Third Quarter Highlights: ST. LOUIS, Nov. 20 /PRNewswire-FirstCall/
-- Patriot Coal Corporation (NYSE:PCX) today reported its financial
results for the third quarter and first nine months of 2007,
periods in which the company was wholly-owned and operated by
Peabody Energy Corporation. Patriot was spun off from Peabody,
effective October 31, 2007. The purpose of this release is to
discuss historical results, and to present pro forma information
showing the effects of transactions associated with the spin-off,
assuming the spin-off was in effect beginning January 1, 2007.
Patriot Coal Corporation reported pro forma net loss of $18.4
million and $2.5 million for the quarter and nine months ended
September 30, 2007, respectively. Excluding pro forma adjustments,
net loss on a historical basis was $39.5 million and $57.2 million
for the quarter and nine months ended September 30, 2007,
respectively. On a historical basis for the prior year, Patriot
reported third quarter net loss of $3.0 million and nine month net
income of $9.2 million. Historical basis financial statements,
excluding pro forma adjustments, are not representative of the
company's results on a post- spin, stand-alone basis. Pro forma
EBITDA for the quarter and nine months ended September 30, 2007 was
positive $11.7 million and $97.2 million, respectively. On a
historical basis, Patriot reported third quarter EBITDA of negative
$13.1 million. Historical EBITDA for the nine months ended
September 30, 2007 was $22.1 million. On a historical basis for the
prior year, Patriot reported third quarter and nine month EBITDA of
$33.8 million and $110.3 million, respectively. "We are pleased to
provide this inaugural earnings release for Patriot Coal and to
complete our spin-off from Peabody Energy effective October 31,"
said Patriot President and Chief Executive Officer Richard M.
Whiting. "During the year, we established our new management team
and Board of Directors. They have already established sound
corporate governance practices, which we believe are critical to
our success and the creation of shareholder value." A number of
initiatives occurred in 2007 to further strengthen the company's
diversified asset base. Earlier this year, the company obtained
additional Pittsburgh seam reserves contiguous to its Federal mine,
extending the life of the mine to ten-plus years. Patriot also
increased its ownership in the Kanawha Eagle joint venture to
81.5%. This is a 2.5 million ton per annum operation which serves
both thermal and metallurgical coal markets. The company's capital
expenditures totaled $41.8 million for the first nine months of
2007. Patriot also sold some non-strategic reserves in western
Kentucky at a sizeable gain. "From an operations perspective, 2007
has been a year of transition for Patriot Coal. Since our
management team took over these operations early in the third
quarter, we have made decisions to better match our production with
market demand and have taken steps to control costs, as we
establish a solid operating base for our future," said Whiting. "We
have redirected production from thermal to metallurgical coal,
accelerated the start-up of a new metallurgical mine, scaled back
thermal coal production at higher-cost operations and revised mine
plans to better match equipment configuration to certain coal
reserves. We believe these initial actions position Patriot to
capture market opportunities and improve profitability going
forward." Financial & Operating Highlights The Company's
information statement filed with the Securities and Exchange
Commission on Form 8-K on October 24, 2007 provides a detailed
explanation of the pro forma transactions associated with the
company's spin-off from Peabody Energy. These include an increase
to revenues from repricing of a major coal supply agreement to
reflect anticipated long-term market pricing for similar quality
coal and a reduction to the company's costs associated with the
assumption by Peabody Energy of certain retiree healthcare
liabilities. Historical results do not reflect these transactions.
Pro forma financial information was derived from the company's
historical combined financial statements and includes these
adjustments, among others, to present results as if the spin-off of
Patriot Coal from Peabody Energy occurred on January 1, 2007. Tons
sold increased in the third quarter to 6.0 million. Historical
revenues increased 2.9% in the 2007 third quarter to $293.3
million, compared to $285.0 million in the same period in 2006. The
increase resulted from higher volumes and a shift from thermal coal
to metallurgical coal. Tons sold for the nine months ended
September 30, 2007 were 17.1 million, a decrease of 1.6 million
compared to the same period in 2006. Historical revenues decreased
7.6% in the 2007 nine month period to $819.2 million, compared to
$886.7 million in the same period in 2006. In Appalachia, volume
decreased 0.6 million tons, and average selling prices decreased in
part due to higher- sulfur coal sales in 2007. In the Illinois
Basin, higher pricing resulting from a contract re-based to market
pricing January 1, 2007 was partially offset by lower volume of 1.0
million tons. The Big Run mine in the Illinois Basin, which
produced 1.0 million tons of thermal coal with revenues of $21.4
million in the first nine months of 2006, was sold in late 2006.
