Contura Announces Third Quarter 2018 Results

(millions, except per share)

Three months ended Sept. 30,

Nine months ended Sept. 30,

2018⁽¹⁾

2017⁽¹⁾

2018⁽¹⁾

2017⁽¹⁾

Net income⁽²⁾

$14.0

$9.7

$147.0

$59.1

Net income⁽²⁾ per diluted share

$1.35

$0.89

$14.23

$5.45

Adjusted EBITDA⁽³⁾

$38.8

$41.5

$223.9

$234.1

Operating cash flow⁽⁴⁾

$60.7

$73.7

$176.3

$259.9

Capital expenditures

$18.4

$17.8

$56.7

$48.3

Tons of coal sold

3.9

3.8

12.1

12.2

^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.

in millions of tons

High

CAPP

3.7

4.1

NAPP

6.1

6.5

Total Production

9.8

10.6

Contura Trading & Logistics

5.6

6.2

Total Shipments

15.4

16.8

Committed/Priced^1,2,3

Committed

Average Price

CAPP⁴

85

$130.13

NAPP

90

%

$44.45

Committed/Unpriced^1,3

Committed

CAPP⁴

15

%

Costs per ton

Low

High

CAPP

$77

$81

NAPP

$35

$38

Margin per ton

Low

High

Contura Trading & Logistics

$9

$15

In millions (except taxes)

Low

High

SG&A⁵

$32

$36

Idle Operations Expense

$10

$12

Cash Interest Expense

$25

$27

DD&A

$40

$50

Capital Expenditures

$72

$82

Tax Rate

0

%

5

%

CONTURA ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

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

Three Months Ended September 30,

Nine Months Ended September 30,

2018

2017

2018

2017

Revenues:

Coal revenues

$

443,005

$

319,178

$

1,446,538

$

1,100,078

Freight and handling revenues

—

61,492

—

191,411

Other revenues

1,868

12,583

5,836

Total revenues

447,871

382,538

1,459,121

1,297,325

Costs and expenses:

Cost of coal sales (exclusive of items shown separately below)

307,689

270,838

936,817

842,158

Freight and handling costs

91,041

61,492

268,017

191,411

Depreciation, depletion and amortization

11,141

7,504

33,951

25,292

Amortization of acquired intangibles, net

1,158

14,868

12,468

49,111

Selling, general and administrative expenses (exclusive of depreciation, depletion and amortization shown separately above)

12,382

15,946

43,490

56,094

Merger related costs

1,181

—

5,064

—

Secondary offering costs

—

1,061

—

4,499

Total other operating (income) loss:

Gain on disposal of assets

(601)

—

(17,103)

—

Mark-to-market adjustment for acquisition-related obligations

—

839

—

3,221

Gain on settlement of acquisition-related obligations

(118)

—

(410)

(9,200)

Other expenses

150

8

438

89

Total costs and expenses

424,023

372,556

1,282,732

1,162,675

Income from operations

23,848

9,982

176,389

134,650

Other income (expense):

Interest expense

(8,554)

(8,466)

(26,538)

(28,080)

Interest income

507

43

829

116

Loss on early extinguishment of debt

—

—

—

(38,701)

Equity loss in affiliates

(1,624)

(411)

(2,857)

(2,120)

Bargain purchase gain

—

369

—

1,011

Miscellaneous income, net

(154)

(158)

(737)

(350)

Total other expense, net

(9,825)

(8,623)

(29,303)

(68,124)

Income from continuing operations before income taxes

14,023

1,359

147,086

66,526

Income tax (expense) benefit

(12)

8,371

(133)

(7,440)

Net income from continuing operations

14,011

9,730

146,953

59,086

Discontinued operations:

(2,117)

3,724

(4,330)

(276)

Income tax expense from discontinued operations

—

(3,295)

—

(929)

(Loss) income from discontinued operations

(2,117)

429

(4,330)

(1,205)

Net income

11,894

$

10,159

$

142,623

$

57,881

Basic income (loss) per common share:

