Contura Announces Third Quarter 2018 Results
BRISTOL, Tenn., November 14, 2018 – Contura Energy, Inc. (NYSE: CTRA), a leading U.S. coal supplier, today reported results for the third quarter and year-to-date through September 30, 2018.
• Net Income from continuing operations of $14 million for the third quarter 2018 compared with $10 million in the same period last year
• Adjusted EBITDA of $39 million for the quarter compared with $42 million in the same period last year
• Merger with Alpha officially closed on November 9, 2018, creating the largest metallurgical coal supplier in the U.S. The third quarter results disclosed herein do not include any effects of the Alpha transaction
• The company now trades on the NYSE under the symbol “CTRA”
• Successfully refinanced the company’s and legacy Alpha’s term loans with a new 7-year, $550 million term loan credit facility
• Upsized the asset-backed revolving credit facility from $125 million to $225 million
(millions, except per share)
|Three months ended Sept. 30, 2018||Three months ended Sept. 30, 2017||Nine months ended Sept. 30, 2018||Nine months ended Sept. 30, 2017|
|Net income per diluted share||$1.35||$0.89||$14.23||$5.45|
|Operating cash flow||$60.7||$73.7||$176.3||$259.9|
|Tons of coal sold||3.9||3.8||12.1||12.2|
1. Excludes discontinued operations.
2. From continuing operations.
3. These are non-GAAP financial measures. A reconciliation of Net Income to Adjusted EBITDA is included in tables accompanying the financial schedules.
4. Includes discontinued operations.
“Beyond delivering another positive quarter, largely supported through continued success of our robust export platform, we are very pleased to have brought to a successful completion both the merger with Alpha and the refinancing of our term loans. These actions provide our company the scalability, both operationally and financially, to continue to thrive and return meaningful value to our shareholders,” said Kevin Crutchfield, chief executive officer. “Our focus will now shift to achieving the operational, marketing and cost synergies we have targeted through this transaction and I am confident that we have the right team in place to complete the integration efficiently.”
Total revenues in the third quarter were $447.9 million. Coal revenues in the third quarter, excluding freight and handling fulfillment revenues, were $352.0 million, with Central Appalachia (CAPP) coal revenues accounting for $115.1 million, Trading and Logistics (T&L) accounting for $177.8 million, and Northern Appalachia (NAPP) coal revenues totaling $59.1 million. Comparatively, in the third quarter 2017, CAPP revenues were $108.6 million, T&L revenues were $144.9 million, and NAPP revenues were $65.7 million of the $319.2 million in total coal revenues.
CAPP coal shipments for the third quarter 2018 were 1.0 million tons at an average per-ton realization of $116.62, compared to 1.0 million tons at $105.86 per ton in the prior year third quarter. Contura shipped 1.3 million tons of NAPP coal during the quarter at an average per-ton realization of $44.88, down from 1.5 million tons at $44.57 per ton in the third quarter 2017. As previously announced, NAPP volumes in the quarter were impacted by geologic conditions, including a period of reduced coal seam thickness and localized soft clay issues, which have been resolved. In the T&L segment, coal volumes increased from 1.3 million tons in the prior year period to 1.6 million tons in the third quarter 2018, while the average T&L realization increased marginally from $112.48 per ton in the prior year’s third quarter to $112.81 per ton during third quarter 2018.
Freight and handling fulfillment revenues and other revenues in the third quarter 2018 were $91.0 million and $4.9 million, respectively, compared with $61.5 million and $1.9 million, respectively, in the prior year period.
Total costs and expenses during the third quarter 2018 were $424.0 million and cost of coal sales was $307.7 million, compared with $372.6 million and $270.8 million, respectively, in the same period a year ago. The cost of coal sales in CAPP for the quarter averaged $86.38 per ton, up from $74.02 in the prior year period. CAPP costs include $1.04 per ton in idle costs. The main drivers of increased costs versus expectations were incremental use of purchased coal, which increased the cost of coal sales per ton by approximately $3.50, and higher supply costs, which increased costs by approximately $2.00 per ton. Also, higher sales-related costs resulting from strong metallurgical coal realizations continued to contribute to higher costs per ton.
NAPP costs at $46.37 per ton were impacted by the aforementioned geologic conditions experienced during the quarter and a longwall move in September, both of which reduced production volume. NAPP costs include idle costs of $1.31 per ton. In the year ago period, NAPP cost of coal sales averaged $44.51 per ton. In the T&L segment, the cost of coal sales during the third quarter 2018 was $102.42 per ton versus $100.45 per ton in the third quarter 2017.
Selling, general and administrative (SG&A) expenses for the third quarter 2018 were $12.4 million, down from $15.9 million in the year ago period. The year-ago period included approximately $5.0 million in non-cash stock compensation and $1.7 million in charges related to the company’s incentive plan. Included in the SG&A costs for the third quarter 2018 are approximately $1.8 million in non-cash stock compensation and accrued expenses of $2.7 million related to incentive bonus plans. Depreciation, depletion and amortization was $11.1 million during the third quarter 2018 and amortization of acquired intangibles was $1.2 million, compared with $7.5 million and $14.9 million, respectively, in the same period last year, excluding discontinued operations.
