JAMES RIVER COAL COMPANY 
By RICHMOND, Va., Nov. 7, 2013 /PRNewswire/ -- James River Coal Company (NASDAQ: JRCC), today announced that it had net loss of $25.5 million or $0.73 per diluted share for the third quarter of 2013 and net loss of $15.0 million or $0.43 per diluted share for the nine months ended September 30, 2013. Third quarter and the nine months ended September 30, 2013 results include $23.9 million or $0.68 per share and $125.1 million or $3.58 per share, respectively, of pre-tax gain related to the Exchange Transactions. The 2013 results are compared to net loss of $20.6 million or $0.59 per diluted share for the third quarter of 2012 and net loss of $62.0 million or $1.78 per diluted share for the nine months ended September 30, 2012. Included in the third quarter and nine months ended September 30, 2012 results is a gain of $22.2 million from the repurchase of outstanding notes in open market purchases.
Peter T. Socha, Chairman and Chief Executive Officer commented: "The mines are doing great. They have continued to exceed our expectations for both cost control and capital control. They have done an incredible job of adjusting to the soft market conditions and the high levels of uncertainty and concern that surround the coal industry of Central Appalachia. We have made another set of painful, but necessary, production adjustments this week. This involved idling four additional mines in eastern Kentucky. We are hopeful that these idlings can be reversed in the first half of 2014. The coal markets have stabilized during the past several weeks. Prices are still very low, but they are finally moving in a better direction. Finally, we are making progress, but have not finished our project to deleverage our balance sheet and improve our liquidity."
FINANCIAL RESULTS
The following tables show selected operating results for the quarter and nine months ended September 30, 2013 compared to the quarter and nine months ended September 30, 2012 (in 000's except per ton amounts).
Total Results Three Months Ended September 30, Nine Months Ended September 30,
------------- --------------------------------
2013 2012 2013 2012
---- ---- ---- ----
Total Per Ton Total Per Ton Total Per Ton Total Per Ton
----- ------- ----- ------- ----- ------- ----- -------
Company and contractor production (tons) 1,902 2,229 6,115 7,571
Coal purchased from other sources (tons) 287 631 993 1,428
--- --- --- -----
Total coal available to ship (tons) 2,188 2,860 7,108 8,999
Coal shipments (tons) 2,087 3,164 6,663 9,125
Coal sales revenue $143,338 68.68 $264,633 83.64 $469,796 70.51 $804,024 88.11
Freight and handling revenue 6,824 3.27 23,469 7.42 33,822 5.08 63,421 6.95
Cost of coal sold 138,897 66.55 244,365 77.23 444,852 66.76 705,568 77.32
Freight and handling costs 6,824 3.27 23,469 7.42 33,822 5.08 63,421 6.95
Depreciation, depletion, & amortization 28,520 13.67 35,518 11.23 86,725 13.02 98,152 10.76
Gross profit (loss) (24,079) (11.54) (15,250) (4.82) (61,781) (9.27) 304 0.03
Selling, general & administrative 13,260 6.35 14,672 4.64 40,917 6.14 45,504 4.99
Adjusted EBITDA (1) $(6,979) (3.34) $7,556 2.39 $(10,122) (1.52) $59,638 6.54
(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 revolving credit facility.
