1 Represents only the three company operated mines
Excluding the impact of the broker contract that expired in the first
quarter 2010, second quarter 2010 EBITDA of $88.6 million was $3 million
higher than the prior year. The increase was due to improved volumes and
pricing, partially offset by higher costs per ton. Cash generated from
operations in the quarter was $50.5 million and capital expenditures
were $7.5 million (including the LBM awarded at Spring Creek mine).
Capital expenditures continued to run lower than planned largely due to
timing differences as certain of our capital expenditure is spent in
large tranches and its timing can be variable.
Average revenue per ton of coal sold from the company-operated mines in
the second quarter of 2010 increased to $12.20 from $12.00. Costs were
$8.37 per ton, compared to $7.89 per ton in the same period of 2009. The
increase in unit costs was primarily due to a low oil price in early
2009, which benefited us with low diesel costs for that period.
Production from the three company operated mines in the second quarter
of 2010 was 23.9 million tons compared to 21.8 million tons for the
second quarter 2009. The increase was due to increased domestic demand
for PRB coal, following last year′s downturn and catch up from low
shipments in the first quarter of 2010 that were impacted by weather
related disruptions to rail and our utility customers. Additional demand
for exported coal from Asian utilities allowed exports to increase.
Marshall said, 'We are pleased that we were able to execute so well this
quarter. Operationally, the performance at the mines was excellent;
equipment ran well and we were able to take advantage of some of the
pre-stripping we completed in the first quarter when shipments were
slow. Unlike this time last year, our customers′ demand is strong and
has caught up after a slower first quarter to bring us onto a good
annual pace for shipments at the end of the first six months.?
Export volume was 760,000 tons in the second quarter and 1.5 million
tons for the first six months of 2010 compared to 1.6 million tons for
the full year 2009. We continue to see future export demand and prices
strengthen and expect the second half of the year to be even stronger.
Export volumes are now anticipated to exceed 3 million tons this year.
During the first six months of 2010, Cloud Peak Energy reported $652.6
million in revenue, $167.0 million in EBITDA, $67.9 million in income
from continuing operations, and $0.89 diluted earnings per share from
continuing operations. In the first six months of 2009 the company
reported $704.0 million in revenue, $200.3 million in EBITDA, and $94.8
million in income from continuing operations, and $1.58 diluted earnings
per share from continuing operations. The first six months of 2009 had
the full benefit of a significant broker sales contract that ended
during the first quarter of 2010, which contributed $67.1 million in
revenue and $36.4 million in EBITDA to the first six months of 2009 and
$14.4 million in revenue and $8.3 million in EBITDA for the first six
months of 2010.
Health, Safety and Environment Record
The company′s All Injury Frequency Rate (AIFR) for the first six months
of 2010 was 0.62, which included four low severity incidents in the
second quarter. According to Mine Safety and Health Administration
(MSHA) data, Cloud Peak Energy had the lowest 2009 AIFR among the ten
largest U.S. coal producers of 0.66. There have been no reportable
injuries to any contractors working on our mine sites during 2010 which
is a significant achievement as contractors historically have a higher
injury rate. Additionally, the company′s three operated mines have not
received notice of any environmental violations under the Surface Mining
Control and Reclamation Act (SMCRA) since October 2002.
Balance Sheet
Unrestricted cash on hand as of June 30, 2010, was $249.6 million. We
increased our restricted cash, which secures a portion of the company′s
future reclamation obligations, by $41.9 million to $218.3 million at
the end of the second quarter of 2010. Using cash as collateral instead
of letters of credit has allowed us to reduce the cost of securing
future reclamation obligations. As of June 30, 2010, we committed $10.5
million under the company′s $400 million credit facility in connection
with the issuance of letters of credit to secure reclamation
obligations. Cloud Peak Energy′s balance sheet is well positioned with
total available liquidity of almost $640 million as of June 30, 2010.
The company′s long-term debt as of June 30, 2010, net of original issue
discount, was $595 million for the senior notes, plus other long-term
debt of $171 million (including the current portion) primarily
reflecting the company′s discounted payment obligations under federal
coal leases.