Revenues on a pro forma basis would have been $6.7 million and
$20.2 million higher for the three and nine months ended September
30, 2007, respectively. EBITDA on a historical basis was negative
$13.1 million in the third quarter of 2007, $46.8 million lower
than the third quarter of 2006. The 2006 third quarter included
gains on property sales of $33.5 million, compared to $1.7 million
in the 2007 third quarter. Additionally, past mining obligations on
a historical basis were approximately $11.8 million higher in third
quarter 2007 compared to 2006, as a result of increased healthcare
costs and multi- employer healthcare and pension plan funding. As
noted above, Peabody Energy assumed certain retiree healthcare
liabilities and the associated expense effective with the spin-off.
Under this arrangement, Peabody would have assumed approximately
$15.6 million of past mining obligation expense for the quarter had
the transaction leading to the pro forma adjustment been in place.
EBITDA on a pro forma basis would have increased by $24.7 million
to $11.7 million for the three months ended September 30, 2007. "We
believe the changes initiated at our operations over the last
several months have us on the right track, as operating performance
at our mines improved in the third quarter of this year when
compared to the first six months," said Patriot Senior Vice
President and Chief Financial Officer Mark N. Schroeder.
"Management believes these changes are sustainable and further
improvement can be achieved at our operations, which will be more
apparent as we move into 2008." Liquidity Effective with the
spin-off, the company entered into a four-year, $500 million credit
facility. Borrowings under the agreement bear interest at LIBOR
plus 1.75% at current debt levels. The agreement provides the
flexibility to pursue acquisitions and for working capital needs.
Patriot's pro forma net cash position at September 30, 2007 was a
positive $37.5 million, with a pro forma cash balance of $56.7
million and debt of $19.2 million. Markets & Outlook Demand for
metallurgical coal, which accounted for 25% of the company's
volumes through the 2007 third quarter, continues at a brisk pace.
Global steel production has increased more than 8% over last year.
This increased demand, together with infrastructure constraints
around the globe, is causing upward pressure on metallurgical coal
prices. In particular, the market for U.S. exports to Europe and
Brazil is robust, and international met coal customers have
accelerated their 2008 price negotiations in response to tighter
markets. U.S. electricity generation also continues its steady
growth, with estimated coal use up more than 26 million tons, or
3.2%, through October 2007, compared to the same period in 2006.
Demand for export thermal coal is also growing. High vessel freight
rates and the weak U.S. dollar have made U.S. thermal coal very
attractive, particularly in Europe. Recently traded indices for
thermal coal delivered into Europe have reached all-time highs, in
the $125 per metric ton range. The met and thermal markets appear
poised for longer-term growth and further upward pricing pressure.
Patriot's presence in all three eastern U.S. coal basins allows it
to fully participate in the strengthening met and thermal markets,
both in the U.S. and overseas. Patriot has historically exported
about 30% of its met coal, and the company expects this percentage
to increase as it looks forward. Additionally, tighter
international thermal coal markets have created export
opportunities from Central Appalachia, Northern Appalachia and the
Illinois Basin. Patriot is gaining visibility to its 2008 met
pricing, with recent settlements at substantially higher prices
when compared to 2007 levels. As of September 30, Patriot had
remaining 2008 unpriced met volumes in the range of 2.0 million to
2.5 million tons. Further, the company's unpriced thermal coal
position of 1.5 million to 2.0 million tons allows it to
participate in global markets near-term and a U.S. thermal market
the company believes is likely to strengthen in 2008 and beyond.
