Cloud Peak Energy Inc. (NYSE:CLD), one of the largest U.S. coal
producers and the only pure-play Powder River Basin (“PRB”) coal
company, today announced results for the second quarter and first
six months of 2017.
Highlights and Recent Developments
Quarter Ended Year to
Date (in millions, except per ton amounts)
06/30/17 06/30/16
06/30/17 06/30/16 Net income (loss) $
(6.9 ) $ 35.3 $ (27.1 )
$ (1.1 ) Adjusted EBITDA (1) $ 29.6 $ 19.3 $ 50.0 $ 18.0
Shipments - owned and operated mines (tons) 14.3 11.8 28.4 24.8
Realized price per ton sold $ 12.25 $ 12.60 $ 12.18 $ 12.62 Average
cost per ton sold $ 9.72 $ 10.50 $ 9.75 $ 10.84 Cash margin per ton
sold (2) $ 2.53 $ 2.10 $ 2.43 $ 1.78 Shipments - Asian exports
(tons) 1.3 —
1.8 0.2
(1) Non-GAAP financial measure; see definition and
reconciliation below in this release and the attached tables.(2)
Calculated by subtracting the average cost per ton sold from the
realized price per ton sold.
- Second quarter 2017 net loss was $6.9
million, as compared to the net income of $35.3 million for the
second quarter of 2016, which included both $18.8 million of
contract buyout revenue and non-cash accounting income of $37.3
million for asset retirement obligation remeasurements.
- Adjusted EBITDA of $29.6 million,
shipments of 14.3 million tons, and an average cost of $9.72 per
ton were all improved results as compared to the second quarter of
2016.
- Exported 1.3 million tons during the
second quarter, which were the Company’s full contracted volumes
for the period.
- Reduced undrawn letters of credit by
$38.9 million from March 31, 2017. The improved Company and coal
industry conditions supported a lower amount of collateral for its
reclamation bonding program. Cloud Peak Energy now has $28.6
million remaining in undrawn letters of credit.
- Ended the quarter with total available
liquidity of $453 million.
- Cordero Rojo Mine received the 2016
Safe Sam Award, from the Wyoming Mining Association, and the
Wyoming Governor’s Safety Award.
Colin Marshall, President and Chief Executive Officer,
commented, “Second quarter shipments improved by 21 percent
compared with the second quarter of 2016, as we exported 1.3
million tons and domestic customers took their contracted coal
ratably. Improving volumes allowed us to deliver a solid
operational and financial performance in the second quarter as the
industry environment continued to improve.”
Health, Safety, and Environment
During the second quarter of 2017, among the Company’s
approximately 1,150 full-time mine site employees, there were no
reportable injuries. The year-to-date Mine Safety and Health
Administration (“MSHA”) All Injury Frequency Rate (“AIFR”) is 0.17,
compared to a rate of 0.16 through the second quarter of 2016.
During the 39 MSHA inspector days at the mine sites in the quarter,
the Company received one significant and substantial citation with
an assessment totaling $4,632.
The Cordero Rojo Mine was awarded the 2016 Safe Sam Award, which
is presented by the Wyoming Mining Association to the mining
operation with the best safety record and the most work-hours
across operations of all sizes. The Cordero Rojo Mine also received
the Wyoming Governor’s Safety Award for the large mine category.
This award recognizes safety excellence among Wyoming’s mine
operators, chosen from approximately 350 active operators in the
state.
In addition, Cloud Peak Energy’s Antelope Mine, located near
Douglas, Wyoming, received the third place safety award for large
surface mines from the Wyoming State Mine Inspector and the Wyoming
Mining Association.
There were no reportable environmental incidents during the
quarter.
Consolidated Business Results
Quarter Ended Year to
Date (in millions, except per ton amounts)
06/30/17 06/30/16
06/30/17 06/30/16 Total tons sold 14.4
11.9 28.5 24.9
Total revenue $ 229.2 $ 174.2 $ 424.9 $ 355.4 Net income (loss) $
(6.9 ) $ 35.3 $ (27.1 ) $ (1.1 ) Adjusted EBITDA (1)
$ 29.6 $ 19.3 $ 50.0
$ 18.0
(1) Non-GAAP financial measure; see definition and
reconciliation below in this release and the attached tables.
Operating Segments
Owned and Operated Mines
The Owned and Operated Mines segment comprises the results of
mine site sales from the Company’s three mines primarily to its
domestic utility customers and also to the Logistics and Related
Activities segment.
Quarter Ended Year to
Date (in millions, except per ton amounts)
06/30/17 06/30/16
06/30/17 06/30/16 Tons sold 14.3
11.8 28.4 24.8 Revenue $
178.7 $ 152.1 $ 352.2 $ 319.3 Cost of product sold $ 140.8 $ 129.0
$ 279.9 $ 276.0 Realized price per ton sold $ 12.25 $ 12.60 $ 12.18
$ 12.62 Average cost of product sold per ton $ 9.72 $ 10.50 $ 9.75
$ 10.84 Cash margin per ton sold (1) $ 2.53 $ 2.10 $ 2.43 $ 1.78
Segment operating income (loss) $ 15.3 $ 49.2 $ 27.2 $ 43.7 Segment
Adjusted EBITDA (2) $ 36.7 $ 20.6
$ 70.5 $ 36.0
(1) Calculated by subtracting the average cost per ton sold from
the realized price per ton sold.(2) Non-GAAP financial measure; see
definition and reconciliation below in this release and the
attached tables.
