First quarter results consistent with
expectations
Mining operations continue uninterrupted due to
critical infrastructure designation in Alabama
Warrior Met Coal, Inc. (NYSE:HCC) (“Warrior” or the “Company”)
today announced results for the first quarter of 2020. Warrior is
the leading dedicated U.S. based producer and exporter of high
quality metallurgical (“met”) coal for the global steel
industry.
Warrior reported first quarter 2020 net income of $21.5 million,
or $0.42 per diluted share, compared to net income of $110.4
million, or $2.14 per diluted share, in the first quarter of 2019.
Adjusted net income per share for the first quarter of 2020 was
$0.39 per diluted share compared to $2.30 per diluted share in the
first quarter of 2019. The Company reported Adjusted EBITDA of
$61.7 million in the first quarter of 2020, compared to Adjusted
EBITDA of $181.0 million in the first quarter of 2019.
“We were pleased to have achieved higher sales and production
volumes for the first quarter compared to those outlined on our
last quarterly earnings call,” commented Walt Scheller, CEO of
Warrior. “The rest of the year is less certain, however, due to the
global health crisis. We are seeing the impact of COVID-19 on
global steel production and overall met coal demand in light of
reduced automobile manufacturing and a slowdown of construction
projects.”
Mr. Scheller continued, “We are fortunate to have a low and
variable cost structure, which will enable us to drive margins in
most price environments. We are also using our ability to lower
other production costs and capital expenditures due to our
significant investments over the past three years. At the same
time, we have adequate liquidity, a strong balance sheet, and
confidence in our long-term strategic initiatives. With our
operational and financial flexibility, premium products and strong
customer relationships, we should be well positioned to weather any
prolonged economic challenge and return to our strong operational
trajectory as soon as the global economy recovers.”
“We would like to thank our employees, who have done an
outstanding job in keeping our operations running, while adhering
to the Centers for Disease Control guidelines. We have taken
extensive measures to protect the health and safety of our
employees, including alternative work schedules and restricting
visitors, while maintaining operations as a critical infrastructure
business in the state of Alabama. We continue to regularly update
our business continuity scenario planning on global steel
production and met coal demand for various potential developments
related to COVID-19 and will continue to adjust precautionary
measures as necessary,” Mr. Scheller concluded.
Operating Results
The Company produced 2.1 million short tons of met coal in the
first quarter of 2020 compared to 2.3 million short tons in the
first quarter of 2019. Sales volume in the first quarter of 2020
was 1.8 million short tons compared to 2.1 million short tons in
the first quarter of 2019. Inventory levels rose to 978 thousand
short tons at the end of March 31, 2020 from 749 thousand short
tons at the end of the fourth quarter of 2019.
Additional Financial Results
Total revenues were $226.7 million for the first quarter of
2020, including $221.3 million in mining revenues, which consisted
of met coal sales of 1.8 million short tons at an average net
selling price of $122.02 per short ton, net of demurrage and other
charges. This compares to total revenues of $378.3 million in the
first quarter of 2019. The average net selling price of the
Company's met coal declined from $176.37 per short ton in the first
quarter of 2019 to $122.02 per short ton in the first quarter of
2020. The Company sold its met coal in the first quarter of 2020 at
89% of the quarterly Australian premium low-volatility hard coking
coal (“HCC”) Platts Premium LV FOB Australian Index (the "Platts
Index”) price.
Cash cost of sales (including mining, transportation and royalty
costs) for the first quarter of 2020 were $150.7 million, or 68.1%
of mining revenues, compared to $181.9 million, or 49.2% of mining
revenues in the same period of 2019. Cash cost of sales
(free-on-board port) per short ton decreased to $83.07 in the first
quarter of 2020 from $86.80 in the first quarter of 2019,
reflecting Warrior's low and variable cost structure and focus on
cost control during periods of depressed met coal prices.
Selling, general and administrative expenses for the first
quarter of 2020 were $8.5 million, or 3.7% of total revenues.
Depreciation and depletion costs for the first quarter of 2020 were
$28.7 million, or 12.7% of total revenues. Warrior incurred net
interest expense of $7.5 million during the first quarter of
2020.