Marshall stated, 'The good operational performance translated to strong
cash generation in the first half of 2010. We continue to build our cash
position as planned to enable us to fund additional coal leases, invest
in our existing business and pursue new growth opportunities. Our
proportionally low long-term liabilities, both reclamation and employee
related, combined with availability under our revolving credit facility,
further enhance our balance sheet strength.?
Outlook
For the domestic U.S. coal market, the second quarter of 2010
experienced a strong recovery from the same period a year ago. Several
factors contributed to this; overall electricity demand is recovering,
the warm summer is having an impact, higher natural gas prices are
reducing fuel switching, and increased exports are reducing domestic
supply.
Overall coal stockpiles are expected to reduce this summer from their
high levels of last year. More importantly for Cloud Peak Energy,
stockpiles of PRB coal are already well below their 2009 levels. Our
customers are indicating they will be taking all their contracted tons
this year raising our expectation for the minimum level of our 2010
shipments. Due to many regulatory, environmental and operational issues
within other coal basins, several U.S. utilities are expanding the range
of coal types to include PRB coal in their recent requests for
proposals. This is a trend we would expect to continue as reduced
eastern production and increased exports lead to a need to source
alternative coal. Cloud Peak Energy is well placed to benefit from this
trend.
'We are also encouraged by the increased demand from our growing number
of Asian utility customers. Our Spring Creek mine is well positioned to
expand the export market for PRB coal,? said Marshall. 'Coal from the
Spring Creek mine has favorable energy content and shorter haul than
other PRB mines and with our strengthening relationships with Asian
customers, we have a valuable opportunity to incrementally grow this
business dependent on export terminal capacity.?
For 2010, we are completely contracted for all our planned production
and will remain focused on safely managing our costs and shipping the
contracted coal. Of our 2010 planned production, 98 percent is committed
under fixed price contracts. Given our forecasts for the pricing of the
remaining 2 percent index contracts, we estimate that the average
realized price will be between $12.30 and $12.45 per ton for the full
year 2010. For 2011, we have currently contracted 80 million tons from
our three operated mines. Of this committed 2011 production, 66 million
tons are under fixed price contracts. Assuming recent forward pricing
for indexed and uncommitted tons, our estimated 2011 full-year average
realized price will be around $12.80 per ton.
'As the economy continues to recover, eastern coal production decreases
and exports increase, demand for PRB coal is expected to grow to
backfill the needs of many U.S. utilities. That increase plus our
expanded export business allow us to feel more confident about our
business for the foreseeable future. Our sales strategy is to enter each
year with our expected production essentially fully sold, which has
consistently proven to be a prudent and profitable approach. We are
comfortable with our current contracted position for 2011 and, as
growing demand improves the price for coal, we will seek to contract our
unsold coal for 2011, 2012 and 2013 at higher levels,? said Marshall.
Marshall continued, 'It is great to be able to report such a strong
second quarter when all our operations ran smoothly and a number of
external factors moved in our favor. While there is still a long way to
go this year our expectations for operating costs, minimum shipments and
exports have improved as reflected in our full year guidance.?
Updated Guidance - 2010 Financial and Operational Estimates
The following table provides the company′s current outlook and
assumptions for selected 2010 financial and operational metrics:
Item
Estimate or Estimated Range
Coal production for our three operated mines
91 ? 93 million tons
Committed sales with fixed prices
98% of estimated 2010 production
Anticipated realized price of produced coal
$12.30 to $12.45 per ton
Average cost of produced coal1
$8.45 - $9.00 per ton
Additional operating income 2
$25 - $35 million
Selling, general and administrative expenses
$60 - $70 million
Interest expense
$50 - $60 million
Depreciation, depletion, amortization and accretion
$110 - $125 million
Effective income tax rate3
16% - 20%
Capital expenditures (excludes federal coal leases)
$50 - $70 million
Committed federal coal lease cash payments
$64 million
1 Represents average Cost of Product Sold for produced coal for our
three operated mines.
2 Does not include $8.3 million contribution for first quarter 2010 from
one significant broker sales contract.
3 The company′s effective income tax rate is expected to be lower than
the federal statutory rate of 35 percent primarily because Cloud Peak
Energy Inc., the publicly traded parent company, provides for tax only
on its controlling 51.7 percent share of income from Cloud Peak Energy
Resources LLC.