Shipments during the second quarter of 2017 were over 21 percent
higher than the second quarter of 2016, supported by increased
exports and natural gas prices around $3.00 per MMBtu. Utility
coal-fired power plants continued to run during the quarter and
drew down coal inventories, although less than anticipated due to
the slow start to summer.
Revenue from the Owned and Operated Mines segment increased 17
percent in the second quarter of 2017 compared to the second
quarter of 2016 due to higher shipments, partially offset by lower
average realized prices per ton. Cost per ton improved to $9.72 for
the second quarter of 2017 compared with $10.50 for the second
quarter of 2016. The year-over-year improvement was driven by
increased shipments and the continued impact of measures taken to
improve operational flexibility and efficiency. The operations team
continued to successfully manage capital spend while keeping the
equipment fleet in good condition.
Operating income decreased in the second quarter and year to
date June 30, 2017 as compared to the same periods in 2016
primarily due to non-cash accounting income of $37.3 million for
asset retirement obligation remeasurements in 2016.
Logistics and Related Activities
The Logistics and Related Activities segment comprises the
results of the Company’s logistics and transportation services to
its domestic and international customers.
Quarter Ended Year to
Date (in millions, except per ton amounts)
06/30/17 06/30/16
06/30/17 06/30/16 Total tons delivered
1.3 0.1 1.9 0.4
Asian exports (tons) 1.3 — 1.8 0.2 Domestic (tons) — 0.1 0.1 0.2
Revenue $ 66.0 $ 3.2 $ 94.2 $ 17.2 Total cost of product sold $
69.4 $ 11.5 $ 105.1 $ 33.3 Realized gain on financial instruments $
— $ 1.8 $ — $ 3.6 Segment operating income (loss) $ (3.4 ) $ (8.2 )
$ (10.9 ) $ (16.1 ) Segment Adjusted EBITDA (1) $ 1.6
$ (7.4 ) $ (0.9 )
$ (14.3 )
(1) Non-GAAP financial measure; see definition and
reconciliation below in this release and the attached tables.
The Company exported 1.3 million tons during the second quarter
of 2017 as Asian utility demand remains strong. Second quarter 2017
segment operating loss was $3.4 million, as compared to a loss of
$8.2 million for the second quarter of 2016, as prior year
contractual payments were partially mitigated by current year
export sales activity. Adjusted EBITDA includes certain minimum
payments pursuant to the Company’s rail and port agreements and
unexpectedly high demurrage charges caused by rail delays as
shipments ramped up. The Company has currently contracted 3.5
million tons to export during 2017 and expects to export
approximately 4.5 million tons during 2017. This 0.5 million ton
reduction from the 5 million tons of exports previously forecast is
due to delays in ramping up rail service in the first quarter that
will not be recovered during the remainder of the year. The Company
believes these issues are now substantially resolved.
Cash, Liquidity, and Financial Position
Cash and cash equivalents as of June 30, 2017 were $80.5
million. During the second quarter, the cash used in operations
totaled $7.1 million, while capital expenditures (excluding
capitalized interest) were $3.8 million.
During the quarter, the Company reduced the amount outstanding
on undrawn letters of credit used as collateral for reclamation
bonds by nearly $16.9 million from the $67.5 million it reported as
of March 31, 2017. As of the date of this release, Cloud Peak
Energy has reduced the undrawn letters of credit by an additional
$22 million from March 31, 2017 and now has a total of $28.6
million remaining in undrawn letters of credit used as
collateral.
At June 30, 2017, the available borrowing capacity under the
$400 million Credit Agreement was approximately $358 million.
Including cash on hand and the availability under the A/R
Securitization, the Company ended the quarter with total available
liquidity of $453 million.
Government Affairs
During the first six months of the Trump Administration, there
has been a significantly improved, near-term federal regulatory
environment for the U.S. coal industry and utilities. The
Administration’s stated policies seek to promote the use of
America’s energy resources, including coal and other fossil fuels,
and alleviate unnecessary regulatory burdens. The Environmental
Protection Agency, Department of Interior, Department of Energy,
and other agencies are reviewing existing regulations pursuant to
these new policy directives.
Although these policy changes are a welcome shorter-term
improvement, Cloud Peak Energy remains hopeful that Congress and
the Trump Administration will also implement longer-term energy
policies that recognize the substantial benefits of safe, reliable,
and affordable baseload electricity generated from coal by
providing utilities the certainty and incentives to invest in the
nation’s coal power plant fleet. In particular, Cloud Peak Energy
continues to advocate for the development and commercialization of
advanced fossil fuel technologies, including carbon capture. It is
encouraging to see bi-partisan support for the recently introduced
Senate FUTURE Act that aims to amend the existing 45Q tax credit in
order to promote the deployment of carbon capture and utilization
technology on a significant scale.
In British Columbia, Canada (“B.C.”), following earlier
statements from former B.C. Premier Clark that she would respond to
U.S. tariffs on Canadian softwood lumber by potentially banning or
imposing taxes or other levies on U.S. thermal coal transshipments
through B.C, former Premier Clark’s Liberal Party lost a vote of
confidence following recent provincial elections and a new
government has been formed by the New Democratic Party (“NDP”) with
the support of the Green Party. The new NDP-led government
officially assumed power on July 18, 2017 and Mr. John Horgan, NDP
leader, became B.C.’s Premier. Cloud Peak Energy is not aware of
the new government seeking to impose any similar anti-coal
measures. The Company will continue to monitor the political
situation in B.C. and work with its business partners and other
stakeholders to help ensure the U.S. remains a supplier of coal to
Asian trading partners, meeting their need for reliable and
affordable electricity.