Income from continuing operations

$

1.45

$

0.95

$

15.30

$

5.74

(Loss) income from discontinued operations

(0.22)

0.04

(0.45)

(0.12)

Net income

$

1.23

$

0.99

$

14.85

$

5.62

Diluted income (loss) per common share

Income from continuing operations

$

1.35

$

0.89

$

14.23

$

5.45

(Loss) income from discontinued operations

(0.20)

0.04

(0.42)

(0.11)

Net income

$

1.15

$

0.93

$

13.81

$

5.34

Weighted average shares - basic

9,633,164

10,277,974

9,602,860

10,298,889

Weighted average shares - diluted

10,384,513

10,896,856

10,328,031

10,832,989

CONTURA ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

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

September 30, 2018

December 31, 2017

Assets

Current assets:

Cash and cash equivalents

$

238,129

$

141,924

Trade accounts receivable, net of allowance for doubtful accounts of $0 as of

September 30, 2018 and December 31, 2017

138,697

127,326

Inventories, net

58,496

69,561

Assets held for sale

—

171

Short-term restricted cash

8,853

11,615

Short-term deposits

6,551

12,366

Prepaid expenses and other current assets

45,915

59,693

Current assets - discontinued operations

22,179

40,498

Total current assets

518,820

463,154

Property, plant, and equipment, net

218,347

196,579

Other acquired intangibles, net of accumulated amortization of $20,760 and $28,662 as

of September 30, 2018 and December 31, 2017

5,990

18,458

Long-term restricted cash

36,882

40,421

Long-term deposits

9,237

3,607

Deferred income taxes

78,744

78,744

Other non-current assets

38,605

28,005

Non-current assets - discontinued operations

—

7,632

Total assets

$

906,625

$

836,600

Liabilities and Stockholders' Equity

Current liabilities:

Current portion of long-term debt

$

4,791

$

10,730

Trade accounts payable

79,360

76,319

Acquisition-related obligations - current

13,670

15,080

Liabilities held for sale

1,345

27,161

Accrued expenses and other current liabilities

56,020

58,771

Current liabilities - discontinued operations

20,850

54,114

Total current liabilities

176,036

242,175

Long-term debt

361,770

361,973

Acquisition-related obligations - long-term

11,997

20,332

Asset retirement obligations

55,821

52,434

Other non-current liabilities

61,686

59,276

Non-current liabilities - discontinued operations

103

7,762

Total liabilities

667,413

743,952

Commitments and Contingencies

Stockholders' Equity

Preferred stock - par value $0.01, 2.0 million shares authorized, none issued

—

—

Common stock - par value $0.01, 20.0 million shares authorized, 10.8 million issued

and 9.9 million outstanding at September 30, 2018 and 10.7 million issued and 9.9

million outstanding at December 31, 2017

108

108

Additional paid-in capital

49,407

40,616

Accumulated other comprehensive loss

(1,959)

(1,948)

Treasury stock, at cost: 0.9 million shares at September 30, 2018 and 0.8 million

shares at December 31, 2017

(54,931)

(50,092)

Retained earnings

246,587

103,964

Total stockholders' equity

239,212

92,648

Total liabilities and stockholders' equity

$

906,625

$

836,600

CONTURA ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(Amounts in thousands)

Nine Months Ended September 30,

2018

2017

Operating activities:

Net income

$

142,623

$

57,881

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation, depletion and amortization

33,951

49,431

Amortization of acquired intangibles, net

12,468

49,111

Accretion of acquisition-related obligations discount

4,165

5,954

Amortization of debt issuance costs and accretion of debt discount

2,264

2,132

Mark-to-market adjustment for acquisition-related obligations

—

3,221

Gain on settlement of acquisition-related obligations

(410)

(9,200)

Gain on disposal of assets

(17,103)

(513)

Bargain purchase gain

—

(1,011)

Accretion of asset retirement obligations

5,545

16,573

Employee benefit plans, net

6,551

8,459

Loss on early extinguishment of debt

—

38,701

Stock-based compensation

9,472

11,946

Equity in loss of affiliates

2,857

2,106

Other, net

1,020

—

Changes in operating assets and liabilities

(27,087)

