Alpha Natural Resources, Inc. : Alpha Natural Resources Announces Results for First Quarter 2012
05/03/2012| 07:05am US/Eastern
Recommend:
BRISTOL, Va., May 3, 2012 /PRNewswire/ -- Alpha Natural Resources, Inc. (NYSE: ANR), a leading U.S. coal producer, reported a first quarter net loss of $29.1 million or $0.13 per diluted share compared to net income of $49.8 million or $0.41 per diluted share last year. Excluding amortization of acquired intangibles, changes in fair value and settlement of derivative instruments, merger-related expenses, UBB expenses, severance charges arising from the production adjustments announced February 3, a weather-related property damage loss, and related tax impacts of these items, the first quarter 2012 adjusted net loss was $58.2 million or $0.27 per diluted share, compared to net income of $78.9 million or $0.65 per diluted share last year.
Earnings before interest, taxes, depreciation, depletion and amortization, or EBITDA, for the first quarter 2012 was $222.1 million, compared to $193.0 million in the year ago period. Excluding the change in fair value and settlement of derivative instruments, merger-related expenses, UBB expenses, severance charges arising from the production adjustments announced February 3, and a weather-related property damage loss, first quarter 2012 adjusted EBITDA was $210.5 million.
Quarterly Financial & Operating Highlights
(millions, except per-share and per-ton amounts)
Q1 Q4(2) Q1
2012 2011 2011
Coal revenues $1,639.6 $1,793.6 $987.0
Net (loss) income ($29.1) ($742.9) $49.8
Net (loss) income per
diluted share ($0.13) ($3.39) $0.41
Adjusted net (loss)
income(1) ($58.2) ($17.3) $78.9
Adjusted net (loss) income
per diluted share(1) ($0.27) ($0.08) $0.65
EBITDA(1) $222.1 ($500.0) $193.0
Adjusted EBITDA(1) $210.5 $262.8 $214.9
Tons of coal sold 28.1 31.1 21.0
Coal margin per ton $8.58 $8.49 $12.49
Adjusted coal margin per
ton(1) $9.46 $9.95 $12.49
(1) These are non-GAAP financial
measures. A reconciliation of
adjusted net income (loss) to net
income (loss), a reconciliation of
both EBITDA and adjusted EBITDA to
net income (loss), and a
reconciliation of adjusted cost of
coal sales per ton to cost of coal
sales per ton are included in
tables accompanying the financial
schedules.
(2) The results for the fourth quarter
of 2011 have been adjusted to
reflect certain immaterial
corrections and the impact of
retrospective adjustments made as
a result of applying acquisition
accounting for Massey.
"During the first quarter, Alpha's workforce continued to deliver on our shared commitment to Running Right," said Kevin Crutchfield, Alpha's chief executive officer. "We recently announced that eight operations received MSHA's 2011 Sentinel of Safety certificates, and two operations received Mountaineer Guardian Safety awards. In addition, Alpha's incident rate improved 21 percent in the first quarter of 2012, compared to the last seven months of 2011 since the closing of the Massey acquisition. We salute the successful efforts of our workforce, but the loss of a member of the Alpha family at the Kingston No. 2 mine reminds us that Alpha's safety goal is zero incidents. To that end, we remain dedicated to Running Right and continuous improvement in our safety performance."
"Alpha responded swiftly to challenging market conditions, reducing planned 2012 production volumes by approximately 4 million tons based on actions announced in early February. Since then unusually mild winter weather and decade-low natural gas prices have significantly reduced domestic steam coal consumption and driven utility inventories to near record levels. In response coal producers continue to announce plans to reduce production. Alpha plans to introduce additional production adjustments in the near future. Accordingly, we are reducing the midpoint of our 2012 shipment guidance by an additional 7 million tons of steam coal. The market for metallurgical coal has also softened somewhat, particularly for lower-quality metallurgical coals, due to increased global supply and a geographically mixed demand picture. In response, we are reducing the midpoint of our shipment guidance for metallurgical coal by 0.5 million tons. In this environment, Alpha will remain focused on selectively pruning our portfolio, controlling costs, and maximizing free cash flow generation."
"In approximately one month, we will reach the first anniversary of Alpha's acquisition of Massey Energy Company. With three full quarters as a combined entity now behind us, the integration is progressing well, and we are on track to achieve our targeted synergies. Here is just a short list of our achievements thus far:
-- Our workforce is fully integrated;
-- Running Right has been embraced, and employee engagement is outstanding;
-- We have succeeded in having the last legacy Massey mine removed from
MSHA's Potential Pattern of Violation (PPOV) list;
-- Employee turnover is now in the single digits throughout the company, a
level that is expected to be sustainable;
-- We ended the first quarter of 2012 with an annual synergy run-rate of
greater than $150 million; and
-- We continue to target annual recurring synergies of $220 million to $260
million by mid-year 2013.
