Cloud Peak Energy Inc. Announces Results for Second Quarter and First Six Months of 2011

02.08.2011  |  Business Wire

Cloud Peak Energy Inc. (NYSE:CLD), one of the largest U.S. coal
producers and the only pure-play Powder River Basin (PRB) coal company,
today announced results for the second quarter and first six months of
2011.

2011 Second Quarter and Six Months Highlights

• 
  Adjusted EBITDA¹ of $88.3 million in the second quarter of
  2011 compared with $88.6 million in the second quarter of 2010; Record
  Adjusted EBITDA of $170.9 million compared with $158.7 million for the
  first six months of 2010.
  
• 
  Net income of $94.6 million resulting in Adjusted EPS¹ of
  $0.72 compared to $0.51 in the second quarter of 2010; for the six
  months 2011 net income of $121.4 million resulting in Adjusted EPS of
  $1.16 compared to $0.84 in the first six months of 2010.
  
• 
  Diluted EPS of $1.56 compared to $0.51 in the second quarter of 2010;
  diluted EPS of $2.00 compared to $0.89 in the first six months of 2010.
  
• 
  Successfully bid on two federal coal leases that the BLM estimates to
  contain approximately 407 million tons of mineable coal. The
  acquisition of these leases will also provide access to an additional
  80 million tons of coal within an adjacent State of Wyoming coal lease
  that Cloud Peak Energy controls.
  
• 
  Asian export shipments were up approximately 85 percent to 1.4 million
  tons from second quarter of 2010 of 758,000 tons. For the first six
  months Asian exports were 2.3 million tons.
  
• 
  Increased revolving credit facility by $100 million to $500 million
  with improved pricing and increased financial flexibility.
  

¹ Defined later.

'Our second quarter was highlighted by our successful bids on the West
Antelope II North and South Coal Tracts that contain 407 million
mineable tons according to Bureau of Land Management (BLM) estimates.
Operationally, our mines performed well despite heavy rainfall in the
PRB, and we were able to load trains as available. Domestic shipments
were slightly lower due to the impact of flooding on the rail system.
Once again, we were able to increase our Asian exports which were up 85
percent over the second quarter of last year as demand from our
customers continues to be strong,? said Colin Marshall, President and
Chief Executive Officer.

For the second quarter, production from our three company-operated mines
was 22.9 million tons, down from 23.9 million tons in the second quarter
of 2010 due to the impact of flooding in the Midwestern United States,
which constrained rail services.

For the second quarter, Adjusted EBITDA declined slightly to $88.3
million, driven by lower volumes. Average revenue per ton increased to
$12.94. Average cost of product sold per ton was $9.23, higher than last
year due to lower volumes mined, increased taxes and royalties, higher
diesel prices, and a higher strip ratio. For the first six months, we
generated a record Adjusted EBITDA of $170.9 million from $158.7 million
for the same period in 2010 driven by strong export sales and higher
realized prices.

Health, Safety and Environment Record

During the first six months of 2011, of our approximately 1,550
employees, five suffered reportable injuries resulting in an MSHA All
Injury Frequency Rate of 0.70 for the first six months of 2011, an
increase over the full year 2010 rate of 0.58. We continue to focus on
the safety of all of our employees and contractors.

During the second quarter, floodwaters caused southern Montana residents
to be evacuated from their homes and sent to shelters in the Billings
area. Cloud Peak Energy was able to provide immediate support for over
2,000 displaced and isolated people in the form of water, food and other
necessities to assist in these relief efforts.

Balance Sheet and Cash Flow

Cash flow from operations totaled $38.7 million for second quarter 2011.
Capital expenditures were $24.7 million. Total coal lease acquisition
payments for the quarter were $79.0 million, of which $69.4 million were
initial payments for the successful West Antelope II North and South
bids, and $9.6 million was the third installment payment of the
previously awarded Maysdorf lease.

Unrestricted cash on hand as of June 30, 2011 was $326.7 million. Cloud
Peak Energy′s balance sheet is well positioned with total available
liquidity of $816.2 million as of June 30, 2011.

On June 3, 2011 we entered into an Amended and Restated Credit Agreement
which amended our existing credit facility. The new facility is for $500
million up from the previous $400 million. Loans under this facility
will bear interest at LIBOR plus an applicable margin of between 1.75
percent and 2.50 percent, depending on our leverage ratio. Additionally,
the annual undrawn fee is reduced from 75 basis points to 50 basis
points.