25,141

Net cash provided by operating activities

176,316

259,932

Investing activities:

Capital expenditures

(56,722)

(56,403)

Payments on disposal of assets

(10,250)

—

Proceeds on disposal of assets

647

2,449

Capital contributions to equity affiliates

(3,759)

(4,160)

Purchase of additional ownership interest in equity affiliate

—

(13,293)

Other, net

(1,455)

(408)

Net cash used in investing activities

(71,539)

(71,815)

Financing activities:

Proceeds from borrowings on debt

—

396,000

Principal repayments of debt

(6,323)

(368,500)

Principal repayments of capital lease obligations

(221)

(798)

Debt issuance costs

(466)

(14,385)

Debt extinguishment costs

—

(25,036)

Debt amendment costs

—

(4,520)

Common stock repurchases and related expenses

(4,839)

(17,445)

Special dividend paid

—

(92,786)

Principal repayments of notes payable

(3,094)

(1,093)

Other, net

70

11

Net cash used in financing activities

(14,873)

(128,552)

Net increase in cash and cash equivalents and restricted cash

89,904

59,565

Cash and cash equivalents and restricted cash at beginning of period

193,960

171,289

Cash and cash equivalents and restricted cash at end of period

$

283,864

$

230,854

Supplemental cash flow information:

Cash paid for interest

$

20,417

$

34,091

Cash paid for taxes

$

6

$

13,328

Cash received for income tax refunds

$

13,457

$

—

Supplemental disclosure of non-cash investing and financing activities:

Capital leases and capital financing - equipment

$

414

$

735

Accrued capital expenditures

$

7,725

$

9,169

Nine Months Ended September 30,

2018

2017

Cash and cash equivalents

$

238,129

$

173,490

Short-term restricted cash

8,853

—

Long-term restricted cash

36,882

57,364

Total cash and cash equivalents and restricted cash shown in the Condensed

 Consolidated Statements of Cash Flows

$

283,864

$

230,854

CONTURA ENERGY, INC. AND SUBSIDIARIES

ADJUSTED EBITDA RECONCILIATION

(Amounts in thousands)

Reconciliation of Non-GAAP measures:

Three Months Ended September 30, 2018

CAPP

NAPP

Trading and Logistics

All Other

Consolidated

Net income (loss) from continuing operations

$

24,787

$

(4,765)

$

15,749

$

(21,760)

$

14,011

Interest expense

4

(490)

—

9,040

8,554

Interest income

(7)

(12)

—

(488)

(507)

Income tax expense

—

—

—

12

12

Depreciation, depletion and amortization

5,658

5,298

—

185

11,141

Merger related costs

—

—

—

1,181

1,181

Non-cash stock compensation expense

—

—

—

1,885

1,885

Gain on settlement of acquisition-related obligations

—

—

—

(118)

(118)

Accretion expense

548

941

—

—

1,489

Amortization of acquired intangibles, net

—

—

1,158

—

1,158

Adjusted EBITDA ⁽¹⁾

$

30,990

$

972

$

16,907

$

(10,063)

$

38,806

⁽¹⁾ Pursuant to the PRB divestiture and classification as a discontinued operation, the Company is no longer presenting a PRB reporting segment. The former PRB reporting segment had Adjusted EBITDA of ($1,102) for the three months ended September 30, 2018.