Domestic Outlook
Mine shipments to domestic customers for the second quarter of
2017 were 13.0 million tons, as compared to 13.5 million tons
shipped to domestic customers in the first quarter of 2017.
Typically, the second quarter is the slowest of the year by a
larger margin as customers take units offline for planned
maintenance before the summer cooling season increases demand. With
natural gas prices around $3.00 per MMBtu during 2017, utilities
have maintained their consumption of PRB coal. The latest data from
the U.S. Energy Information Administration shows that natural gas
inventories have declined by 9 percent, compared to 2016 levels.
Energy Ventures Analysis estimates there were 78 million tons of
PRB coal inventories at utilities at the end of June 2017, a
decline of 13 million tons from second quarter 2016 levels. The
slow start to summer prevented PRB stockpiles from declining
further. Full year shipments will now largely depend on the level
of summer cooling demand, natural gas prices, and associated coal
burn. These factors will dictate the level of third quarter coal
buying and shipments utilities require in preparation for winter.
If the summer is mild, it is possible that there will be few new
purchases for delivery in 2017. This would result in Cloud Peak
Energy’s first and second half domestic shipments being relatively
equal, which would be unusual. Many utilities appear to be
continuing to delay purchasing coal to have flexibility to switch
between coal and gas electricity generation based on near term
pricing. While this maximizes their flexibility, it could lead to
some price support for coal during periods of increased natural gas
prices and electricity demand.
For 2017, the Company currently plans to ship between 56 and 59
million tons, with current commitments to sell 56 million tons,
which includes 3.5 million tons contracted with export customers.
Nearly all of the 56 million tons are under fixed-price contracts
with a weighted-average price of $12.18 per ton. The approximately
1 million tons for 2017 that were priced during the second quarter
of 2017 averaged $11.63 per ton, in line with prevailing prices at
that time.
The Company is currently contracted to sell 34 million tons in
2018. Of this committed production, 32 million tons are under
fixed-price contracts with a weighted-average price of $12.49 per
ton. For 2018, there were 5 million tons contracted during the
second quarter of 2017 at an average of $12.38 per ton.
International Outlook
International thermal coal prices softened during the second
quarter of 2017 with import demand growth led by China, South
Korea, and southeast Asia countries. China has led the growth in
imports of thermal coal (includes bituminous, sub-bituminous and
lignite) increasing 20 million tonnes or 37 percent over the first
six months of 2016. Year to date, Chinese domestic production
rebounded during the second quarter of 2017 with an increase of
almost 60 million tonnes, or 4 percent, from a relatively flat
first quarter of 2017. China’s strong domestic production and
imports were driven by a year-to-date increase in electric
generation of over 7 percent, which was mostly supplied by
coal-fired generation. In South Korea, the commissioning of several
new coal-fired units in 2016 increased imports of thermal coal by
over 7 million tonnes, or 20 percent, through May 2017.
During the quarter, no new additional export sales were booked
as the Company managed and adjusted shipment volumes to be
delivered in the second and third quarters due to the slower than
planned rail ramp up. The Company has reduced its full-year export
forecast from 5 million tons to 4.5 million tons, of which 3.5
million tons are currently committed. Industry benchmark pricing
for export tons softened but remained within an economic range
during the second quarter of 2017 on very few trades. Activity has
recently increased and international coal prices have firmed as
Asian utilities have begun making purchases for the second half of
the year. The Company’s remaining uncommitted export volumes are
for fourth quarter shipments, and those sales are expected to be
contracted during the third quarter.
2017 Guidance – Financial and Operational Estimates
“Second quarter shipments showed a marked improvement over the
second quarter of 2016, with solid demand from both domestic and
international customers. We are now looking ahead to steady demand
over the remainder of the summer and normalized export rail
performance. The actions we took in 2016 to control our costs and
improve our financial position mean we are well placed to
successfully manage through the current environment and prosper as
it improves,” commented Marshall.
The following table provides the current outlook and assumptions
for selected 2017 consolidated financial and operational
metrics:
Estimate or Estimated Range Coal shipments for
the three mines(1) 56 – 59 million tons
Committed sales with fixed prices Approximately 56 million tons
Anticipated realized price of produced coal with fixed prices
Approximately $12.18 per ton Adjusted EBITDA(2) $85 – $105 million
Net interest expense Approximately $40 million Cash interest paid
Approximately $45 million Depreciation, depletion, amortization,
and accretion $70 – $80 million Capital expenditures
$20 – $25 million
(1)
Inclusive of intersegment sales.
(2)
Non-GAAP financial measure; please see
definition below in this release. Management did not prepare
estimates of reconciliation with comparable GAAP measures,
including net income, because information necessary to provide such
a forward-looking estimate is not available without unreasonable
effort.
Conference Call Details
A conference call with management is scheduled at 5:00 p.m. ET
on July 27, 2017 to review the results and current business
conditions. The call will be webcast live over the Internet from
www.cloudpeakenergy.com under “Investor Relations”. Participants
should follow the instructions provided on the website for
downloading and installing the audio applications necessary to join
the webcast. Interested individuals also can access the live
conference call via telephone at (855) 793-3260 (domestic) or (631)
485-4929 (international) and entering pass code 48355637.
