Second Quarter 2018 Highlights:
- Coal sales of nearly $270.0 million,
an increase of 32% compared to the second quarter 2017, on higher
sales volumes of 5.9 million tons and higher sales realization per
ton sold.
- Adjusted EBITDA of $104.1
million.
- Cash flows from operations of $30.6
million.
- Net loss attributable to limited
partner units of $29.2 million, or ($0.18) per common unit and
($0.23) per subordinated unit, which includes a $110.7 million
non-cash impairment charge and a $69.1 million non-cash contract
benefit related to the previously announced closure of Hillsboro
operations.
- Declared a $0.0565 per unit
distribution from retained excess cash flow generated in 2017, to
be paid on August 31, 2018 to unitholders of record as of August
21, 2018.
Foresight Energy LP (“Foresight” or the “Partnership”) (NYSE:
FELP) today reported financial and operating results for the second
quarter ended June 30, 2018. Foresight generated coal sales
revenues of nearly $270.0 million on sales volumes of 5.9
million tons resulting in a net loss attributable to limited
partner units of $29.2 million, Adjusted EBITDA of $104.1 million,
and cash flows from operations of $30.6 million. Net loss
attributable to limited partner units reflects the receipt of $44.1
million of insurance proceeds related to the combustion event at
the Partnership’s Hillsboro operation and includes a $110.7 million
non-cash impairment charge and a $69.1 million non-cash contract
benefit related to the previously announced closure of the
Partnership’s Hillsboro operation.
“The second quarter was another successful period for Foresight,
as we were able to take advantage of a strong export market to
realize significant year-over-year improvements in our sales
volumes,” said Mr. Robert D. Moore, Chairman, President and Chief
Executive Officer. “Foresight remains well-positioned to continue
capitalizing on the strong export market for our product.
Furthermore, with all of our calendar year 2018 longwall moves
completed, we expect to continue to improve on our industry-leading
cost structure over the remainder of the year.”
Foresight also announced that due to the Partnership’s operating
performance during the second quarter, the Board of Directors of
its General Partner approved a quarterly cash distribution of
$0.0565 per unit from retained excess cash flow. The distribution
is payable on August 31, 2018 for unitholders of record on
August 21, 2018.
Second Quarter Consolidated Financial Results
Coal sales totaled nearly $270.0 million for the second quarter
2018 compared to $204.5 million for the second quarter 2017,
representing an increase of $65.5 million, or 32%. The increase in
coal sales revenues was due to higher coal sales volumes combined
with higher coal sales realization per ton sold. Coal sales volumes
and coal sales realization per ton sold were higher due to
increased export sales, which experienced more favorable API2
pricing during 2018.
Cost of coal produced was $137.0 million, or $23.70 per ton
sold, for the second quarter 2018 compared to $105.8 million, or
$21.88 per ton sold, for the second quarter 2017. The increase was
due to an increase in produced tons sold as well as a higher cash
cost per ton sold resulting primarily from increased expenses
relating to royalties, subsidence, and two longwall moves during
the second quarter. The higher royalty and subsidence expenses are
functions of which coal reserve leases and land parcels that we
currently mine. Royalty expense also increased because of higher
coal sales realizations per ton.
Transportation costs increased approximately $30.7 million from
the second quarter 2017 to the second quarter 2018 due to a higher
percentage of sales going to the export market during the current
year period and the additional transportation and transloading
costs associated therewith.
In April 2018, the permanent closure of the Hillsboro complex
was announced. As a result, Foresight recorded an aggregate
impairment charge of $110.7 million in the second quarter of 2018.
Also related to the permanent closure of Hillsboro, Foresight
recognized a benefit of $69.1 million associated with the write-off
of an unfavorable royalty agreement during the second quarter of
2018.
Other operating (income) expense, net increased $29.5 million
for the second quarter 2018 compared to the second quarter 2017
primarily due to the receipt of $43.0 million in payments from the
insurance companies in the current period compared to $12.8 million
in the prior year period. An additional $1.1 million of insurance
proceeds related to the recovery of mitigation costs was recorded
to cost of coal produced (excluding depreciation, depletion and
amortization). Foresight continues to pursue additional remedies
under its insurance policies; however, there can be no assurances
that Foresight will receive any further insurance recoveries
related to the Hillsboro combustion event.
