FELP Foresight Energy Partners LP

Second Quarter 2019 Highlights:

• Coal sales of $224 million on sales volumes of 5.0 million tons
• Adjusted EBITDA of $45.1 million
• 5.4 million tons produced
• Net loss of $33.7 million, or ($0.23) per common unit and subordinated unit 

Foresight Energy LP (“Foresight” or the “Partnership”) (NYSE: FELP) today reported financial and operating results for the second quarter ended June 30, 2019. Foresight generated second quarter coal sales revenues of $224.5 million on sales volumes of 5.0 million tons, resulting in a net loss of $33.7 million, and Adjusted EBITDA of $45.1 million. Production was strong with the mines safely and efficiently producing 5.4 million tons during the quarter.

“Overall coal demand continues to be affected by mild temperatures and very low natural gas prices. In particular, our export markets experienced declining pricing as well as logistical difficulties owing to high river levels and swift currents near the port facilities. These factors presented significant challenges to our second quarter 2019 results,” remarked Mr. Robert D. Moore, Chairman, President, and Chief Executive Officer. “To compete in this challenging market, we continue to pursue additional outlets for our production volumes, we reduced planned capital spending for the remainder of 2019, and we continue to focus on maintaining our low cost structure so as to maintain financial flexibility and preserve liquidity.”

Second Quarter Consolidated Financial Results

Coal sales totaled $224.5 million for the second quarter 2019 compared to $270.0 million for the second quarter 2018, representing a decrease of $45.5 million, or 16.9%. The decrease in coal sales revenues was driven by a nearly 15%, or approximately 1.0 million ton, decrease in tons sold combined with a decrease in coal sales realizations of 2.5%, or $1.17 per ton sold. The decreases in coal sales volumes and realizations were the result of reduced export sales due to challenging river conditions and depressed export market pricing.

Cost of coal produced was $122.2 million for the second quarter 2019 compared to nearly $137.0 million for the second quarter 2018. The decrease in cost of coal produced was due to an overall decrease in produced tons sold offset by an increase in the cash cost per ton sold. The increase in cash cost per ton sold was primarily related to sales volumes.

Transportation costs decreased approximately $9.2 million from the second quarter 2018 to the second quarter 2019 because of a decrease in produced tons sold during 2019 and a larger percentage of our sales going to the export market during 2018, which have higher associated transportation and transloading costs. These decreases were slightly offset by increased costs owing to high river levels at the export facility near New Orleans.

The decrease in selling, general and administrative expense during the second quarter 2019 was primarily due to decreased sales and marketing expenses resulting from lower sales volumes and legal expenses incurred in the prior year period associated with the Hillsboro and Macoupin litigation matters settled in October of 2018.

Interest expense during the second quarter 2019 was comparable to interest expense during the second quarter 2018 primarily as a result of lower overall outstanding principal balances offset by additional outstanding borrowings on our revolving credit facility.

Adjusted EBITDA was $45.1 million for the second quarter 2019 compared to $104.1 million for the second quarter 2018. The decrease in Adjusted EBITDA was due primarily to the receipt of $44.1 million of insurance proceeds in the prior year period, plus the decreased sales volumes and lower coal sales realization per ton in the current year period.

During the second quarter 2019, Foresight used $8.3 million in cash flows from operations and ended the quarter with nearly $3.0 million in cash on hand. Available borrowing capacity under the revolving credit facility, net of outstanding borrowings and letters of credit, was $44.7 million as of June 30, 2019. Capital expenditures for the second quarter 2019 totaled $26.9 million compared to $15.7 million for the second quarter 2018. The increase in capital expenditures was primarily the result of the completion of a new portal facility at the Sugar Camp complex and the resumption of mining activity at Hillsboro’s Deer Run Mine, including the development of a longwall panel.

Guidance for 2019

Based on Foresight’s contracted position, recent performance, and its current outlook on pricing and the coal markets in general, the Partnership is affirming and updating the following guidance for 2019:

Sales Volumes – Based on current committed position and expectations for 2019, Foresight is projecting sales volumes to be between 21.0 and 22.0 million tons, with over 6.0 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 $240 to $270 million.