Following the live webcast, a replay will be available at the
same URL on the website for seven days. A telephonic replay will
also be available approximately two hours after the call and can be
accessed by dialing (855) 859-2056 (domestic) or (404) 537-3406
(international) and entering pass code 48355637. The telephonic
replay will be available for seven days.
About Cloud Peak Energy®
Cloud Peak Energy Inc. (NYSE:CLD) is headquartered in Wyoming
and is one of the largest U.S. coal producers and the only
pure-play Powder River Basin coal company. As one of the safest
coal producers in the nation, Cloud Peak Energy mines low sulfur,
subbituminous coal and provides logistics supply services. The
Company owns and operates three surface coal mines in the PRB, the
lowest cost major coal producing region in the nation. The Antelope
and Cordero Rojo mines are located in Wyoming and the Spring Creek
Mine is located in Montana. In 2016, Cloud Peak Energy shipped
approximately 59 million tons from its three mines to customers
located throughout the U.S. and around the world. Cloud Peak Energy
also owns rights to substantial undeveloped coal and complimentary
surface assets in the Northern PRB, further building the Company’s
long-term position to serve Asian export and domestic customers.
With approximately 1,300 total employees, the Company is widely
recognized for its exemplary performance in its safety and
environmental programs. Cloud Peak Energy is a sustainable fuel
supplier for approximately three percent of the nation’s
electricity.
Cautionary Note Regarding Forward-Looking Statements
This release and our related quarterly investor presentation
contain “forward-looking statements” within the meaning of the safe
harbor provisions of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Forward-looking
statements are not statements of historical facts and often contain
words such as “anticipate,” “believe,” “could,” “estimate,”
“expect,” “intend,” “may,” “plan,” “potential,” “seek,” “should,”
“will,” “would,” or words of similar meaning. Forward-looking
statements may include, for example: (1) our outlook for 2017 and
future periods for Cloud Peak Energy, the Powder River Basin
(“PRB”) and the industry in general; (2) our operational, financial
and shipment guidance, including export shipments; (3) estimated
thermal coal demand by domestic and Asian utilities; (4) coal
stockpile and natural gas storage levels and the impacts on future
demand and pricing; (5) our ability to sell additional tons in 2017
and future periods at improved, economic prices; (6) the impact of
the Trump administration energy policies, ongoing state, local and
international anti-coal regulatory and political developments, NGO
activities and global climate change initiatives; (7) potential
commercialization of carbon capture technologies for utilities; (8)
the impact of competition from other domestic and international
coal producers, natural gas supplies and other alternative sources
of energy used to generate electricity; (9) the timing and extent
of any sustained recovery for depressed coal industry conditions,
domestically and internationally; (10) the impact of industry
conditions on our financial performance, liquidity and compliance
with the financial covenants in our Credit Agreement; (11) our
ability to manage our take-or-pay exposure for currently committed
port and rail capacity; (12) our future liquidity and access to
sources of capital and credit to support our existing operations
and growth opportunities, including our ability to renew or replace
our credit facility before its early 2019 termination; (13) the
impact of our hedging programs; (14) our ability to renew or obtain
surety bonds to meet regulatory requirements; (15) our cost
management efforts; (16) operational plans for our mines; (17)
business development and growth initiatives; (18) our plans to
acquire or develop additional coal to maintain and extend our mine
lives; (19) our estimates of the quality and quantity of economic
coal associated with our development projects, the potential
development of our Youngs Creek and other Northern PRB assets, and
our potential exercise of options for Crow Tribal coal; (20)
potential development of additional export terminal capacity and
increased future access to existing or new capacity; (21) industry
estimates of the U.S. Energy Information Administration and other
third party sources; and (22) other statements regarding our
current plans, strategies, expectations, beliefs, assumptions,
estimates and prospects concerning our business, operating results,
financial condition, industry, economic conditions, government
regulations, energy policies and other matters that do not relate
strictly to historical facts.
These statements are subject to significant risks, uncertainties
and assumptions that are difficult to predict and could cause
actual results to differ materially and adversely from those
expressed or implied in the forward-looking statements. The
following factors are among those that may cause actual results to
differ materially and adversely from our forward-looking
statements: (1) the timing and extent of any sustained recovery of
the currently depressed coal industry, domestically and
internationally, and the impact of ongoing or further depressed
industry conditions on our financial performance, liquidity, and
financial covenant compliance; (2) the prices we receive for our
coal and logistics services, our ability to effectively execute our
forward sales strategy, and changes in utility purchasing patterns
resulting in decreased long-term purchases of coal; (3) the timing
of reductions or increases in customer coal inventories; (4) our
ability to obtain new coal sales agreements on favorable terms, to
resolve customer requests for reductions or deferrals, and to
respond to any cancellations of their committed volumes on terms
that preserve the amount and timing of our forecasted economic
value; (5) the impact of increasingly variable and less predictable
demand for thermal coal based on natural gas prices, summer cooling
demand, winter heating demand, economic growth rates and other
factors that impact overall demand for electricity; (6) our ability
to efficiently and safely conduct our mining operations and to
adjust our planned production levels to respond to market
conditions and effectively manage the costs of our operations; (7)
competition with other producers of coal and with traders and
re-sellers of coal, including the current oversupply of thermal
coal, the impacts of currency exchange rate fluctuations and the
strong U.S. dollar, and government environmental, energy and tax
policies and regulations that make foreign coal producers more
competitive for international transactions; (8) the impact of coal
industry bankruptcies on our competitive position relative to other
companies who have recently emerged from bankruptcy with reduced
leverage and potentially reduced operating costs; (9) competition
