First Quarter 2017 Highlights:
- Coal sales of $227.8 million on
sales volumes of 5.3 million tons, each a nearly 40% increase from
prior year period
- Net loss attributable to limited
partner units of $111.2 million or $(0.85) per unit, including a
loss on early extinguishment of debt of $95.5 million or ($0.73)
per unit
- Adjusted EBITDA of $64.0
million
- Cash flows from operations of $22.4
million
- Completed $1.25 billion refinancing
of prior credit facility and second lien debt
Foresight Energy LP (“Foresight” or the “Partnership”) (NYSE:
FELP) today reported financial and operating results for the first
quarter of 2017. Foresight generated quarterly coal sales revenues
of $227.8 million on sales volumes of 5.3 million tons
resulting in Adjusted EBITDA of $64.0 million, cash flows from
operations of $22.4 million and a net loss attributable to limited
partner units of $111.2 million, or $(0.85) per unit. Results for
the first quarter 2017 were negatively impacted by a loss on the
early extinguishment of debt of $95.5 million related to the
refinancing completed on March 28th. Quarterly sales volumes
increased 40% compared to the first quarter 2016 due in part to an
increase in export tons sold during the first quarter 2017. Cash
costs per ton sold decreased to $22.80 despite two longwall moves
at the operations during the first quarter 2017.
On March 28, 2017, Foresight completed the refinancing of
certain of its previously outstanding debt. As part of the
transaction, Foresight issued $1.25 billion of new debt, consisting
of a term loan of $825 million and $425 million in second lien
notes. The proceeds were used to retire the previously outstanding
revolving credit facility, term loan and second lien notes. The
completed transaction also resulted in a new revolving credit
facility with $158.5 million of capacity with no borrowings at
close. Concurrent with the refinancing transaction, Murray Energy
exercised its option to acquire an additional 46% of the general
partner of Foresight increasing its voting interest in the general
partner to 80%. For additional information on the refinancing
transaction, please refer to the Form 8-K filed with the SEC on
April 3, 2017.
“The first quarter was successful for Foresight as we realized
significant year-over-year improvements in sales volumes, coal
sales and production costs, as our operations continued to perform
exceptionally well,” said Mr. Robert D. Moore, Chairman, President
and Chief Executive Officer. “We were able to take advantage of
improved capital markets during the first quarter and successfully
complete the refinancing of our indebtedness. The new facilities
extend maturities well into the future, lower our effective
interest rate compared to the August 2016 restructuring, provides
Foresight with adequate headroom under the new financial covenants,
and, importantly, prevents massive dilution to the current
unitholders by refinancing the former exchangeable notes prior to
their maturity,” stated Mr. Moore.
As a result of its increased voting interest, Murray Energy had
the option to apply pushdown accounting to Foresight’s standalone
financial statements and elected to do so on the acquisition date.
Consequently, Foresight’s consolidated financial statements were
adjusted to reflect the preliminary pushdown accounting
adjustments. The consolidated financial statements are presented in
two distinct periods to indicate the application of two different
bases of accounting between the periods presented. The periods
prior to the acquisition date are identified as “Predecessor” and
the period after the acquisition date is identified as
“Successor”.
Consolidated Financial Results
Quarter Ended March 31, 2017 Compared to Quarter Ended March 31,
2016
Coal sales totaled $227.8 million for the first quarter 2017
compared to $163.1 million for the first quarter 2016. The increase
in coal sales revenue from the prior year period was largely due to
a 1.5 million ton increase in coal sales volumes principally driven
by increased shipments into the export market during the current
quarter. During the first quarter 2017, Foresight shipped 24% of
its coal into the export market compared to 14% during the prior
year quarter.
Cost of coal produced was $117.8 million, or $22.80 per ton
sold, for the first quarter 2017 compared to $89.2 million, or
$23.86 per ton sold, for the same period of 2016. The increase
during the current year quarter was due to higher sales volumes
offset by a reduction in Foresight’s cash cost per ton sold of
$1.06 per ton. The improvement in cash cost per ton sold was driven
by increased production at the Williamson mine, which was impacted
in the first quarter of 2016 by higher longwall-related costs.
Additionally, direct and indirect costs related to the Hillsboro
combustion event were lower during the current year period.
Transportation costs increased $11.9 million, or $0.27 per ton
sold, from the prior year period due to higher export sales
volumes. During the first quarter of 2017, Foresight shipped 24% of
its sales volumes to the export market compared to 14% during the
prior year period. The increase in volumes and per ton costs was
offset by $2.9 million of lower charges for shortfalls on minimum
contractual rail and export terminal throughput requirements.
Related to the refinancing transaction completed on March 28,
2017, Foresight recorded $95.5 million of expense related to the
early extinguishment of debt during the first quarter 2017,
compared to $0.1 million of debt extinguishment costs and $9.7
million of debt restructuring costs during the year ago quarter.
During the first quarter 2017, Foresight also recorded $9.3 million
of income related to updating the warrants issued during the August
2016 restructuring to fair value. As the warrants were not in place
during the prior year period, there was no income or expense during
that period.