Income tax expense was $3.2 million in the first quarter of 2020
and represents a noncash expense that reflects the utilization of
the Company’s net operating losses (“NOLs”). This compares to
income tax expense of $28.0 million in the first quarter of 2019.
The Company expects to continue to utilize its NOLs and pay no cash
taxes for the next several years, contingent upon met coal pricing
and overall Company performance.
Cash Flow and Liquidity
The Company generated positive cash flows from operating
activities in the first quarter of 2020 of $21.0 million, compared
to $126.4 million in the first quarter of 2019. Capital
expenditures and mine development costs for the first quarter of
2020 were $26.5 million. Free cash flow was negatively impacted
during the first quarter of 2020 by the increase in net working
capital.
Net working capital, excluding cash, for the first quarter of
2020 increased by $37.5 million from the fourth quarter of 2019,
primarily reflecting an increase in accounts receivables and
inventory partially offset by an increase in accrued expenses and
accounts payable.
Cash flows provided by financing activities for the first
quarter of 2020 were $62.6 million, primarily due to the $70.0
million drawdown under our Amended and Restated Asset-Based
Revolving Credit Agreement (the "ABL Facility"), partially offset
by principal repayments of capital lease obligations of $3.8
million, and the payment of dividends of $2.6 million.
The Company’s available liquidity as of March 31, 2020 was
$302.8 million, consisting of cash and cash equivalents of $256.7
million and available liquidity under its ABL Facility of $46.1
million, net of outstanding letters of credit of $8.9 million. As
previously disclosed, the Company borrowed $70.0 million under its
ABL Facility on March 24, 2020 as a precautionary measure taken to
reduce risk during these unprecedented times.
Capital Allocation
On April 24, 2020, the board of directors declared a regular
quarterly cash dividend of $0.05 per share, totaling approximately
$2.6 million, which will be paid on May 11, 2020 to stockholders of
record as of the close of business on May 5, 2020.
Company Outlook
In light of the uncertainties regarding the duration of the
COVID-19 pandemic and its overall impact on the global economy and
the Company's operations, the Company is withdrawing its full-year
2020 guidance issued on February 19, 2020 at this time. The Company
is also appropriately adjusting its operational needs, including
managing its expenses, capital expenditures, working capital,
liquidity and cash flows. For example, as precautionary measures,
the Company has delayed the budgeted $25.0 million development of
the Blue Creek project until at least July 1, 2020 and has
temporarily suspended its Stock Repurchase Program. The Company
will continue to evaluate the impact of the COVID-19 pandemic on
its business for the remainder of the fiscal year and expects to
provide further updates to its financial outlook and the
development of the Blue Creek project during its second quarter
earnings call to be held in late July 2020.
Use of Non-GAAP Financial Measures
This release contains the use of certain non-GAAP financial
measures. These non-GAAP financial measures are provided as
supplemental information for financial measures prepared in
accordance with GAAP. Management believes that these non-GAAP
financial measures provide additional insights into the performance
of the Company, and they reflect how management analyzes Company
performance and compares that performance against other companies.
These non-GAAP financial measures may not be comparable to other
similarly titled measures used by other entities. The definition of
these non-GAAP financial measures and a reconciliation of non-GAAP
to GAAP financial measures is provided in the financial tables
section of this release.
Conference Call
The Company will hold a conference call to discuss its first
quarter 2020 results today, April 29, 2020, at 4:30 p.m. ET. To
listen to the event, live or access an archived recording, please
visit http://investors.warriormetcoal.com/. Analysts and
investors who would like to participate in the conference call
should dial 1-844-340-9047 (domestic) or 1-412-858-5206
(international) 10 minutes prior to the start time and reference
the Warrior Met Coal conference call. Telephone playback will also
be available from 6:30 p.m. ET April 29, 2020 until 6:30 p.m. ET on
May 29, 2020. The replay will be available by calling:
1-877-344-7529 (domestic) or 1-412-317-0088 (international) and
entering passcode 10140063.
