Mr. Paul Blalock reports
WALTER ENERGY ANNOUNCES FOURTH QUARTER AND FULL YEAR 2012 RESULTS
Walter Energy Inc. has released its results for the fourth quarter ended Dec. 31, 2012, that reflect cost-control initiatives, aggressive production management and disciplined capital spending, in light of significantly lower global pricing levels.
Revenues were $479-million in the fourth quarter of 2012, down from $703-million in the fourth quarter of 2011 primarily due to reduced demand and pricing for metallurgical coal. The realized price of metallurgical coal declined 39 per cent compared with the fourth quarter of 2011. The company reported a net loss for the quarter of $71-million or $1.13 per diluted share. This loss includes impairment and restructuring charges of $6.8-million, primarily in connection with a reduction in spending at the Aberpergwm mine in the United Kingdom. Excluding these charges, adjusted net loss and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) for the quarter were $66-million and $7-million, respectively. Results for the quarter also included a $71-million tax benefit.
For the year, the company recorded revenues of $2.4-billion and a net loss of $1.1-billion, including impairment and restructuring charges of $1.1-billion. Excluding these charges, the company's adjusted net income was $31-million and adjusted EBITDA was $412-million.
During 2012, the company:
- Achieved record metallurgical coal production of 11.7 million tonnes;
- Improved cash cost per tonne of production of metallurgical coal by 6 per cent;
- Enhanced liquidity and extended its debt maturities by issuing $500-million of senior notes due 2020;
- Improved the total reportable injury rate by 26 per cent as compared with 2011.
"Walter Energy made solid operational progress during 2012 in the face of challenging market conditions. We safely increased our production of metallurgical coal to a record 11.7 million tonnes, strengthened our senior management team and put in place a highly competitive operating platform that reduced our cost of production," said Walter Scheller, chief executive officer. "In the fourth quarter, we responded to the lower pricing and demand environment by executing the strategy announced last quarter to reconfigure our Canadian operations in order to lower production and reduce costs. Further, we reduced spending at the Aberpergwm mine in the U.K."
Mr. Scheller continued: "Although there are clear signs of improving trends in global demand and pricing for metallurgical coal, our current outlook for 2013 remains cautious and we are focused on driving further efficiency in our business. We currently expect sales and production of metallurgical coal in 2013 to be in line with 2012. However, we are extremely well positioned to increase sales and production to capitalize on anticipated improvements in pricing and demand when market conditions warrant."
In the fourth quarter of 2012, Walter Energy produced 2.5 million tonnes of metallurgical coal, down from a record third quarter 2012 production of 3.3 million tonnes, but an increase from the 2.3 million tonnes produced in the fourth quarter of 2011.
Hard coking coal production decreased to two million tonnes in the fourth quarter 2012, as compared with 2.4 million tonnes in the third quarter 2012 and 1.8 million tonnes in the fourth quarter 2011. Fourth quarter pulverized coal injection (PCI) production of 476,000 tonnes decreased 51 per cent, as compared with the 963,000 tonnes produced in the third quarter of 2012 and 3 per cent from the 489,000 tonnes produced in the fourth quarter 2011.
Sales volume and price
In 2012, Walter Energy sold 10.4 million tonnes of metallurgical coal, up 19 per cent from 8.7 million tonnes of metallurgical coal sales in 2011. Fourth quarter 2012 metallurgical coal sales volume totalled 2.5 million tonnes, as compared with 2.6 million tonnes sold in the third quarter 2012 and 2.4 million tonnes sold in the fourth quarter of 2011.
Metallurgical coal prices averaged $149 per tonne in the quarter, a decrease of 22 per cent from the average of $191 per tonne in the third quarter of 2012 and a 39-per-cent decrease as compared with the $242 per tonne of the fourth quarter 2011.
Cash cost of sales
The consolidated cash cost of sales for metallurgical coal was $135 per tonne in the fourth quarter of 2012, as compared with $132 per tonne in the third quarter of 2012 and $139 per tonne in the fourth quarter of 2011.