Following the Massey transaction, Alpha is now among the top three leading global suppliers of metallurgical coal and controls more export terminal capacity than any other U.S. producer. As market conditions improve, Alpha is well-positioned to capitalize on strengthening global demand for metallurgical coal."
Financial Performance
During the first quarter of 2012, Alpha shipped 11.8 million tons of Powder River Basin (PRB) coal, 11.5 million tons of Eastern steam coal and 4.9 million tons of Eastern metallurgical coal, compared with 12.5 million tons of PRB coal, 4.9 million tons of Eastern steam coal and 3.6 million tons of Eastern metallurgical coal in the first quarter of 2011. Average per ton realizations for PRB shipments rose to $12.95 compared to $11.96 in the fourth quarter of 2011 and $11.91 in the first quarter of 2011. The average per ton realization for Eastern steam coal shipments in the first quarter of 2012 was $67.48 compared to $66.93 in the prior quarter and $66.89 in the first quarter last year, and the average per ton realization for metallurgical coal was $145.51 in the first quarter compared to $156.48 in the prior quarter and $141.76 in the first quarter of 2011.
-- Total revenues in the first quarter were $1.93 billion compared to $1.13
billion in the same period of 2011, and coal revenues were $1.64
billion, up 66 percent compared to $0.99 billion in the first quarter of
2011. Coal revenues were higher than the year-ago period primarily due
to the inclusion of legacy Massey operations which contributed estimated
coal revenues of $680 million during the first quarter. Freight and
handling revenues and other revenues were $209 million and $86 million,
respectively, during the first quarter compared to $116 million and $28
million, respectively, in the year-ago period.
-- Total costs and expenses during the first quarter of 2012 were $1.96
billion compared to $1.05 billion in the first quarter of 2011. Cost of
coal sales was $1.42 billion compared to $0.73 billion in the year-ago
period. The year-over-year increase was primarily attributable to
increased shipment volumes due to the inclusion of legacy Massey
operations during the first quarter 2012.
-- Adjusted cost of coal sales in the East averaged $76.00 per ton in the
first quarter of 2012 compared to $78.50 in the fourth quarter of 2011
and $71.30 in the first quarter last year. The quarter-over-quarter
improvement reflected a greater influence on the weighted average
adjusted cost of coal sales in the East from the Pennsylvania longwall
mines and reduced purchased coal volumes, partly offset by the lower of
cost or market ("LCM") adjustments discussed below and the impact of
fixed costs being spread across fewer tons as production has been
adjusted to match demand. The year-over-year increase in adjusted cost
of coal sales per ton is primarily due to a higher proportion of Central
Appalachia operations in the weighted average. The cost of coal sales
per ton for Alpha Coal West's PRB mines increased to $10.96 during the
first quarter of 2012 compared with $9.66 in the first quarter of 2011
due to reduced production volumes and higher per ton variable costs
resulting from higher average per ton realizations. At Alpha's Central
Appalachia operations, increasing average costs combined with declining
thermal coal prices resulted in the carrying value of certain coal
inventories being reduced to the lower of cost or market. LCM
adjustments are estimated to have increased first quarter 2012 cost of
coal sales by approximately $34.7 million, which is equivalent to $2.12
per ton for eastern shipments. LCM adjustments in previous quarters
were much less significant.
-- Selling, general and administrative expense in the first quarter 2012
was $65.1 million compared to $67.3 million in the first quarter of
2011. First quarter 2012 selling, general and administrative expense
includes $5.5 million of merger-related expenses, while the first
quarter 2011 reflects the impact of $22.1 million of merger-related
expenses primarily related to M&A advisory, bridge financing and
consulting fees attributable to the then-pending Massey transaction.
Depreciation, depletion and amortization (DD&A) expense during the first
quarter of 2012 was $285.9 million, and amortization of acquired
intangibles was a pre-tax benefit of $35.3 million, compared with DD&A
expense and amortization of intangibles expense of $88.6 million and
$26.0 million, respectively, in the first quarter of 2011.
-- Alpha recorded a net loss of $29.1 million or $0.13 per diluted share
during the first quarter of 2012 compared to net income of $49.8 million
or $0.41 per diluted share during the first quarter of 2011. The first
quarter 2012 net loss included a $35.6 million pre-tax benefit from the
change in fair value and settlement of derivative instruments, a $35.3
million pre-tax benefit from amortization of acquired intangibles, net,
$14.3 million of pre-tax UBB expenses, $4.1 million of pre-tax severance
charges arising from production adjustments announced February 3, $3.4
million of pre-tax merger-related expenses, and a $2.3 million pre-tax
loss from weather-related property damage. Excluding these items and
related tax impacts, the first quarter adjusted net loss was $58.2
million or $0.27 per diluted share compared to adjusted net income of
$78.9 million or $0.65 per diluted share in the first quarter of 2011.
-- EBITDA was $222.1 million in the first quarter 2012 compared to $193.0
million in the prior-year period. Excluding changes in fair value and
settlement of derivative instruments, merger-related expenses, UBB
expenses, severance charges arising from production adjustments
announced February 3 and losses from weather-related property damage,
adjusted EBITDA was $210.5 million in the first quarter of 2012 compared
to $214.9 million in the first quarter of 2011.