Segment Information:

Three Months Ended September 30, 2018

CAPP

NAPP

Trading and Logistics

All Other

Consolidated

Total revenues

$

115,280

$

60,944

$

270,985

$

662

$

447,871

Depreciation, depletion, and amortization

$

5,658

$

5,298

$

—

$

185

$

11,141

Amortization of acquired intangibles, net

$

—

$

—

$

1,158

$

—

$

1,158

Adjusted EBITDA

$

30,990

$

972

$

16,907

$

(10,063)

$

38,806

Capital expenditures

$

7,984

$

10,270

$

—

$

119

$

18,373

Reconciliation of Non-GAAP measures:

Nine Months Ended September 30, 2018

CAPP

NAPP

Trading and Logistics

All Other

Consolidated

Net income (loss) from continuing operations

$

147,787

$

1,440

$

70,643

$

(72,917)

$

146,953

Interest expense

316

(839)

—

27,061

26,538

Interest income

(17)

(24)

(18)

(770)

(829)

Income tax expense

—

—

—

133

133

Depreciation, depletion and amortization

17,636

15,761

—

554

33,951

Merger related costs

—

—

—

5,064

5,064

Management restructuring costs ⁽¹⁾

—

—

—

2,659

2,659

Non-cash stock compensation expense

—

—

—

8,240

8,240

Gain on settlement of acquisition-related obligations

—

—

—

(410)

(410)

Gain on sale of disposal group ⁽²⁾

(16,386)

—

—

—

(16,386)

Accretion expense

2,722

2,823

—

—

5,545

Amortization of acquired intangibles, net

—

—

12,468

—

12,468

Adjusted EBITDA ⁽³⁾

$

152,058

$

19,161

$

83,093

$

(30,386)

$

223,926

⁽¹⁾ Management restructuring costs are related to severance expense associated with senior management changes in the nine months ended September 30, 2018.

⁽²⁾ During the fourth quarter of 2017, the Company entered into an asset purchase agreement to sell a disposal group (comprised of property, plant and equipment and associated asset retirement obligations) within our CAPP segment. From the date the Company entered into the asset purchase agreement through the transaction close date, the property, plant and equipment and associated asset retirement obligations were classified as held for sale in amounts representing the fair value of the disposal group. Upon permit transfer, the transaction closed on April 2, 2018. The Company paid $10,000 in connection with the transaction, which was paid into escrow on March 27, 2018 and transferred to the buyer at the transaction close date, and expects to pay a series of additional cash payments in the aggregate amount of $1,500, per the terms stated in the agreement, and recorded a gain on sale of $16,386 within gain on disposal of assets within the Condensed Consolidated Statements of Operations.

⁽³⁾ Pursuant to the PRB divestiture and classification as a discontinued operation, the Company is no longer presenting a PRB reporting segment. The former PRB reporting segment had Adjusted EBITDA of ($3,470) for the nine months ended September 30, 2018.

Segment Information:

Nine Months Ended September 30, 2018

CAPP

NAPP

Trading and Logistics

All Other

Consolidated

Total revenues

$

402,823

$

196,173

$

857,230

$

2,895

$

1,459,121

Depreciation, depletion, and amortization

$

17,636

$

15,761

$

—

$

554

$

33,951

Amortization of acquired intangibles, net

$

—

$

—

$

12,468

$

—

$

12,468

Adjusted EBITDA

$

152,058

$

19,161

$

83,093

$

(30,386)

$

223,926

Capital expenditures

$

23,829

$

32,611

$

—

$

282

$

56,722

Reconciliation of Non-GAAP measures:

Three Months Ended September 30, 2017

CAPP

NAPP

Trading and Logistics

All Other

Consolidated

Net income (loss) from continuing operations

$

30,238

$

(3,300)

$

613

$

(17,821)

$

9,730

Interest expense

1

(264)

—

8,729

8,466

Interest income

(3)

—

—

(40)

(43)

Income tax expense

—

—

—

(8,371)

(8,371)

Depreciation, depletion and amortization

2,736

4,544

—

224

7,504

Non-cash stock compensation expense

—

—

171

5,143

5,314

Mark-to-market adjustment - acquisition-related obligations

—

—

—

839

839

Secondary offering costs

—

—

—

1,061

1,061

Bargain purchase gain

—

—

—

(369)

(369)

Accretion expense

1,461

1,041

—

—

2,502

Amortization of acquired intangibles, net

—

—

14,868

—

14,868

Adjusted EBITDA ^{(1) (2)}

$

34,433

$

2,021

$

15,652

$

(10,605)

$

41,501

⁽¹⁾ The Company's Adjusted EBITDA calculation has been modified to add back non-cash stock compensation expense to align with industry peer group methodology.