Capital Expenditures – Total 2019 capital expenditures are estimated to be between $75 and $85 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 February 27, 2019. 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) 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, contract amortization and write-off, 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) income, 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, 2019. A reconciliation of estimated 2019 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 nearly 2.1 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. Additionally, Foresight has recently resumed continuous miner production at its Hillsboro complex and continues to evaluate potential future mining options. 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 Energy LP

Consolidated Balance Sheets

(In Thousands)

 

June 30,

 

 

 

December 31,

 

 

2019

 

 

 

2018

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

2,982

 

 

 

$

269

 

Accounts receivable

 

27,327

 

 

 

 

32,248

 

Due from affiliates

 

43,897

 

 

 

 

49,613

 

Financing receivables - affiliate

 

3,527

 

 

 

 

3,392

 

Inventories, net

 

84,688

 

 

 

 

56,524

 

Prepaid royalties - affiliate

 

—

 

 

 

 

2,000

 

Deferred longwall costs

 

23,850

 

 

 

 

14,940

 

Other prepaid expenses and current assets

 

8,256

 

 

 

 

10,872

 

Contract-based intangibles

 

795

 

 

 

 

1,326

 

Total current assets

 

195,322

 

 

 

 

171,184

 

Property, plant, equipment and development, net

 

2,113,473

 

 

 

 

2,148,569

 

Financing receivables - affiliate

 

58,907

 

 

 

 

60,705

 

Prepaid royalties, net

 

6,933

 

 

 

 

2,678

 

Other assets

 

11,995

 

 

 

 

4,311

 

Contract-based intangibles

 

363

 

 

 

 

726

 

Total assets

$

2,386,993

 

 

 

$

2,388,173

 

Liabilities and partners’ capital

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Current portion of long-term debt and finance lease obligations

$

11,028

 

 

 

$

53,709

 

Current portion of sale-leaseback financing arrangements

 

7,080

 

 

 

 

6,629

 

Accrued interest

 

19,063

 

 

 

 

24,304

 

Accounts payable

 

126,596

 

 

 

 

99,735

 

Accrued expenses and other current liabilities

 

66,533

 

 

 

 

67,466

 

Asset retirement obligations

 

6,578

 

 

 

 

6,578

 

Due to affiliates

 

20,648

 

 

 

 

17,740

 

Contract-based intangibles

 

7,509

 

 

 

 

8,820

 

Total current liabilities

 

265,035

 

 

 

 

284,981

 

Long-term debt and finance lease obligations

 

1,271,813

 

 

 

 

1,194,394

 

Sale-leaseback financing arrangements

 

187,066

 

 

 

 

189,855

 

Asset retirement obligations

 

39,959

 

 

 

 

38,966

 

Other long-term liabilities

 

17,583

 

 

 

 

16,428

 

Contract-based intangibles

 

63,729

 

 

 

 

66,834

 

Total liabilities

 

1,845,185

 

 

 

 

1,791,458

 

Limited partners' capital:

 

 

 

 

 

 

 

 

Common unitholders (80,939 and 80,844 units outstanding as of June 30, 2019 and December 31, 2018, respectively)

 

347,617

 

 

 

 

377,880

 

Subordinated unitholder (64,955 units outstanding as of June 30, 2019 and December 31, 2018)

 

194,191

 

 

 

 

218,835

 

Total partners' capital

 

541,808

 

 

 

 

596,715

 

Total liabilities and partners' capital

$

2,386,993

 

 

 

$

2,388,173

 

 

Foresight Energy LP

Consolidated Statement of Operations

(In Thousands, Except Per Unit Data)

 

 

Three Months Ended June 30, 2019

 

 

Three Months Ended June 30, 2018

 

 

 

Six Months Ended June 30, 2019

 

 

Six Months Ended June 30, 2018

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Coal sales

$

224,488

 

 

$

269,992

 

 

 

$

491,825

 

 

$

508,379

 

Other revenues

 

2,428

 

 

 

1,430

 

 

 

 

4,163

 

 

 

3,769

 

Total revenues

 

226,916

 

 

 

271,422

 

 

 

 

495,988

 

 

 

512,148

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of coal produced (excluding depreciation, depletion and amortization)

