Walter Energy Announces First Quarter 2011 Results Company Reports Earnings of $1.53 per Diluted Share and Net Income of $81.8 Million, Both Almost Double Compared to First Quarter 2010EBITDA of $148.1 Million, Up 58 PercentUnderground Mining Segment
Company Reports Earnings of $1.53 per Diluted Share and Net Income of $81.8 Million, Both Almost Double Compared to First Quarter 2010
EBITDA of $148.1 Million, Up 58 Percent
Underground Mining Segment Nearly Doubles Operating Income
TAMPA, FL -- (Marketwire) -- 04/20/11 -- Walter
Energy (NYSE: WLT) (TSX: WLT), the world's leading, publicly traded
'pure play' producer of metallurgical coal for the global
steel industry, today announced earnings per diluted share of $1.53 and net
income of $81.8 million for the quarter ended March 31, 2011, compared to
earnings per diluted share of $0.77 and net income of $41.6 million in the
first quarter 2010. Results for the period exclude results from Western
Coal, which the Company acquired on April 1, 2011.
'We generated strong year-over-year growth in revenues and income driven
primarily by the third highest coking coal pricing we have ever achieved,'
said Walter Energy Chief Executive Officer Keith Calder. 'Now that our
acquisition of Western Coal is complete, we can turn our attention to
delivering on our promises, executing integration activities and framing
future growth opportunities.'
First Quarter 2011 Financial Results
Revenues for the first quarter 2011 totaled $408.7 million compared to
$312.0 million in the prior-year period. Operating income totaled $119.8
million for the quarter, compared to $71.3 million in the prior-year
period. Revenue and operating income improvements were primarily due to
strong coking coal pricing from the Company's underground mining segment.
Operating income improvements were partially offset by higher costs and
lower sales volumes from the underground mining segment.
EBITDA for the first quarter 2011 was $148.1 million, compared to $93.5
million in the first quarter 2010.
Results for the quarter also include $9.9 million in costs associated with
the acquisition of Western Coal.
Underground Mining
The underground mining segment reported revenues of $343.2 million in the
first quarter 2011, compared to $240.3 million in the prior-year period.
Operating income was $123.9 million, nearly double the operating income in
the same period last year. Revenues and operating income were higher
primarily due to significantly higher average coking coal contract pricing,
partially offset by lower coal sales volumes. Operating income was also
negatively impacted by higher production costs, royalties and freight
costs.
Coking coal sales totaled 1.7 million tons in the first quarter, down 6.4
percent compared to the prior-year period due to lower production volumes
despite strong customer demand. The average selling price in the quarter
was $193.51 per short ton FOB Port, a 52.3 percent increase over the
average selling price of $127.05 per ton for the same period last year.
The Company produced 1.6 million tons of coking coal in the quarter,
compared to 1.7 million tons in the first quarter 2010. Lower production
was primarily the result of challenging mining conditions, which persisted
longer than expected in the first quarter 2011. Production costs for the
quarter averaged $69.20 per ton compared to $58.19 in the prior-year
period. Cost per ton increased due to the effect of lower volumes as well
as planned continuous miner development associated with the preparation of
future longwall panels.
The Company's natural gas business sold 3.4 billion cubic feet of gas at an
average price of $4.09 per thousand cubic feet in the first quarter 2011
compared to 1.4 billion cubic feet at an average price of $5.49 per
thousand cubic feet in the prior-year period. Increased production and
sales for the quarter resulted from the May 2010 acquisition of the Walter
Black Warrior Basin natural gas business.
Surface Mining
The surface mining segment reported revenues of $40.8 million for the first
quarter 2011, compared to $31.3 million in the prior-year period on
increased sales volumes and pricing. Operating income for the surface
mining segment was $6.7 million, compared to $7.3 million in the prior-year
period. Operating income was lower as higher revenues were more than offset
by increases in production costs, primarily due to higher stripping ratios
and diesel prices.
The surface mining segment reported coal sales of 426,000 tons during the
first quarter, up 13.6 percent compared to the prior-year period primarily
due to incremental sales volumes from the Reid School metallurgical coal
mine. Production was 369,000 tons, up 7.0 percent versus the first quarter
last year driven by the incremental Reid School mine tonnage.
Walter Coke
Walter Coke reported revenues of $47.3 million in the first quarter 2011,
compared to $51.2 million in the prior-year period. Revenues were lower as
a result of lower sales volumes, which more than offset increased pricing.
