Third Quarter 2016 Highlights:
- Coal sales of $228.5 million on
sales volumes of 5.3 million tons
- Net loss attributable to limited
partner units of $24.3 million or $(0.19) per unit
- Adjusted EBITDA of $85.4
million
- Cash flows from operations of $72.7
million
- Completed global restructuring of
indebtedness
Foresight Energy LP (NYSE:FELP) today reported financial and
operating results for third quarter 2016. Sales volumes of 5.3
million tons during third quarter 2016 generated coal sales revenue
of $228.5 million contributing to Adjusted EBITDA of $85.4 million,
cash flows from operations of $72.7 million and a net loss
attributable to limited partner units of $24.3 million, or
$(0.19) per unit. Sales volumes for third quarter 2016 increased
4.4% compared to second quarter 2016 and were 7.5% lower as
compared to the prior year third quarter. The current quarter
benefited from $10.5 million of insurance recoveries for the
reimbursement of mitigation costs incurred at our Hillsboro
operation related to the combustion event. However, third quarter
2016 results were negatively impacted by $13.2 million in debt
extinguishment costs, of which $11.0 million were non-cash, $6.1
million of debt restructuring costs, and $6.0 million of losses on
commodity derivative contracts.
“Despite challenging market conditions and all of the activities
related to the global restructuring of our indebtedness, we
delivered very solid operating and financial results for the third
quarter. These results demonstrate the superior quality of our
asset base and our operational excellence,” said Robert D. Moore,
President and Chief Executive Officer. “Our operating costs
continue to be best-in-class and allow us to generate positive
Adjusted EBITDA margins at all points in the commodity cycle.
Additionally, domestic and export realizations showed modest
improvement during the quarter allowing us to contract over 4.0
million tons for delivery though 2018.”
During the quarter, as described in FELP’s Form 8-K filed on
September 6, 2016, Foresight completed an out-of-court
restructuring of more than $1.4 billion in indebtedness. This
restructuring resolved the various defaults and events of default
related to the December 2015 Delaware Court of Chancery opinion
that the equity transaction involving Murray Energy and Foresight
Reserves constituted a “change of control.” The restructuring
provided for, among other things: (1) an amendment and restatement
of the Partnership’s senior credit facility, restoring access to
our revolving credit facility while also amending certain
commitment levels and financial maintenance covenants; (2) an
amendment and restatement of the Partnership’s receivables
securitization facility; (3) amendments and waivers related to the
Partnership’s longwall equipment leases and financings including a
reduction in certain maturities; and (4) amendments and other
modifications to governance documents and existing agreements by
and among the equity sponsors, as well as, the execution of various
mutual releases among the participants in the restructuring. Please
refer to the Current Report on Form 8-K filed with the Securities
and Exhange Commission (“SEC”) on September 6, 2016 and the
Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 2016 filed with the SEC today for more information
regarding the debt restructuring.
“The resulting transaction addresses the change of control
litigation and improves the Partnership’s long-term leverage
profile, which better positions the Partnership as it continues to
operate in a difficult environment,” added Mr. Moore.
In addition to strong production, Foresight’s operations
continue to make significant improvements in the area of safety.
During third quarter 2016, Foresight’s Macoupin operation was the
recipient of an award from the Joseph A. Holmes Safety Association
for having the lowest total reportable incident frequency rate for
the second quarter of 2016. “All of our operations have put a
renewed emphasis on safety initiatives and we have seen
improvements in various safety metrics including reportable and
lost time incidents. This is a credit to our employees and their
efforts,” stated Mr. Moore.
Consolidated Financial Results
Coal sales totaled $228.5 million during third quarter 2016, a
decrease of $22.7 million from the prior year third quarter. This
decrease was primarily due to reduced sales volumes attributed to
difficult coal market conditions driven by oversupply in the
market, excess utility stockpiles and continued low natural gas
prices. However, during the third quarter, the Partnership began to
see some improvement in the international markets as export thermal
coal pricing improved significantly.
Cost of coal produced was $110.3 million for third quarter 2016
compared to $128.2 million for the same period 2015. The decrease
during the current quarter was due to lower sales volumes, as well
as a reduction in our cash cost per ton sold, driven largely by
synergies related to the transaction with Murray Energy, including
lower mine overhead costs and operational efficiencies, plus the
benefit of the insurance recoveries for the reimbursement of
mitigation costs related to the Hillsboro combustion event which
totaled $10.5 million.