During second quarter 2018, Foresight generated operating cash
flows of $30.6 million and ended the period with $38.8 million in
cash and $124.0 million of available borrowing capacity, net of
outstanding borrowings and letters of credit, under its revolving
credit facility. Capital expenditures for the quarter ended June
30, 2018 totaled $15.7 million compared to $21.7 million for the
quarter ended June 30, 2017.
Guidance for 2018
Based on Foresight’s remaining contracted position, second
quarter and year-to-date performance, and its current outlook on
pricing and the coal markets in general, the Partnership is
affirming and updating the following guidance for 2018:
Sales Volumes – Based on current committed position and
expectations for the remainder of 2018, Foresight is projecting
sales volumes to be between 22.0 and 22.8 million tons, with at
least 8.5 million tons expected to be sold into the international
market.
Adjusted EBITDA – Based on the projected sales volumes and
operating cost structure, Foresight currently expects to generate
Adjusted EBITDA in a range of $300 to $330 million.
Capital Expenditures – Total 2018 capital expenditures are
estimated to be between $70 and $80 million.
Forward-Looking Statements
This press release contains “forward-looking” statements within
the meaning of the federal securities laws. These statements
contain words such as “possible,” “intend,” “will,” “if” and
“expect” and can be impacted by numerous factors, including risks
relating to the securities markets, the impact of adverse market
conditions affecting business of the Partnership, adverse changes
in laws including with respect to tax and regulatory matters and
other risks. There can be no assurance that actual results will not
differ from those expected by management of the Partnership. Known
material factors that could cause actual results to differ from
those in the forward-looking statements are described in Part I,
“Item 1A. Risk Factors” of the Partnership’s Annual Report on Form
10-K filed on March 7, 2018. The Partnership undertakes
no obligation to update or revise such forward-looking statements
to reflect events or circumstances that occur, or which the
Partnership becomes aware of, after the date hereof.
Non-GAAP Financial Measures
Adjusted EBITDA is a non-GAAP supplemental financial measure
that management and external users of the Partnership’s
consolidated financial statements, such as industry analysts,
investors, lenders and rating agencies, may use to assess:
- the Partnership’s operating performance
as compared to other publicly traded partnerships, without regard
to historical cost basis or, in the case of Adjusted EBITDA,
financing methods;
- the Partnership’s ability to incur and
service debt and fund capital expenditures;
- and the viability of acquisitions and
other capital expenditure projects and the returns on investment of
various expansion and growth opportunities.
The Partnership defines Adjusted EBITDA as net income (loss)
attributable to controlling interests before interest, income
taxes, depreciation, depletion, amortization and accretion.
Adjusted EBITDA is also adjusted for equity-based compensation,
losses/gains on commodity derivative contracts, settlements of
derivative contracts, a change in the fair value of the warrant
liability and material nonrecurring or other items, which may not
reflect the trend of future results. As it relates to commodity
derivative contracts, the Adjusted EBITDA calculation removes the
total impact of derivative gains/losses on net income (loss) during
the period and then adds/deducts to Adjusted EBITDA the amount of
aggregate settlements during the period. Adjusted EBITDA also
includes any insurance recoveries received, regardless of whether
they relate to the recovery of mitigation costs, the receipt of
business interruption proceeds, or the recovery of losses on
machinery and equipment.
The Partnership believes the presentation of Adjusted EBITDA
provides useful information to investors in assessing the
Partnership’s financial condition and results of operations.
Adjusted EBITDA should not be considered an alternative to net
(loss) income, operating income, cash flow from operations, or any
other measure of financial performance presented in accordance with
U.S. GAAP, nor should Adjusted EBITDA be considered an alternative
to operating surplus, adjusted operating surplus or other
definitions in the Partnership’s partnership agreement. Adjusted
EBITDA has important limitations as an analytical tool because it
excludes some, but not all, of the items that affects net (loss)
income. Additionally, because Adjusted EBITDA may be defined
differently by other companies in the industry, and the
Partnership’s definition of Adjusted EBITDA may not be comparable
to similarly titled measures of other companies, the utility of
such a measure is diminished. For a reconciliation of Adjusted
EBITDA to net loss, please see the table below.
This press release references forward-looking estimates of
Adjusted EBITDA projected to be generated by the Partnership during
the year ending December 31, 2018. A reconciliation of estimated
2018 Adjusted EBITDA to U.S. GAAP net income (loss) is not provided
because U.S. GAAP net income (loss) for the projection period is
not practical to assess due to unknown variables and uncertainty
related to future results. In recent years, the Partnership has
recognized significant asset impairment charges, transition and
reorganization costs, losses on early extinguishment of debt, and
debt restructuring costs. While these items affect U.S. GAAP net
income (loss), they are generally excluded from Adjusted EBITDA.