In United States operations, the cash cost of sales for metallurgical coal was $118 per tonne in the fourth quarter of 2012, as compared with $119 per tonne in the third quarter of 2012 and the fourth quarter of 2011.
In Canada, the cash costs of sales for metallurgical coal was $161 per tonne in the fourth quarter of 2012, as compared with $166 per tonne in the third quarter and $168 per tonne in the fourth quarter of 2011.
Cash cost of production
The consolidated cash cost of production for metallurgical coal in the fourth quarter of 2012 was $95 per tonne, a 20-per-cent improvement as compared with $119 per tonne in the fourth quarter of 2011.
The cash cost of production for low-volatility hard coking coal improved to $74 per tonne in the fourth quarter of 2012 from $77 per tonne in the third quarter 2012 and $78 per tonne in the fourth quarter of 2011. The cash cost of production for mid-volatility hard coking coal was $102 per tonne in the fourth quarter of 2012, as compared with $95 per tonne in the third quarter of 2012 and $113 per tonne in the fourth quarter of 2011. The cash cost of production for low-volatility PCI was $125 per tonne in the fourth quarter of 2012, as compared with $96 per tonne in the third quarter of 2012 and $204 per tonne in the fourth quarter of 2011.
The company's capital expenditures were $60-million for the fourth quarter 2012 and $392-million for the year, compared with $121-million and $415-million, respectively, in the prior-year periods. For 2013, the company continues to expect capital expenditures of approximately $220-million.
At the end of 2012, available liquidity was $445-million, consisting of cash and cash equivalents of $117-million, plus $328-million of availability under the company's $375-million revolving credit facility. During the quarter, the company issued $500-million in senior notes due in 2020 to enhance liquidity and improve its debt maturity profile.
Safety and stewardship highlights
Walter Energy's emphasis on safety continues to show results as the majority of locations are achieving lower total reportable injury rates. On a consolidated basis, Walter's total reportable injury rate decreased by 26 per cent in 2012 as compared with 2011.
During 2012, Walter Energy earned safety awards in Canada, West Virginia and in Alabama operations, including the Sentinels of Safety award sponsored by the National Mining Association, the Edward Prior Safety award from the Office of the Chief Inspector of Mines from the Ministry of Natural Resource Operations in British Columbia, Canada, and a surface mine reclamation award co-sponsored by the West Virginia Coal Association and the West Virginia Department of Environmental Protection.
Conference call webcast
The company will hold a webcast to discuss fourth quarter and full-year 2012 results on Thursday, Feb. 21, 2013, at 9 a.m. EST. To listen to the live event, visit the company website.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
(in thousands of dollars)
For the three months For the years
ended Dec. 31, ended Dec. 31,
2012 2011 2012 2011
Sales $ 473,347 $ 707,433 $ 2,381,760 $ 2,562,325
(loss) 5,437 (4,427) 18,135 9,033
478,784 703,006 2,399,895 2,571,358
Costs and expenses:
Cost of sales
depletion) 430,608 455,888 1,796,991 1,561,112
depletion 92,720 72,709 316,232 230,681
Selling, general and
administrative 28,889 33,224 133,467 165,749
benefits 13,213 10,011 52,852 40,385
Asset impairment and
restructuring 9,109 - 49,070 -
Goodwill impairment (2,345) - 1,064,409 -
572,194 571,832 3,413,021 1,997,927
Operating income (loss) (93,410) 131,174 (1,013,126) 573,431
Interest expense (49,640) (33,575) (139,356) (96,820)
Interest income 73 250 804 606
Other income (loss)
774 6,246 (13,081) 17,606
Income (loss) from
before income tax
expense (142,203) 104,095 (1,164,759) 494,823
Income tax expense
(benefit) (71,232) 23,843 (99,204) 131,225
Income (loss) from
continuing operations (70,971) 80,252 (1,065,555) 363,598
Income from discontinue
operations - - 5,180 -
Net income (loss) (70,971) 80,252 (1,060,375) 363,598
We seek Safe Harbor.