Transportation costs declined slightly from the prior year
period due to lower export sales volumes offset partially by higher
charges for shortfalls on minimum contractual throughput volume
requirements.
Selling, general and administrative expenses increased $2.6
million in the third quarter 2016 compared to the third quarter
2015 due to incremental litigation accrual expenses.
Interest expense for the third quarter 2016 increased $8.0
million from the prior year period due primarily to higher
effective interest rates under the new and amended debt instruments
as well as higher interest rates under the term loan, revolving
credit facility and A/R securitization facility prior to the
closing date of the restructuring transactions due to default
interest rates being in effect.
As a result of the completion of the global restructuring,
Foresight also recognized $6.1 million in debt restructuring costs
and a $13.2 million loss on the extinguishment of debt during the
third quarter 2016.
Cash flows provided by operations for third quarter 2016 reached
$72.7 million and Foresight ended the quarter with $76.8 million in
cash and cash equivalents, representing an increase of
$31.7 million from second quarter 2016. During third quarter
2016 capital expenditures were $14.7 million and year-to-date
capital expenditures are down $41.5 million as compared to the nine
months ended September 30, 2015.
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 15, 2016 and Part II, “Item 1A. Risk
Factors” of the Partnership’s Quarterly Report on Form 10-Q filed
today. 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 add/deducts to Adjusted EBITDA the amount of
aggregate settlements during the period.
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, 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
attributable to controlling interests, please see the table
below.
About Foresight Energy LP
Foresight Energy LP is a leading producer and marketer of
thermal coal controlling over 3 billion tons of coal reserves in
the Illinois Basin. Foresight currently owns four mining complexes
(Williamson, Sugar Camp, Hillsboro and Macoupin), with four
longwall systems, 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 Energy LP Unaudited Condensed Consolidated
Statements of Operations Three Months
Ended Nine Months Ended September 30,
September 30, 2016 2015 2016
2015 (In Thousands, Except per Unit Data) Revenues
Coal sales $ 228,472 $ 251,125 $ 615,662 $ 739,940 Other revenues
2,353 1,941 7,249 3,263 Total revenues
230,825 253,066 622,911 743,203 Costs and expenses: Cost of
coal produced (excluding depreciation, depletion and amortization)
110,311 128,195 311,557 360,769 Cost of coal purchased 183 5,055
733 7,063 Transportation 33,324 34,377 96,679 127,757 Depreciation,
depletion and amortization 43,637 54,152 125,521 145,701 Accretion
on asset retirement obligations 844 567 2,532 1,700 Selling,
general and administrative 7,340 4,761 18,648 25,285 Transition and
reorganization costs — 5,037 6,889 17,288 Loss (gain) on commodity
derivative contracts 5,987 (17,541 ) 17,270 (40,703 ) Other
operating expense (income), net (2,215 ) 384
(2,124 ) (13,872 ) Operating income 31,414 38,079 45,206
112,215 Other expenses: Interest expense, net 37,939 29,891 105,269
86,591 Debt restructuring costs 6,072 — 21,702 — Change in fair
value of warrants (1,452 ) — (1,452 ) — Loss on extinguishment of
debt 13,186 — 13,294 — Net (loss)
income (24,331 ) 8,188 (93,607 ) 25,624 Less: net (loss) income
attributable to noncontrolling interests (45 ) 118
169 652 Net (loss) income attributable to controlling
interests (24,286 ) 8,070 (93,776 ) 24,972 Less: net income
attributable to predecessor equity — — —
23 Net (loss) income attributable to limited partner units $
(24,286 ) $ 8,070 $ (93,776 ) $ 24,949 Net (loss) income
