Foresight Energy LP Reports Third Quarter 2019 Results

Third Quarter 2019 Highlights:

  • Coal sales of $181.5 million on sales volumes of 4.7 million tons
  • Adjusted EBITDA of $46.9 million
  • Nearly 5.0 million tons produced with a cost per ton in the low $20s
  • Net loss of $34.1 million, or ($0.23) per common unit and subordinated unit

 

ST. LOUIS–(BUSINESS WIRE)–Foresight Energy LP (“Foresight” or the “Partnership”) (OTCQX: FELPU) today reported financial and operating results for the third quarter ended September 30, 2019. Foresight generated third quarter coal sales revenues of $181.5 million on sales volumes of 4.7 million tons, resulting in a net loss of $34.1 million, and Adjusted EBITDA of $46.9 million. Our mines safely and efficiently produced nearly 5.0 million tons during the quarter.

During the quarter, the Partnership commenced discussions with its creditor constituencies to explore potential restructuring alternatives. Refer to our recent Current Reports on Form 8-K for further discussions of our restructuring efforts and related matters.

On November 12, 2019, we reached a resolution with our insurers regarding the remaining recoveries under our policies related to the Hillsboro Combustion Event. In consideration for the resolution of all claims, we expect to receive a final payment of $25.4 million. The final payment is expected to be recognized in the consolidated statement of operations in the fourth quarter of 2019 and is in addition to the $91.0 million of recoveries received in previous years related to the Partnership’s mitigation costs, losses on machinery and equipment, and business interruption costs arising from the Hillsboro Combustion Event

“The impact of depressed demand and pricing in both domestic and international markets has impacted us significantly in recent months,” remarked Mr. Robert D. Moore, Chairman, President, and Chief Executive Officer. “As a result, we are revising our financial and operating guidance for 2019, and we are actively exploring potential restructuring alternatives that would provide for an improved cash flow profile necessary to manage the current headwinds being encountered.”

Third Quarter Consolidated Financial Results

Coal sales totaled $181.5 million for the third quarter 2019 compared to nearly $292.0 million for the third quarter 2018, representing a decrease of $110.5 million, or 37.9%. The decrease in coal sales revenue from the prior year period was due to lower coal sales volumes combined with lower coal sales realization per ton sold. Coal sales volumes for the three months ended September 30, 2019 were lower as compared to the prior year period due primarily to lower sales volumes placed into the export market. Declining API2 pricing on export volumes resulted in lower overall coal sales realizations.

Cost of coal produced was $93.7 million for the third quarter 2019 compared to $133.7 million for the third quarter 2018. The decrease in cost of coal produced from the prior year period was due to an overall decrease in produced tons sold and a decrease in the cash cost per ton sold. The decrease in cash cost per ton sold was primarily due to efforts to further contain mine supplies expenses owing to the current financial condition of the Partnership.

Transportation costs decreased approximately $27.1 million from the third quarter 2018 to the third quarter 2019 because of a decrease in produced tons sold and a larger percentage of our sales going to the export market during the prior year period, which have higher associated transportation and transloading costs.

The decrease in selling, general and administrative expense during the third quarter 2019 was primarily due to decreased sales and marketing expenses resulting from lower export sales volumes and legal expenses incurred in the prior year period associated with the Hillsboro and Macoupin litigation matters settled in October of 2018.

Interest expense during the third quarter 2019 was comparable to the three months ended September 30, 2018 primarily as a result of lower overall outstanding principal balances on our Term Loan due 2022 and longwall financing arrangements, offset by additional outstanding borrowings on our revolving credit facility.

Debt restructuring costs of $1.2 million consist of legal and financial advisor fees related to our efforts to restructure our business for the long term.

Adjusted EBITDA was $46.9 million for the third quarter 2019 compared to $57.6 million for the third quarter 2018. The decrease in Adjusted EBITDA was due to overall decreased sales volumes and lower coal sales realization per ton in the current year period.

During the third quarter 2019, Foresight generated $22.4 million in cash flows from operations and ended the quarter with over $42 million in cash on hand. Capital expenditures for the third quarter 2019 totaled $18.8 million compared to $18.6 million for the third quarter 2018. Cash provided from financing activities in the third quarter 2019 was $34.9 million, consisting of additional borrowings on our revolving credit facility offset by $6.2 million in payments related to the final installment on our longwall financing arrangement and regularly scheduled payments on our finance lease obligations.

Guidance for 2019

Based on Foresight’s contracted position, recent performance, and its current outlook on pricing and the coal markets in general, the Partnership is updating the following guidance for the remainder of 2019:

Sales Volumes – Based on current committed position and expectations for the remainder of 2019, Foresight is projecting sales volumes to be between 19.5 and 20.5 million tons, with approximately 6.0 million tons expected to be sold into the international market.

