FELP Foresight Energy Partners LP

First Quarter 2019 Highlights:

• Coal sales of $267 million on sales volumes of 5.7 million tons.
• Adjusted EBITDA of $65.5 million.
• Cash flows from operations of $49.2 million.
• Net loss of $16.8 million, or ($0.09) per common unit and ($0.15) per subordinated unit.

Foresight Energy LP (“Foresight” or the “Partnership”) (NYSE: FELP) today reported financial and operating results for the first quarter ended March 31, 2019. Foresight generated first quarter coal sales revenues of $267.3 million on sales volumes of nearly 5.7 million tons, resulting in a net loss of $16.8 million, Adjusted EBITDA of $65.5 million, and cash flows from operations of $49.2 million. Production was strong with the mines safely and efficiently producing over 6 million tons during the quarter. Foresight also announced that the Board of Directors of its General Partner has suspended the quarterly distribution to common unitholders.

“Despite the difficult flooding conditions experienced on the river and at our ports on the Gulf, we exported nearly 2.2 million tons during the quarter and, given our contracted position, we maintained sales realizations even though we continue to see a decline in API2 pricing,” remarked Mr. Robert D. Moore, Chairman, President, and Chief Executive Officer. “These factors, combined with our continued industry-leading cost structure, allowed us to maintain comparable margins quarter-over-quarter.”

Mr. Moore further commented, “Regarding the decision to suspend the quarterly cash distribution at this time, the Board considered the current export price environment and challenging logistical conditions, the desire to maintain financial strength and flexibility, and other factors to conclude that our cash resources would be best directed towards other uses including, among other things, liquidity improvement and debt reduction.”

Consolidated Financial Results

Quarter Ended March 31, 2019 Compared to Quarter Ended March 31, 2018

Coal sales totaled $267.3 million for the first quarter 2019 compared to $238.4 million for the first quarter 2018, representing an increase of $28.9 million, or over 12%. The increase in coal sales revenues was driven by a nearly 9%, or 456 thousand ton, increase in tons sold combined with an increase in coal sales realizations of over 3%, or $1.44 per ton sold. The increases in sales volumes and sales realizations per ton were primarily the result of increased export sales. Although API2 pricing has declined during the first quarter 2019, Foresight’s contracted position allowed it to maintain comparable coal sales realizations on export tons.

Cost of coal produced was $134.0 million for the first quarter 2019 compared to $120.6 million for the first quarter 2018. The increase in cost of coal produced was primarily due to higher sales volumes during the first quarter 2019, as the cost per ton sold was comparable quarter-over-quarter.

Transportation costs increased approximately $12.4 million from the first quarter 2018 to the first quarter 2019 because of higher sales volumes and a higher percentage of sales going to the export market during the current quarter and the additional transportation and transloading costs associated therewith.

The small increase in selling, general and administrative expense during the first quarter 2019 was primarily due to increased sales and marketing expense associated with increased export sales volumes.

Interest expense during the first quarter 2019 increased $1.0 million compared to interest expense during the first quarter 2018 primarily due to outstanding borrowings on the revolving credit facility and overall higher variable interest rates during the current quarter, offset by lower overall outstanding principal balances.

During the first quarter 2019, Foresight generated operating cash flows of $49.2 million and ended the quarter with $3.5 million in cash and $112.7 million of available borrowing capacity, net of outstanding borrowings and letters of credit, under its revolving credit facility. Capital expenditures for the first quarter 2019 totaled $35.1 million compared $16.5 million for the first quarter 2018. The increase in capital expenditures was primarily the result of land purchases, a new portal at the Sugar Camp complex, and development of the Hillsboro complex.

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 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 20.0 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 $260 to $300 million.

Capital Expenditures – Total 2019 capital expenditures are estimated to be between $70 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)

 

 

  March 31,   December 31, 2019 2018 Assets Current assets: Cash and cash equivalents $ 3,486 $ 269 Accounts receivable 27,274 32,248 Due from affiliates 38,658 49,613 Financing receivables - affiliate 3,459 3,392 Inventories, net 63,625 56,524 Prepaid royalties - affiliate 1,619 2,000 Deferred longwall costs 26,401 14,940 Other prepaid expenses and current assets 8,603 10,872 Contract-based intangibles   1,031   1,326 Total current assets 174,156 171,184 Property, plant, equipment and development, net 2,134,244 2,148,569 Financing receivables - affiliate 59,815 60,705 Prepaid royalties, net 3,054 2,678 Other assets 12,431 4,311 Contract-based intangibles   545   726 Total assets $ 2,384,245 $ 2,388,173 Liabilities and partners’ capital Current liabilities: Current portion of long-term debt and finance lease obligations $ 43,000 $ 53,709 Current portion of sale-leaseback financing arrangements 6,807 6,629 Accrued interest 31,684 24,304 Accounts payable 116,797 99,735 Accrued expenses and other current liabilities 66,235 67,466 Asset retirement obligations 6,578 6,578 Due to affiliates 16,304 17,740 Contract-based intangibles   8,211   8,820 Total current liabilities 295,616 284,981 Long-term debt and finance lease obligations 1,203,094 1,194,394 Sale-leaseback financing arrangements 187,976 189,855 Asset retirement obligations 39,578 38,966 Other long-term liabilities 17,454 16,428 Contract-based intangibles   65,281   66,834 Total liabilities 1,808,999 1,791,458 Limited partners' capital: Common unitholders (80,939 and 80,844 units outstanding as of March 31, 2019 and December 31, 2018, respectively) 366,064 377,880 Subordinated unitholder (64,955 units outstanding as of March 31, 2019 and December 31, 2018)   209,182   218,835 Total partners' capital   575,246   596,715 Total liabilities and partners' capital $ 2,384,245 $ 2,388,173    