Contura reported net income from continuing operations of $14.0 million, or $1.35 per diluted share, for the third quarter 2018. In the third quarter 2017, the company had net income from continuing operations of $9.7 million or $0.89 per diluted share.
Total adjusted EBITDA was $38.8 million for the third quarter, compared with $41.5 million in the prior year quarter, adjusted to remove the impact of discontinued operations.
Liquidity and Capital Resources
Cash provided by operating activities for the third quarter 2018, including discontinued operations, was $60.7 million and capital expenditures for the third quarter were $18.4 million. In the prior year period, the cash provided by operating activities was $73.7 million and capital expenditures were $17.8 million. Capital expenditures of $3.1 million from discontinued operations are excluded from the prior year total.
At the end of September 2018, Contura had $238.1 million in unrestricted cash. Total long-term debt, including the current portion of long-term debt as of September 30, 2018, was approximately $366.6 million. At the end of the quarter, the company had total liquidity of $334.4 million, including cash and cash equivalents of $238.1 million and $96.3 million of unused commitments available under the Asset-Based Revolving Credit Facility. As of September 30, 2018, the company had no borrowings and $28.7 million in letters of credit outstanding under the Asset-Based Revolving Credit Facility.
Alpha Merger Update
On November 9, 2018, the merger between Contura Energy and ANR, Inc. and Alpha Natural Resources Holdings, Inc. (together, “Alpha”) was completed, creating the largest metallurgical coal supplier in the U.S. complemented by a cost-competitive thermal coal portfolio.
In conjunction with the transaction closing, Contura shares were listed and began trading on the New York Stock Exchange (NYSE) under the symbol “CTRA.” Concurrently, the company refinanced its and legacy Alpha’s term loans with a new $550 million, 7-year term loan credit facility. The interest rate will be LIBOR plus 500bps. In addition, the company upsized its asset-backed revolving credit facility from $125 million to $225 million.
As previously announced, the merger is expected to generate synergies in the range of $30 million to $50 million annually.
Other Business Updates
On December 11, 2017, the company announced that its wholly-owned subsidiary, Contura Coal West, LLC, completed a transaction to sell the Eagle Butte and Belle Ayr mines in Wyoming, along with related coal reserves, equipment, infrastructure and other real properties, to Blackjewel L.L.C. The public comment period for the permits is currently in process, and the final transfer is expected to be completed prior to year-end 2018.
2018 Full-Year Guidance
None of the guidance ranges described herein include any effects of the transaction with Alpha, which closed on November 9, 2018. We expect to provide full-year 2019 guidance for the combined company in early 2019.
The company expects total 2018 coal shipments to be unchanged in the range of 15.4 million to 16.8 million tons. CAPP metallurgical coal guidance remains at 3.7 million to 4.1 million tons with the T&L segment remaining at 5.6 million to 6.2 million tons. NAPP shipments are expected to be between 6.1 million and 6.5 million tons in 2018.
As of October 25, 2018, 85% of the midpoint of anticipated 2018 CAPP coal shipments were committed and priced at an average expected per-ton realization of $130.13, with the remaining 15% committed and priced based on various indices. Based on the midpoint of guidance, 90% of anticipated 2018 NAPP coal shipments were committed and priced at an average expected per-ton realization of $44.45.
Contura is increasing guidance for 2018 CAPP cost of coal sales per ton to $77.00 to $81.00 to account for increased purchase coal tons and continued strength in the metallurgical coal markets leading to higher realizations and subsequently higher sales related expenses than originally anticipated. NAPP cost estimates remain in the range of $35.00 to $38.00 per ton. Additionally, costs related to the company’s idle operations are expected to be between $10 million and $12 million for the full-year 2018.
The margin from Contura’s T&L platform is expected to average between $9 to $15 per ton for the full-year 2018.
Contura’s SG&A guidance is estimated at $32 million to $36 million, excluding one-time and non-recurring items, annual incentive bonuses and stock compensation. Capital expenditure guidance is unchanged in the range of $72 million to $82 million. Depreciation, depletion and amortization for 2018 is expected to be between $40 million and $50 million. The company expects 2018 cash interest expense to be between $25 million and $27 million.
None of the guidance ranges described below include any effects of the transaction with Alpha, which closed on November 9, 2018.
|in millions of tons||Low||High|
|Contura Trading & Logistics||5.6||6.2|
|Costs per ton||Low||High|
|Margin per ton||Low||High|
|Contura Trading & Logistics||$9||$15|
|In millions (except taxes)||Low||High|
|Idle Operations Expense||$10||$12|
|Cash Interest Expense||$25||$27|
1. Based on committed and priced coal shipments as of October 25, 2018. 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 non-cash stock compensation, accrual of incentive bonus and non-recurring business development expenses.
ABOUT CONTURA ENERGY
Contura Energy (NYSE: CTRA) is a Tennessee-based coal supplier with affiliate mining operations across major coal basins in Pennsylvania, Virginia and West Virginia. 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.
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. 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 STATEMENTS OF OPERATIONS (Unaudited)
(Amounts in thousands, except share and per share data)
CONTURA ENERGY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(Amounts in thousands, except share and per share data)
CONTURA ENERGY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(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)