The segment generated $8.0 million in operating income in the quarter,
compared to $7.6 million in the prior-year period. Operating income
improvements were the result of strong pricing and improved plant
performance.
The segment sold 104,000 tons of metallurgical coke in the first quarter
2011 at an average price of $409.85 per ton compared to 139,000 tons sold
in the prior-year period at an average price of $327.37 per ton. Price
increases were primarily attributable to improved demand in the domestic
automotive and steel markets.
2011 Full-Year Business Outlook
As previously announced, Walter Energy acquired Western Coal on April 1,
2011. Sales volume expectations for both legacy Walter Energy and legacy
Western Coal are as follows:
The Company expects full year metallurgical coal sales from the Walter
Energy Alabama underground operations of 7.5 million to 8.0 million short
tons. In addition, the Walter Energy Alabama surface operations expect to
sell between 1.4 million and 1.6 million short tons of thermal coal for the
full year.
From the legacy Western Coal operations, the Company expects metallurgical
coal sales of between 4.9 million and 5.3 million metric tons for the
period of April 1, 2011 to Dec. 31, 2011. The Company expects thermal coal
sales of 1.0 million to 1.2 million metric tons for the same period from
these operations.
Capital Expenditures
Capital expenditures for the full year 2011 are expected to total between
$500 million and $540 million and includes significant expansion projects
at the Canadian operations. Estimates for the previous Western Coal
operations are for the period covering April 1, 2011 through Dec. 31, 2011.
Liquidity
Simultaneous with the closing of the acquisition of Western Coal, the
Company entered into a new $2,750 million credit facility. As of mid-April
2011, the Company had available liquidity of approximately $500 million,
consisting of cash, cash equivalents and marketable securities of $169
million, plus $331 million available under the Company's new $375 million
revolver. Total long-term debt, including the current portion of long-term
debt as of mid-April 2011, was approximately $2,290 million.
Conference Call Web Cast
Chief Executive Officer Keith Calder and members of the Company's
leadership team will discuss Walter Energy's first quarter results, its
outlook and other general business matters during a conference call and
live Web cast to be held Thursday, April 21, 2011, at 11 a.m. Eastern
Daylight Time. To listen to the event live or in archive, or to view the
accompanying slides, visit the Company Web site at www.walterenergy.com.
About Walter Energy
Walter Energy is the world's
leading, publicly traded 'pure play' metallurgical coal producer for the
global steel industry. The Company also produces steam coal and industrial coal, anthracite, metallurgical coke and coal bed methane gas. The Company
has strategic access to high-growth steel markets in Asia, South America
and Europe. Walter Energy had pro forma 2010 revenues of approximately $2.3
billion and employs approximately 4,000 employees and contractors with
operations in the United States, Canada and United Kingdom. For more
information about Walter Energy, please visit the company website at
www.walterenergy.com.
Safe Harbor Statement
Except for historical information contained herein, the statements in this
release are forward-looking and made pursuant to the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995 and may involve a
number of risks and uncertainties. Forward-looking statements are based on
information available to management at the time, and they involve judgments
and estimates. Forward-looking statements include expressions such as
'believe,' 'anticipate,' 'expect,' 'estimate,' 'intend,' 'may,' 'plan,'
'predict,' 'will,' and similar terms and expressions. These forward-looking
statements are made based on expectations and beliefs concerning future
events affecting us and are subject to various risks, uncertainties and
factors relating to our operations and business environment, all of which
are difficult to predict and many of which are beyond our control, that
could cause our actual results to differ materially from those matters
expressed in or implied by these forward-looking statements. The following
factors are among those that may cause actual results to differ materially
from our forward-looking statements: the market demand for coal, coke and
natural gas as well as changes in pricing and costs; the availability of
raw material, labor, equipment and transportation; changes in weather and
geologic conditions; changes in extraction costs, pricing and assumptions
and projections concerning reserves in our mining operations; changes in
customer orders; pricing actions by our competitors, customers, suppliers
and contractors; changes in governmental policies and laws, including with
respect to safety enhancements and environmental initiatives; availability
and costs of credit, surety bonds and letters of credit; and changes in
general economic conditions. Forward-looking statements made by us in this
release, or elsewhere, speak only as of the date on which the statements
were made. See also the 'Risk Factors' in our 2010 Annual Report on Form
10-K and subsequent filings with the SEC which are currently available on
our website at www.walterenergy.com. New risks and uncertainties arise from
time to time, and it is impossible for us to predict these events or how
they may affect us or our anticipated results. We have no duty to, and do
not intend to, update or revise the forward-looking statements in this
release, except as may be required by law. In light of these risks and
uncertainties, readers should keep in mind that any forward-looking
statement made in this press release may not occur. All data presented
herein is as of the date of this release unless otherwise noted.