Therefore, these items do not materially impact the Partnership’s
ability to forecast Adjusted EBITDA.
About Foresight Energy LP
Foresight is a leading producer and marketer of thermal coal
controlling over 1.7 billion tons of coal reserves in the Illinois
Basin. Foresight currently operates two longwall mining complexes
with three longwall mining systems (Williamson (one longwall mining
system) and Sugar Camp (two longwall mining systems)), one
continuous mining operation (Macoupin) and the Sitran river
terminal on the Ohio River. Foresight’s operations are
strategically located near multiple rail and river transportation
access points, providing transportation cost certainty and
flexibility to direct shipments to the domestic and international
markets. Foresight also owns coal interests and mining assets
located in southeastern Ohio.
1 Foresight adopted pushdown accounting as of March 31, 2017 as
a result of Murray Energy obtaining control of its general partner.
As required by pushdown accounting, the Partnership revalued its
balance sheet on the change of control date and therefore certain
financial statement line items are not comparable to prior periods.
As such, operational results prior to March 31, 2017 were recorded
on the predecessor financial statements (the “Predecessor”).
Operational results subsequent to March 31, 2017 were recorded on
the successor financial statements (the “Successor”).
Foresight Energy LP Unaudited
Condensed Consolidated Balance Sheets
(In Thousands)
(Successor) (Successor) June 30,
December 31, 2018 2017 Assets Current
assets: Cash and cash equivalents $ 38,760 $ 2,179 Accounts
receivable 27,242 35,158 Due from affiliates 49,908 37,685
Financing receivables - affiliate 3,262 3,138 Inventories, net
44,678 40,539 Prepaid royalties — 4,000 Deferred longwall costs
20,427 9,520 Other prepaid expenses and current assets 7,243 10,844
Contract-based intangibles 1,867 11,268 Total current
assets 193,387 154,331 Property, plant, equipment and development,
net 2,203,885 2,378,605 Due from affiliates — 947 Financing
receivables - affiliate 62,434 64,097 Prepaid royalties, net 2,096
1,250 Other assets 4,087 5,358 Contract-based intangibles
1,389 2,052 Total assets $ 2,467,278 $ 2,606,640
Liabilities and partners’ capital Current liabilities:
Current portion of long-term debt and capital lease obligations $
50,449 $ 109,532 Current portion of sale-leaseback financing
arrangements 4,907 4,148 Accrued interest 24,258 13,410 Accounts
payable 88,081 76,658 Accrued expenses and other current
liabilities 65,575 62,442 Asset retirement obligations 4,416 4,416
Due to affiliates 24,909 13,324 Contract-based intangibles
20,275 28,688 Total current liabilities 282,870 312,618
Long-term debt and capital lease obligations 1,221,776 1,205,000
Sale-leaseback financing arrangements 194,118 196,496 Asset
retirement obligations 51,583 39,655 Other long-term liabilities
29,383 32,330 Contract-based intangibles 71,220
144,715 Total liabilities 1,850,950 1,930,814 Limited partners'
capital: Common unitholders (79,921 and 77,644 units outstanding as
of June 30, 2018 and December 31, 2017, respectively) 388,575
421,161 Subordinated unitholder (64,955 units outstanding as of
June 30, 2018 and December 31, 2017) 227,753 254,665
Total partners' capital 616,328 675,826 Total
liabilities and partners' capital $ 2,467,278 $ 2,606,640
Foresight Energy
LP Unaudited Condensed Consolidated Statements of
Operations
(In Thousands, Except Per Unit
Data)
(Successor) (Successor) (Successor)
(Successor) (Predecessor)
Three Months
Ended
June 30, 2018
Three Months
Ended
June 30, 2017
Six Months
Ended
June 30, 2018
Period From
April 1, 2017
through
June 30, 2017
Period From
January 1,
2017
through
March 31,
2017
Revenues: Coal sales $ 269,992 $ 204,516 $ 508,379 $ 204,516 $
227,813 Other revenues 1,430 2,577 3,769
2,577 2,581 Total revenues 271,422 207,093 512,148