About Warrior
Warrior is a U.S.-based, environmentally and socially minded
supplier to the global steel industry. It is dedicated entirely to
mining non-thermal met coal used as a critical component of steel
production by metal manufacturers in Europe, South America and
Asia. Warrior is a large-scale, low-cost producer and exporter of
premium met coal, also known as hard-coking coal (HCC), operating
highly efficient longwall operations in its underground mines based
in Alabama. The HCC that Warrior produces from the Blue Creek coal
seam contains very low sulfur, has strong coking properties and is
of a similar quality to coal referred to as the premium HCC
produced in Australia. The premium nature of Warrior’s HCC makes it
ideally suited as a base feed coal for steel makers and results in
price realizations near the Platts Index price. For more
information, please visit www.warriormetcoal.com.
Forward-Looking Statements
This press release contains, and the Company’s officers and
representatives may from time to time make, forward-looking
statements within the meaning of Section 27A of the Securities Act
of 1933, as amended and Section 21E of the Securities Exchange Act
of 1934, as amended. All statements, other than statements of
historical facts, included in this press release that address
activities, events or developments that the Company expects,
believes or anticipates will or may occur in the future are
forward-looking statements, including statements regarding 2020
guidance, the impact of COVID-19 on its business and that of its
customers, sales and production growth, ability to maintain cost
structure, demand, the future direction of prices, expected capital
expenditures, future effective income tax rates and payment of cash
taxes, if any. The words “believe,” “expect,” “anticipate,” “plan,”
“intend,” “estimate,” “project,” “target,” “foresee,” “should,”
“would,” “could,” “potential,” or “outlook,” “guidance” or other
similar expressions are intended to identify forward-looking
statements. However, the absence of these words does not mean that
the statements are not forward-looking. These forward-looking
statements represent management’s good faith expectations,
projections, guidance or beliefs concerning future events, and it
is possible that the results described in this press release will
not be achieved. These forward-looking statements are subject to
risks, uncertainties and other factors, many of which are outside
of the Company’s control, that could cause actual results to differ
materially from the results discussed in the forward-looking
statements, including, without limitation, fluctuations or changes
in the pricing or demand for the Company’s coal (or met coal
generally) by the global steel industry; the impact of COVID-19 on
its business and that of its customers, including the risk of a
decline in demand for the Company's met coal due to the impact of
COVID-19 on steel manufacturers, the inability of the Company to
effectively operate its mines and the resulting decrease in
production, the inability of the Company to ship its products to
customers in the case of a partial or complete shut-down of the
Port of Mobile; federal and state tax legislation; changes in
interpretation or assumptions and/or updated regulatory guidance
regarding the Tax Cuts and Jobs Act of 2017; legislation and
regulations relating to the Clean Air Act and other environmental
initiatives; regulatory requirements associated with federal, state
and local regulatory agencies, and such agencies’ authority to
order temporary or permanent closure of the Company’s mines;
operational, logistical, geological, permit, license, labor and
weather-related factors, including equipment, permitting, site
access, operational risks and new technologies related to mining;
the timing and impact of planned longwall moves; the Company’s
obligations surrounding reclamation and mine closure; inaccuracies
in the Company’s estimates of its met coal reserves; any
projections or estimates regarding Blue Creek, including the
expected returns from this project, if any, and the ability of Blue
Creek to enhance the Company's portfolio of assets, the Company's
expectations regarding its future tax rate as well as its ability
to effectively utilize its NOLs to reduce or eliminate its cash
taxes; the Company's ability to develop Blue Creek; the Company’s
ability to develop or acquire met coal reserves in an economically
feasible manner; significant cost increases and fluctuations, and
delay in the delivery of raw materials, mining equipment and
purchased components; competition and foreign currency
fluctuations; fluctuations in the amount of cash the Company
generates from operations, including cash necessary to pay any
special or quarterly dividend; the Company’s ability to comply with
covenants in its ABL Facility or indenture relating to its senior
secured notes; integration of businesses that the Company may
acquire in the future; adequate liquidity and the cost,
availability and access to capital and financial markets; failure
to obtain or renew surety bonds on acceptable terms, which could
affect the Company’s ability to secure reclamation and coal lease
obligations; costs associated with litigation, including claims not
yet asserted; and other factors described in the Company’s Form
10-K for the year ended December 31, 2019 and other reports filed
from time to time with the Securities and Exchange Commission (the
“SEC”), which could cause the Company’s actual results to differ
materially from those contained in any forward-looking statement.