Moving to the outlook for the fourth quarter, markets are improving
for Patriot's products, and most operations are running at
projected production capacity. The longwalls at the Federal and
Harris mines will move in the quarter, a process that negatively
affects results. At the Federal mine, development work for the new
panel was not complete when mining in the prior panel ceased,
creating a production delay of 5 weeks. Development is near
completion and the company plans for the longwall to commence
mining by early December. The longwall move at the Harris mine
during the fourth quarter will be its final move, as the company
will convert this mine to a continuous miner operation in early
March 2008. Conference Call Management will hold a conference call
to discuss the third quarter results on November 20, 2007 at 10:00
a.m. Central Standard Time. The conference call can be accessed by
dialing 800-398-9367, or through the Patriot Coal website at
http://www.patriotcoal.com/. International callers can dial
612-234-9959 to access the conference call. A replay of the
conference call will be available on the company's website and also
by telephone, at 800-475- 6701 for domestic callers or 320-365-3844
for international callers, passcode 894798. About Patriot Coal
Patriot Coal Corporation is a leading producer and marketer of coal
in the eastern United States, with eight company-operated mines,
two joint venture mines and numerous contractor-operated mines in
Appalachia and the Illinois Basin. The company ships to electric
utilities, industrial users and metallurgical coal customers, and
controls approximately 1.2 billion tons of proven and probable coal
reserves. The company's common stock trades on the New York Stock
Exchange under the symbol PCX. Forward Looking Statements Certain
statements in this press release are forward-looking as defined in
the Private Securities Litigation Reform Act of 1995. These
statements involve certain risks and uncertainties that may be
beyond our control and may cause our actual future results to
differ materially from expectations. We do not undertake to update
our forward-looking statements. Factors that could affect our
results include, but are not limited to: coal and power market
conditions; the outcome of commercial negotiations involving sales
contracts or other transactions; our dependence on Peabody Energy
in the near future; geologic, equipment and operational risks
associated with mining; supplier performance and the availability
and cost of key equipment and commodities; our ability to recover
coal reserves; labor availability and relations; availability and
costs of transportation; legislative and regulatory developments;
weather patterns affecting energy demand; availability and costs of
competing energy resources; and other risks detailed in the
company's filings with the Securities and Exchange Commission. This
information includes certain non-GAAP financial measures as defined
by SEC regulations. We have included reconciliations of these
measures to the most directly comparable GAAP measures in this
release. EBITDA (also called Adjusted EBITDA) is defined as net
income (loss) before deducting net interest expense, income taxes,
minority interests, asset retirement obligation expense, and
depreciation, depletion and amortization. EBITDA, which is not
calculated identically by all companies, is not a substitute for
operating income, net income and cash flow as determined in
accordance with generally accepted accounting principles.
Management uses EBITDA as a key measure of operating performance
and also believes it is a useful indicator of its ability to meet
debt service and capital expenditure requirements. Condensed Income
Statements (Unaudited) For the Quarters Ended September 30, 2007
and 2006 (Dollars and tons in thousands, except per share data) Pro
Forma Historical Quarter Quarter Ended Ended September September
September 2007 2006 2007 Tons sold 5,988 5,922 5,988 Revenues
$293,301 $285,038 $299,953 Operating costs and expenses 297,480
275,690 282,245 Depreciation, depletion and amortization 23,130
20,459 22,514 Asset retirement obligation expense 3,641 4,008 3,641
Selling and administrative expenses 10,544 9,306 7,725 Other
operating income: Net gain on disposal of assets (1,670) (33,546)
(1,670) Income from equity affiliates (1) (169) (1) Operating
profit (39,823) 9,290 (14,501) Interest income (3,527) (146)
(3,527) Interest expense 1,716 2,446 2,623 Income tax provision -
5,525 3,357 Minority interest 1,439 4,419 1,439 Net loss $(39,451)
$(2,954) $(18,393) Loss per share, basic & diluted $(1.50)
$(0.11) $(0.69) EBITDA $(13,052) $33,757 $11,654 Pro forma results
include transactions associated with the company's spin-off from
Peabody Energy, which was effective October 31, 2007. These include
an increase to revenues from repricing of a major coal supply
agreement to reflect anticipated long-term market pricing for
similar quality coal of $6.7 million for the three months ended
September 30, 2007; a reduction of operating costs associated with
the assumption by Peabody Energy of certain retiree healthcare
liabilities of $15.6 million for the three months ended September
30, 2007; and a reduction of selling and administrative costs for
Patriot's stand-alone management and administrative structure and
functions of $2.8 million for the three months ended September 30,
2007. Historical results do not reflect these transactions. Pro
forma financial information was derived from the company's
historical combined financial statements and includes these
adjustments, among others, to present results as if the spin-off of
Patriot Coal from Peabody Energy occurred on January 1, 2007. This
information is intended to be reviewed in conjunction with the
company's filings with the Securities and Exchange Commission.