Interest expense for first quarter 2017 increased $10.4 million
from the prior year period due primarily to higher interest costs
resulting from the August 2016 debt restructuring as the Second
Lien Notes and Second Lien PIK notes carried higher effective
interest rates than the 2021 Senior Notes replaced at the time of
the August 2016 restructuring.
Cash flows provided by operations totaled $22.4 million for
first quarter 2017 and Foresight ended the quarter with $4.2
million in cash and $158.5 million of available capacity, net of
outstanding letters of credit, under the revolving credit facility.
During the first quarter 2017, capital expenditures totaled $19.9
million, an increase of $14.9 million compared to the quarter ended
March 31, 2016. Capital spending in the prior year period was lower
as a result of the timing of capital outlays related to the
maintenance of Foresight’s operations.
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 1, 2017. 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.
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 is a leading producer and marketer of thermal coal
controlling over 2 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 Energy LP
Unaudited Condensed Consolidated
Balance Sheets
(Successor) (Predecessor)
March 31, December 31, 2017 2016 (In
Thousands) (In Thousands)
Assets Current assets: Cash and
cash equivalents $ 4,235 $ 103,690 Accounts receivable 35,210
54,905 Due from affiliates 19,293 16,891 Financing receivables -
affiliate 2,961 2,904 Inventories, net 49,539 43,052 Prepaid
royalties 4,800 3,136 Deferred longwall costs — 13,310 Coal
derivative assets 2,576 7,650 Other prepaid expenses and current
assets 17,901 21,443 Intangible contracts 39,822 —
Total current assets 176,337 266,981 Property, plant, equipment and
development, net 2,607,144 1,318,937 Due from affiliates 947 1,843
Financing receivables - affiliate 66,473 67,235 Prepaid royalties —
13,765 Other assets 2,270 20,250 Intangible contracts 10,928
— Total assets $ 2,864,099 $ 1,689,011
Liabilities and
partners’ capital (deficit) Current liabilities: Current
portion of long-term debt and capital lease obligations $ 67,778 $
368,993 Current portion of sale-leaseback financing arrangements
1,499 1,372 Accrued interest 4,839 29,760 Accounts payable 68,295
60,971 Accrued expenses and other current liabilities 38,165 43,592
Asset retirement obligations 8,167 7,273 Due to affiliates 9,253
20,904 Intangible contracts 23,640 — Total current
liabilities 221,636 532,865 Long-term debt and capital lease
obligations 1,299,998 1,022,070 Sale-leaseback financing
arrangements 190,169 190,497 Asset retirement obligations 37,438
37,644 Warrant liability — 51,169 Other long-term liabilities 4,857
9,359 Intangible contracts 109,508 — Total
liabilities 1,863,606 1,843,604 Limited partners' capital
(deficit): Common unitholders (75,733 and 66,105 units outstanding
as of March 31, 2017 and December 31, 2016, respectively) 596,469
100,628 Subordinated unitholders (64,955 units outstanding as of
March 31, 2017 and December 31, 2016) 404,024
(255,221 ) Total partners' capital (deficit) 1,000,493
(154,593 ) Total liabilities and partners' capital (deficit)
$ 2,864,099 $ 1,689,011
Foresight Energy LP
Unaudited Condensed Consolidated
Statements of Operations
(Predecessor) Three Months Ended
March 31,
2017 2016 (In Thousands, Except per Unit Data)
Revenues Coal sales $ 227,813 $ 163,097 Other revenues 2,581
2,988 Total revenues 230,394 166,085 Costs and
expenses: Cost of coal produced (excluding depreciation, depletion
and amortization) 117,762 89,177 Cost of coal purchased 7,973 550
Transportation 37,726 25,798 Depreciation, depletion and
amortization 39,298 36,417 Accretion on asset retirement
obligations 710 844 Selling, general and administrative 6,554 5,719
Transition and reorganization costs — 5,940 Loss on commodity
derivative contracts 1,492 523 Other operating expense (income),
net 451 (88 ) Operating income 18,428 1,205 Other
expenses: Interest expense, net 43,380 32,995 Debt restructuring
costs — 9,710 Change in fair value of warrants (9,278 ) — Loss on
early extinguishment of debt 95,510 107 Net loss
(111,184 ) (41,607 ) Less: net income attributable to
noncontrolling interests — 97 Net loss attributable
to controlling interests (111,184 ) (41,704 ) Net loss attributable
to predecessor (111,184 ) (41,704 ) Net loss
attributable to successor $ — $ — Net loss available to
limited partner units - basic and diluted: Common unitholders $
(56,259 ) $ (20,890 ) Subordinated unitholders $ (54,925 ) $
(20,814 ) Net loss per limited partner unit - basic and
diluted: Common unitholders $ (0.85 ) $ (0.32 ) Subordinated
unitholders $ (0.85 ) $ (0.32 ) Weighted average limited
partner units outstanding - basic and diluted: Common units 66,533