207,093 230,394 Costs and expenses: Cost of coal produced
(excluding depreciation, depletion and amortization) 136,982
105,790 257,552 105,790 117,762 Cost of coal purchased 3,906 —
5,657 — 7,973 Transportation 59,034 28,258 105,477 28,258 37,726
Depreciation, depletion and amortization 55,312 49,537 106,732
49,537 39,298 Contract amortization and write-off (70,424 ) 8,733
(71,844 ) 8,733 — Accretion on asset retirement obligations 559 728
1,290 728 710 Selling, general and administrative 10,534 7,277
18,309 7,277 6,554 Long-lived asset impairments 110,689 — 110,689 —
— Loss on commodity derivative contracts — 1,117 — 1,117 1,492
Other operating (income) expense, net (42,983 )
(13,490 ) (43,631 ) (13,490 ) 451 Operating
income 7,813 19,143 21,917 19,143 18,428 Other expenses: Interest
expense, net 37,035 35,420 72,708 35,420 43,380 Change in fair
value of warrants — — — — (9,278 ) Loss on early extinguishment of
debt — — — — 95,510 Net loss $
(29,222 ) $ (16,277 ) $ (50,791 ) $ (16,277 ) $ (111,184 )
Net loss available to limited partner units - basic and diluted:
Common unitholders $ (14,090 ) $ (8,790 ) $ (23,879 ) $ (8,790 ) $
(56,259 ) Subordinated unitholder $ (15,132 ) $ (7,487 ) $ (26,912
) $ (7,487 ) $ (54,925 ) Net loss per limited partner unit -
basic and diluted: Common unitholders $ (0.18 ) $ (0.12 ) $ (0.30 )
$ (0.12 ) $ (0.85 ) Subordinated unitholder $ (0.23 ) $ (0.12 ) $
(0.41 ) $ (0.12 ) $ (0.85 ) Weighted average limited partner
units outstanding - basic and diluted: Common units 79,842 76,270
79,347 76,270 66,533 Subordinated units 64,955 64,955 64,955 64,955
64,955 Distributions declared per limited partner unit $
0.0565 $ — $ 0.1130 $ — $ —
Foresight Energy LP Unaudited Condensed Consolidated
Statements of Cash Flows
(In Thousands)
(Successor) (Successor) (Predecessor)
Six Months
Ended
June 30, 2018
Period From
April 1, 2017
through
June 30, 2017
Period From
January 1, 2017
through
March 31, 2017
Cash flows from operating activities Net loss $ (50,791 ) $
(16,277 ) $ (111,184 ) Adjustments to reconcile net loss to net
cash provided by operating activities: Depreciation, depletion and
amortization 106,732 49,537 39,298 Amortization of debt discount
and deferred issuance costs 1,326 628 6,365 Contract amortization
and write-off (71,844 ) 8,733 — Equity-based compensation 352 211
318 Loss on commodity derivative contracts — 1,117 1,492
Settlements of commodity derivative contracts — 444 3,724 Realized
gains on coal derivatives included in investing activities — —
(3,520 ) Long-lived asset impairments 110,689 — — Insurance
proceeds included in investing activities (42,947 ) — — Change in
fair value of warrants — — (9,278 ) Debt extinguishment expense — —
95,510 Other — 5,867 1,321 Changes in operating assets and
liabilities: Accounts receivable 7,916 1,836 19,695 Due from/to
affiliates, net 309 (4,204 ) (13,157 ) Inventories (3,327 ) (19,863
) (917 ) Prepaid expenses and other assets (5,050 ) (2,224 ) (5,117
) Prepaid royalties 3,154 4,276 (241 ) Commodity derivative assets
and liabilities — (303 ) (532 ) Accounts payable 11,423 4,075 7,324
Accrued interest 10,848 11,801 (9,803 ) Accrued expenses and other
current liabilities 2,007 423 (3,430 ) Other 1,491
(965 ) 1,782 Net cash provided by operating activities
82,288 45,112 19,650
Cash flows from investing activities
Investment in property, plant, equipment and development (32,228 )
(21,732 ) (19,908 ) Return of investment on financing arrangements
with Murray Energy (affiliate) 1,539 719 705 Insurance proceeds
42,947 — — Settlement of certain coal derivatives — — 3,520
Proceeds from sale of property, plant and equipment —
— 1,898 Net cash provided by (used in) investing activities
12,258 (21,013 ) (13,785 )
Cash flows from financing
activities Borrowings under revolving credit facility 50,000 —
— Payments on revolving credit facility (15,000 ) — (352,500 ) Net