Coal Acquisitions

On May 11, 2011, we were the successful bidder for the lease sale of the
WAII North Coal Tract with a bid of $297.7 million, or approximately
$0.85 per ton, based on the BLM estimate of 350 million mineable tons.
We submitted a payment for $59.5 million on May 11, 2011, and four
additional payments in the same amount will be payable annually on the
anniversary of the lease effective date. On June 15, 2011, we were the
successful bidder for the lease sale of WAII South Coal Tract with a bid
of $49.3 million, or approximately $0.875 per ton, based on the BLM's
estimate of 56 million mineable tons. We submitted a payment for $9.9
million on June 15, 2011, and four additional payments in the same
amount will be payable annually on the anniversary of the lease
effective date. As previously disclosed, the West Antelope II Leases by
Application (LBA) are subject to pending legal challenges filed by
certain environmental organizations against the BLM and the Secretary of
the Interior.

The BLM estimates that these tracts together contain 407 million tons of
mineable coal. With the acquisition of the West Antelope II North lease,
we also gain access to an additional 80 million tons of coal in an
adjacent State of Wyoming coal lease that we already controlled but were
not previously included in our reserve estimates. These coal additions
are expected to significantly increase our year end reserve position and
the life of the Antelope mine.

The successful bids triggered an update of our estimates of Asset
Retirement Obligation and Tax Receivable Agreement liabilities. The
addition of the new leases extends the expected life of Antelope mine,
reducing the discounted value of its Asset Retirement Obligation by
$15.7 million, which is a credit to our depreciation and depletion
expense in the quarter.

The addition of the new leases also increased our estimates of future
taxable income. The increased amount of future taxable income will allow
Cloud Peak Energy Inc. to realize increased portions of the tax benefit
generated as a result of our 2009 IPO and 2010 Secondary Offering
transactions. This resulted in an increase in the undiscounted estimated
future liability due to Rio Tinto under the Tax Receivable Agreement,
resulting in a $42.7 million charge to non-operating income for the
three and six months ended June  30, 2011. This is a non-cash,
non-operating charge reflecting the change in the estimated liability
over the life of our mines. We recorded a corresponding increase in our
deferred tax asset of $15.4 million and we now expect to be able to
realize $78.2 million of expected tax benefits against which we had
previously recorded a valuation allowance. This resulted in a credit of
$93.6 million to income tax expense in the quarter.

Outlook

While the impact of disruptions to the rail transportation system due to
flooding and the pace of recovery will be clearer by the end of the
third quarter, currently our expected production from the three
company-operated mines for 2011 is unchanged at 93 million to 96 million
tons. Our 2011 production is essentially fully sold, consistent with our
sales strategy. Assuming constant prices of $14.25 per ton for 8800 Btu
quality coal and $11.75 per ton for 8400 Btu quality coal on our indexed
tons, the expected total realized price for 2011 would be approximately
$12.91 per ton. For 2012, we have currently contracted to sell 81
million tons from our three operated mines. Of this committed 2012
production, 69 million tons are under fixed-price contracts with a
weighted-average price of $13.22 per ton.

Total exports to our Asian customers in 2011 are now expected to be
between 4.0 and 4.5 million tons. Exports from the Spring Creek mine
through the Westshore terminal in Vancouver are expected to approximate
3.5 to 4.0 million tons this year, driven by the strong demand from the
company′s Asian utility customers. Additional export sales are expected
to be made through the Ridley terminal in Prince Rupert, British
Columbia. As previously disclosed, exports through the Ridley terminal
will incur significantly higher rail costs than through Westshore but do
allow additional Asian customers to gain experience burning Spring Creek
coal.

Updated Guidance ? 2011 Financial and Operational Estimates

The following table provides the company′s current outlook and
assumptions for selected 2011 financial and operational metrics:

Conference Call Details

A conference call with management is scheduled at 5:00 p.m. ET on August
2, 2011, to review the results and current business conditions. The call
will be web cast live over the Internet from the company′s Web site at www.cloudpeakenergy.com
under 'Investor Relations.? Participants should follow the instructions
provided on the Web site for downloading and installing the audio
applications necessary to join the web cast. Interested individuals also
can access the live conference call via telephone at 877-556-5921
(domestic) or 617-597-5474 (international) and entering pass code
50697278.

Following the live web cast, a replay will be available 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 46772884. 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 one of the largest U.S. coal producers and the only pure-play 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 1,550 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.