with natural gas, wind, solar and other non-coal energy resources,
which may continue to increase as a result of low domestic natural
gas prices, the declining cost of renewables, and due to
environmental, energy and tax policies, regulations, subsidies and
other government actions that encourage or mandate use of
alternative energy sources; (10) coal-fired power plant capacity
and utilization, including the impact of climate change and other
environmental regulations and initiatives, energy policies,
political pressures, NGO activities, international treaties or
agreements and other factors that may cause domestic and
international electric utilities to continue to phase out or close
existing coal-fired power plants, reduce or eliminate construction
of any new coal-fired power plants, or reduce consumption of coal
from the PRB; (11) the failure of economic, commercially available
carbon capture technology to be developed and adopted by utilities
in a timely manner; (12) the impact of “keep coal in the ground”
campaigns and other well-funded, anti-coal initiatives by
environmental activist groups and others targeting substantially
all aspects of our industry; (13) our ability to offset declining
U.S. demand for coal and achieve longer term growth in our business
through our logistics revenue and export sales, including the
significant impact of Chinese and Indian thermal coal import demand
and production levels from other countries and basins on overall
seaborne coal prices; (14) railroad, export terminal and other
transportation performance, costs and availability, including the
availability of sufficient and reliable rail capacity to transport
PRB coal, the development of future export terminal capacity and
our ability to access capacity on commercially reasonable terms;
(15) the impact of our rail and terminal take-or-pay commitments if
we do not meet our required export shipment obligations; (16)
weather conditions and weather-related damage that impact our
mining operations, our customers, or transportation infrastructure;
(17) operational, geological, equipment, permit, labor, and other
risks inherent in surface coal mining; (18) future development or
operating costs for our development projects exceeding our
expectations; (19) our ability to successfully acquire coal and
appropriate land access rights at economic prices and in a timely
manner and our ability to effectively resolve issues with
conflicting mineral development that may impact our mine plans;
(20) the impact of asset impairment charges if required as a result
of challenging industry conditions or other factors; (21) our plans
and objectives for future operations and the development of
additional coal reserves, including risks associated with
acquisitions; (22) the impact of current and future environmental,
health, safety, endangered species and other laws, regulations,
treaties, executive orders, court decisions or governmental
policies, or changes in interpretations thereof and third-party
regulatory challenges, including additional requirements,
uncertainties, costs, liabilities or restrictions adversely
affecting the use, demand or price for coal, our mining operations
or the logistics, transportation, or terminal industries; (23) the
impact of required regulatory processes and approvals to lease coal
and obtain permits for coal mining operations or to transport coal
to domestic and foreign customers, including third-party legal
challenges to regulatory approvals that are required for some or
all of our current or planned mining activities; (24) any increases
in rates or changes in regulatory interpretations or assessment
methodologies with respect to royalties or severance and production
taxes and the potential impact of associated interest and
penalties; (25) inaccurately estimating the costs or timing of our
reclamation and mine closure obligations and our assumptions
underlying reclamation and mine closure obligations; (26) our
ability to obtain required surety bonds and provide any associated
collateral on commercially reasonable terms; (27) the availability
of, disruptions in delivery or increases in pricing from
third-party vendors of raw materials, capital equipment and
consumables which are necessary for our operations, such as
explosives, petroleum-based fuel, tires, steel, and rubber; (28)
our assumptions concerning coal reserve estimates; (29) our
relationships with, and other conditions affecting, our customers
(including our largest customers who account for a significant
portion of our total revenue) and other counterparties, including
economic conditions and the credit performance and credit risks
associated with our customers and other counterparties, such as
traders, brokers, and lenders under our Credit Agreement and
financial institutions with whom we maintain accounts or enter
hedging arrangements; (30) the results of our hedging programs and
changes in the fair value of derivative financial instruments that
are not accounted for as hedges; (31) the terms and restrictions of
our indebtedness; (32) liquidity constraints, access to capital and
credit markets and availability and costs of credit, surety bonds,
letters of credit, and insurance, including risks resulting from
the cost or unavailability of financing due to debt and equity
capital and credit market conditions for the coal sector or in
general, changes in our credit rating, our compliance with the
covenants in our debt agreements, the increasing credit pressures
on our industry due to depressed conditions, or any demands for
increased collateral by our surety bond providers; (33) volatility
in the price of our common stock, including the impact of any
delisting of our stock from the New York Stock Exchange if we fail
to meet the minimum average closing price listing standard; (34)
our liquidity, results of operations, and financial condition
generally, including amounts of working capital that are available;
(35) litigation and other contingencies; (36) the authority of
federal and state regulatory authorities to order any of our mines
to be temporarily or permanently closed under certain
circumstances; and (37) other risk factors or cautionary language
described from time to time in the reports and registration
statements we file with the Securities and Exchange Commission,
including those in Item 1A - Risk Factors in our most recent Form
10-K and any updates thereto in our Forms 10-Q and current reports
on Form 8-K.
Additional factors, events or uncertainties that may emerge from
time to time, or those that we currently deem to be immaterial,
could cause our actual results to differ, and it is not possible
for us to predict all of them. We make forward-looking statements
based on currently available information, and we assume no
obligation to, and expressly disclaim any obligation to, update or
revise publicly any forward-looking statements made in this release
or our related quarterly investor presentation, whether as a result
of new information, future events or otherwise, except as required
by law.