change in borrowings under A/R securitization program — (100 )
7,000 Proceeds from long-term debt and capital lease obligations —
— 1,234,438 Payments on long-term debt and capital lease
obligations (78,633 ) (12,287 ) (970,721 ) Payments on short-term
debt (3,654 ) — — Proceeds from issuance of common units to Murray
Energy (affiliate) — — 60,586 Distributions paid (9,020 ) — — Debt
extinguishment costs — — (57,645 ) Debt issuance costs paid — —
(27,328 ) Other (1,658 ) (2,130 ) (1,892 ) Net
cash used in financing activities (57,965 ) (14,517 )
(108,062 ) Net increase (decrease) in cash, cash
equivalents, and restricted cash 36,581 9,582 (102,197 ) Cash, cash
equivalents, and restricted cash, beginning of period 2,179
14,724 116,921 Cash, cash equivalents, and restricted
cash, end of period $ 38,760 $ 24,306 $ 14,724
Reconciliation of U.S. GAAP Net Loss to
Adjusted EBITDA (In Thousands)
(Successor)
Three
Months
Ended
June 30, 2018
(Successor)
Three
Months
Ended
June 30, 2017
(Successor)
Six Months
Ended
June 30, 2018
(Successor)
Period From
April 1, 2017
through
June 30,
2017
(Predecessor)
Period From
January 1,
2017
through
March 31,
2017
Combined -
Period From
January 1,
2017
through
June 30,
2017
Net loss(1) $ (29,222 ) $ (16,277 ) $ (50,791 ) $ (16,277 ) $
(111,184 ) $ (127,461 ) Interest expense, net 37,035 35,420 72,708
35,420 43,380 78,800 Depreciation, depletion and amortization
55,312 49,537 106,732 49,537 39,298 88,835 Accretion on asset
retirement obligations 559 728 1,290 728 710 1,438 Contract
amortization and write-off (70,424 ) 8,733 (71,844 ) 8,733 — 8,733
Noncash impact of recording coal inventory to fair value in
pushdown accounting 4,562 — 4,562 — 4,562 Equity-based compensation
175 211 352 211 318 529 Long-lived asset impairments 110,689 —
110,689 — — — Loss on commodity derivative contracts — 1,117 —
1,117 1,492 2,609 Settlements of commodity derivative contracts —
444 — 444 3,724 4,168 Change in fair value of warrants — — — —
(9,278 ) (9,278 ) Loss on early extinguishment of debt —
— — — 95,510 95,510
Adjusted
EBITDA $ 104,124 $ 84,475 $ 169,136 $ 84,475 $ 63,970 $ 148,445
(1) - Included in net loss during the three and six months
ended June 30, 2018 and the three months and combined period ended
June 30, 2017 was insurance proceeds of $44.1 million and $12.8
million, respectively, from the Hillsboro mine combustion event.
Operating Metrics (In Thousands, Except
Per Ton Data)
(Successor)
Three
Months
Ended
June 30,
2018
(Successor)
Three
Months
Ended
June 30,
2017
(Successor)
Six Months
Ended
June 30,
2018
(Successor)
Period From
April 1, 2017
through
June 30,
2017
(Predecessor)
Period From
January 1,
2017
through
March 31,
2017
Combined -
Period From
January 1,
2017
through
June 30,
2017
Produced tons sold 5,779 4,835 10,978 4,835 5,165 10,000 Purchased
tons sold 88 — 129 — 118
118
Total tons sold 5,867 4,835 11,107
4,835 5,283 10,118 Tons produced 5,419
5,660 11,086 5,660 5,267 10,927 Coal sales realization per
ton sold(1) $ 46.02 $ 42.30 $ 45.77 $ 42.30 $ 43.12 $ 42.73 Cash
cost per ton sold(2) $ 23.70 $ 21.88 $ 23.46 $ 21.88 $ 22.80 $
22.36 Netback to mine realization per ton sold(3) $ 35.96 $ 36.45 $
36.27 $ 36.45 $ 35.98 $ 36.21 (1) - Coal sales realization
per ton sold is defined as coal sales divided by total tons sold.
(2) - Cash cost per ton sold is defined as cost of coal produced
(excluding depreciation, depletion and amortization) divided by
produced tons sold. (3) - Netback to mine realization per ton sold
is defined as coal sales less transportation expense divided by
tons sold.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180803005073/en/
Foresight Energy LPCody E. Nett, 740-338-3100Corporate Secretary
and Director of Media and Investor
RelationsInvestor.relations@foresight.comMedia@coalsource.com
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