Cautionary Note Regarding Forward-Looking Statements

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
energy policies and other factors. Forward-looking statements may
include, for example, (1) our outlook for 2011 and future periods for
our company, PRB coal and the coal industry in general, and our 2011
operational and financial guidance; (2) anticipated economic conditions
and demand by domestic and foreign 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) business development and
growth initiatives; (7) operational plans for our mines; (8) our cost
management efforts; (9) industry estimates of the EIA and other third
party sources; (10) estimated Tax Receivable Agreement liabilities; and
(11) 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 terminal capacity 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 and energy policies 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) operational,
geological, equipment, permit, labor, weather-related and other risks
inherent in surface coal mining; (g) our ability to efficiently conduct
our mining operations, (h) transportation and export terminal
availability, performance and costs; (i) availability, timing of
delivery and costs of key supplies, capital equipment or commodities
such as diesel fuel, steel, explosives and tires; (j) 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, (k) access to capital and
credit markets and availability and costs of credit, surety bonds,
letters of credit, and insurance; (l) the impact of direct and indirect
competition from coal producers and competing sources of energy,
domestically and internationally; (m) litigation and other contingent
liabilities; and (n) 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 most recent Form 10-K and any updates thereto in our Forms 10-Q
and current reports on Forms 8-K. 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
measures of (1) Adjusted EBITDA and (2) Adjusted Earnings Per Share
('Adjusted EPS'). Adjusted EBITDA and Adjusted EPS are intended to
provide additional information only and do not have any standard meaning
prescribed by generally accepted accounting principles in the U.S., or
GAAP. A quantitative reconciliation of net income to Adjusted EBITDA and
EPS (as defined below) to Adjusted EPS is found in the tables
accompanying this release.

EBITDA represents net income before (1) interest income (expense) net,
(2) income tax provision, (3) depreciation and depletion, (4)
amortization, and (5) accretion. Adjusted EBITDA represents EBITDA as
further adjusted to exclude specifically identified items that
management believes do not directly reflect our core operations. The
specifically identified items are the income statement impacts, as
applicable, of: (1) the Tax Receivable Agreement and (2) our significant
broker contract that expired in the first quarter of 2010.

Adjusted EPS represents diluted earnings (loss) per share attributable
to controlling interest ('EPS'), adjusted to exclude the estimated per
share impact of the same specifically identified items used to calculate
Adjusted EBITDA and described above.

Adjusted EBITDA is an additional tool intended to assist our management
in comparing our performance on a consistent basis for purposes of
business decision-making by removing the impact of certain items that
management believes do not directly reflect our core operations.
Adjusted EBITDA is a metric intended to assist management in evaluating
operating performance, comparing performance across periods, planning
and forecasting future business operations and helping determine levels
of operating and capital investments. Period-to-period comparisons of
Adjusted EBITDA are intended to help our management identify and assess
additional trends potentially impacting our company that may not be
shown solely by period-to-period comparisons of net income. Adjusted
EBITDA is also used as part of our incentive compensation program for
our executive officers and others.

We believe Adjusted EBITDA and Adjusted EPS are also useful to
investors, analysts and other external users of our consolidated
financial statements in evaluating our operating performance from period
to period and comparing our performance to similar operating results of
other relevant companies. Adjusted EBITDA allows investors to measure a
company's operating performance without regard to items such as interest
expense, taxes, depreciation and depletion, amortization and accretion
and other specifically identified items that are not considered to
directly reflect our core operations. Similarly, we believe our use of
Adjusted EPS provides an appropriate measure to use in assessing our
performance across periods given that this measure provides an
adjustment for certain specifically identified significant items that
are not considered to directly reflect our core operations, the
magnitude of which may vary drastically from period to period and,
thereby, have a disproportionate effect on the earnings per share
reported for a given period.

Our management recognizes that using Adjusted EBITDA and Adjusted EPS as
performance measures has inherent limitations as compared to net income,
EPS or other GAAP financial measures, as these non-GAAP measures exclude
certain items, including items that are recurring in nature, which may
be meaningful to investors. Adjusted EBITDA and Adjusted EPS should not
be considered in isolation and do not purport to be alternatives to net
income, EPS or other GAAP financial measures as a measure of our
operating performance. Because not all companies use identical
calculations, our presentations of Adjusted EBITDA and Adjusted EPS may
not be comparable to other similarly titled measures of other companies.
Moreover, our presentation of Adjusted EBITDA is different than EBITDA
as defined in our debt financing agreements.