Maintains positive cash flow despite difficult
pricing environment
Warrior Met Coal, Inc. (NYSE: HCC) (“Warrior” or the “Company”)
today announced results for the first quarter of 2021. Warrior is
the leading dedicated U.S. based producer and exporter of high
quality metallurgical (“met”) coal for the global steel
industry.
Warrior reported a net loss for the first quarter of 2021 of
$21.4 million, or $0.42 per diluted share, compared to net income
of $21.5 million, or $0.42 per diluted share, in the first quarter
of 2020. Adjusted net income per share for the first quarter of
2021 was $0.08 per diluted share compared to adjusted net income
per share of $0.39 per diluted share in the first quarter of 2020.
The Company reported Adjusted EBITDA of $47.1 million in the first
quarter of 2021, compared to Adjusted EBITDA of $62.0 million in
the first quarter of 2020.
“During the first quarter, we saw COVID-19 and the Chinese ban
on Australian coal have a continued impact on both pricing and
demand across the met coal industry,” commented Walt Scheller, CEO
of Warrior. “However, we remained focused on successfully managing
our costs, working capital and capex spending, which enabled us to
be free cash flow positive despite these headwinds.”
Mr. Scheller continued, "The end of the first quarter also
coincided with the expiration of our Collective Bargaining
Agreement with the United Mine Workers of America on April 1. While
we continue to negotiate in good faith with the UMWA to reach a new
contract, the UMWA has chosen to initiate a strike.”
“Importantly, we have business continuity plans in place to
continue meeting the needs of our valued customers during this
time.”
Operating Results The Company produced 2.2 million short
tons of met coal in the first quarter of 2021 compared to 2.1
million short tons in the first quarter of 2020. Sales volume in
the first quarter of 2021 was 2.0 million short tons compared to
1.8 million short tons in the first quarter of 2020. Inventory
levels rose to 1.2 million short tons at the end of March 31, 2021
from the 998 thousand short tons at the end of 2020.
Additional Financial Results Total revenues were $213.8
million for the first quarter of 2021, including $207.0 million in
mining revenues, which consisted of met coal sales of 2.0 million
short tons at an average net selling price of $106.04 per short
ton, net of demurrage and other charges. This compares to total
revenues of $226.7 million in the first quarter of 2020. The
average net selling price of the Company's met coal declined 13%
from $122.02 per short ton in the first quarter of 2020 to $106.04
per short ton in the first quarter of 2021. During the first
quarter of 2021, the Company averaged a met coal selling price of
$106.04 per short ton, which corresponds to 95% of the quarterly
Australian premium low-volatility hard coking coal (“HCC”) Platts
Premium LV FOB Australian Index (the "Platts Index”) price for the
same period. The year-over-year decline in revenues and profits is
primarily attributed to weaker met coal pricing in challenging
market conditions associated with the impact of COVID-19 and the
Chinese ban on Australian coal.
Cost of sales for the first quarter of 2021 was $154.4 million
compared to $151.5 million for the first quarter of 2020. Cash cost
of sales (including mining, transportation and royalty costs) for
the first quarter of 2021 were $153.5 million, or 74.2% of mining
revenues, compared to $150.7 million, or 68.1% of mining revenues
in the same period of 2020. Cash cost of sales (free-on-board port)
per short ton decreased to $78.64 in the first quarter of 2021 from
$83.07 in the first quarter of 2020, 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 2021 were $7.6 million, or 3.6% of total revenues, and
were 9.7% lower than in the same period last year. Depreciation and
depletion costs for the first quarter of 2021 were $32.9 million,
or 15.4% of total revenues, and were 14.7% higher than in the same
period last year. Warrior incurred net interest expense of $8.7
million during the first quarter of 2021, which was higher than the
same quarter last year due to interest on our ABL draw and lower
returns on our cash balances.
Income tax expense was $23.6 million in the first quarter of
2021 due to a noncash charge recognized upon the establishment of a
valuation allowance against our state deferred income tax assets.
This result was due to a change in Alabama tax law on February 12,
2021, which became effective January 1, 2021, and required all
sales originating in Alabama and delivered to a jurisdiction where
the seller is not subject to tax to be excluded from Alabama
taxable income without the need to utilize our Alabama net
operating losses. This compares to income tax expense of $3.2
million in the first quarter of 2020.
Cash Flow and Liquidity The Company generated positive
cash flows from operating activities in the first quarter of 2021
of $45.2 million, compared to $21.0 million in the first quarter of
2020. Capital expenditures and mine development costs for the first
quarter of 2021 were $21.8 million. Free cash flow was positive at
$23.4 million in the first quarter of 2021 reflecting our conscious
management of expenses and spending while balancing longer term
capital investments.