The Company’s filings with the SEC are available on its website at
www.warriormetcoal.com and on the SEC's website at www.sec.gov.
Any forward-looking statement speaks only as of the date on
which it is made, and, except as required by law, the Company does
not undertake any obligation to update or revise any
forward-looking statement, whether as a result of new information,
future events or otherwise. New factors emerge from time to time,
and it is not possible for the Company to predict all such
factors.
WARRIOR MET COAL, INC.
CONDENSED STATEMENTS OF
OPERATIONS
($ in thousands, except per
share)
(Unaudited)
For the three months ended
March 31,
2020
2019
Revenues:
Sales
$
221,338
$
369,681
Other revenues
5,382
8,609
Total revenues
226,720
378,290
Costs and expenses:
Cost of sales (exclusive of items shown
separately below)
151,514
182,628
Cost of other revenues (exclusive of items
shown separately below)
7,561
7,745
Depreciation and depletion
28,692
22,233
Selling, general and administrative
8,456
8,905
Total costs and expenses
196,223
221,511
Operating income
30,497
156,779
Interest expense, net
(7,533
)
(8,592
)
Loss on early extinguishment of debt
—
(9,756
)
Other income
1,822
—
Income before income tax expense
24,786
138,431
Income tax expense
3,241
27,984
Net income
$
21,545
$
110,447
Basic and diluted net income per
share:
Net income per share—basic
$
0.42
$
2.14
Net income per share—diluted
$
0.42
$
2.14
Weighted average number of shares
outstanding—basic
51,106
51,511
Weighted average number of shares
outstanding—diluted
51,273
51,630
Dividends per share:
$
0.05
$
0.05
WARRIOR MET COAL, INC.
QUARTERLY SUPPLEMENTAL
FINANCIAL DATA AND RECONCILIATION OF NON-GAAP FINANCIAL
MEASURES
(Unaudited)
QUARTERLY SUPPLEMENTAL FINANCIAL
DATA:
For the three months ended
March 31,
(short tons in thousands)(1)
2020
2019
Tons sold
1,814
2,096
Tons produced
2,099
2,298
Gross price realization (2)
89
%
98
%
Average net selling price
$
122.02
$
176.37
Cash cost of sales (free on board port)
per short ton (3)
$
83.07
$
86.80
(1) 1 short ton is equivalent to 0.907185
metric tons.
(2) For the three months ended March 31,
2020 and 2019, our gross price realization represents a volume
weighted-average calculation of our daily realized price per ton
based on gross sales, which excludes demurrage and other charges,
as a percentage of the Platts Index.
RECONCILIATION OF CASH COST OF SALES
(FREE-ON-BOARD PORT) TO COST OF SALES REPORTED UNDER U.S.
GAAP:
(in thousands)
For the three months ended
March 31,
2020
2019
Cost of sales
$
151,514
$
182,628
Asset retirement obligation
(369
)
(373
)
Stock compensation expense
(449
)
(319
)
Cash cost of sales (free-on-board
port)(3)
$
150,696
$
181,936
(3) Cash cost of sales
(free-on-board port) is based on reported cost of sales and
includes items such as freight, royalties, labor, fuel and other
similar production and sales cost items, and may be adjusted for
other items that, pursuant to GAAP, are classified in the Condensed
Statements of Operations as costs other than cost of sales, but
relate directly to the costs incurred to produce met coal. Our cash
cost of sales per short ton is calculated as cash cost of sales
divided by the short tons sold. Cash cost of sales per short ton is
a non-GAAP financial measure which is not calculated in conformity
with U.S. GAAP and should be considered supplemental to, and not as
a substitute or superior to financial measures calculated in
conformity with GAAP. We believe cash cost of sales per ton is a
useful measure of performance and we believe it aids some investors
and analysts in comparing us against other companies to help
analyze our current and future potential performance. Cash cost of
sales per ton may not be comparable to similarly titled measures
used by other companies.
