Contura Announces Third Quarter and Year-to-Date Results

BRISTOL, Tenn., November 27, 2017 – Contura Energy, Inc., a leading U.S. coal supplier, today reported results for the third quarter and year-to-date through September 30, 2017.

Highlights include:

  • Net Income of $10 million for the third quarter and $58 million for the year-to-date period
  • Adjusted EBITDA of $51 million for the third quarter and $255 million year-to-date
  • Paid $100.7 million in special dividend and equivalents in mid-July
  • Eliminated approximately $70 million (at face value) of acquisition-related contingent obligations
  • Extended tender offer expiration to December 15, 2017

 

(millions, except per share)

 Third Quarter 2017Year to Date 2017
Coal revenues$417.9$1,367.6
Net Income$10.2$57.9
Net Income per diluted share$0.93$5.34
Adjusted EBITDA[1]$50.7$255.4
Operating cash flow$73.2$245.9
Capital expenditures$20.9$56.4
Tons of coal sold12.836.7

[1] These are non-GAAP financial measures. A reconciliation of net loss to adjusted EBITDA is included in tables accompanying the financial schedules. Contura is modifying its Adjusted EBITDA calculation to add back accretion expense, a non-cash expense.

“Despite some temporary production challenges due to difficult geology at our Cumberland longwall mine in Northern Appalachia, we remained focused this past quarter on operating safe, productive mines, growing our profitable Trading and Logistics segment, and delivering shareholder value through dividends and share buybacks,” said Kevin Crutchfield, chief executive officer. “During the third quarter, we returned more than $100 million to our shareholders in the form of a special dividend and equivalent, and initiated a tender offer to repurchase up to $31.8 million of common stock. The company continues to pursue accretive shareholder actions.”

 

Financial Performance

Coal revenues in the third quarter were $417.9 million, with Central Appalachia (CAPP) accounting for $108.6 million and Trading and Logistics accounting for $144.9 million. On the thermal side, Northern Appalachia (NAPP) revenue totaled $65.7 million and the Powder River Basin (PRB) generated $98.8 million in coal sales. Freight and handling revenues and other revenues were $61.5 million and $3.5 million, respectively, in the third quarter.

CAPP coal shipments for the third quarter were 1.0 million tons at an average per-ton realization of $105.86. Contura shipped 9.0 million tons of PRB coal during the quarter at an average per-ton realization of $11.02, while NAPP shipments totaled 1.5 million tons at an average per-ton realization of $44.57. NAPP volumes were reduced due to a roof fall at the Cumberland underground longwall mine in mid-September. Full production resumed in mid-October and the company believes the production issues have been successfully mitigated. In the Trading and Logistics segment, 1.3 million tons of coal were shipped at an average price of $112.48 per ton.

For the year-to-date period through September 30, 2017, CAPP metallurgical coal shipments were 3.1 million tons at an average per-ton realization of $119.90. Contura shipped 24.5 million tons of PRB coal at an average per-ton realization of $10.94 through end of September, while NAPP shipments totaled 5.5 million tons at an average per-ton realization of $43.67. In the Trading and Logistics segment, 3.6 million tons of coal were shipped at an average price of $135.24 per ton.

Total costs and expenses during the third quarter were $469.3 million and cost of coal sales was $358.6 million. The cost of coal sales in CAPP for the quarter averaged $74.10 per ton, including $1.92 per ton in idle costs. NAPP costs at $44.54 per ton were elevated due to the aforementioned roof fall, which impacted production during the last two weeks of the quarter. NAPP costs included idle costs of $1.37 per ton. The cost of coal sales for the PRB mines was $9.77 per ton during the third quarter. In the Trading and Logistics segment, the cost of coal sales during the third quarter was $100.45 per ton.

Total costs and expenses year-to-date were $1.44 billion and cost of coal sales was $1.09 billion. The cost of coal sales in CAPP averaged $74.06 per ton for the year-to-date period, while NAPP costs averaged $34.72 through the end of September. The cost of coal sales for the PRB mines for the same period was $10.02 per ton. In the Trading and Logistics segment, the cost of coal sales year-to-date was $116.77 per ton.

Selling, general and administrative (SG&A) expenses for the third quarter were $15.9 million, which includes approximately $5.0 million in non-cash stock compensation and $1.7 million of charges related to the company’s incentive bonus plans. Depreciation, depletion and amortization was $15.2 million during the third quarter and amortization of acquired intangibles was $14.9 million.