Condensed Income Statements (Unaudited) For the Nine Months Ended
September 30, 2007 and 2006 (Dollars and tons in thousands, except
per share data) Pro Forma Historical Nine Months Nine Months Ended
Ended September September September 2007 2006 2007 Tons sold 17,082
18,692 17,082 Revenues $819,185 $886,640 $839,429 Operating costs
and expenses 847,484 796,505 801,808 Depreciation, depletion and
amortization 64,048 61,166 62,555 Asset retirement obligation
expense 12,936 15,630 12,936 Selling and administrative expenses
32,342 27,934 23,175 Other operating income: Net gain on disposal
of assets (82,696) (47,881) (82,696) Income from equity affiliates
(16) (182) (16) Operating profit (54,913) 33,468 21,667 Interest
income (8,293) (394) (8,293) Interest expense 6,504 8,659 7,978
Income tax provision - 5,525 20,412 Minority interest 4,092 10,485
4,092 Net income (loss) $(57,216) $9,193 $(2,522) Earnings (loss)
per share, basic & diluted $(2.17) $0.35 $(0.09) EBITDA $22,071
$110,264 $97,158 Pro forma results include transactions associated
with the company's spin-off from Peabody Energy, which was
effective October 31, 2007. These include an increase to revenues
from repricing of a major coal supply agreement to reflect
anticipated long-term market pricing for similar quality coal of
$20.2 million for the nine months ended September 30, 2007; a
reduction of operating costs associated with the assumption by
Peabody Energy of certain retiree healthcare liabilities of $46.7
million for the nine months ended September 30, 2007; and a
reduction of selling and administrative costs for Patriot's
stand-alone management and administrative structure and functions
of $9.2 million for the nine months ended September 30, 2007.
Historical results do not reflect these transactions. Pro forma
financial information was derived from the company's historical
combined financial statements and includes these adjustments, among
others, to present results as if the spin-off of Patriot Coal from
Peabody Energy occurred on January 1, 2007. This information is
intended to be reviewed in conjunction with the company's filings
with the Securities and Exchange Commission. Supplemental Financial
Data (Unaudited) For the Quarters Ended September 30, 2007 and 2006
Pro Forma Historical Quarter Quarter Ended Ended September
September September 2007 2006 2007 Tons Sold (In Thousands)
Appalachia 4,120 3,992 4,120 Illinois Basin 1,868 1,930 1,868 Total
5,988 5,922 5,988 Revenue Summary (Dollars in Thousands) Appalachia
$230,172 $231,217 $236,824 Illinois Basin 61,663 52,183 61,663
Other 1,466 1,638 1,466 Total $293,301 $285,038 $299,953 Revenues
per Ton - Mining Operations Appalachia $55.87 $57.92 $57.48
Illinois Basin 33.01 27.04 33.01 Total 48.74 47.86 49.85 Operating
Costs per Ton - Mining Operations (1) Appalachia $48.23 $46.39
$48.39 Illinois Basin 31.34 31.96 31.34 Total 42.96 41.69 43.07
Segment Adjusted EBITDA per Ton - Mining Operations Appalachia
$7.64 $11.53 $9.09 Illinois Basin 1.67 (4.92) 1.67 Total 5.78 6.17
6.78 Dollars in Thousands Past Mining Obligations $38,791 $27,005
$22,891 Net Gain on Disposal of Assets 1,670 33,546 1,670 Selling
and Administrative Expenses 10,544 9,306 7,725 Depreciation,
Depletion and Amortization 23,130 20,459 22,514 Asset Retirement
Obligation Expense 3,641 4,008 3,641 Capital Expenditures (Excludes
Acquisitions) 15,324 21,266 15,324 (1) Operating costs are the
direct costs of our mining operations, excluding costs for past
mining obligations, asset retirement obligations, and depreciation,
depletion and amortization. Pro forma results include transactions
associated with the company's spin- off from Peabody Energy, which
was effective October 31, 2007. These include an increase to
revenues from repricing of a major coal supply agreement to reflect
anticipated long-term market pricing for similar quality coal of
$6.7 million for the three months ended September 30, 2007; a
reduction of operating costs associated with the assumption by
Peabody Energy of certain retiree healthcare liabilities of $15.6
million for the three months ended September 30, 2007; and a
reduction of selling and administrative costs for Patriot's
stand-alone management and administrative structure and functions
of $2.8 million for the three months ended September 30, 2007.