Liquidity and Capital Resources
Cash provided by operations for the quarter ended March 31, 2012 was $166.6 million compared to $168.4 million for the first quarter of 2011.
Capital expenditures for the first quarter 2012 were $125.8 million, versus $57.1 million in the comparable period last year.
At the end of the first quarter, Alpha had available liquidity of approximately $1.8 billion, consisting of an aggregate $0.7 billion of cash, cash equivalents and marketable securities, plus $1.1 billion available under the company's secured credit facilities. Total long-term debt, including the current portion of long-term debt at March 31, 2012, remained approximately $3.0 billion, consistent with December 31, 2011.
Market Overview
Following a year of record-high metallurgical coal pricing in 2011, the market for metallurgical coal experienced a period of relative weakness in the opening months of 2012. Recent data suggests that pricing has stabilized for premium, benchmark quality coals in Asia due to Chinese steel production that rose four percent in March to an annualized rate of approximately 725 million metric tons and labor and weather-related supply disruptions in Australia. However, European steel production is pacing below 2011 levels, and demand and pricing in the Atlantic basin remain challenged relative to the markets in Asia, particularly for lower quality and blended products that comprise the bulk of U.S. export products. While the export market for U.S. metallurgical coal has been under pressure recently, the market appears unlikely to deteriorate further and may strengthen in coming quarters, depending upon a host of variables, including expected continued growth in Asian steel production, any further supply disruptions in Australia, expected gradual economic recovery in Europe, and potential additional cutbacks in U.S. production of lower quality coking coals.
Demand for domestic thermal coal has significantly declined in recent months due to the inter-related effects of mild winter weather and extremely low natural gas prices which have reduced coal burn by domestic utilities. Utility inventories are approaching record levels and have grown rapidly to greater than 200 million tons nationwide. Based on today's natural gas prices, coal-to-gas switching has expanded from the East, where it has been a fairly common phenomenon, into areas served by PRB coals. Requests for shipment deferrals have become commonplace in all regions, and spot pricing is below production costs for much of Central Appalachia and certain PRB operations. In light of burgeoning inventories, some thermal coal shipments have been re-sold either to other utilities or to traders with some of the coal ultimately moving into the seaborne market. Producers are also striving to maximize exports in order to place thermal coal production, and seaborne thermal coal exports from the U.S. have increased significantly in the first quarter of 2012. U.S. coal producers have responded to this challenging market environment by adjusting production volumes and idling high cost mines. Announced cutbacks to date are in the range of approximately 50 million tons annually and additional reductions appear necessary to balance supply and demand. Alpha remains focused on creating a sustainable thermal coal portfolio and continues to evaluate how best to match thermal coal production with expected demand.
Markets for both metallurgical and thermal coal are under pressure, but the challenges facing the metallurgical market appear to be cyclical and could reverse quickly. The challenges facing the domestic steam coal market, on the other hand, appear to be both cyclical and structural and are likely to linger well into 2013. Alpha continues to pursue its three-pronged strategy: supporting and augmenting our metallurgical coal franchise; creating a sustainable steam coal portfolio; and taking appropriate actions to address operations that are unable to contribute to a sustainable portfolio.
Outlook
Alpha is updating its 2012 shipment guidance ranges. The Company now expects to ship between 20.0 million tons and 24.0 million tons of Eastern metallurgical coal, compared to the previous range of 20.0 million tons to 25.0 million tons. Eastern steam coal shipments in 2012 are now expected to range from 38.0 million tons to 44.0 million tons, compared to the previous range of 42.0 million tons to 48.0 million tons. Western steam coal shipments out of the Powder River Basin in 2012 are anticipated to be in the range of 42.0 million tons to 48.0 million tons, compared to the previous range of 45.0 million tons to 51.0 million tons. As of April 20, 2012, 78 percent of the midpoint of anticipated metallurgical coal shipments were committed and priced at an average per ton realization of $146.31; 99 percent of the midpoint of anticipated Eastern steam coal shipments were committed and priced at an average per ton realization of $66.78; and 100 percent of the midpoint of anticipated PRB shipments were committed and priced at an average per ton realization of $12.83. Alpha's expected range for the cost of coal sales per ton in 2012 is $75 to $79 in the East, compared to the prior guidance range of $72 to $77. The increase in Eastern cost of coal sales per ton is due to the reduction in expected shipment volumes and a mix shift with proportionally more metallurgical and less thermal coal shipments. The expected range for the cost of coal sales per ton in West is unchanged at $10.50 to $11.50. Selling, general and administrative expenses are anticipated to range from $210 million to $230 million for 2012, compared to prior guidance of $220 million to $240 million. DD&A expense is expected to range between $1.1 billion and $1.2 billion, compared to the prior guidance of $1.05 billion to $1.15 billion. Interest expense guidance remains unchanged at $175 million to $185 million. Anticipated capital expenditures for 2012 have been reduced by $100 million to a range of $450 million to $650 million, compared to the prior guidance of $550 million to $750 million.