65,193 Subordinated units 64,955 64,955 Distributions
declared per limited partner unit $ — $ —
Foresight Energy LP
Unaudited Condensed Consolidated
Statements of Cash Flows
(Predecessor) Three Months Ended
March 31, 2017 2016 (In
Thousands)
Cash flows from operating activities Net loss $
(111,184 ) $ (41,607 ) Adjustments to reconcile net loss to net
cash provided by operating activities: Depreciation, depletion and
amortization 39,298 36,417 Amortization of debt discount and
deferred issuance costs 6,365 1,727 Equity-based compensation 318
3,992 Loss on commodity derivative contracts 1,492 523 Settlements
of commodity derivative contracts 3,724 5,119 Realized gains on
commodity derivative contracts included in investing activities
(3,520 ) — Transition and reorganization expenses paid by Foresight
Reserves (affiliate) — 2,000 Change in fair value of warrants
(9,278 ) — Debt extinguishment expense 95,510 107 Other 1,321 1,465
Changes in operating assets and liabilities: Accounts receivable
19,695 16,902 Due from/to affiliates, net (13,157 ) 13,064
Inventories (917 ) (10,237 ) Prepaid expenses and other current
assets (2,375 ) (4,247 ) Prepaid royalties (241 ) 891 Commodity
derivative assets and liabilities (532 ) 1,707 Accounts payable
7,324 (3,239 ) Accrued interest (9,803 ) 12,769 Accrued expenses
and other current liabilities
(3,430
) (695 ) Other 1,782 (2,436 ) Net cash provided by
operating activities
22,392
34,222
Cash flows from investing
activities
Investment in property, plant, equipment and development (19,908 )
(5,040 ) Return of investment on financing arrangements with Murray
Energy (affiliate) 705 653 Settlement of certain coal derivatives
3,520 — Proceeds from sale of property, plant and equipment
1,898 83 Net cash used in investing activities (13,785 )
(4,304 )
Cash flows from financing activities Net change in
borrowings under revolving credit facility (352,500 ) — Net change
in borrowings under A/R securitization program 7,000 (19,800 )
Proceeds from other long-term debt 1,234,438 — Payments on other
long-term debt and capital lease obligations
(970,721
) (11,097 ) Proceeds from issuance of common units to Murray Energy
(affiliate) 60,586 — Debt extinguishment costs (57,645 ) — Debt
issuance costs paid (27,328 ) — Other
(1,892
) (339 ) Net cash used in financing activities
(108,062
) (31,236 ) Net decrease in cash and cash equivalents
(99,455 ) (1,318 ) Cash and cash equivalents, beginning of period
103,690 17,538 Cash and cash equivalents, end of
period $ 4,235 $ 16,220
Supplemental disclosures of
non-cash financing activities: Non-cash capital contribution
from Foresight Reserves LP (affiliate) $ — $ 813 Reclassification
of warrant liability to partners' capital $ 41,888 $ —
Reconciliation of U.S. GAAP Net Loss
Attributable to Controlling Interests to Adjusted EBITDA:
Three Months Ended March 31, 2017
March 31, 2016
December 31, 2016
(In Thousands)
Net loss attributable to controlling
interests(1)
$ (111,184 ) $ (41,704 ) $ (85,012 ) Interest expense, net 43,380
32,995 43,932 Depreciation, depletion and amortization 39,298
36,417 38,691 Long-lived asset impairments — — 74,575 Accretion on
asset retirement obligations 710 844 844 Transition and
reorganization costs (excluding amounts included in equity-based
compensation below) — 2,241 — Equity-based compensation (2) 318
3,992 395 Loss on commodity derivative contracts 1,492 523 6,482
Settlements of commodity derivative contracts 3,724 5,119 (468 )
Debt restructuring costs — 9,710 119 Change in fair value of
warrants (9,278 ) — 18,576 Loss (gain) on early extinguishment of
debt 95,510 107 (90 )
Adjusted EBITDA
$ 63,970 $ 50,244 $ 98,044 (1) - Included in net loss
attributable to controlling interests during the three months ended
December 31, 2016 was business interruption proceeds of $20.0
million, which was recorded in other operating income, net. (2) -
Includes equity-based compensation of $3,698 which was recorded in
transition and reorganization costs in the statement of operations
for the three months ended March 31, 2016.
Operating Metrics Three Months Ended March
31, 2017 March 31, 2016
December 31, 2016 (In Thousands, Except Per Ton Data)
Produced tons sold 5,165 3,737 4,923 Purchased tons sold 118
17 256
Total tons sold
5,283 3,754 5,179 Tons produced 5,267
4,299 5,072 Coal sales realization per ton sold(1) $ 43.12 $
43.45 $ 48.46 Cash cost per ton sold(2) $ 22.80 $ 23.86 $ 22.84
Netback to mine realization per ton sold(3) $ 35.98 $ 36.57 $ 40.16
(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/20170511005159/en/
Foresight Energy LPGary M. Broadbent, 740-338-3100Senior
Corporate Counsel andDirector of Investor and Media
RelationsInvestor.relations@foresight.comMedia@coalsource.com
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