Net working capital, excluding cash, for the first quarter of
2021 decreased by $764,000 from the fourth quarter of 2020. This
decrease reflects an increase in coal inventory of approximately
200,000 short tons offset by other working capital decreases.
Cash flows used in financing activities for the first quarter of
2021 were $13.4 million, primarily due to principal repayments of
capital lease obligations of $8.2 million and the payment of
dividends of $2.6 million.
The Company’s total liquidity as of March 31, 2021 was $272.0
million, consisting of cash and cash equivalents of $221.9 million
and available liquidity under its ABL Facility of $50.1 million,
net of outstanding letters of credit of $9.4 million.
Capital Allocation On April 27, 2021, 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 12, 2021 to stockholders of record as of the close of business
on May 7, 2021.
Collective Bargaining Agreement The Company's Collective
Bargaining Agreement ("CBA") contract with the United Mine Workers
of America ("UMWA") expired on April 1, 2021, and the UMWA
initiated a strike. The Company believes that it is well positioned
to fulfill anticipated customer volume commitments for 2021 of
approximately 4.9 to 5.5 million short tons through a combination
of existing coal inventory of 1.2 million short tons and expected
production during the rest of 2021. For now, Warrior has idled Mine
4. It expects production to continue at Mine 7, although at lower
than usual rates. While the Company has business continuity plans
in place, the strike may still cause disruption to production and
shipment activities, and the plans may vary significantly from
quarter to quarter in 2021.
Company Outlook Due to ongoing uncertainty related to
negotiations with the UMWA, the COVID-19 pandemic, the Chinese ban
on Australian coal and other potentially disruptive factors,
Warrior will not be providing full year 2021 guidance at this time.
The Company expects to return to providing guidance once there is
further clarity on these issues.
Warrior continues to appropriately adjust its operational needs,
including managing expenses, capital expenditures, working capital,
liquidity and cash flows. The Company has delayed the development
of the Blue Creek project and its Stock Repurchase Program also
remains temporarily suspended, while it focuses on preserving cash
and liquidity.
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 2021 results today, May 5, 2021, 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 May 5, 2021 until
6:30 p.m. ET on May 19, 2021. The replay will be available by
calling: 1-877-344-7529 (domestic) or 1-412-317-0088
(international) and entering passcode 10152949.
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 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, management of
liquidity, cash flows, expenses and expected capital expenditures
and working capital, future effective income tax rates and payment
of cash taxes, if any, as well as statements regarding production,
our ability to fulfill expected customer orders and the outcome of
negotiations with our labor union. The words “believe,” “expect,”
“anticipate,” “plan,” “intend,” “estimate,” “project,” “target,”
“foresee,” “should,” “would,” “could,” “potential,” “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
and labor strikes or slowdowns; 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, 2020 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,
2021
2020
Revenues:
Sales
$
206,989
$
221,338
Other revenues
6,775
5,382
Total revenues
213,764
226,720
Costs and expenses:
Cost of sales (exclusive of items shown
separately below)
154,350
151,514
Cost of other revenues (exclusive of items
shown separately below)
7,795
7,561
Depreciation and depletion
32,903
28,692
Selling, general and administrative
7,637
8,456
Total costs and expenses
202,685
196,223
Operating income
11,079
30,497
Interest expense, net
(8,693
)
(7,533
)
Other income (expense)
(109
)
1,822
Income before income tax expense
2,277
24,786
Income tax expense
23,632
3,241
Net (loss) income
$
(21,355
)
$
21,545
Basic and diluted net (loss) income per
share:
Net (loss) income per share—basic
$
(0.42
)
$
0.42
Net (loss) income per share—diluted
$
(0.42
)
$
0.42
Weighted average number of shares
outstanding—basic
51,274
51,106
Weighted average number of shares
outstanding—diluted
51,274
51,273
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)
2021
2020
Tons sold
1,952
1,814
Tons produced
2,172
2,099
Gross price realization (2)
95
%
89
%
Average net selling price
$
106.04
$
122.02
Cash cost of sales (free-on-board port)
per short ton (3)
$
78.64
$
83.07
(1)
1 short ton is equivalent to 0.907185
metric tons.
(2)
For the three months ended March 31, 2021
and 2020, 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,
2021
2020
Cost of sales
154,350
$
151,514
Asset retirement obligation accretion
(432
)
(369
)
Stock compensation expense
(422
)
(449
)
Cash cost of sales (free-on-board
port)(3)
$
153,496
$
150,696
(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.