Non-GAAP Financial Measures
This release and our related presentation include the non-GAAP
financial measure of Adjusted EBITDA (on a consolidated basis and
for our reporting segments). Adjusted EBITDA is intended to provide
additional information only and does not have any standard meaning
prescribed by generally accepted accounting principles in the
United States of America. (“U.S. GAAP”). A quantitative
reconciliation of historical net income (loss) to Adjusted EBITDA
is found in the tables accompanying this release. EBITDA represents
net income (loss) before: (1) interest income (expense), net,
(2) income tax provision, (3) depreciation and depletion,
and (4) amortization. Adjusted EBITDA represents EBITDA as
further adjusted for accretion, which represents non-cash increases
in asset retirement obligation liabilities resulting from the
passage of time, and specifically identified items that management
believes do not directly reflect our core operations. For the
periods presented herein, the specifically identified items are:
(1) adjustments to exclude non-cash impairment charges, (2)
adjustments for derivative financial instruments, excluding fair
value mark-to-market gains or losses and including cash amounts
received or paid, (3) adjustments to exclude debt restructuring
costs, and (4) non-cash throughput amortization expense and
contract termination payments made to amend the BNSF and Westshore
agreements. We enter into certain derivative financial instruments
such as put options that require the payment of premiums at
contract inception. The reduction in the premium value over time is
reflected in the mark-to-market gains or losses. Our calculation of
Adjusted EBITDA does not include premiums paid for derivative
financial instruments; either at contract inception, as these
payments pertain to future settlement periods, or in the period of
contract settlement, as the payment occurred in a preceding period.
In prior years the amortization of port and rail contract
termination payments were included as part of EBITDA and Adjusted
EBITDA because the cash payments approximated the amount of
amortization being taken during the year. During 2017, management
determined that the non-cash portion of amortization arising from
payments made in prior years as well as the amortization of
contract termination payments should be adjusted out of Adjusted
EBITDA because the ongoing cash payments are now significantly
smaller than the overall amortization of these payments and no
longer reflect the transactional results. Because of the inherent
uncertainty related to the items identified above, management does
not believe it is able to provide a meaningful forecast of the
comparable GAAP measures or reconciliation to any forecasted GAAP
measure.
Adjusted EBITDA is an additional tool intended to assist our
management in comparing our performance on a consistent basis
for purposes of business decision making by removing the impact of
certain items that management believes do not directly reflect our
core operations. Adjusted EBITDA is a metric intended to assist
management in evaluating operating performance, comparing
performance across periods, planning and forecasting future
business operations and helping determine levels of operating and
capital investments. Period-to-period comparisons of Adjusted
EBITDA are intended to help our management identify and assess
additional trends potentially impacting our company that may not be
shown solely by period-to-period comparisons of net income (loss).
Consolidated Adjusted EBITDA is also used as part of our incentive
compensation program for our executive officers and others.
We believe Adjusted EBITDA is also useful to investors, analysts
and other external users of our consolidated financial statements
in evaluating our operating performance from period to period and
comparing our performance to similar operating results of other
relevant companies. Adjusted EBITDA allows investors to measure a
company’s operating performance without regard to items such as
interest expense, taxes, depreciation and depletion, amortization
and accretion and other specifically identified items that are not
considered to directly reflect our core operations.
Our management recognizes that using Adjusted EBITDA as a
performance measure has inherent limitations as compared to net
income (loss) or other GAAP financial measures, as this non-GAAP
measure excludes certain items, including items that are recurring
in nature, which may be meaningful to investors. As a result of
these exclusions, Adjusted EBITDA should not be considered in
isolation and does not purport to be an alternative to net income
(loss) or other GAAP financial measures as a measure of our
operating performance. Because not all companies use identical
calculations, our presentation of Adjusted EBITDA may not be
comparable to other similarly titled measures of other
companies.
CLOUD PEAK ENERGY INC.
UNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF
OPERATIONS AND COMPREHENSIVE INCOME
(LOSS)
(in thousands, except per share
data)
Three Months Ended Six Months Ended June
30, June 30, 2017 2016
2017 2016 Revenue $ 229,201 $
174,188 $ 424,930 $ 355,437
Costs and
expenses Cost of product sold (exclusive of depreciation,
depletion, and accretion) 194,370 140,616 363,309 305,650
Depreciation and depletion 19,249 (19,510 ) 37,894 (408 ) Accretion
1,846 1,994 3,667 4,576 (Gain) loss on derivative financial
instruments 1,595 (8,286 ) 3,939 (6,325 ) Selling, general and
administrative expenses 9,565 13,251 20,279 27,026 Impairments ― 34
― 4,187 Other operating costs 92 169
310 456 Total costs and expenses
226,717 128,268 429,398
335,162 Operating income (loss) 2,484
45,920 (4,468 ) 20,275
Other income
(expense) Interest income 118 33 157 70 Interest expense (9,866
) (11,286 ) (22,778 ) (22,338 ) Other, net (138 )
(206 ) (448 ) (595 ) Total other income (expense)
(9,886 ) (11,459 ) (23,069 ) (22,863 )
Income (loss) before income tax provision and earnings from
unconsolidated affiliates (7,402 ) 34,461 (27,537 ) (2,588 ) Income
tax benefit (expense) 149 1,158 (151 ) 2,580 Income (loss) from
unconsolidated affiliates, net of tax 305 (330
) 632 (1,078 ) Net income (loss) (6,948
) 35,289 (27,056 ) (1,086 )
Other
comprehensive income (loss) Postretirement medical plan
amortization of prior service costs (1,821 ) (1,871 ) (3,642 )
(1,510 ) Postretirement medical plan change ― 42,851 ― 42,851
Income tax on postretirement medical and pension changes ―
(974 ) ― (1,944 ) Other comprehensive income
(loss) (1,821 ) 40,006 (3,642 )
39,397 Total comprehensive income (loss) $ (8,769 ) $ 75,295
$ (30,698 ) $ 38,311
Income (loss) per common
share: Basic $ (0.09 ) $ 0.58 $ (0.38 ) $ (0.02 )
Diluted $ (0.09 ) $ 0.57 $ (0.38 ) $ (0.02 )
Weighted-average shares outstanding - basic 75,086
61,296 70,634 61,244
Weighted-average shares outstanding - diluted 75,086
61,971 70,634 61,244
CLOUD PEAK ENERGY INC.