WARRIOR MET COAL, INC.
QUARTERLY SUPPLEMENTAL
FINANCIAL DATA AND RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(CONTINUED)
(Unaudited)
RECONCILIATION OF ADJUSTED EBITDA TO
AMOUNTS REPORTED UNDER U.S. GAAP:
For the three months ended
March 31,
(in thousands)
2020
2019
Net income
$
21,545
$
110,447
Interest expense, net
7,533
8,592
Income tax expense
3,241
27,984
Depreciation and depletion
28,692
22,233
Asset retirement obligation accretion
733
812
Stock compensation expense
1,733
1,194
Loss on early extinguishment of debt
—
9,756
Other income
(1,822
)
—
Adjusted EBITDA (4)
$
61,655
$
181,018
Adjusted EBITDA margin (5)
27.2
%
47.9
%
(4) Adjusted EBITDA is defined as net
income before net interest expense (benefit), income tax expense,
depreciation and depletion, non-cash asset retirement obligation
accretion and valuation adjustment, non-cash stock compensation
expense, loss on early extinguishment of debt and other income.
Adjusted EBITDA is not a measure of financial performance in
accordance with GAAP, and we believe items excluded from Adjusted
EBITDA are significant to a reader in understanding and assessing
our financial condition. Therefore, Adjusted EBITDA should not be
considered in isolation, nor as an alternative to net income,
income from operations, cash flows from operations or as a measure
of our profitability, liquidity or performance under GAAP. We
believe that Adjusted EBITDA presents a useful measure of our
ability to incur and service debt based on ongoing operations.
Furthermore, analogous measures are used by industry analysts to
evaluate our operating performance. Investors should be aware that
our presentation of Adjusted EBITDA may not be comparable to
similarly titled measures used by other companies.
(5) Adjusted EBITDA margin is defined as
Adjusted EBITDA divided by total revenues.
RECONCILIATION OF ADJUSTED NET INCOME
TO AMOUNTS REPORTED UNDER U.S. GAAP:
(in thousands, except per share
amounts)
For the three months ended
March 31,
2020
2019
Net income
$
21,545
$
110,447
Loss on early extinguishment of debt, net
of tax
—
7,784
Other income, net of tax
(1,584
)
—
Adjusted net income(6)
$
19,961
$
118,231
Weighted average number of basic shares
outstanding
51,106
51,511
Weighted average number of diluted shares
outstanding
51,273
51,630
Adjusted basic net income per share:
$
0.39
$
2.30
Adjusted diluted net income per share:
$
0.39
$
2.30
(6) Adjusted net income is
defined as net income net of loss on early extinguishment of debt,
net of tax and other income, net of tax (based on each respective
period's effective tax rate). Adjusted net income is not a measure
of financial performance in accordance with GAAP, and we believe
items excluded from adjusted net income are significant to the
reader in understanding and assessing our results of operations.
Therefore, adjusted net income should not be considered in
isolation, nor as an alternative to net income under GAAP. We
believe adjusted net income is a useful measure of performance and
we believe it aids some investors and analysts in comparing us
against other companies to help analyze our current and future
potential performance. Adjusted net income may not be comparable to
similarly titled measures used by other companies.
WARRIOR MET COAL, INC.