Segment Results Three Months Ended September 30, Nine Months Ended September 30,
---------------
2013 2012 2013 2012
---- ---- ---- ----
CAPP Total Per Ton Total Per Ton Total Per Ton Total Per Ton
---- ----- ------- ----- ------- ----- ------- ----- -------
Company and contractor production (tons) 1,312 1,607 4,340 5,784
Coal purchased from other sources (tons) 287 631 993 1,428
--- --- --- -----
Total coal available to ship (tons) 1,599 2,238 5,333 7,212
Coal shipments (tons)
Steam (tons) 1,088 1,540 3,236 4,716
Metallurgical (tons) 412 1,007 1,662 2,632
--- ----- ----- -----
Total Shipments (tons) 1,500 2,547 4,898 7,348
Coal sales revenue
Steam $79,185 72.78 $122,116 79.30 $237,093 73.27 $391,211 82.95
Metallurgical 37,764 91.66 115,104 114.30 153,178 92.16 333,859 126.85
------ ------- ------- -------
Total coal sales revenue 116,949 77.97 237,220 93.14 390,271 79.68 725,070 98.68
Freight and handling revenue 6,658 4.44 23,105 9.07 33,278 6.79 61,575 8.38
Cost of coal sold $116,703 77.80 $221,961 87.15 $378,730 77.32 $638,266 86.86
Freight and handling costs 6,658 4.44 23,105 9.07 33,278 6.79 61,575 8.38
Three Months Ended September 30, Nine Months Ended September 30,
2013 2012 2013 2012
---- ---- ---- ----
Midwest Total Per Ton Total Per Ton Total Per Ton Total Per Ton
------- ----- ------- ----- ------- ----- ------- ----- -------
Company and contractor production (tons) 590 622 1,775 1,787
Coal purchased from other sources (tons) - - - -
--- --- --- ---
Total coal available to ship (tons) 590 622 1,775 1,787
Coal shipments (tons) 587 617 1,765 1,777
Coal sales revenue $26,389 44.96 $27,413 44.43 $79,525 45.06 $78,954 44.43
Freight and handling revenue 166 0.28 364 0.59 544 0.31 1,846 1.04
Cost of coal sold $22,194 37.81 $22,404 36.31 $66,122 37.46 $67,302 37.87
Freight and handling costs 166 0.28 364 0.59 544 0.31 1,846 1.04
MARKET ADJUSTMENTS
Due to the continued weakness in the coal market, the Company idled coal production at its McCoy Elkhorn operations, Bledsoe Coal operations and Long Branch Surface operations. Approximately 525 employees were originally furloughed, and on October 16, WARN notices were issued to a majority of those employees after determining that the date of re-opening these operations was unknown. As a result of these actions, the Company anticipates paying approximately $5.8 million in severance related costs during the fourth quarter of 2013.
On November 6, 2013, we idled two underground and two surface mines at our Buckeye complex. Approximately 200 employees and contractors were furloughed. We expect the Buckeye complex, which produced 1.0 million tons in the first nine months of 2013, to restart in 2014 depending on market conditions.
SAFETY AWARDS
James River had two mines that were recognized by the Kentucky Office of Mine Safety and Licensing and the Kentucky Coal Association. Bell County Coal Corporation's Garmeda #2 mine was selected to receive an Underground Safety Award in recognition of the best safety record in the Barbourville District Office.
James River Coal Service's Buckeye Surface Mine was selected to receive a Surface Safety Award in recognition of the best safety record in the Hazard District Office.
C.K. Lane, Chief Operating Officer Commented: "We are very proud of receiving these awards recognizing the hard work of our employees in making James River a safe place to work, especially in these difficult times in the coal industry."
LIQUIDITY AND CASH FLOW
As of September 30, 2013, the Company had available liquidity of $71.0 million calculated as follows (in millions):
Unrestricted Cash $60.2
Availability under the Revolver 75.5
Letters of Credit Issued under
the Revolver (64.7)
-----
Available Liquidity $71.0
=====
Restricted Cash $36.7
=====
Other significant items impacting liquidity in the quarter:
Capital expenditures $(10.2)
Increase in accounts receivable (13.5)
Increase in coal inventories (7.4)
Interest payments (0.9)
Increase in accounts payable 4.3
EXCHANGE TRANSACTIONS
In September 2013, the Company issued $19.3 million principal amount of 10.0% convertible senior notes due 2018 (the 10.0% Convertible Senior Notes) in exchange for $3.9 million principal amount of our 4.5% Convertible Senior Notes and $38.3 million principal amount of our 3.125% Convertible Senior Notes (the Public Exchange Transactions). The Public Exchange Transactions resulted in a gain of $23.9 million, which includes the write-off of $0.6 million of unamortized financing costs. The Company recorded $1.0 million of financing costs associated with Public Exchange Transactions.
In May 2013, the Company issued $123.3 million principal amount of 10.0% Convertible Senior Notes due 2018 (the 10.0% Convertible Senior Notes) in exchange for $90.0 million principal amount of our 4.5% Convertible Senior Notes due 2015 and $153.4 million principal amount of our 3.125% Convertible Senior Notes due 2018 (the Private Exchange Transactions). The Private Exchange Transactions resulted in a gain of $101.2 million, which includes the write-off of $3.6 million of unamortized financing costs. The Company recorded $4.8 million of financing costs associated with the issuance of the 10.0% Convertible Senior Notes.
Upon completion of the Public and Private Exchange Transactions the Company has $142.6 million principal amount of the 10% Convertible Senior Notes Outstanding, $47.3 million principal amount of the 4.5% Convertible Senior Notes Outstanding, and $13.3 million principal amount of the 3.125% Convertible Senior Notes Outstanding.