 

122,216

 

 

 

136,982

 

 

 

 

256,197

 

 

 

257,552

 

Cost of coal purchased

 

2,090

 

 

 

3,906

 

 

 

 

4,465

 

 

 

5,657

 

Transportation

 

49,790

 

 

 

59,034

 

 

 

 

108,624

 

 

 

105,477

 

Depreciation, depletion and amortization

 

43,244

 

 

 

55,312

 

 

 

 

89,792

 

 

 

106,732

 

Contract amortization and write-off

 

(1,836

)

 

 

(70,424

)

 

 

 

(3,522

)

 

 

(71,844

)

Accretion on asset retirement obligations

 

552

 

 

 

559

 

 

 

 

1,103

 

 

 

1,290

 

Selling, general and administrative

 

8,008

 

 

 

10,534

 

 

 

 

16,655

 

 

 

18,309

 

Long-lived asset impairments

 

—

 

 

 

110,689

 

 

 

 

—

 

 

 

110,689

 

Other operating (income) expense, net

 

(94

)

 

 

(42,983

)

 

 

 

(161

)

 

 

(43,631

)

Operating income

 

2,946

 

 

 

7,813

 

 

 

 

22,835

 

 

 

21,917

 

Other expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

36,618

 

 

 

37,035

 

 

 

 

73,328

 

 

 

72,708

 

Net loss

$

(33,672

)

 

$

(29,222

)

 

 

$

(50,493

)

 

$

(50,791

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss available to limited partner units - basic and diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common unitholders

$

(18,681

)

 

$

(14,090

)

 

 

$

(25,849

)

 

$

(23,879

)

Subordinated unitholder

$

(14,991

)

 

$

(15,132

)

 

 

$

(24,644

)

 

$

(26,912

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per limited partner unit - basic and diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common unitholders

$

(0.23

)

 

$

(0.18

)

 

 

$

(0.32

)

 

$

(0.30

)

Subordinated unitholder

$

(0.23

)

 

$

(0.23

)

 

 

$

(0.38

)

 

$

(0.41

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average limited partner units outstanding - basic and diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common units

 

80,939

 

 

 

79,842

 

 

 

 

80,927

 

 

 

79,347

 

Subordinated units

 

64,955

 

 

 

64,955

 

 

 

 

64,955

 

 

 

64,955

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Distributions declared per limited partner unit

$

—

 

 

$

0.0565

 

 

 

$

0.0600

 

 

$

0.1130

 

Foresight Energy LP

Consolidated Statements of Cash Flows

(In Thousands)

 

 

Six Months Ended June 30, 2019

 

 

Six Months Ended June 30, 2018

 

Cash flows from operating activities

 

 

 

 

 

 

 

Net loss

$

(50,493

)

 

$

(50,791

)

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

 

 

 

 

 

 

 

Depreciation, depletion and amortization

 

89,792

 

 

 

106,732

 

Amortization of debt discount

 

1,419

 

 

 

1,326

 

Contract amortization and write-off

 

(3,522

)

 

 

(71,844

)

Accretion on asset retirement obligations

 

1,103

 

 

 

1,290

 

Equity-based compensation

 

467

 

 

 

352

 

Long-lived asset impairments

 

—

 

 

 

110,689

 

Insurance proceeds included in investing activities

 

—

 

 

 

(42,947

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Accounts receivable

 

4,921

 

 

 

7,916

 

Due from/to affiliates, net

 

8,624

 

 

 

309

 

Inventories

 

(20,817

)

 

 

(3,327

)

Prepaid expenses and other assets

 

(4,723

)

 

 

(5,050

)

Prepaid royalties

 

(2,255

)

 

 

3,154

 

Accounts payable

 

26,861

 

 

 

11,423

 

Accrued interest

 

(5,241

)

 

 

10,848

 

Accrued expenses and other current liabilities

 

(5,616

)

 

 

2,007

 

Other

 

352

 

 

 

201

 

Net cash provided by operating activities

 

40,872

 

 

 

82,288

 

Cash flows from investing activities

 

 

 

 

 

 

 

Investment in property, plant, equipment and development

 

(62,043

)