Guidance
(in millions, except per-ton and percentage amounts)
---------------------------------------------------
2012
----
Average per Ton Sales Realization on
Committed and Priced Coal
Shipments(1,2)
------------------------------------
West $12.83
---- ------
Eastern Steam $66.78
------------- ------
Eastern Metallurgical $146.31
--------------------- -------
Coal Shipments(3) 100.0 - 116.0
---------------- -------------
West 42.0 - 48.0
---- -----------
Eastern Steam(4) 38.0 - 44.0
--------------- -----------
Eastern Metallurgical 20.0 - 24.0
--------------------- -----------
Committed and Priced (%)(5) 95%
-------------------------- ---
West 100%
---- ---
Eastern Steam 99%
------------- ---
Eastern Metallurgical 78%
--------------------- ---
Committed and Unpriced (%)(6) 3%
---------------------------- ---
West 0%
---- ---
Eastern Steam 1%
------------- ---
Eastern Metallurgical 16%
--------------------- ---
West - Cost of Coal Sales per Ton $10.50 - $11.50
--------------------------------- ---------------
East - Cost of Coal Sales per Ton(7) $75.00 - $79.00
----------------------------------- ---------------
Selling, General & Administrative
Expense(8) (excluding merger-related
expenses) $210 - $230
------------------------------------- -----------
Depletion, Depreciation & Amortization $1,100 - $1,200
-------------------------------------- ---------------
Interest Expense $175 - $185
---------------- -----------
Capital Expenditures(9) $450 - $650
Notes:
(1) Based on committed and priced coal shipments as of
April 20, 2012.
(2) Actual average per ton realizations on committed
and priced tons recognized in future periods may
vary based on actual freight expense in future
periods relative to assumed freight expense
embedded in projected average per ton
realizations.
(3) Eastern shipments in 2012 include an estimated 2.0
to 3.0 million tons of brokered coal per year.
(4) The 2012 shipment range for Eastern steam coal
reflects the impact of longwall moves at the
Cumberland mine in April and at the Emerald mine
in March, as well as anticipated longwall moves
at the Cumberland mine in September and at the
Emerald mine in November/December.
(5) As of April 20, 2012, compared to the midpoint of
shipment guidance range.
(6) In 2012, committed and unpriced Eastern tons
include approximately 3.4 million tons of
metallurgical coal subject to market pricing,
approximately 0.1 million tons of steam coal
subject to market pricing, and approximately 0.3
million tons of steam coal subject to average
indexed pricing estimated at $65.89 per ton.
(7) Excludes merger-related expenses, non-cash
charges for the fair value adjustment of acquired
coal inventory, UBB charges, severance charges
arising from actions to adjust production and
weather related property damage. Alpha has not
reconciled the adjusted Eastern cost of coal
sales per ton to Eastern cost of coal sales per
ton because merger-related expenses, a necessary
reconciling item, cannot be reasonably predicted
and Alpha is unable to provide guidance for such
expenses.
(8) Alpha has not reconciled the adjusted selling,
general & administrative expense to selling,
general & administrative expense because merger-
related expenses, a necessary reconciling item,
cannot be reasonably predicted and Alpha is
unable to provide guidance for such expenses.
(9) Includes the annual bonus bid payments on the
Federal Lease by Applications (LBAs) for the
Eagle Butte and Belle Ayr mines of $36.1 million
and $28.9 million, respectively.
About Alpha Natural Resources
With $7.1 billion in total revenue in 2011, Alpha Natural Resources ranks as America's second-largest coal producer by revenue and third-largest by production. Alpha is the nation's largest supplier of metallurgical coal used in the steel-making process and is a major supplier of thermal coal to electric utilities and manufacturing industries. In 2011, the Company had more than 200 Customers on five continents. More information about Alpha can be found on the company's Web site at www.alphanr.com.