SALES POSITION AND MARKET COMMENTS
As of November 6, 2013, we had the following agreements to ship coal at a fixed and known price (in 000's except per ton amounts):
2014 Priced
-----------
As of August As of November
8, 2013 6, 2013 Change
Tons Avg Price Tons Avg Price Tons Avg Price
Per Ton Per Ton Per Ton
--- --- -------
CAPP 300 $75.75 1,048 $72.11 748 $70.65
----
Midwest (1) 900 $47.64 1,850 $44.86 950 $42.23
(1) The prices for the Midwest are minimum base price amounts adjusted for projected fuel escalators.
CONFERENCE CALL, WEBCAST AND REPLAY: The Company will hold a conference call with management to discuss the quarterly earnings November 7, 2013 at 10:00 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.
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 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.
CONTACT: James River Coal Company
Elizabeth M. Cook
Director of Investor
Relations
(804) 780-3000
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 and projected fuel escalators. These forward-looking statements are subject to a number of risks and uncertainties. These risks and uncertainties include, but are not limited to, the following: our cash flows, results of operation or financial condition; the ability to consummate financing transactions, including transactions to increase liquidity, or acquisition, or disposition transactions, and the effect thereof on our business; governmental policies, regulatory actions and court decisions affecting the coal industry or our customers' coal usage; legal and administrative proceedings, settlements, investigations and claims; our ability to obtain and renew permits necessary for our existing and planned operation in a timely manner; environmental concerns related to coal mining and combustion and the cost and perceived benefits of alternative sources of energy; inherent risks of coal mining beyond our control, including weather and geologic conditions or catastrophic weather-related damage; our production capabilities; availability of transportation; our ability to timely obtain necessary supplies and equipment; market demand for coal, electricity and steel; competition, including competition from alternative sources such as natural gas; our relationships with, and other conditions affecting, our customers; employee workforce factors; our assumptions concerning economically recoverable coal reserve estimates; future economic or capital market conditions; our plans and objectives for future operations and expansion or consolidation; and the other risks detailed in our reports filed with the Securities and Exchange Commission (SEC). Management believes that these forward-looking statements are reasonable; however, you should not place undue reliance on such statements. These statements are based on current expectations and speak only as of the date of such statements. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of future events, new information or otherwise.
JAMES RIVER COAL COMPANY
AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except share data)
September 30, 2013 December 31, 2012
------------------ -----------------
Assets (unaudited)
Current assets:
Cash and cash equivalents $60,207 127,386
Trade receivables 52,209 89,816
Inventories:
Coal 62,247 26,598
Materials and supplies 15,863 16,699
Total inventories 78,110 43,297
------ ------
Prepaid royalties 8,501 8,623
Other current assets 7,775 9,127
Total current assets 206,802 278,249
------- -------
Property, plant, and equipment, net 790,698 855,217
Restricted cash and short term investments 36,681 36,558
Other assets 31,859 34,097
Total assets $1,066,040 1,204,121
========== =========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $53,849 72,861
Accrued salaries, wages, and employee benefits 12,085 10,996
Workers' compensation benefits 9,900 9,900
Black lung benefits 2,508 2,508
Accrued taxes 10,202 8,382
Other current liabilities 28,342 22,124
Total current liabilities 116,886 126,771
------- -------
Long-term debt, less current maturities 425,379 546,407
Other liabilities:
Noncurrent portion of workers' compensation benefits 68,500 66,953
Noncurrent portion of black lung benefits 64,360 62,834
Pension obligations 32,617 35,325
Asset retirement obligations 101,178 99,177
Other 9,778 12,027
Total other liabilities 276,433 276,316
Total liabilities 818,698 949,494
------- -------
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
36,060,869 and 35,866,549 shares as of September 30, 2013 and December
31, 2012 361 359
Paid-in-capital 549,333 546,289
Accumulated deficit (251,587) (236,588)