available to limited partner units - basic and diluted: Common
unitholders $ (12,249 ) $ 4,041 $ (47,135 ) $ 12,486 Subordinated
unitholders $ (12,037 ) $ 4,029 $ (46,641 ) $ 12,463 Net
(loss) income per limited partner unit - basic and diluted: Common
unitholders $ (0.19 ) $ 0.06 $ (0.72 ) $ 0.19 Subordinated
unitholders $ (0.19 ) $ 0.06 $ (0.72 ) $ 0.19 Weighted
average limited partner units outstanding - basic and diluted:
Common units 66,098 65,156 65,737 65,067 Subordinated units 64,955
64,955 64,955 64,927 Distributions declared per limited
partner unit $ — $ 0.38 $ — $ 1.11
Foresight Energy
LP Unaudited Condensed Consolidated Balance Sheets
September 30, December
31, 2016 2015 (In Thousands)
Assets
Current assets: Cash and cash equivalents $ 76,847 $ 17,538
Accounts receivable 64,622 61,325 Due from affiliates 10,526 16,615
Financing receivables - affiliate 2,849 2,689 Inventories, net
39,942 50,652 Prepaid expenses 7,883 5,498 Prepaid royalties 838
5,386 Deferred longwall costs 14,541 18,476 Coal derivative assets
11,654 26,596 Other current assets 3,209 5,565 Total
current assets 232,911 210,340 Property, plant, equipment and
development, net 1,335,999 1,433,193 Due from affiliates 1,843
2,691 Financing receivables - affiliate 67,982 70,139 Prepaid
royalties 72,149 70,300 Coal derivative assets 3,068 22,027 Other
assets 21,871 12,493 Total assets $ 1,735,823 $
1,821,183
Liabilities and partners’ (deficit) capital
Current liabilities: Current portion of long-term debt and capital
lease obligations $ 68,057 $ 1,434,566 Accrued interest 6,061
24,574 Accounts payable 52,071 55,192 Accrued expenses and other
current liabilities 41,126 35,825 Due to affiliates 10,226
8,536 Total current liabilities 177,541 1,558,693 Long-term
debt and capital lease obligations 1,345,142 — Long-term accrued
interest 4,174 — Sale-leaseback financing arrangements 193,220
193,434 Asset retirement obligations 45,571 43,277 Warrant
liability 32,593 — Other long-term liabilities 7,613
6,896 Total liabilities 1,805,854 1,802,300 Limited partners'
capital (deficit): Common unitholders (66,105 and 65,192 units
outstanding as of September 30, 2016 and December 31, 2015,
respectively) 143,057 186,660 Subordinated unitholder (64,955 units
outstanding as of September 30, 2016 and December 31, 2015)
(213,088 ) (166,061 ) Total limited partners' (deficit)
capital (70,031 ) 20,599 Noncontrolling interests —
(1,716 ) Total partners' (deficit) capital (70,031 )
18,883 Total liabilities and partners' (deficit) capital $
1,735,823 $ 1,821,183
Foresight Energy LP
Unaudited Condensed Consolidated Statements of Cash Flows
Nine Months Ended September 30,
2016 2015 Cash flows from operating
activities (In Thousands) Net (loss) income $ (93,607 ) $
25,624 Adjustments to reconcile net (loss) income to net cash
provided by operating activities: Depreciation, depletion and
amortization 125,521 145,701 Equity-based compensation 4,711 12,897
Loss (gain) on commodity derivative contracts 17,270 (40,703 )
Settlements of commodity derivative contracts 13,112 51,556
Settlements of commodity derivative contracts included in investing
activities — (19,073 ) Transition and reorganization expenses paid
by Foresight Reserves (affiliate) 2,333 8,031 Current period
interest expense converted into debt 31,484 — Non-cash debt
extinguishment expense 11,125 — Other 9,025 6,822 Changes in
operating assets and liabilities: Accounts receivable (3,297 )
22,676 Due from/to affiliates, net 8,627 (25,406 ) Inventories
9,737 (3,806 ) Prepaid expenses and other current assets (2,549 )
2,265 Prepaid royalties 2,699 (1,820 ) Commodity derivative assets
and liabilities 2,624 (2,447 ) Accounts payable (3,121 ) (21,625 )
Accrued interest 3,380 (14,451 ) Accrued expenses and other current
liabilities 5,843 (4,085 ) Other 1,422 (2,390 ) Net
cash provided by operating activities 146,339 139,766