Forward Looking Statements
This news release includes forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on Alpha's expectations and beliefs concerning future events and involve risks and uncertainties that may cause actual results to differ materially from current expectations. These factors are difficult to predict accurately and may be beyond Alpha's control. The following factors are among those that may cause actual results to differ materially from our forward-looking statements:
-- worldwide market demand for coal, electricity and steel;
-- global economic, capital market or political conditions, including a
prolonged economic recession in the markets in which we operate;
-- decline in coal prices;
-- our liquidity, results of operations and financial condition;
-- regulatory and court decisions;
-- changes in environmental laws and regulations, including those directly
affecting our coal mining and production, and those affecting our
customers' coal usage, including potential carbon or greenhouse gas
related legislation;
-- changes in safety and health laws and regulations and the ability to
comply with such changes;
-- inherent risks of coal mining beyond our control;
-- our ability to obtain, maintain or renew any necessary permits or
rights, and our ability to mine properties due to defects in title on
leasehold interests;
-- the geological characteristics of the Powder River Basin, Central and
Northern Appalachian coal reserves;
-- competition in coal markets;
-- our assumptions concerning economically recoverable coal reserve
estimates;
-- changes in postretirement benefit obligations, pension obligations and
federal and state black lung obligations;
-- increased costs and obligations potentially arising from the Patient
Protection and Affordable Care Act;
-- our ability to negotiate new UMWA wage agreements on terms acceptable to
us, increased unionization of our workforce in the future, and any
strikes by our workforce;
-- availability of skilled employees and other employee workforce factors,
such as labor relations;
-- potential instability and volatility in worldwide financial markets;
-- future legislation and changes in regulations, governmental policies or
taxes or changes in interpretation thereof;
-- disruption in coal supplies;
-- our production capabilities and costs;
-- our ability to integrate successfully operations that we have acquired
or developed with our existing operations, including those of Massey, as
well as those operations that we may acquire or develop in the future,
or the risk that any such integration could be more difficult,
time-consuming or costly than expected;
-- our plans and objectives for future operations and expansion or
consolidation;
-- the consummation of financing transactions, acquisitions or dispositions
and the related effects on our business;
-- uncertainty of the expected financial performance of Alpha following the
acquisition of Massey;
-- our ability to achieve the cost savings and synergies contemplated by
the acquisition of Massey within the expected time frame;
-- disruption from the acquisition of Massey making it more difficult to
maintain relationships with customers, employees or suppliers;
-- the final allocation of the acquisition price in connection with the
acquisition of Massey to the net assets acquired in accordance with
applicable accounting rules and methodologies;
-- the outcome of pending or potential litigation or governmental
investigations, including with respect to the Upper Big Branch
explosion;
-- the inability of our third-party coal suppliers to make timely
deliveries and the refusal by our customers to receive coal under agreed
contract terms;
-- our relationships with, and other conditions affecting, our customers,
including the inability to collect payments from our customers if their
creditworthiness declines;
-- reductions or increases in customer coal inventories and the timing of
those changes;
-- changes in and renewal or acquisition of new long-term coal supply
arrangements;
-- railroad, barge, truck and other transportation availability,
performance and costs;
-- availability of mining and processing equipment and parts;
-- disruptions in delivery or changes in pricing from third party vendors
of goods and services that are necessary for our operations, such as
diesel fuel, steel products, explosives and tires;
-- fair value of derivative instruments not accounted for as hedges that
are being marked to market;
-- our ability to obtain or renew surety bonds on acceptable terms or
maintain self bonding status;
-- indemnification of certain obligations not being met;
-- continued funding of the road construction business, related costs, and
profitability estimates;
-- restrictive covenants in our secured credit facility and the indentures
governing our outstanding debt securities;
-- certain terms of our outstanding debt securities, including any
conversions of our convertible debt securities, that may adversely
impact our liquidity;
-- our substantial indebtedness and potential future indebtedness;
-- significant or rapid increases in commodity prices;
-- reclamation and mine closure obligations;
-- terrorist attacks and threats, and escalation of military activity in
response to such attacks;
-- inflationary pressures on supplies and labor;
-- utilities switching to alternative energy sources such as natural gas,
renewables and coal from basins where we do not operate;
-- weather conditions or catastrophic weather-related damage; and
-- other factors, including the other factors discussed in the
"Management's Discussion and Analysis of Financial Condition and Results
of Operations", and "Risk Factors" sections of our Annual Report on Form
10-K for the year ended December 31, 2011.
These and other risks and uncertainties are discussed in greater detail in Alpha's and Massey's Annual Reports on Form 10-K and other documents filed with the Securities and Exchange Commission. Forward-looking statements in this news release or elsewhere speak only as of the date made. New uncertainties and risks come up from time to time, and it is impossible for Alpha to predict these events or how they may affect the Company. Alpha has no duty to, and does not intend to, update or revise the forward-looking statements in this news release after the date it is issued. In light of these risks and uncertainties, investors should keep in mind that the results, events or developments disclosed in any forward-looking statement made in this news release may not occur.
FINANCIAL TABLES FOLLOW
Use of Non-GAAP Measures
In addition to the results prepared in accordance with generally accepted accounting principles in the United States (GAAP) provided throughout this press release, Alpha has presented the following non-GAAP financial measures, which management uses to gauge operating performance: EBITDA, adjusted EBITDA, adjusted net income (loss), adjusted diluted earnings per common, adjusted cost of coal sales per ton, adjusted coal margin per ton and adjusted weighted average coal margin per ton.