Historical results do not reflect these transactions. Pro forma
financial information was derived from the company's historical
combined financial statements and includes these adjustments, among
others, to present results as if the spin-off of Patriot Coal from
Peabody Energy occurred on January 1, 2007. This information is
intended to be reviewed in conjunction with the company's filings
with the Securities and Exchange Commission. Supplemental Financial
Data (Unaudited) For the Nine Months Ended September 30, 2007 and
2006 Pro Forma Historical Nine Months Nine Months Ended Ended
September September September 2007 2006 2007 Tons Sold (In
Thousands) Appalachia 11,344 11,981 11,344 Illinois Basin 5,738
6,711 5,738 Total 17,082 18,692 17,082 Revenue Summary (Dollars in
Thousands) Appalachia $628,605 $702,644 $648,849 Illinois Basin
187,737 179,520 187,737 Other 2,843 4,476 2,843 Total $819,185
$886,640 $839,429 Revenues per Ton - Mining Operations Appalachia
$55.41 $58.65 $57.20 Illinois Basin 32.72 26.75 32.72 Total 47.79
47.19 48.97 Operating Costs per Ton - Mining Operations (1)
Appalachia $48.70 $42.94 $48.89 Illinois Basin 30.78 29.14 30.78
Total 42.68 37.98 42.80 Segment Adjusted EBITDA per Ton - Mining
Operations Appalachia $6.71 $15.71 $8.31 Illinois Basin 1.94 (2.39)
1.94 Total 5.11 9.21 6.17 Dollars in Thousands Past Mining
Obligations $115,513 $81,913 $67,813 Net Gain on Disposal of Assets
82,696 47,881 82,696 Selling and Administrative Expenses 32,342
27,934 23,175 Depreciation, Depletion and Amortization 64,048
61,166 62,555 Asset Retirement Obligation Expense 12,936 15,630
12,936 Capital Expenditures (Excludes Acquisitions) 41,810 63,706
41,810 (1) Operating costs are the direct costs of our mining
operations, excluding costs for past mining obligations, asset
retirement obligations, and depreciation, depletion and
amortization. Pro forma results include transactions associated
with the company's spin- off from Peabody Energy, which was
effective October 31, 2007. These include an increase to revenues
from repricing of a major coal supply agreement to reflect
anticipated long-term market pricing for similar quality coal of
$20.2 million for the nine months ended September 30, 2007; a
reduction of operating costs associated with the assumption by
Peabody Energy of certain retiree healthcare liabilities of $46.7
million for the nine months ended September 30, 2007; and a
reduction of selling and administrative costs for Patriot's
stand-alone management and administrative structure and functions
of $9.2 million for the nine months ended September 30, 2007.