⁽²⁾ Pursuant to the PRB divestiture and classification as a discontinued operation, the Company is no longer presenting a PRB reporting segment. The former PRB reporting segment had Adjusted EBITDA of $14,528 for the three months ended September 30, 2017.

Segment Information:

Three Months Ended September 30, 2017

CAPP

NAPP

Trading and Logistics

All Other

Consolidated

Total revenues

$

108,996

$

66,625

$

206,749

$

168

$

382,538

Depreciation, depletion, and amortization

$

2,736

$

4,544

$

—

$

224

$

7,504

Amortization of acquired intangibles, net

$

—

$

—

$

14,868

$

—

$

14,868

Adjusted EBITDA

$

34,433

$

2,021

$

15,652

$

(10,605)

$

41,501

Capital expenditures

$

3,645

$

14,156

$

—

$

—

$

17,801

Reconciliation of Non-GAAP measures:

Nine Months Ended September 30, 2017

CAPP

NAPP

Trading and Logistics

All Other

Consolidated

Net income (loss) from continuing operations

$

128,584

$

41,855

$

17,203

$

(128,556)

$

59,086

Interest expense

(92)

(633)

—

28,805

28,080

Interest income

(8)

—

—

(108)

(116)

Income tax expense

—

—

—

7,440

7,440

Depreciation, depletion and amortization

13,447

11,206

—

639

25,292

Non-cash stock compensation expense

—

—

380

11,532

11,912

Mark-to-market adjustment - acquisition-related obligations

—

—

—

3,221

3,221

Gain on settlement of acquisition-related obligations

—

—

—

(9,200)

(9,200)

Secondary offering costs

—

—

—

4,499

4,499

Loss on early extinguishment of debt

—

—

—

38,701

38,701

Bargain purchase gain

—

—

—

(1,011)

(1,011)

Accretion expense

4,384

3,123

—

—

7,507

Amortization of acquired intangibles, net

—

—

49,111

—

49,111

Expenses related to Special Dividend

377

57

—

9,102

9,536

Adjusted EBITDA ^{(1) (2)}

$

146,692

$

55,608

$

66,694

$

(34,936)

$

234,058

⁽¹⁾ The Company's Adjusted EBITDA calculation has been modified to add back non-cash stock compensation expense to align with industry peer group methodology.

⁽²⁾ Pursuant to the PRB divestiture and classification as a discontinued operation, the Company is no longer presenting a PRB reporting segment. The former PRB reporting segment had Adjusted EBITDA of $33,289 for the nine months ended September 30, 2017.

Segment Information:

Nine Months Ended September 30, 2017

CAPP

NAPP

Trading and Logistics

All Other

Consolidated

Total revenues

$

369,600

$

243,605

$

683,558

$

562

$

1,297,325

Depreciation, depletion, and amortization

$

13,447

$

11,206

$

—

$

639

$

25,292

Amortization of acquired intangibles, net

$

—

$

—

$

49,111

$

—

$

49,111

Adjusted EBITDA

$

146,692

$

55,608

$

66,694

$

(34,936)

$

234,058

Capital expenditures

$

10,834

$

36,365

$

—

$

1,058

$

48,257

CONTURA ENERGY, INC. AND SUBSIDIARIES

RESULTS OF OPERATIONS

(Amounts in thousands, except per ton data)

Three Months Ended September 30,

Increase (Decrease)

(In thousands, except

for per ton data)

2018

2017

$ or Tons

%

Revenues:

Coal revenues:

Steam

$

51,010

$

60,684

$

(15.9)%

Met

300,954

258,494

42,460

16.4

%

Freight and handling fulfillment revenues

91,041

61,492

29,549

48.1

%

Other revenues

4,866

1,868

2,998

160.5

%

Total revenues

$

447,871

$

382,538

$

65,333

17.1

%