Alpha defines EBITDA as net income (loss) plus interest expense, income tax expense, depreciation, depletion and amortization, and amortization of acquired intangibles less interest income and income tax benefit. Alpha defines adjusted EBITDA as EBITDA plus expenses attributable to mergers, goodwill impairment, losses on early extinguishment of debt, UBB expenses, mineral lease terminations expense, losses from changes in fair value and settlements of derivative instruments, and changes in estimated future costs of water treatment at closed mines less gains from changes in fair value and settlements of derivative instruments and various gains and losses not expected to recur on a quarterly basis. Alpha defines adjusted net income (loss) as net income (loss) plus expenses attributable to mergers, goodwill impairment, losses on early extinguishment of debt, losses from changes in fair value and settlements of derivative instruments, changes in estimated future costs of water treatment at closed mines, amortization of acquired intangibles, UBB expenses, mineral lease terminations expense, less gains from changes in fair value and settlements of derivative instruments and various gains and losses that are not expected to recur on a quarterly basis, discrete income tax benefits from reversal of valuation allowances for deferred tax assets and reversal of reserves for uncertain tax positions, adjustments to deferred taxes due to significant law changes and estimated income tax effects of the pre-tax adjustments. Adjusted diluted earnings (loss) per common share is adjusted net income (loss) divided by weighted average diluted shares.
Alpha defines adjusted cost of coal sales per ton as the cost of coal sales per ton less per ton expenses attributable to mergers, UBB expenses, mineral lease terminations expense, changes in estimated future costs of water treatment at closed mines and various gains and losses that are not expected to recur on a quarterly basis. Alpha defines adjusted coal margin per ton as the average realized price per ton sold less the adjusted cost of coal sales per ton. Alpha defines adjusted weighted average coal margin per ton as the weighted average realized price per ton sold less the adjusted weighted average total cost of coal sales per ton.
The definition of these non-GAAP measures may be changed periodically by management to adjust for significant items important to an understanding of operating trends. These measures are not intended to replace financial performance measures determined in accordance with GAAP. Rather, they are presented as supplemental measures of the Company's performance that management believes are useful to securities analysts, investors and others in assessing the Company's performance over time. Moreover, these measures are not calculated identically by all companies and therefore may not be comparable to similarly titled measures used by other companies. A reconciliation of each of these measures to its most directly comparable GAAP measure is provided in the tables below.
Alpha Natural Resources, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In Thousands Except Shares and Per Share Data)
(Unaudited)
Three Months Ended March 31,
----------------------------
2012 2011
---- ----
Revenues:
Coal
revenues $1,639,558 $986,978
Freight and
handling
revenues 209,350 116,055
Other
revenues 85,740 27,705
------ ------
Total
revenues 1,934,648 1,130,738
--------- ---------
Costs and
expenses:
Cost of coal
sales
(exclusive
of items
shown
separately
below) 1,419,420 734,985
Freight and
handling
costs 209,350 116,055
Other
expenses 19,396 18,579
Depreciation,
depletion
and
amortization 285,895 88,638
Amortization
of acquired
intangibles,
net (35,267) 25,983
Selling,
general and
administrative
expenses
(exclusive
of
depreciation,
depletion
and
amortization
shown
separately
above) 65,061 67,284
------ ------
Total costs
and
expenses 1,963,855 1,051,524
--------- ---------
Income
(loss) from
operations (29,207) 79,214
------- ------
Other income
(expense):
Interest
expense (45,434) (15,610)
Interest
income 1,097 1,045
Miscellaneous
income, net 642 (834)
--- ----
Total other
expense,
net (43,695) (15,399)
------- -------
Income
(loss)
before
income
taxes (72,902) 63,815
Income tax
benefit
(expense) 43,785 (13,967)
------ -------
Net income
(loss) (29,117) 49,848
======= ======
Earnings
(loss) per
common
share:
Basic
earnings
(loss)
per
common
share: $(0.13) $0.42
Diluted
earnings
(loss)
per
common
share: $(0.13) $0.41
Weighted
average
shares
outstanding:
Weighted
average
shares--
basic 219,785,981 120,014,520
Weighted
average
shares--
diluted 219,785,981 122,035,780
This information is intended to
be reviewed in conjunction
with the company's filings
with the U.S. Securities and
Exchange Commission.
Alpha Natural Resources, Inc. and Subsidiaries
Supplemental Sales, Operations and Financial Data
(In Thousands, Except Per Ton and Percentage Data)
(Unaudited)
Three Months Ended March
31,
-------------------------
2012 2011
---- ----
Tons sold (1):
Powder River Basin 11,772 12,487
Eastern steam 11,476 4,859
Eastern
metallurgical 4,898 3,620
----- -----
Total 28,146 20,966
====== ======
Average realized
price per ton sold
(2)(9):
Powder
River
Basin $12.95 $11.91
Eastern steam 67.48 66.89
Eastern
metallurgical 145.51 141.76
Weighted
average
total $58.25 $47.08
Coal revenues:
Powder
River
Basin $152,441 $148,779
Eastern steam 774,424 325,011
Eastern
metallurgical 712,693 513,188
------- -------
Total
coal
revenues $1,639,558 $986,978
Adjusted cost of
coal sales per ton
(3)(7)(8)(11):
Powder
River
Basin $10.96 $9.66
East
(4) $76.00 $71.30
Adjusted
weighted
average
total $48.79 $34.59
Adjusted
weighted
average
coal
margin
per
ton
(9) $9.46 $12.49
Adjusted weighted
average coal
margin percentage
(10) 16.2% 26.5%
Cost of coal sales
per ton
(3)(7)(11):
Powder
River
Basin $10.96 $9.66
East
(4) $77.50 $71.30
Weighted
average
total $49.67 $34.59
Weighted
average
coal
margin
per
ton
(9) $8.58 $12.49
Weighted average
coal margin
percentage (10) 14.7% 26.5%
Net
cash
provided
by
operating
activities $166,629 $168,418
Capital
expenditures $125,774 $57,101
(1) Stated in thousands of short tons.