UNAUDITED CONDENSED CONSOLIDATED
BALANCE SHEETS
(in thousands)
June 30, December 31, ASSETS
2017 2016 Current assets Cash and cash
equivalents $ 80,536 $ 83,708 Accounts receivable 49,042 49,311 Due
from related parties 478 — Inventories, net 70,022 68,683
Derivative financial instruments — 752 Income tax receivable 1,516
1,601 Other prepaid and deferred charges 33,438 20,361 Other assets
802 741 Total current assets 235,834
225,157
Noncurrent assets Property, plant and
equipment, net 1,408,080 1,432,361 Goodwill 2,280 2,280 Other
assets 43,732 54,978 Total assets $
1,689,926 $ 1,714,776
LIABILITIES AND
EQUITY Current liabilities Accounts payable $ 32,925 $
27,678 Royalties and production taxes 57,335 63,018 Accrued
expenses 31,375 35,857 Due to related parties — 71 Other
liabilities 2,552 2,567 Total current
liabilities 124,187 129,191
Noncurrent liabilities
Senior notes 409,368 475,009 Asset retirement obligations, net of
current portion 107,891 97,048 Accumulated postretirement medical
benefit obligation, net of current portion 23,701 22,950 Royalties
and production taxes 20,995 21,557 Other liabilities 15,276
17,360 Total liabilities 701,418
763,115
Equity Common stock ($0.01 par
value; 200,000 shares authorized; 75,611 and 61,942 shares issued
and 75,134 and 61,465 outstanding as of June 30, 2017 and December
31, 2016, respectively) 751 615 Treasury stock, at cost (477 shares
as of both June 30, 2017 and December 31, 2016) (6,498 ) (6,498 )
Additional paid-in capital 649,382 581,975 Retained earnings
326,630 353,685 Accumulated other comprehensive income (loss)
18,243 21,884 Total equity
988,508 951,661 Total liabilities and equity $
1,689,926 $ 1,714,776
CLOUD PEAK ENERGY INC.
UNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(in thousands)
Six Months Ended June 30, 2017
2016 Cash flows from operating activities Net
income (loss) $ (27,056 ) $ (1,086 ) Adjustments to reconcile net
income (loss) to net cash provided by (used in) operating
activities: Depreciation and depletion 37,894 (408 ) Accretion
3,667 4,576 Impairments — 4,187 Loss (income) from unconsolidated
affiliates, net of tax (632 ) 1,078 Distributions of income from
unconsolidated affiliates 3,500 1,500 Deferred income taxes —
(1,944 ) Equity-based compensation expense 2,506 3,900 (Gain) loss
on derivative financial instruments 3,939 (6,325 ) Cash received
(paid) on derivative financial instrument settlements (1,147 )
(2,640 ) Non-cash interest expense related to early retirement of
debt and refinancings 702 — Net periodic postretirement benefit
costs (2,736 ) 995 Payments for logistics contracts (17,000 )
(7,500 ) Logistics throughput contract amortization expense 18,998
16,333 Other 4,296 662 Changes in operating assets and liabilities:
Accounts receivable 269 5,563 Inventories, net (1,395 ) 2,019 Due
to or from related parties (478 ) (570 ) Other assets (6,160 )
10,813 Accounts payable and accrued expenses (6,100 ) (42,654 )
Asset retirement obligations (520 ) (712 ) Net cash
provided by (used in) operating activities 12,547
(12,213 )
Investing activities Purchases of
property, plant and equipment (7,896 ) (12,075 ) Cash paid for
capitalized interest — (945 ) Investment in development projects
(2,110 ) (1,500 ) Insurance proceeds — 2,826 Other 33
45 Net cash provided by (used in) investing
activities (9,973 ) (11,649 )
Financing
activities Repayment of senior notes (62,094 ) — Payment of
debt refinancing costs (406 ) — Payment of deferred financing costs
— (191 ) Payment amortized to deferred gain (6,294 ) — Proceeds
from issuance of common stock 68,850 — Cash paid for equity
offering (4,490 ) — Other (1,312 ) (1,133 ) Net cash
provided by (used in) financing activities (5,746 )
(1,324 ) Net increase (decrease) in cash and cash
equivalents (3,172 ) (25,186 ) Cash and cash equivalents at
beginning of period 83,708 89,313 Cash
and cash equivalents at end of period $ 80,536 $ 64,127
Supplemental cash flow disclosures: Interest
paid $ 18,605 $ 20,665 Income taxes paid (refunded) $ (85 ) $