Following the live web cast, a replay will be available at the same URL
on the company's Web site for seven days. A telephonic replay will also
be available approximately two hours after the call and can be accessed
by dialing 888-286-8010 (domestic) or 617-801-6888 (international) and
entering pass code 54878133. The telephonic replay will be available for
seven days.
About Cloud Peak Energy?
Cloud Peak Energy Inc. (NYSE:CLD) is headquartered in Wyoming and
is the third largest U.S. coal producer and the only pure-play Powder
River Basin (PRB) coal company. As one of the safest coal producers in
the nation, Cloud Peak Energy specializes in the production of low
sulfur, subbituminous coal. The company owns and operates three surface
coal mines in the PRB, the lowest cost major coal producing region in
the nation. The Antelope and Cordero Rojo mines are located in Wyoming
and the Spring Creek Mine is located near Decker, Montana. With
approximately 1,500 employees, the company is widely recognized for its
exemplary performance in its safety and environmental programs. Cloud
Peak Energy is a sustainable fuel supplier for approximately 4 percent
of the nation′s electricity.
This release and our related presentation contain 'forward-looking
statements' within the meaning of the safe harbor provisions of Section
27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Forward-looking statements are not statements of
historical facts and often contain words such as 'may,' 'will,'
'expect,' 'believe,' 'anticipate,' 'plan,' 'estimate,' 'seek,' 'could,'
'should,' 'intend,' 'potential,' or words of similar meaning.
Forward-looking statements are based on management's current
expectations or beliefs, as well as assumptions and estimates regarding
our company, industry, economic conditions, government regulations and
other factors. Forward-looking statements may include, for example, (1)
our outlook for 2010 and future periods for our company, PRB coal and
the coal industry in general, and our 2010 operational and financial
guidance; (2) anticipated improvements in overall economic conditions
and demand by utilities; (3) prices for natural gas and other
alternative sources of energy used to generate electricity; (4) coal
stockpile levels and the impacts on future demand; (5) our plans to
replace and/or grow our coal tons; (6) operational plans for our mines;
(7) our cost management efforts; (8) industry estimates of the EIA and
other third party sources; (9) our transition to a stand-alone public
company and related costs; and (10) other statements regarding our
plans, strategies, prospects and expectations concerning our business,
operating results, financial condition and other matters that do not
relate strictly to historical facts. These statements are subject to
significant risks, uncertainties and assumptions that are difficult to
predict and could cause actual results to differ materially from those
expressed or implied in the forward-looking statements. Factors that
could adversely affect our future results include, for example, (a)
future economic conditions; (b) demand for our coal by the domestic
electric generation industry, export demand and the price we receive for
our coal; (c) reductions or deferrals of purchases by major customers
and our ability to renew sales contracts; (d) environmental, health,
safety, endangered species or other legislation, regulations, court
decisions or government actions, or related third-party regulatory legal
challenges, including any new requirements affecting the use, demand or
price for coal or imposing additional costs, liabilities or restrictions
on our mining operations; (e) public perceptions, third-party regulatory
legal challenges or governmental actions relating to concerns about
climate change, including emissions restrictions and governmental
subsidies that make wind, solar or other alternative fuel sources more
cost-effective and competitive with coal; (f) the impact of our IPO
structuring and financing transactions and ability to successfully
operate as a stand-alone public company; (g) operational, geological,
equipment, permit, labor, weather-related and other risks inherent in
surface coal mining; (h) our ability to efficiently conduct our mining
operations, (i) transportation availability, performance and costs; (j)
availability, timing of delivery and costs of key supplies, capital
equipment or commodities such as diesel fuel, steel, explosives and
tires; (k) our ability to acquire future coal tons through the federal
LBA process and necessary surface rights in a timely and cost-effective
manner and the impact of third-party regulatory legal challenges, (l)
access to capital and credit markets and availability and costs of
credit, surety bonds, letters of credit, and insurance; (m) the impact
of direct and indirect competition from coal producers and competing
sources of energy; (n) litigation and other contingent liabilities; and
(o) other risk factors described from time to time in the reports and
registration statements we file with the Securities and Exchange
Commission ('SEC'), including those in Item 1A - Risk Factors in our
2009 Form 10-K and any updates thereto in our Forms 10-Q. There may be
other risks and uncertainties that are not currently known to us or that
we currently believe are not material. We make forward-looking
statements based on currently available information, and we assume no
obligation to, and expressly disclaim any obligation to, update or
revise publicly any forward-looking statements made in this release or
our related presentation, whether as a result of new information, future
events or otherwise, except as required by law.