(2) Coal revenues divided by tons sold. This
statistic is stated as free on board (FOB) at
the processing plant.
(3) Cost of coal sales divided by tons sold. The
cost of coal sales per ton only includes costs
in our Eastern and Western Coal Operations.
(4) East includes the Company's operations in
Central Appalachia (CAPP) and Northern
Appalachia (NAPP).
(5) Weighted average total sales realization per
ton less weighted average total cost of coal
sales per ton.
(6) Weighted average coal margin per ton divided
by weighted average total sales realization per
ton.
(7) Amounts per ton calculated based on unrounded
revenues, cost of coal sales and tons sold.
(8) For the three months ended March 31, 2012,
adjusted cost of coal sales per ton for East
includes adjustments to exclude the impact of
certain non-cash charges that resulted from
recording Massey's beginning inventory at fair
value, merger related compensation, severance
expenses and costs related to UBB. Additionally,
adjusted cost of coal sales per ton for East
excludes the impact of severance expenses
related to production adjustments announced
February 3, 2012 and the impact of weather-
related property damage loss.
(9) Weighted average total sales realization per
ton less adjusted weighted average total cost of
coal sales per ton.
(10) Adjusted weighted average coal margin per
ton divided by weighted average total sales
realization per ton.
(11) Adjusted cost of coal sales per ton,
adjusted weighted average coal margin per ton
and adjusted weighted average coal margin
percentage for our Eastern Operations are
reconciled to their unadjusted amounts as
follows:
Three
months
ended
March 31,
2012
---------
Adjusted cost of coal sales per
ton-East $76.00
Impact of merger-related
compensation and severance
expenses 0.01
Impact of merger-related
inventory expenses 0.22
Impact of UBB expenses 0.88
Impact of severance expenses
related to mine idlings 0.25
Impact of write-off of weather-
related property damage 0.14
Cost of coal sales per ton-East $77.50
======
This information is intended to
be reviewed in conjunction
with the company's filings
with the U.S. Securities and
Exchange Commission.
Alpha Natural Resources, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets and Supplemental Liquidity Data
(In Thousands)
(Unaudited)
March 31, 2012 December 31, 2011 (1)
-------------- --------------------
Cash and cash
equivalents $487,507 $585,882
Trade accounts receivable, net 440,465 641,975
Inventories, net 551,934 492,022
Short-term marketable
securities 101,396 80,342
Prepaid expenses and other
current assets 638,746 686,617
------- -------
Total current assets 2,220,048 2,486,838
Property, equipment and mine
development costs, net 2,723,102 2,812,208
Owned and leased mineral
rights and land, net 8,202,395 8,283,929
Goodwill, net 2,260,248 2,260,248
Long-term marketable
securities 111,843 20,489
Other non-current assets 623,530 649,992
------- -------
Total assets $16,141,166 $16,513,704
Current portion of
long-term debt $53,529 $46,029
Trade accounts payable 366,172 504,059
Accrued expenses and other
current liabilities 1,092,413 1,218,366
--------- ---------
Total current liabilities 1,512,114 1,768,454
Long-term debt 2,912,683 2,922,052
Pension and postretirement
medical benefit obligations 1,219,765 1,214,724
Asset retirement obligations 787,333 731,643
Deferred income taxes 1,455,630 1,528,707
Other non-current liabilities 841,831 923,815
------- -------
Total liabilities 8,729,356 9,089,395
Total stockholders' equity 7,411,810 7,424,309
--------- ---------
Total liabilities
and stockholders'
equity $16,141,166 $16,513,704
As of
-----
March 31, 2012 December 31, 2011
-------------- -----------------
Liquidity ($ in 000's):
Cash and cash
equivalents $487,507 $585,882
Marketable securities with
maturities of less than one
year 101,396 80,342
Marketable securities with
maturities of greater than
one year 111,843 20,489
------- ------
Total cash, cash equivalents
and marketable securities 700,746 686,713
Unused revolving credit and A/
R securitization facilities 1,114,700 1,114,700
--------- ---------
Total available
liquidity $1,815,446 $1,801,413
(1) During the three months ended March 31, 2012,
the Company recorded certain adjustments to the
provisional opening balance sheet of Massey.
