director of Investor Relations
(804) 780-3000
JAMES RIVER COAL COMPANY
AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except share data)
September 30, 2008 December 31, 2007
Assets (unaudited)
Current assets:
Cash and cash equivalents $45,070 5,413
Receivables:
Trade 34,980 40,544
Other 665 762
Total receivables 35,645 41,306
Inventories:
Coal 7,595 5,915
Materials and supplies 10,337 8,277
Total inventories 17,932 14,192
Prepaid royalties 4,649 3,817
Other current assets 5,381 4,180
Total current assets 108,677 68,908
Property, plant, and equipment, at cost:
Land 6,678 6,220
Mineral rights 229,841 191,586
Buildings, machinery and equipment 312,134 285,009
Mine development costs 38,515 31,923
Total property,
plant, and equipment 587,168 514,738
Less accumulated depreciation,
depletion, and amortization 238,675 195,534
Property, plant and
equipment, net 348,493 319,204
Goodwill 26,492 26,492
Other assets 21,006 24,683
Total assets $504,668 439,287
JAMES RIVER COAL COMPANY
AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except share data)
September 30, 2008 December 31, 2007
Liabilities and Shareholders'
Equity (unaudited)
Current liabilities:
Current maturities of long-term debt $29,775 1,600
Accounts payable 54,326 46,641
Accrued salaries, wages, and
employee benefits 8,117 6,010
Workers' compensation benefits 9,450 9,450
Black lung benefits 2,050 2,050
Accrued taxes 5,266 4,234
Other current liabilities 13,986 7,394
Total current liabilities 122,970 77,379
Long-term debt, less current maturities 150,000 187,200
Other liabilities:
Noncurrent portion of workers'
compensation benefits 45,970 44,142
Noncurrent portion of black lung benefits 23,533 22,084
Pension obligations 4,205 5,423
Asset retirement obligations 38,072 32,288
Other 1,158 997
Total other liabilities 112,938 104,934
Total liabilities 385,908 369,513
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 27,401,703 and
21,906,265 shares as of September 30,
2008 and December 31, 2007, respectively 274 219
Paid-in-capital 271,162 159,403
Accumulated deficit (154,125) (91,719)
Accumulated other comprehensive income 1,449 1,871
Total shareholders' equity 118,760 69,774
Total liabilities and
shareholders' equity $504,668 439,287
JAMES RIVER COAL COMPANY
AND SUBSIDIARIES
Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
Three Months Three Months
Ended Ended
September 30, 2008 September 30, 2007
Revenues $151,842 130,052
Cost of sales:
Cost of coal sold 138,873 119,251
Gain on curtailment of pension plan - (6,091)
Depreciation, depletion and amortization 17,158 17,358
Total cost of sales 156,031 130,518
Gross profit (loss) (4,189) (466)
Selling, general and administrative expenses 9,057 8,062
Total operating loss (13,246) (8,528)
Interest expense 4,625 5,250
Interest income (55) (81)
Charges associated with repayment and
amendment of debt 4,223 -
Miscellaneous income, net (327) (84)
Total other expense, net 8,466 5,085
Loss before income taxes (21,712) (13,613)
Income tax benefit - (3,917)
Net loss $(21,712) (9,696)
Loss per common share
Basic loss per common share $(0.86) (0.60)
Shares used to calculate basic
loss per share 25,173 16,044
Diluted loss per common share $(0.86) (0.60)
Shares used to calculate diluted
loss per share 25,173 16,044
JAMES RIVER COAL COMPANY
AND SUBSIDIARIES
Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
Nine Months Nine Months
Ended Ended
September 30, 2008 September 30, 2007
Revenues $427,733 394,423
Cost of sales:
Cost of coal sold 393,470 355,295
Gain on curtailment of pension plan - (6,091)
Depreciation, depletion and amortization 52,000 54,621
Total cost of sales 445,470 403,825
Gross profit (loss) (17,737) (9,402)
Selling, general and administrative expenses 25,123 23,225
Total operating loss (42,860) (32,627)
Interest expense 13,700 14,910
Interest income (317) (403)
Charges associated with repayment and
amendment of debt 7,236 2,421
Miscellaneous income, net (1,073) (371)
Total other expense, net 19,546 16,557
Loss before income taxes (62,406) (49,184)
Income tax benefit - (13,620)
Net loss $(62,406) (35,564)
Loss per common share
Basic loss per common share $(2.62) (2.23)
Shares used to calculate basic
loss per share 23,793 15,983
Diluted loss per common share $(2.62) (2.23)
Shares used to calculate diluted
loss per share 23,793 15,983
JAMES RIVER COAL COMPANY
AND SUBSIDIARIES
Reconciliation of EBITDA
(in thousands)
(unaudited)
EBITDA is a measure 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 our current debt covenants. 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.
EBITDA and Adjusted EBITDA are not recognized terms under US GAAP and are not an alternative to net income, operating income or any other performance measures derived in accordance with US 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 or 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 September September September
30, 2008 30, 2007 30, 2008 30, 2007
Net loss $(21,712) (9,696) (62,406) (35,564)
Income tax benefit - (3,917) - (13,620)
Interest expense 4,625 5,250 13,700 14,910
Interest income (55) (81) (317) (403)
Depreciation, depletion,
and amortization 17,158 17,358 52,000 54,621
EBITDA $16 8,914 2,977 19,944
Other adjustments specified
in our current debt agreement:
Gain on curtailment of pension plan - (6,091) - (6,091)
Charges associated with repayment
and amendment of debt 4,223 - 7,236 2,421
Other adjustments 2,860 2,406 7,561 6,695
Adjusted EBITDA $7,099 5,229 17,774 22,969
SOURCE James River Coal Company
http://www.jamesrivercoal.com
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