Non-GAAP Financial Measures
This release and our related presentation include the non-GAAP financial
measure of EBITDA. EBITDA, a performance measure used by management, is
defined as income (loss) from continuing operations plus: (1) interest
expense (net of interest income), (2) income tax provision, (3)
depreciation and depletion, (4) amortization, and (5) accretion. EBITDA
is not defined under generally accepted accounting principles in the
U.S., or GAAP, and does not purport to be an alternative to net income
or other GAAP financial measures as a measure of operating performance.
Because not all companies use identical calculations, our presentation
of EBITDA may not be comparable to other similarly titled measures of
other companies. Our presentation of EBITDA may be different than EBITDA
as defined in our debt financing agreements. We believe EBITDA is useful
to investors and other external users of our consolidated financial
statements as an additional tool to evaluate and compare our operating
performance, because EBITDA is widely used by investors to measure a
company's operating performance without regard to items such as interest
expense, taxes, depreciation and depletion, amortization and accretion,
which can vary substantially from company to company depending upon
accounting methods and book value of assets, capital structure and the
method by which assets were acquired. However, using EBITDA as a
performance measure has material limitations as compared to net income,
or other financial measures as defined under GAAP, as it excludes
certain recurring items which may be meaningful to investors. EBITDA is
also used as a performance measure in our compensation program for our
executives. A quantitative reconciliation of EBITDA to income from
continuing operations is found in the tables accompanying this release.
CLOUD PEAK ENERGY INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except share and per share data)
Three Months Ended June 30,
Six Months Ended June 30,
2010
2009
2010
2009
Revenues
$ 341,603
$ 343,552
$ 652,596
$ 704,045
Costs and expenses
Cost of product sold (exclusive of depreciation, depletion,
amortization and accretion, shown separately)
240,173
225,647
456,841
474,819
Depreciation and depletion
25,508
22,493
49,215
44,336
Amortization
?
7,741
3,197
16,251
Accretion
3,248
2,733
6,566
5,457
Selling, general and administrative expenses
14,368
15,407
30,645
29,511
Total costs and expenses
283,297
274,021
546,464
570,374
Operating income
58,306
69,531
106,132
133,671
Other income (expense)
Interest income
132
82
227
142
Interest expense
(12,006
)
(477
)
(24,782
)
(946
)
Other, net
39
39
39
65
Total other expense
(11,835
)
(356
)
(24,516
)
(739
)
Income from continuing operations before income tax provision
and earnings from unconsolidated affiliates
46,471
69,175
81,616
132,932
Income tax provision
(8,777
)
(19,959
)
(15,500
)
(38,632
)
Earnings from unconsolidated affiliates, net of tax
1,476
407
1,816
478
Income from continuing operations
39,170
49,623
67,932
94,778
Income from discontinued operations, net of tax
?
10,793
?
22,447
Net income
39,170
60,416
67,932
117,225
Less: Net income attributable to noncontrolling interest
23,312
?
40,477
?
Net income attributable to controlling interest
$ 15,858
$ 60,416
$ 27,455
$ 117,225
Amounts attributable to controlling interest common shareholders:
Income from continuing operations
$ 15,858
$ 49,623
$ 27,455
$ 94,778
Income from discontinued operations
?
10,793
?
22,447
Net income
$ 15,858
$ 60,416
$ 27,455
$ 117,225
Earnings per common share attributable to controlling interest:
Basic
Income from continuing operations
$ 0.52
$ 0.83
$ 0.90
$ 1.58
Income from discontinued operations
?
0.18
?