Accordingly, the December 31, 2011 balance sheet
was adjusted to reflect these changes as if they
were recorded on the acquisition date in
accordance with generally accepted accounting
principles related to acquisition accounting. The
Company also recorded the effects of certain
immaterial other adjustments which are also
reflected in the December 31, 2011 balance sheet.
This information is intended to be reviewed in
conjunction with the company's filings with the
U.S. Securities and Exchange Commission.
Alpha Natural Resources, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
Three Months Ended March
31,
-------------------------
2012 2011
---- ----
Operating
activities:
Net
income
(loss) $(29,117) $49,848
Adjustments to
reconcile net
income (loss) to
net cash
provided by
operating
activities:
Depreciation,
depletion,
accretion and
amortization 311,829 97,847
Amortization of
acquired
intangibles, net (35,267) 25,983
Mark-to-market
adjustments for
derivatives (36,025) (140)
Stock-based
compensation 7,014 10,948
Employee benefit
plans, net 20,463 12,852
Deferred income
taxes (44,394) 4,652
Other, net (6,956) (6,360)
Changes in
operating assets
and liabilities:
Trade accounts
receivable, net 201,510 (74,903)
Inventories, net (59,912) (19,372)
Prepaid expenses
and other
current assets 63,188 (17,458)
Other non-
current assets 10,914 (3,589)
Trade accounts
payable (128,865) 109,116
Accrued expenses
and other
current
liabilities (86,296) (13,519)
Pension and
postretirement
medical benefit
obligations (10,980) (12,110)
Asset retirement
obligations (10,141) (961)
Other non-
current
liabilities (336) 5,584
---- -----
Net cash provided
by operating
activities 166,629 168,418
------- -------
Investing
activities:
Capital
expenditures (125,774) (57,101)
Purchases of
marketable
securities (194,965) (160,372)
Sales of
marketable
securities 72,290 60,434
Purchase of
equity-method
investments (6,100) (2,000)
Other, net 3,262 (4,477)
----- ------
Net cash used in
investing
activities (251,287) (163,516)
-------- --------
Financing
activities:
Principal
repayments on
long-term debt (7,500) (2,960)
Principal
repayments on
capital lease
obligations (25) -
Debt issuance
costs - (11,710)
Excess tax
benefit from
stock-based
awards - 5,245
Common stock
repurchases (6,327) (11,203)
Proceeds from
exercise of
stock options 135 1,814
--- -----
Net cash used in
financing
activities (13,717) (18,814)
------- -------
Net
decrease
in
cash
and
cash
equivalents $(98,375) $(13,912)
Cash
and
equivalents
at
beginning
of
period $585,882 $554,772
Cash
and
equivalents
at end
of
period $487,507 $540,860
This information is intended to
be reviewed in conjunction
with the company's filings
with the U. S. Securities and
Exchange Commission.
Alpha Natural Resources, Inc. and Subsidiaries
Reconciliation of EBITDA and Adjusted EBITDA to Net Income (Loss)
(In Thousands)
(Unaudited)
Three Months Ended
March 31,
-------------------
2012 2011
---- ----
Net income (loss) $(29,117) $49,848
Interest expense 45,434 15,610
Interest income (1,097) (1,045)
Income tax expense (benefit) (43,785) 13,967
Depreciation, depletion and
amortization 285,895 88,638
Amortization of acquired
intangibles, net (35,267) 25,983
------- ------
EBITDA 222,063 193,001
Merger related expenses 3,365 22,068
UBB expenses 14,344 -
Change in fair value and
settlement of derivative
instruments (35,608) (170)
Impact of severance expenses
related to mine idlings 4,056 -
Impact of write-off of weather-
related property damage 2,300 -
----- ---
Adjusted EBITDA $210,520 $214,899
This information is intended to
be reviewed in conjunction
with the company's filings
with the U.S. Securities and
Exchange Commission.
Alpha Natural Resources, Inc. and Subsidiaries
Reconciliation of Adjusted Net Income (Loss) to Net Income (Loss)
(In Thousands Except Shares and Per Share Data)
(Unaudited)
Three Months Ended March 31,
----------------------------
2012 2011
---- ----
Net income
(loss) $(29,117) $49,848
Merger related expenses 3,365 22,068
UBB expenses 14,344 -
Change in fair value and
settlement of
derivative instruments (35,608) (170)
Impact of severance
expenses related to
mine idlings 4,056 -
Impact of write-off of
weather-related
property damage 2,300 -
Amortization of acquired
intangibles, net (35,267) 25,983
Estimated income tax
effect of above
adjustments 17,712 (18,856)
------ -------
Adjusted net
income
(loss) $(58,215) $78,873
Weighted average shares-
-diluted 219,785,981 122,035,780
=========== ===========
Adjusted
diluted
earnings
(loss) per
common share $(0.27) $0.65
This information is intended to
be reviewed in conjunction
with the company's filings
with the U.S. Securities and
Exchange Commission.
SOURCE Alpha Natural Resources, Inc.
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