Foresight Energy LP

Consolidated Statement of Operations

(In Thousands, Except Per Unit Data)

 

Three Months EndedMarch 31, 2019

 

Three Months EndedMarch 31, 2018

Revenues: Coal sales $ 267,337 $ 238,387 Other revenues   1,735     2,339   Total revenues 269,072 240,726   Costs and expenses: Cost of coal produced (excluding depreciation, depletion and amortization) 133,981 120,570 Cost of coal purchased 2,375 1,751 Transportation 58,834 46,443 Depreciation, depletion and amortization 46,548 51,420 Contract amortization (1,686 ) (1,420 ) Accretion on asset retirement obligations 551 731 Selling, general and administrative 8,647 7,775 Other operating (income) expense, net   (67 )   (648 ) Operating income 19,889 14,104 Other expenses Interest expense, net   36,710     35,673   Net loss $ (16,821 ) $ (21,569 )   Net loss available to limited partner units - basic and diluted: Common unitholders $ (7,168 ) $ (9,789 ) Subordinated unitholder $ (9,653 ) $ (11,780 )   Net loss per limited partner unit - basic and diluted: Common unitholders $ (0.09 ) $ (0.12 ) Subordinated unitholder $ (0.15 ) $ (0.18 )   Weighted average limited partner units outstanding - basic and diluted: Common units 80,915 78,846 Subordinated units 64,955 64,955   Distributions declared per limited partner unit $ 0.0600 $ 0.0565    

Foresight Energy LP

Consolidated Statements of Cash Flows

(In Thousands)

   

Three MonthsEndedMarch 31, 2019

 

Three MonthsEndedMarch 31, 2018

Cash flows from operating activities Net loss $ (16,821 ) $ (21,569 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation, depletion and amortization 46,548 51,420 Amortization of debt discount 700 655 Contract amortization (1,686 ) (1,420 ) Accretion on asset retirement obligations 551 731 Equity-based compensation 233 177 Changes in operating assets and liabilities: Accounts receivable 4,974 6,547 Due from/to affiliates, net 9,519 11,392 Inventories (4,228 ) (12,927 ) Prepaid expenses and other assets (9,235 ) (6,424 ) Prepaid royalties 5 2,004 Accounts payable 17,062 9,218 Accrued interest 7,380 13,315 Accrued expenses and other current liabilities (6,157 ) (1,466 ) Other   322     53   Net cash provided by operating activities 49,167 51,706 Cash flows from investing activities Investment in property, plant, equipment and development (35,096 ) (16,531 ) Return of investment on financing arrangements with Murray Energy (affiliate)   823     778   Net cash used in investing activities (34,273 ) (15,753 ) Cash flows from financing activities Borrowings under revolving credit facility 21,000 — Payments on revolving credit facility (13,000 ) — Payments on long-term debt and finance lease obligations (10,709 ) (12,608 ) Distributions paid (4,856 ) (4,510 ) Payments on sale-leaseback and short-term financing arrangements   (4,112 )   (2,461 ) Net cash used in financing activities   (11,677 )   (19,579 ) Net increase in cash, cash equivalents, and restricted cash 3,217 16,374 Cash, cash equivalents, and restricted cash, beginning of period   269     2,179   Cash, cash equivalents, and restricted cash, end of period $ 3,486   $ 18,553      

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

 

Three MonthsEndedMarch 31, 2019

 

Three MonthsEndedMarch 31, 2018

 

Three MonthsEndedDecember 31, 2018

Net (loss) income $ (16,821 ) $ (21,569 ) $ 16,879 Interest expense, net 36,710 35,673 36,809 Depreciation, depletion and amortization 46,548 51,420 53,128 Accretion and changes in estimates on asset retirement obligations 551 731 (10,364 ) Contract amortization (1,686 ) (1,420 ) (9,782 ) Equity-based compensation   233     177     199   Adjusted EBITDA $ 65,535   $ 65,012   $ 86,869      

Operating Metrics (In Thousands, Except Per Ton Data)

 

Three MonthsEndedMarch 31, 2019

 

Three MonthsEndedMarch 31, 2018

 

Three MonthsEndedDecember 31, 2018

Produced tons sold 5,646 5,199 6,087 Purchased tons sold   50   41   58 Total tons sold   5,696   5,240   6,145   Tons produced 6,065 5,667 6,061   Coal sales realization per ton sold(1) $ 46.93 $ 45.49 $ 48.33 Cash cost per ton sold(2) $ 23.73 $ 23.19 $ 22.30 Netback to mine realization per ton sold(3) $ 36.61 $ 36.63 $ 38.03   (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/20190508005394/en/

Cody E. NettCorporate Secretary740-338-3100Investor.relations@foresight.comCody.Nett@coalsource.com