0.37
Net income
$ 0.52
$ 1.01
$ 0.90
$ 1.95
Weighted-average shares outstanding ? basic
30,600,000
60,000,000
30,600,000
60,000,000
Diluted
Income from continuing operations
$ 0.51
$ 0.83
$ 0.89
$ 1.58
Income from discontinued operations
?
0.18
?
0.37
Net income
$ 0.51
$ 1.01
$ 0.89
$ 1.95
Weighted-average shares outstanding ? diluted
60,140,222
60,000,000
60,120,173
60,000,000
CLOUD PEAK ENERGY INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share and per share data)
June 30, 2010
December 31, 2009
ASSETS
Current assets
Cash and cash equivalents
$ 249,562
$ 268,316
Restricted cash
218,345
80,180
Accounts receivable, net
77,944
82,809
Due from related parties
1,949
8,340
Inventories
68,461
64,199
Deferred income taxes
280
280
Other assets
20,122
7,321
Total current assets
636,663
511,445
Property, plant and equipment, net
957,711
987,143
Intangible assets, net
?
3,197
Goodwill
35,634
35,634
Deferred income taxes
84,460
100,520
Other assets
39,341
39,657
Total assets
$ 1,753,809
$ 1,677,596
LIABILITIES AND EQUITY
Current liabilities
Accounts payable
$ 49,917
$ 57,304
Royalties and production taxes
116,096
102,912
Accrued expenses
46,518
47,763
Current portion of tax agreement liability
758
758
Current portion of other long-term debt
55,881
55,282
Total current liabilities
269,170
264,019
Tax agreement liability, net of current portion
53,751
53,751
Senior notes
595,500
595,321
Other long-term debt, net of current portion
115,588
123,085
Asset retirement obligations, net of current portion
179,601
175,940
Other liabilities
22,779
20,002
Total liabilities
1,236,389
1,232,118
Equity
Common stock ($0.01 par value; 200,000,000 shares authorized;
31,501,676 and 31,449,002 shares issued and outstanding at
June 30, 2010 and December 31, 2009, respectively)
315
314
Additional paid-in capital
254,627
251,083
Retained earnings
36,080
8,459
Accumulated other comprehensive loss
(6,696)
(6,951)
Total Cloud Peak Energy Inc. shareholders′ equity
284,326
252,905
Noncontrolling interest
233,094
192,573
Total equity
517,420
445,478
Total liabilities and equity
$ 1,753,809
$ 1,677,596
CLOUD PEAK ENERGY INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
Six Months Ended June 30,
2010
2009
Cash flows from continuing operations
Operating activities
Income from continuing operations
$ 67,932
$ 94,778
Adjustments to reconcile income from continuing operations to net
cash provided by operating activities from continuing
operations:
Depreciation and depletion
49,215
44,336
Amortization
3,197
16,251
Accretion
6,566
5,457
Earnings from unconsolidated affiliates
(1,816
)
(478
)
Distributions of income from equity investments
15
4,000
Deferred income taxes
15,500
(5,182
)
Stock compensation expense
3,545
460
Other, net
2,296
230
Changes in operating assets and liabilities:
Accounts receivable, net
4,865
1,137
Inventories
(4,238
)
(5,971
)
Due to or from related parties
6,391
58,873
Other assets
(12,823
)
221
Accounts payable and accrued expenses
(3,447
)
26,940
Asset retirement obligations
(2,685
)
(1,287
)
Net cash provided by operating activities from continuing
operations
134,513
239,765
Investing activities
Purchases of property, plant and equipment
(8,511
)
(69,358
)
Return of restricted cash
80,180
?
Restricted cash deposit
(218,345
)
?
Proceeds from sales of assets
471
71
Cash advances to affiliate
?
(175,961
)
Net cash used in investing activities from continuing operations
(146,205
)
(245,248
)
Financing activities
Repayments on other long-term debt
(6,898
)
(27,751
)
Distributions to Rio Tinto America
(164
)
(241
)
Net cash used in financing activities from continuing operations
(7,062
)
(27,992
)
Net cash used in continuing operations
(18,754
)
(33,475
)
Cash flows from discontinued operations
Net cash from operating activities
?
42,278
Net cash from investing activities
?
(5,124
)
Net cash provided by discontinued operations
?
37,154
Net increase (decrease) in cash and cash equivalents