RECONCILIATION OF ADJUSTED EBITDA TO
AMOUNTS REPORTED UNDER U.S. GAAP:
For the three months
ended
March 31,
(in thousands)
2021
2020
Net (loss) income
$
(21,355
)
$
21,545
Interest expense, net
8,693
7,533
Income tax expense
23,632
3,241
Depreciation and depletion
32,903
28,692
Asset retirement obligation accretion
805
733
Stock compensation expense
1,696
1,733
Other non-cash accretion
361
353
Other (income) expense
402
(1,804
)
Adjusted EBITDA (4)
$
47,137
$
62,026
Adjusted EBITDA margin (5)
22.1
%
27.4
%
(4)
Adjusted EBITDA is defined as net income
(loss) before net interest expense, income tax expense (benefit),
depreciation and depletion, non-cash asset retirement obligation
accretion, non-cash stock compensation expense, other non-cash
accretion and other (income) expense. 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 (loss) income, income (loss) 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,
2021
2020
Net (loss) income
$
(21,355
)
$
21,545
Alabama state income tax valuation
allowance
24,965
—
Other (income) expense, net of tax
284
(1,568
)
Adjusted net income (6)
$
3,894
$
19,977
Weighted average number of basic shares
outstanding
51,274
51,106
Weighted average number of diluted shares
outstanding
51,471
51,273
Adjusted basic net income per share:
$
0.08
$
0.39
Adjusted diluted net income per share:
$
0.08
$
0.39
(6)
Adjusted net income is defined as net
income net of Alabama state income tax valuation allowance and
other (income) expense, 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,
2021
2020
OPERATING ACTIVITIES:
Net (loss) income
$
(21,355
)
$
21,545
Non-cash adjustments to reconcile net
(loss) income to net cash provided by operating activities
59,461
34,785
Changes in operating assets and
liabilities:
Trade accounts receivable
7,178
(32,055
)
Inventories
(16,107
)
(17,326
)
Prepaid expenses and other receivables
10,192
(235
)
Accounts payable
4,964
15,614
Accrued expenses and other current
liabilities
(5,463
)
(3,538
)
Other
6,352
2,232
Net cash provided by operating
activities
45,222
21,022
INVESTING ACTIVITIES:
Purchases of property, plant and
equipment
(9,479
)
(22,775
)
Mine development costs
(12,333
)
(3,677
)
Proceeds from sale of property, plant and
equipment
20
—
Other
—
6,233
Net cash used in investing activities
(21,792
)
(20,219
)
FINANCING ACTIVITIES:
Net cash (used in) provided by financing
activities
(13,399
)
62,557
Net increase in cash and cash
equivalents
10,031
63,360
Cash and cash equivalents at beginning of
period
211,916
193,383
Cash and cash equivalents at end of
period
$
221,947
$
256,743
RECONCILIATION OF FREE CASH FLOW TO
AMOUNTS REPORTED UNDER U.S. GAAP:
(in thousands)
For the three months
ended
March 31,
2021
2020
Net cash provided by operating
activities
$
45,222
$
21,022
Purchases of property, plant and equipment
and mine development costs
(21,812
)
(26,452
)
Free cash flow (7)
$
23,410
$
(5,430
)
Free cash flow conversion (8)
49.7
%
(8.8
) %
(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, 2021
(Unaudited)
December 31,
2020
ASSETS
Current assets:
Cash and cash equivalents
$
221,947
$
211,916
Short-term investments
8,504
8,504
Trade accounts receivable
76,120
83,298
Inventories, net
135,696
118,713
Prepaid expenses and other receivables
34,859
45,052
Total current assets
477,126
467,483
Mineral interests, net
98,395
100,855
Property, plant and equipment, net
640,732
637,108
Deferred income taxes
150,741
174,372
Other long-term assets
12,997
14,118
Total assets
$
1,379,991
$
1,393,936
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Accounts payable
$
65,336
$
59,110
Accrued expenses
62,901
86,108
Short term financing lease liabilities
23,619
14,385
Other current liabilities
9,107
10,715
Total current liabilities
160,963
170,318
Long-term debt
380,098
379,908
Asset retirement obligations
60,746
57,553
Long term financing lease liabilities
40,662
24,091
Other long-term liabilities
37,219
36,825
Total liabilities
679,688
668,695
Stockholders’ Equity:
Common stock, $0.01 par value per share
(Authorized -140,000,000 shares as of March 31, 2021 and December
31, 2020, 53,567,566 issued and 51,345,725 outstanding as of March
31, 2021 and 53,408,040 issued and 51,186,199 outstanding as of
December 31, 2020)
536
534
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, 2021 and December 31, 2020)
(50,576
)
(50,576
)
Additional paid in capital
248,774
249,746
Retained earnings
501,569
525,537
Total stockholders’ equity
700,303
725,241
Total liabilities and stockholders’
equity
$
1,379,991
$
1,393,936
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210505005876/en/
For Investors: Dale W. Boyles, 205-554-6129
dale.boyles@warriormetcoal.com
For Media: D'Andre Wright, 205-554-6131
dandre.wright@warriormetcoal.com
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