Cash flows
from investing activities Investment in property, plant,
equipment and development (28,031 ) (69,502 ) Investment in
financing arrangements with Murray Energy (affiliate) — (75,000 )
Return of investment on financing arrangements with Murray Energy
(affiliate) 1,997 1,112 Settlements of certain coal derivatives —
19,073 Other 2,359 — Net cash used in investing
activities (23,675 ) (124,317 )
Cash flows from financing
activities Net change in borrowings under revolving credit
facility — 58,000 Net change in borrowings under A/R securitization
program (12,200 ) 50,000 Proceeds from other long-term debt —
59,325 Payments on other long-term debt and capital lease
obligations (33,499 ) (33,274 ) Payments on short-term debt (653 )
(2,010 ) Distributions paid (182 ) (144,748 ) Debt issuance costs
paid (15,825 ) (2,751 ) Other (996 ) (1,507 ) Net
cash used in financing activities (63,355 ) (16,965 )
Net increase (decrease) in cash and cash equivalents 59,309 (1,516
) Cash and cash equivalents, beginning of period 17,538
26,509 Cash and cash equivalents, end of period $ 76,847 $
24,993
Supplemental information, including disclosures of
non-cash financing activities: Interest paid, net of amounts
capitalized $ 63,972 $ 96,050 Interest converted into debt $ 49,203
$ — Fair value of warrants issued $ 34,045 $ — Non-cash capital
contribution from Foresight Reserves LP (affiliate) $ 1,046 $
10,507 Modifications to capital lease obligations $ 663 $ —
Short-term insurance financing $ 603 $ 2,809
Reconciliation of U.S. GAAP Net (Loss) Income Attributable to
Controlling Interests to Adjusted EBITDA:
Three Months Ended Nine Months Ended
September 30,
2016
September 30,
2015
June 30, 2016
September 30,
2016
September 30,
2015
(In Thousands) Net (loss) income attributable to controlling
interests $ (24,286 ) $ 8,070 $ (27,786 ) $ (93,776 ) $ 24,972
Interest expense, net 37,939 29,891 34,335 105,269 86,591
Depreciation, depletion and amortization 43,637 54,152 45,467
125,521 145,701 Accretion on asset retirement obligations 844 567
844 2,532 1,700 Transition and reorganization costs (excluding
amounts included in equity-based compensation below) — 3,784 333
2,575 13,388 Equity-based compensation (1) 284 1,258 435 4,711
12,897 Loss (gain) on commodity derivative contracts 5,987 (17,541
) 10,760 17,270 (40,703 ) Settlements of commodity derivative
contracts 3,191 10,925 4,801 13,112 51,556 Debt restructuring costs
6,072 — 5,920 21,702 — Loss on extinguishment of debt 13,186 — —
13,294 — Change in fair value of warrants (1,452 ) —
— (1,452 ) —
Adjusted EBITDA $ 85,402 $
91,106 $ 75,109 $ 210,758 $ 296,102 (1) - Includes
equity-based compensation of $616 and $1,252 which was recorded in
transition and reorganization costs in the statements of operations
for the three months ended June 30, 2016 and September 30, 2015,
respectively, and $4,315 and $3,900 for the nine months ended
September 30, 2016 and 2015, respectively.
Operating
Metrics Three Months Ended Nine
Months Ended
September 30,
2016
September 30,
2015
June 30, 2016
September 30,
2016
September 30,
2015
(In Thousands, Except Per Ton Data) Produced tons sold 5,277 5,588
5,057 14,070 16,278 Purchased tons sold 4 120
— 21 162
Total tons sold 5,281
5,708 5,057 14,091 16,440 Tons produced
4,774 4,884 4,889 13,962 16,193 Coal sales realization per
ton sold(1) $ 43.26 $ 44.00 $ 44.31 $ 43.69 $ 45.01 Cash cost per
ton sold(2) $ 20.90 $ 22.94 $ 22.16 $ 22.14 $ 22.16 Netback to mine
realization per ton sold(3) $ 36.95 $ 37.97 $ 36.89 $ 36.83 $ 37.24
(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: http://www.businesswire.com/news/home/20161109005121/en/
Foresight Energy LPGary M. Broadbent, 314-932-6152Assistant
General Counsel and Media
DirectorInvestor.relations@foresight.comMedia@coalsource.com
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