(2,796 )
Supplemental non-cash investing and financing
activities: Capital expenditures included in accounts payable $
1,365 $ 1,652 Assets acquired under capital leases $ — $ 115
CLOUD PEAK ENERGY INC. AND
SUBSIDIARIES
RECONCILIATION OF NON-GAAP
MEASURES
(in millions, except per share
data)
Adjusted EBITDA
Three Months Ended
Six Months Ended June 30, June 30, 2017
2016 2017 2016 Net income (loss) $ (6.9 ) $
35.3 $ (27.1 ) $ (1.1 ) Interest income (0.1 ) — (0.2 ) (0.1
) Interest expense 9.9 11.3 22.8 22.3 Income tax (benefit) expense
(0.1 ) (1.2 ) 0.2 (2.6 ) Depreciation and depletion 19.2
(19.5 ) 37.9 (0.4 ) EBITDA 21.9
25.9 33.6 18.2 Accretion 1.8 2.0 3.7 4.6 Derivative financial
instruments: Exclusion of fair value mark-to-market losses (gains)
(1) 1.6 (8.3 ) 3.9 (6.3 ) Inclusion of cash amounts received (paid)
(2) (0.8 ) (0.3 ) (1.1 ) (2.6 ) Total
derivative financial instruments 0.8 (8.6 ) 2.8 (8.9 ) Impairments
— — — 4.2 Non-cash throughput amortization expense and contract
termination payments 5.1 — 9.9
— Adjusted EBITDA $ 29.6 $ 19.3
$ 50.0 $ 18.0
__________________________
(1) Fair value mark-to-market (gains) losses reflected on
the Unaudited Condensed Consolidated Statements of Operations and
Comprehensive Income (Loss). (2) Cash amounts received and paid
reflected within operating cash flows in the Unaudited Condensed
Consolidated Statements of Cash Flows.
Adjusted EBITDA by Segment
Three Months Ended Six Months Ended
June 30, June 30, 2017 2016
2017 2016 Net income (loss) $ (6.9 ) $ 35.3 $ (27.1 )
$ (1.1 ) Interest income (0.1 ) — (0.2 ) (0.1 ) Interest expense
9.9 11.3 22.8 22.3 Other, net 0.1 0.2 0.4 0.6 Income tax expense
(benefit) (0.1 ) (1.2 ) 0.2 (2.6 ) (Income) loss from
unconsolidated affiliates, net of tax (0.3 ) 0.3
(0.6 ) 1.1 Consolidated operating
income (loss) $ 2.5 $ 45.9 $ (4.5 ) $ 20.3
Owned and Operated Mines Operating income (loss) $
15.3 $ 49.2 $ 27.2 $ 43.7 Depreciation and depletion 19.1 (19.9 )
37.5 (1.1 ) Accretion 1.7 1.9 3.4 4.3 Derivative financial
instruments: Exclusion of fair value mark-to-market (gains) losses
1.6 (8.3 ) 3.9 (6.3 ) Inclusion of cash amounts received (paid)
(0.8 ) (2.1 ) (1.1 ) (6.2 ) Total
derivative financial instruments 0.8 (10.4 ) 2.8 (12.5 )
Impairments — — — 2.2 Other (0.2 ) (0.2 ) (0.4
) (0.6 ) Adjusted EBITDA $ 36.7 $ 20.6 $ 70.5
$ 36.0
Logistics and Related Activities
Operating income (loss) $ (3.4 ) $ (8.2 ) $ (10.9 ) $ (16.1 )
Derivative financial instruments: Inclusion of cash amounts
received (paid) — 1.8 —
3.6 Total derivative financial instruments — 1.8 —
3.6 Non-cash throughput amortization expense and contract
termination payments 5.1 — 9.9 — Other (0.1 ) (1.0 )
0.1 (1.8 ) Adjusted EBITDA $ 1.6 $ (7.4
) $ (0.9 ) $ (14.3 )
Other Operating income (loss) $
(9.9 ) $ 5.1 $ (20.9 ) $ (7.3 ) Depreciation and depletion 0.2 0.3
0.4 0.7 Accretion 0.2 0.1 0.3 0.3 Impairment — 0.1 — 2.0 Other
0.3 0.5 0.7 0.7
Adjusted EBITDA(1) (2) $ (9.2 ) $ 6.1 $ (19.5 ) $
(3.6 )
Eliminations Operating income (loss) $ 0.5
$ (0.1 ) $ — $ (0.1 ) Adjusted EBITDA $ 0.5 $
(0.1 ) $ — $ (0.1 )
_________________________
(1) Includes $0 and $18.8 of sales contract buyouts for the
three months ended June 30, 2017 and 2016, respectively. (2)
Includes $0.1 and $22.8 of sales contract buyouts for the six
months ended June 30, 2017 and 2016, respectively.
Tons Sold (in thousands)
Q2
Q1 Q4 Q3
Q2 Year
Year Year Year
Year 2017 2017
2016 2016
2016 2016 2015
2014 2013
2012 Mine Antelope 6,711 7,375 8,069 8,612 6,273
29,807 35,167 33,647 31,354 34,316 Cordero Rojo 4,227 4,441 5,562
5,492 3,608 18,332 22,872 34,809 36,670 39,205 Spring Creek 3,390
2,210 3,111 2,854 1,946 10,348 17,027 17,443 18,009 17,102 Decker
(50% interest) — — — —
— — — 1,079
1,519 1,441 Total 14,328 14,026
16,743 16,958 11,828 58,488 75,066 86,978 87,552 92,064
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Cloud Peak Energy Inc.Lorri Owen, 720-566-2932Investor
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