CONDENSED STATEMENTS OF CASH
FLOWS
($ in thousands)
(Unaudited)
For the three months ended
March 31,
2020
2019
OPERATING ACTIVITIES:
Net income
$
21,545
$
110,447
Non-cash adjustments to reconcile net
income to net cash provided by operating activities
34,785
62,360
Changes in operating assets and
liabilities:
Trade accounts receivable
(32,055
)
(44,329
)
Income tax receivable
—
297
Inventories
(17,326
)
(10,823
)
Prepaid expenses and other receivables
(235
)
10,167
Accounts payable
15,614
10,640
Accrued expenses and other current
liabilities
(3,538
)
(15,133
)
Other
2,232
2,782
Net cash provided by operating
activities
21,022
126,408
INVESTING ACTIVITIES:
Purchases of property, plant, and
equipment, and other
(22,775
)
(24,161
)
Mine development costs
(3,677
)
(5,578
)
Other
6,233
—
Net cash used in investing activities
(20,219
)
(29,739
)
FINANCING ACTIVITIES:
Net cash provided by (used in) financing
activities
62,557
(147,332
)
Net increase (decrease) in cash and cash
equivalents and restricted cash
63,360
(50,663
)
Cash and cash equivalents and restricted
cash at beginning of period
193,383
206,405
Cash and cash equivalents and restricted
cash at end of period
$
256,743
$
155,742
RECONCILIATION OF FREE CASH FLOW TO
AMOUNTS REPORTED UNDER U.S. GAAP:
(in thousands)
For the three months ended
March 31,
2020
2019
Net cash provided by operating
activities
$
21,022
$
126,408
Purchases of property, plant and equipment
and mine development costs
(26,452
)
(29,973
)
Free cash flow (7)
$
(5,430
)
$
96,435
Free cash flow conversion (8)
(8.8
)%
53.3
%
(7) Free cash flow is defined as net cash
provided by operating activities less purchases of property, plant
and equipment and mine development costs. Free cash flow is not a
measure of financial performance in accordance with GAAP, and we
believe items excluded from net cash provided by operating
activities are significant to the reader in understanding and
assessing our results of operations. Therefore, free cash flow
should not be considered in isolation, nor as an alternative to net
cash provided by operating activities under GAAP. We believe free
cash flow is a useful measure of performance and we believe it aids
some investors and analysts in comparing us against other companies
to help analyze our current and future potential performance. Free
cash flow may not be comparable to similarly titled measures used
by other companies.
(8) Free cash flow conversion is defined
as free cash flow divided by Adjusted EBITDA.
WARRIOR MET COAL, INC.
CONDENSED BALANCE
SHEETS
($ in thousands)
March 31, 2020
(Unaudited)
December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents
$
256,743
$
193,383
Short-term investments
8,500
14,675
Trade accounts receivable
131,526
99,471
Income tax receivable
24,274
12,925
Inventories, net
117,563
97,901
Prepaid expenses and other receivables
25,925
25,691
Total current assets
564,531
444,046
Mineral interests, net
107,432
110,130
Property, plant and equipment, net
598,622
606,200
Deferred income taxes
151,021
154,297
Non-current income tax receivable
—
11,349
Other long-term assets
17,568
18,242
Total assets
$
1,439,174
$
1,344,264
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Accounts payable
$
54,620
$
46,436
Accrued expenses
63,476
65,755
Short term financing lease liabilities
8,022
10,146
Other current liabilities
6,608
6,615
Total current liabilities
132,726
128,952
Long-term debt
409,363
339,189
Asset retirement obligations
54,307
53,583
Long term financing lease liabilities
26,106
25,528
Other long-term liabilities
31,550
31,430
Total liabilities
654,052
578,682
Stockholders’ Equity:
Common stock, $0.01 par value per share
(Authorized -140,000,000 shares as of March 31, 2020 and December
31, 2019, 53,387,591 issued and 51,165,750 outstanding as of March
31, 2020 and 53,293,449 issued and 51,071,608 outstanding as of
December 31, 2019)
533
533
Preferred stock, $0.01 par value per share
(10,000,000 shares authorized, no shares issued and
outstanding)
—
—
Treasury stock, at cost (2,221,841 shares
as of March 31, 2020 and December 31, 2019)
(50,576
)
(50,576
)
Additional paid in capital
244,525
243,932
Retained earnings
590,640
571,693
Total stockholders’ equity
785,122
765,582
Total liabilities and stockholders’
equity
$
1,439,174
$
1,344,264
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200429005495/en/
For Investors: Dale W. Boyles, 205-554-6129
dale.boyles@warriormetcoal.com
For Media: Jason Houston, 205-554-6228
jason.houston@warriormetcoal.com
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