 

 

(32,228

)

Return of investment on financing arrangements with Murray Energy (affiliate)

 

1,663

 

 

 

1,539

 

Insurance proceeds

 

—

 

 

 

42,947

 

Net cash (used in) provided by investing activities

 

(60,380

)

 

 

12,258

 

Cash flows from financing activities

 

 

 

 

 

 

 

Borrowings under revolving credit facility

 

89,000

 

 

 

50,000

 

Payments on revolving credit facility

 

(13,000

)

 

 

(15,000

)

Payments on long-term debt and finance lease obligations

 

(42,681

)

 

 

(78,633

)

Distributions paid

 

(4,856

)

 

 

(9,020

)

Payments on sale-leaseback and short-term financing arrangements

 

(6,242

)

 

 

(5,312

)

Net cash provided by (used in) financing activities

 

22,221

 

 

 

(57,965

)

Net increase in cash and cash equivalents

 

2,713

 

 

 

36,581

 

Cash and cash equivalents, beginning of period

 

269

 

 

 

2,179

 

Cash and cash equivalents, end of period

$

2,982

 

 

$

38,760

 

 

 

 

 

 

 

 

 

 

Reconciliation of U.S. GAAP Net Loss Attributable to Controlling Interests to Adjusted EBITDA (In Thousands)

 

Three Months Ended June 30, 2019

 

 

Three Months Ended June 30, 2018

 

 

Three Months Ended March 31, 2019

 

 

Six Months Ended June 30, 2019

 

 

Six Months Ended June 30, 2018

 

Net loss

$

(33,672

)

 

$

(29,222

)

 

$

(16,821

)

 

$

(50,493

)

 

$

(50,791

)

Interest expense, net

 

36,618

 

 

 

37,035

 

 

 

36,710

 

 

 

73,328

 

 

 

72,708

 

Depreciation, depletion and amortization

 

43,244

 

 

 

55,312

 

 

 

46,548

 

 

 

89,792

 

 

 

106,732

 

Accretion on asset retirement obligations

 

552

 

 

 

559

 

 

 

551

 

 

 

1,103

 

 

 

1,290

 

Contract amortization and write-off

 

(1,836

)

 

 

(70,424

)

 

 

(1,686

)

 

 

(3,522

)

 

 

(71,844

)

Equity-based compensation

 

234

 

 

 

175

 

 

 

233

 

 

 

467

 

 

 

352

 

Long-lived asset impairments

 

—

 

 

 

110,689

 

 

 

—

 

 

 

—

 

 

 

110,689

 

Adjusted EBITDA

$

45,140

 

 

$

104,124

 

 

$

65,535

 

 

$

110,675

 

 

$

169,136

 

Operating Metrics (In Thousands, Except Per Ton Data)

 

Three Months Ended June 30, 2019

 

 

Three Months Ended June 30, 2018

 

 

Three Months Ended March 31, 2019

 

 

Six Months Ended June 30, 2019

 

 

Six Months Ended June 30, 2018

 

Produced tons sold

 

4,960

 

 

 

5,779

 

 

 

5,646

 

 

 

10,606

 

 

 

10,978

 

Purchased tons sold

 

45

 

 

 

88

 

 

 

50

 

 

 

95

 

 

 

129

 

Total tons sold

 

5,005

 

 

 

5,867

 

 

 

5,696

 

 

 

10,701

 

 

 

11,107

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tons produced

 

5,416

 

 

 

5,419

 

 

 

6,065

 

 

 

11,481

 

 

 

11,086

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Coal sales realization per ton sold(1)

$

44.85

 

 

$

46.02

 

 

$

46.93

 

 

$

45.96

 

 

$

45.77

 

Cash cost per ton sold(2)

$

24.64

 

 

$

23.70

 

 

$

23.73

 

 

$

24.16

 

 

$

23.46

 

Netback to mine realization per ton sold(3)

$

34.90

 

 

$

35.96

 

 

$

36.61

 

 

$

35.81

 

 

$

36.27

 

(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/20190807005088/en/

Cody E. Nett Corporate Secretary 740-338-3100 Investor.relations@foresight.com Cody.Nett@coalsource.com