WALTER ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
($ in thousands, except per share and share amounts)
Unaudited
For the three months
ended March 31,
----------------------
2011 2010
---------- ----------
Revenues:
Sales $ 406,575 $ 308,110
Miscellaneous income 2,159 3,939
---------- ----------
408,734 312,049
---------- ----------
Costs and expenses:
Cost of sales (exclusive of depreciation and
depletion) 218,460 189,511
Depreciation and depletion 28,358 22,169
Selling, general and administrative (1) 31,882 18,693
Postretirement benefits 10,267 10,369
---------- ----------
288,967 240,742
---------- ----------
Operating income 119,767 71,307
Interest expense (3,556) (4,777)
Interest income 156 181
---------- ----------
Income from continuing operations before income
taxes 116,367 66,711
Income tax expense (2) 34,554 24,016
---------- ----------
Income from continuing operations 81,813 42,695
Discontinued operations (3) - (1,144)
---------- ----------
Net income $ 81,813 $ 41,551
========== ==========
Basic income per share:
Income from continuing operations $ 1.54 $ 0.80
Discontinued operations - (0.02)
---------- ----------
Basic net income per share $ 1.54 $ 0.78
========== ==========
Weighted average number of shares outstanding 53,190,274 53,437,036
========== ==========
Diluted income per share:
Income from continuing operations $ 1.53 $ 0.79
Discontinued operations - (0.02)
---------- ----------
Diluted net income per share $ 1.53 $ 0.77
========== ==========
Weighted average number of diluted shares
outstanding 53,533,421 54,098,171
========== ==========
(1) The 2011 first quarter includes $9.9 million of costs associated with
the April 1, 2011 acquisition of Western Coal Corp.
(2) Our effective tax rate for the 2010 first quarter is higher than the
2011 first quarter as the 2010 period includes an income tax charge of
$20.7 million related to the elimination of the favorable tax treatment
of Medicare Part D subsidies due to the passage of the Health Care
Reform Act. The prior period tax provision also includes an income tax
benefit of $17.4 million related to the unconventional fuel source
credits for our Walter Coke segment for the years 2006 through 2009.
(3) Discontinued operations includes the results of our closed Homebuilding
and Kodiak operations for the first quarter 2010.
WALTER ENERGY, INC. AND SUBSIDIARIES
RESULTS BY OPERATING SEGMENT
($ in thousands)
Unaudited
For the three months
ended March 31,
--------------------
2011 2010
--------- ---------
REVENUES:
Underground Mining $ 343,154 $ 240,301
Surface Mining 40,796 31,333
Walter Coke 47,276 51,182
Other 798 778
Consolidating eliminations of intersegment activity (23,290) (11,545)
--------- ---------
$ 408,734 $ 312,049
========= =========
OPERATING INCOME (LOSS):
Underground Mining $ 123,876 $ 64,828
Surface Mining 6,737 7,260
Walter Coke 8,000 7,643
Other (1) (19,206) (8,119)
Consolidating eliminations of intersegment activity 360 (305)
--------- ---------
Operating income $ 119,767 $ 71,307
========= =========
(1) Results for the 2011 first quarter include $9.9 million of costs
associated with the April 1, 2011 acquisition of Western Coal Corp.
WALTER ENERGY, INC. AND SUBSIDIARIES
RECONCILIATION OF EBITDA TO AMOUNTS REPORTED UNDER US GAAP
($ in thousands)
Unaudited
For the three months ended
March 31,
--------------------------
2011 2010
------------ ------------
Net income $ 81,813 $ 41,551
Add loss from discontinued operations - 1,144
Add (less) income tax expense (benefit) 34,554 24,016
Add interest expense 3,556 4,777
Less interest income (156) (181)
Add depreciation and depletion expense 28,358 22,169
Earnings from continuing operations before
interest, income taxes, and depreciation and ------------ ------------
depletion (EBITDA) (1) $ 148,125 $ 93,476
============ ============
(1) EBITDA represents earnings from continuing operations before interest
expense, interest income, income taxes, and depreciation and depletion
expense. EBITDA is a financial measure which is not calculated in
conformity with U.S. Generally Accepted Accounting Principles (GAAP)
and should be considered supplemental to, and not as a substitute or
superior to financial measures calculated in conformity with GAAP. We
believe that EBITDA is a useful measure as some investors and analysts
use EBITDA to compare us against other companies and to help analyze
our ability to satisfy principal and interest obligations and capital
expenditure needs. EBITDA may not be comparable to similarly titled
measures used by other entities.