Accumulated other comprehensive loss (50,765) (55,433)
Total shareholders' equity 247,342 254,627
------- -------
Total liabilities and shareholders' equity $1,066,040 1,204,121
========== =========
JAMES RIVER COAL COMPANY
AND SUBSIDIARIES
Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
2013 2012 2013 2012
---- ---- ---- ----
Revenues
Coal sales revenue $143,338 264,633 469,796 804,024
Freight and handling revenue 6,824 23,469 33,822 63,421
Total revenue 150,162 288,102 503,618 867,445
Cost of sales:
Cost of coal sold 138,897 244,365 444,852 705,568
Freight and handling costs 6,824 23,469 33,822 63,421
Depreciation, depletion, and
amortization 28,520 35,518 86,725 98,152
Total cost of sales 174,241 303,352 565,399 867,141
------- ------- ------- -------
Gross profit (loss) (24,079) (15,250) (61,781) 304
Selling, general and administrative expenses 13,260 14,672 40,917 45,504
Total operating loss (37,339) (29,922) (102,698) (45,200)
------- ------- -------- -------
Interest expense 12,058 13,200 36,940 40,112
Interest income (88) (217) (373) (602)
Gain on debt transactions (23,889) (22,231) (125,099) (22,231)
Miscellaneous income, net (98) (147) (331) (580)
--- ---- ---- ----
Total other (income) expense,
net (12,017) (9,395) (88,863) 16,699
------- ------ ------- ------
Net loss before income taxes (25,322) (20,527) (13,835) (61,899)
Income tax expense 190 25 1,164 75
--- --- ----- ---
Net loss $(25,512) (20,552) (14,999) (61,974)
======== ======= ======= =======
Earnings (loss) per common share
Basic earnings (loss) per common
share $(0.73) (0.59) (0.43) (1.78)
Diluted earnings (loss) per common
share $(0.73) (0.59) (0.43) (1.78)
JAMES RIVER COAL COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Nine Months Ended September 30,
-------------------------------
2013 2012
---- ----
Cash flows from operating activities:
Net loss $(14,999) (61,974)
Adjustments to reconcile net (loss) to net cash provided by (used in)
operating activities
86,725 98,152
Depreciation, depletion, and amortization
3,355 3,948
Accretion of asset retirement obligations
10,180 12,914
Amortization of debt discount and issue costs
3,406 3,808
Stock-based compensation
(52) (121)
Gain on sale or disposal of property, plant and equipment
(125,099) (22,231)
Gain on debt transactions
Changes in operating assets and liabilities:
37,607 12,239
Receivables
(29,662) 16,084
Inventories
1,474 (760)
Prepaid royalties and other current assets
(123) (114)
Restricted cash
1,855 5,202
Other assets
(19,012) (34,802)
Accounts payable
1,089 2,308
Accrued salaries, wages, and employee benefits
1,460 (1,256)
Accrued taxes
5,956 (1,014)
Other current liabilities
1,547 3,389
Workers' compensation benefits
3,136 3,596
Black lung benefits
350 (153)
Pension obligations
(1,208) (495)
Asset retirement obligations
(6) (224)
Other liabilities
(32,021) 38,496
Net cash provided by (used in) operating
activities
Cash flows from investing activities:
Additions to property, plant, and equipment (29,866) (66,466)
Proceeds from sale of property, plant and equipment 475 610
(29,391) (65,856)
Net cash used in investing activities
Cash flows from financing activities:
Repayment of long-term debt (33) (20,916)
Debt issuance costs (5,734) -
(5,767) (20,916)
Net cash used in financing activities
(67,179) (48,276)
Decrease in cash and cash equivalents
Cash and cash equivalents at beginning of period 127,386 199,711
Cash and cash equivalents at end of period $60,207 151,435
======= =======
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. We believe that Adjusted EBITDA presents a useful measure of our
ability to service and incur debt on an ongoing basis.
EBITDA and Adjusted EBITDA 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 and Adjusted EBITDA, may not be comparable to other similarly titled measures of other companies. Additionally, EBITDA and 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 30 September 30 September 30 September 30
2013 2012 2013 2012
---- ---- ---- ----
Net income (loss) $(25,512) (20,552) (14,999) (61,974)
Income tax expense 190 25 1,164 75
Interest expense 12,058 13,200 36,940 40,112
Interest income (88) (217) (373) (602)
Depreciation, depletion, and amortization 28,520 35,518 86,725 98,152
EBITDA (before adjustments) $15,168 27,974 109,457 75,763
Other adjustments specified
in our current debt agreement
Gain on debt transactions (23,889) (22,231) (125,099) (22,231)
Other 1,742 1,813 3,406 6,106
----- ----- ----- -----
Adjusted EBITDA $(6,979) 7,556 (12,236) 59,638
======= ===== ======= ======
SOURCE James River Coal Company