SG&A expenses for the year-to-date period were $56.1 million, which includes approximately $4.0 million of non-recurring expenses associated primarily with the company’s filing of a registration statement with the Securities and Exchange Commission (SEC), approximately $11.3 million in stock compensation and approximately $5.1 million of charges related to the company’s incentive bonus plans. The SG&A expenses also include approximately $9.1 million in expenses incurred in connection with the payout of the special dividend (in addition to $0.5 million of expenses recorded in cost of coal sales), comprised of $7.6 million of dividend equivalent payments and approximately $1.5 million of professional fees related to the special dividend. Approximately $1.5 million of business development expense is also included. Depreciation, depletion and amortization during the year-to-date period was $49.4 million and amortization of acquired intangibles was $49.1 million.

Contura recorded a net income of $10.2 million, or $0.93 per diluted share for the third quarter and $57.9 million, or $5.34 per diluted share year-to-date.

Adjusted EBITDA was $50.7 million for the quarter, excluding accretion expense of $5.5 million, secondary offering costs of $1.1 million and a $0.8 million mark-to-market adjustment for acquisition-related obligations. Adverse geologic conditions and the resulting roof fall at the Cumberland underground longwall mine in NAPP had an estimated third quarter EBITDA impact of approximately $18 million, compared to our expected results.

Year-to-date, Adjusted EBITDA was $255.4 million, excluding a $38.7 million loss on early extinguishment of debt, $16.6 million accretion expense, $9.6 million expense related to the payout of the special dividend, $9.2 million gain on settlement of acquisition-related obligations, $4.5 million in secondary offering costs and a $3.2 million mark-to-market adjustment for acquisition related obligations. Contura is modifying its Adjusted EBITDA calculation to add back accretion expense, a non-cash expense, in order to conform with peer reporting methodology.

 

Liquidity and Capital Resources

Cash provided by operating activities for the third quarter and year-to-date were $73.2 million and $245.9 million, respectively. Capital expenditures for the third quarter and year-to-date were $20.9 million and $56.4 million, respectively.

At the end of September, Contura had $173.5 million in unrestricted cash. Total long-term debt, including the current portion of long-term debt as of September 30, 2017, was approximately $375.2 million. At the end of September, the company had total liquidity of $287.2 million, including cash and cash equivalents of $173.5 million and $113.7 million unused commitments available under the Asset-Based Revolving Credit Facility.

During the third quarter, the company paid $100.7 million in special dividend and dividend equivalent payments. In September, Contura repurchased $17.4 million of its common stock shares at $56.40 per share. On November 6, 2017, the company extended to December 15, 2017 the expiration of its previously announced tender offer to repurchase an additional $31.8 million of its common stock.

 

Acquisition-related Liabilities Eliminated

Earlier this month, Contura also announced reduced liability obligations associated with its prior acquisition of certain core coal assets from Alpha Natural Resources on July 26, 2016. On October 24, 2017, Alpha announced the completion of a transaction with Lexington Coal Company (LCC), which included the transfer by Alpha to LCC of certain idle and non-active assets and other real and personal properties located in Kentucky, Tennessee and West Virginia.

As a result of that transaction, Contura eliminated approximately $35 million of Contingent Reclamation Funding liabilities, which had already been reduced from a face value of $50 million at the time of the acquisition. In addition, the Contingent Credit Support Commitment, under which Contura provided to Alpha borrowing capacity of $35 million, was terminated. Lastly, approximately $2.8 million in cash was released from restricted cash to operating cash on Contura’s balance sheet.

 

2017 Full-Year Guidance

Contura is maintaining its recently updated guidance. As previously announced, the company expects total shipments to be in the range of 45.2 to 49.4 million tons across all operations, including 3.7 to 4.1 million tons of captive CAPP coal and 30 to 33 million tons of PRB coal. Contura reduced its NAPP shipment guidance to 6.9 to 7.3 million tons, due to temporary production delays resulting from the previously referenced roof fall at its Cumberland underground longwall mine in Greene County, Pennsylvania. The company believes the issue has been successfully mitigated. Full production resumed at Cumberland in mid-October.

In addition, total shipments through the company’s Trading and Logistics segment are expected to be between 4.6 million and 5.0 million tons in 2017.

As of October 25, 2017, 85% of the midpoint of anticipated 2017 CAPP coal shipments were committed and priced at an average expected per-ton realization of $119.39, with the remaining 15% committed under an indexed pricing model. Based on the midpoint of guidance, 100% of anticipated 2017 NAPP steam coal shipments were committed and priced at an average expected per-ton realization of $43.79, and 99% of the midpoint of anticipated 2017 PRB shipments were committed and priced at an average expected per-ton realization of $10.92.

Contura expects its 2017 CAPP cost of coal sales per ton to range from $72.00 to $74.00. PRB cost of coal sales per ton is estimated at a range of $9.50 to $10.50, and NAPP between $33.00 and $37.00 per ton due to the aforementioned production delay. Additionally, costs related to the company’s idle operations are expected to be between $13 million and $15 million for full-year 2017.