WALTER ENERGY, INC. AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
Unaudited
For the three
months
ended March 31,
-----------------
2011 2010
-------- --------
Operating Data:
Underground Mining
Tons sold by type (in thousands):
Metallurgical coal, contracts 1,564 1,746
Purchased coal 136 70
-------- --------
1,700 1,816
======== ========
Average selling price per short ton $ 193.51 $ 127.05
Tons sold by mine (in thousands):
Mine No. 4 544 732
Mine No. 7 1,020 1,014
-------- --------
Total 1,564 1,746
======== ========
Coal cost of sales (exclusive of depreciation):
Mine No. 4 per ton $ 96.48 $ 65.80
Mine No. 7 per ton $ 91.06 $ 75.06
Weighted average cost of sales per ton $ 92.95 $ 71.18
Purchased coal costs (in thousands) $ 14,176 $ 4,984
Other costs (in thousands) (1) $ 9,338 $ 4,325
Tons of coal produced (in thousands):
Mine No. 4 522 703
Mine No. 7 1,059 955
-------- --------
Total 1,581 1,658
======== ========
Coal production costs per ton: (2)
Mine No. 4 $ 78.83 $ 56.41
Mine No. 7 $ 64.45 $ 59.50
Weighted average production costs per ton $ 69.20 $ 58.19
Natural gas sales, in mmcf (in thousands) 3,376 1,444
Natural gas average sale price per mcf $ 4.09 $ 5.49
Natural gas cost of sales per mcf $ 2.34 $ 3.45
Surface Mining
Tons sold (in thousands) 426 375
Tons of coal produced (in thousands) 369 345
Average selling price per short ton $ 92.75 $ 78.89
Coal production costs per ton $ 75.57 $ 57.81
(1) Consists of charges (credits) not directly allocable to a specific
underground mine. Also includes charges of $5.4 million and $1.9
million in the 2011 first quarter and 2010 first quarter, respectively,
due to lower than normal production.
(2) Coal production costs per ton are a component of inventoriable costs,
including depreciation. Other costs not included in coal production
costs per ton include Company-paid outbound freight, postretirement
benefits, asset retirement obligation expenses, royalties, and Black
Lung excise taxes.
WALTER ENERGY, INC. AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
Unaudited
For the three
months ended
March 31,
-----------------
2011 2010
-------- --------
Operating Data (continued):
Walter Coke:
Metallurgical coke tons sold (in thousands) 104 139
Metallurgical coke average sales price per ton $ 409.85 $ 327.37
Depreciation and depletion ($ in thousands):
Underground Mining $ 23,113 $ 18,492
Surface Mining 3,960 2,582
Walter Coke 1,096 1,018
Other 189 77
-------- --------
$ 28,358 $ 22,169
======== ========
Capital expenditures ($ in thousands):
Underground Mining $ 37,534 $ 12,731
Surface Mining 4,596 494
Walter Coke 2,006 852
Other 157 260
-------- --------
$ 44,293 $ 14,337
======== ========
WALTER ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in thousands)
Unaudited
As of
---------------------------
March 31, December 31,
2011 2010
------------- -------------
ASSETS
Cash and cash equivalents $ 93,205 $ 293,410
Receivables, net 144,991 143,238
Inventories 96,441 97,631
Deferred income taxes 62,215 62,371
Prepaid expenses 22,614 28,179
Other current assets 8,980 10,710
------------- -------------
Total current assets 428,446 635,539
Property, plant and equipment, net 805,031 790,001
Deferred income taxes 141,843 149,520
Investment in Western Coal Corp. (1) 309,157 -
Other long-term assets 83,835 82,705
------------- -------------
TOTAL ASSETS $ 1,768,312 $ 1,657,765
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 65,248 $ 70,692
Accrued expenses 88,436 52,399
Current debt 9,556 13,903
Accumulated postretirement benefits obligation 25,066 24,753
Other current liabilities 23,339 32,100
------------- -------------
Total current liabilities 211,645 193,847
Long-term debt 151,718 154,570
Accumulated postretirement benefits obligation 454,329 451,348
Other long-term liabilities 264,240 262,934
------------- -------------
TOTAL LIABILITIES 1,081,932 1,062,699
STOCKHOLDERS' EQUITY 686,380 595,066
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,768,312 $ 1,657,765
============= =============
(1) In January 2011, we acquired approximately 25.3 million common shares
of Western Coal Corp. from funds advised by Audley Capital for $293.7
million in cash. At March 31, 2011 our investment in Western Coal
Corp. was measured at fair value. On April 1, 2011 we acquired the
remaining common shares of Western Coal Corp. for $3.4 billion, funded
through $2.2 billion in long-term debt and the issue of approximately
9.0 million common shares of Walter Energy, Inc. valued at $1.2
billion.