Historical results do not reflect these transactions. Pro forma
financial information was derived from the company's historical
combined financial statements and includes these adjustments, among
others, to present results as if the spin-off of Patriot Coal from
Peabody Energy occurred on January 1, 2007. This information is
intended to be reviewed in conjunction with the company's filings
with the Securities and Exchange Commission. Condensed Balance
Sheets September 30, 2007 and December 31, 2006 Historical Pro
Forma September December September 2007 2006 2007 (Dollars in
thousands) (unaudited) (unaudited) Cash and cash equivalents $7,319
$398 $56,726 Receivables 30,325 31,583 114,992 Net receivables from
affiliates 32,212 141,021 - Inventories 32,684 34,692 32,684 Other
current assets 7,047 7,004 7,047 Total current assets 109,587
214,698 211,449 Net property, plant, equipment and mine development
860,218 842,687 859,022 Long-term notes receivable 123,272 52,975
123,272 Investments and other assets 62,052 67,821 19,741 Total
assets $1,155,129 $1,178,181 $1,213,484 Current portion of
long-term debt $927 $- $927 Accounts payable and accrued
liabilities 220,606 216,444 165,245 Total current liabilities
221,533 216,444 166,172 Long-term debt, less current maturities
18,266 20,722 18,266 Other long-term liabilities 1,606,369
1,614,689 980,046 Total liabilities 1,846,168 1,851,855 1,164,484
Minority interest 13,786 16,153 13,786 Invested capital (deficit)
(704,825) (689,827) 35,214 Total liabilities and invested capital
(deficit) $1,155,129 $1,178,181 $1,213,484 Pro forma results
include transactions associated with the company's spin- off from
Peabody Energy, which was effective October 31, 2007. These include
the distribution of our common stock to the stockholders of
Peabody; the transfer of certain assets related to our business
from Peabody to us; the capital contribution by Peabody related to
settlement of the intercompany debt owed by us to Peabody of $114.5
million; the agreement by Peabody to pay certain retiree healthcare
liabilities related to our business, which we estimate had a
present value of $615.1 million as of September 30, 2007; and the
contribution of approximately $49.0 million in cash from Peabody to
us for working capital purposes, including monetization of a $19.0
million long-term receivable. Pro forma financial information was
derived from the company's historical combined financial statements
and includes these adjustments, among others, to present results as
if the spin-off of Patriot Coal from Peabody Energy occurred on
January 1, 2007. This information is intended to be reviewed in
conjunction with the company's filings with the Securities and
Exchange Commission. Reconciliation of EBITDA to Net Income
(Unaudited) For the Quarters and Nine Months Ended September 30,
2007 and 2006 (Dollars in Thousands) Pro Forma Historical Quarter
Quarter Ended Ended September September September Reconciliation of
net income (loss) 2007 2006 2007 to EBITDA: Net income (loss)
$(39,451) $(2,954) $(18,393) Depreciation, depletion and
amortization 23,130 20,459 22,514 Asset retirement obligation
expense 3,641 4,008 3,641 Interest income (3,527) (146) (3,527)
Interest expense 1,716 2,446 2,623 Income tax provision - 5,525
3,357 Minority interest 1,439 4,419 1,439 EBITDA $(13,052) $33,757
$11,654 Pro Forma Historical Nine Months Nine Months Ended Ended
September September September Reconciliation of net income (loss)
2007 2006 2007 to EBITDA: Net income (loss) $(57,216) $9,193
$(2,522) Depreciation, depletion and amortization 64,048 61,166
62,555 Asset retirement obligation expense 12,936 15,630 12,936
Interest income (8,293) (394) (8,293) Interest expense 6,504 8,659
7,978 Income tax provision - 5,525 20,412 Minority interest 4,092
10,485 4,092 EBITDA $22,071 $110,264 $97,158 Pro forma results
include transactions associated with the company's spin- off from
Peabody Energy, which was effective October 31, 2007. These include
an increase to revenues from repricing of a major coal supply
agreement to reflect anticipated long-term market pricing for
similar quality coal of $6.7 million and $20.2 million for the
three and nine months ended September 30, 2007, respectively; a
reduction of operating costs associated with the assumption by
Peabody Energy of certain retiree healthcare liabilities of $15.6
million and $46.7 million for the three and nine months ended
September 30, 2007, respectively; and a reduction of selling and
administrative costs for Patriot's stand-alone management and
administrative structure and functions of $2.8 million and $9.2
million for the three and nine months ended September 30, 2007,
respectively. Historical results do not reflect these transactions.
Pro forma financial information was derived from the company's
historical combined financial statements and includes these
adjustments, among others, to present results as if the spin-off of
Patriot Coal from Peabody Energy occurred on January 1, 2007. This
information is intended to be reviewed in conjunction with the
company's filings with the Securities and Exchange Commission.
DATASOURCE: Patriot Coal Corporation CONTACT: Janine Orf of Patriot
Coal Corporation, +1-314-275-3680 Web site:
http://www.patriotcoal.com/
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