Capital expenditures estimates for 2017 are in a range of $80 million to $90 million, while SG&A guidance is estimated at $35 million to $38 million, excluding one-time and non-recurring items. Depreciation, depletion and amortization for 2017 is expected to be between $60 million and $80 million. The company expects 2017 cash interest expense to be between $38 million and $41 million. The cash interest expense reflects $19.25 million of cash interest payments that occurred in 2017, of which $12.9 million were accrued in 2016. These secured Contura notes were refinanced in March 2017 with a lower cost term loan credit facility. The company expects fourth quarter cash interest expense at approximately the current run-rate of $6.25 million per quarter.

in millions of tonsLowHigh
CAPP3.74.1
NAPP6.97.3
PRB30.033.0
Total Production40.644.4
Contura Trading & Logistics4.65.0
Total Shipments45.249.4
Committed/Priced[1][2][3]CommittedAverage Price
CAPP[4]85%$119.39
NAPP100%$43.79
PRB99%$10.92
Committed/Indexed[1][3]Committed
CAPP[4]15%
Costs per tonLowHigh
CAPP$72.00$74.00
NAPP$33.00$37.00
PRB$9.50$10.50
Margin per tonLowHigh
Contura Trading & Logistics$12$16
In millions (except taxes)LowHigh
SG&A[5]$35$38
Idle Operations Expense$13$15
Cash Interest Expense$38$41
DD&A$60$80
Capital Expenditures$80$90
Tax Rate10%20%

Notes:
[1] Based on committed and priced coal shipments as of October 25, 2017. Committed percentage based on the midpoint of shipment guidance range.
[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] Includes estimates of future coal shipments based upon contract terms and anticipated delivery schedules. Actual coal shipments may vary from these estimates.
[4] CAPP committed tons and price information represent captive Contura production and does not include Trading and Logistics.
[5] Excludes expenses related to the company’s previous filing of a registration statement with the SEC, company formation expenses including non-cash stock compensation from formation-related stock plans, accrual of incentive bonus, costs associated with the special dividend, and non-recurring business development expenses.

 

Additional Information

For additional financial information about Contura, please visit www.conturaenergy.com/financials.

 

ABOUT CONTURA ENERGY
Contura Energy is a private, Tennessee-based, diversified coal supplier with affiliate mining operations across multiple major coal basins in Pennsylvania, Virginia, West Virginia and Wyoming. With customers across the globe, high-quality reserves and significant port capacity, Contura Energy reliably supplies both metallurgical coal to produce steel and thermal coal to generate power. For more information, visit www.conturaenergy.com.

 

FORWARD-LOOKING STATEMENTS

This news release includes forward-looking statements. These forward-looking statements are based on Contura’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 Contura’s control. You should review the risks and uncertainties discussed in the company’s condensed consolidated financial statements and report for the period ended September 30, 2017, which are available on our website. Forward-looking statements in this news release or elsewhere speak only as of the date made. New uncertainties and risks arise from time to time, and it is impossible for Contura to predict these events or how they may affect Contura. Except as required by law, Contura has no duty to, and does not intend to, update or revise the forward-looking statements in this news release or elsewhere after the date this release is issued. In light of these risks and uncertainties, investors should keep in mind that results, events or developments discussed 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, Contura has presented the following non-GAAP financial measure: Adjusted EBITDA. The company uses Adjusted EBITDA to measure the operating performance of its segments and allocate resources to the segments. This non-GAAP financial measure excludes various items detailed in the attached reconciliation tables.

The definition of this non-GAAP measure may be changed periodically by management to adjust for significant items important to an understanding of operating trends. This measure is not intended to replace financial performance measures determined in accordance with GAAP. Rather, it is presented as a supplemental measure of the company’s performance that management finds useful in assessing the company’s financial performance and believes is useful to securities analysts, investors and others in assessing the company’s performance over time. Moreover, this measure is not calculated identically by all companies and therefore may not be comparable to similarly titled measures used by other companies.

 

CONTURA ENERGY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND CONDENSED PREDECESSOR COMBINED STATEMENT OF OPERATIONS 

(Amounts in thousands, except share and per share data)

CONTURA ENERGY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share and per share data)

 

 

CONTURA ENERGY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS AND CONDENSED PREDECESSOR COMBINED STATEMENT OF CASH FLOWS

(Amounts in thousands)

CONTURA ENERGY, INC. AND SUBSIDIARIES ADJUSTED EBITDA RECONCILIATION

(Amounts in thousands)

 

 

 

CONTURA ENERGY, INC. AND SUBSIDIARIES RESULTS OF OPERATIONS

(Amounts in thousands, except per ton data)