WALTER ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
AND COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2011
($ in thousands)
Unaudited
Capital
in
Excess Accumulated
of Other
Common Par Comprehensive Retained Comprehensive
Total Stock Value Income Earnings Loss
-------- ----- -------- ---------- -------- ----------
Balance at
December 31,
2010 $595,066 $ 531 $355,540 $411,383 $ (172,388)
Comprehensive
income:
Net income 81,813 $ 81,813 81,813
Other
comprehensive
income, net of
tax:
Change in
pension and
postretirement
benefit
plans 3,149 3,149 3,149
Change in
unrealized
gain on
investment 9,626 9,626 9,626
Change in
unrealized
loss on
hedges (118) (118) (118)
----------
Comprehensive
income $ 94,470
==========
Stock issued
upon the
exercise of
stock options 1,691 2 1,689
Dividends paid,
$0.125 per
share (6,642) (6,642)
Stock-based
compensation 1,150 1,150
Excess tax
benefit from
stock-based
compensation
arrangements 5,731 5,731
Other (5,086) - (5,086)
-------- ----- -------- -------- ----------
Balance at
March 31, 2011 $686,380 $ 533 $359,024 $486,554 $ (159,731)
======== ===== ======== ======== ==========
WALTER ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in thousands)
Unaudited
For the three months
ended March 31,
----------------------
2011 2010
---------- ----------
OPERATING ACTIVITIES
Net income $ 81,813 $ 41,551
Loss (income) from discontinued operations - 1,144
---------- ----------
Income from continuing operations 81,813 42,695
Adjustments to reconcile income from continuing
operations to net cash flows provided by operating
activities:
Depreciation and depletion 28,358 22,169
Decrease in deferred income taxes - 32,772
Other 3,961 (828)
Decrease (increase) in assets, net of effect of
business acquisition:
Receivables (1,753) (41,552)
Inventories 1,190 18,426
Other current assets 6,488 (909)
Increase (decrease) in liabilities, net of effect
of business acquisition:
Accounts payable (5,444) (260)
Accrued expenses and other current liabilities 33,912 2,299
---------- ----------
Cash flows provided by (used in) operating
activities 148,525 74,812
---------- ----------
INVESTING ACTIVITIES
Additions to property, plant and equipment (44,293) (14,337)
Investment in Western Coal (293,678) -
Other 211 (91)
---------- ----------
Cash flows provided by (used in) investing
activities (337,760) (14,428)
---------- ----------
FINANCING ACTIVITIES
Retirements of debt (7,199) (6,627)
Dividends paid (6,642) (5,358)
Purchases of stock under stock repurchase program - (4,689)
Other 2,336 5,794
---------- ----------
Cash flows provided by (used in) financing
activities (11,505) (10,880)
---------- ----------
Cash flows provided by (used in) continuing
operations (200,740) 49,504
---------- ----------
CASH FLOWS FROM DISCONTINUED OPERATIONS
Cash flows provided by (used in) operating
activities - (1,635)
Cash flows provided by (used in) investing
activities - 599
Cash flows provided by (used in) financing
activities - -
---------- ----------
Cash flows provided by (used in) discontinued
operations - (1,036)
---------- ----------
Net increase (decrease) in cash and cash
equivalents $ (200,740) $ 48,468
========== ==========
Cash and cash equivalents at beginning of period $ 293,410 $ 165,279
Add: Cash and cash equivalents of discontinued
operations at beginning of period 535 1,254
Net increase (decrease) in cash and cash
equivalents (200,740) 48,468
Less: Cash and cash equivalents of discontinued
operations at end of period - 577
---------- ----------
Cash and cash equivalents at end of period $ 93,205 $ 214,424
========== ==========
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