Adjusted EBITDA – Based on the projected sales volumes and operating cost structure, Foresight currently expects to generate Adjusted EBITDA in a range of $190 to $210 million, which includes $25.4 million of insurance recoveries expected to be recognized and received in the fourth quarter 2019.

Capital Expenditures – Total 2019 capital expenditures are estimated to be between $83 and $90 million.

Cautionary Statement Regarding Forward-Looking Statements

This press release, and certain oral statements made by our representatives from time to time, may contain “forward-looking” statements within the meaning of the federal securities laws. The words “propose,” “believe,” “expect,” “anticipate,” “plan,” “intend,” “foresee,” “outlook,” “estimate,” “potential,” “continues,” “may,” “will,” “seek,” “approximately,” “predict,” “anticipate,” “should,” “would,” “could” or other similar expressions are intended to identify forward-looking statements, which are generally not historical in nature. Forward-looking statements also include statements about our liquidity, our capital structure and expected results of operations. These forward-looking statements are based on our current expectations and beliefs concerning future developments and their potential effect on us. While management believes that these forward-looking statements are reasonable as and when made, there can be no assurance that the future developments affecting us will be those that we anticipate.

We continue to experience substantial financial, business, operational and reputational risks that threaten our ability to continue as a going concern and could materially affect our present expectations and projections. For additional information regarding known material factors that could cause our actual results to differ from those contained in or implied by forward-looking statements, please see the section entitled “Risk Factors” in the Partnership’s: (i) Annual Report on Form 10-K for the year ended December 31, 2018, filed with the Securities and Exchange Commission on February 27, 2019 and (ii) subsequently filed Quarterly Reports on Form 10-Q.

You are cautioned not to place undue reliance on forward-looking statements, which are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise, except as required by law.

Non-GAAP Financial Measures

Adjusted EBITDA is a non-GAAP supplemental financial measure that management and external users of the Partnership’s consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, may use to assess:

  • the Partnership’s operating performance as compared to other publicly traded partnerships, without regard to historical cost basis or, in the case of Adjusted EBITDA, financing methods;
  • the Partnership’s ability to incur and service debt and fund capital expenditures; and
  • the viability of acquisitions and other capital expenditure projects and the returns on investment of various expansion and growth opportunities.

The Partnership defines Adjusted EBITDA as net income (loss) before interest, income taxes, depreciation, depletion, amortization and accretion. Adjusted EBITDA is also adjusted for equity-based compensation, losses/gains on commodity derivative contracts, settlements of derivative contracts, contract amortization and write-off, a change in the fair value of the warrant liability and material nonrecurring or other items, which may not reflect the trend of future results. As it relates to commodity derivative contracts, the Adjusted EBITDA calculation removes the total impact of derivative gains/losses on net income (loss) during the period and then adds/deducts to Adjusted EBITDA the amount of aggregate settlements during the period. Adjusted EBITDA also includes any insurance recoveries received, regardless of whether they relate to the recovery of mitigation costs, the receipt of business interruption proceeds, or the recovery of losses on machinery and equipment.

The Partnership believes the presentation of Adjusted EBITDA provides useful information to investors in assessing the Partnership’s financial condition and results of operations. Adjusted EBITDA should not be considered an alternative to net (loss) income, operating income, cash flow from operations, or any other measure of financial performance presented in accordance with U.S. GAAP, nor should Adjusted EBITDA be considered an alternative to operating surplus, adjusted operating surplus or other definitions in the Partnership’s partnership agreement. Adjusted EBITDA has important limitations as an analytical tool because it excludes some, but not all, of the items that affects net (loss) income. Additionally, because Adjusted EBITDA may be defined differently by other companies in the industry, and the Partnership’s definition of Adjusted EBITDA may not be comparable to similarly titled measures of other companies, the utility of such a measure is diminished. For a reconciliation of Adjusted EBITDA to net (loss) income, please see the table below.

This press release references forward-looking estimates of Adjusted EBITDA projected to be generated by the Partnership during the year ending December 31, 2019. A reconciliation of estimated 2019 Adjusted EBITDA to U.S. GAAP net income (loss) is not provided because U.S. GAAP net income (loss) for the projection period is not practical to assess due to unknown variables and uncertainty related to future results. In recent years, the Partnership has recognized significant asset impairment charges, transition and reorganization costs, losses on early extinguishment of debt, and debt restructuring costs. While these items affect U.S. GAAP net income (loss), they are generally excluded from Adjusted EBITDA. Therefore, these items do not materially impact the Partnership’s ability to forecast Adjusted EBITDA.

About Foresight Energy LP

Foresight is a leading producer and marketer of thermal coal controlling nearly 2.1 billion tons of coal reserves in the Illinois Basin. Foresight currently operates two longwall mining complexes with three longwall mining systems (Williamson (one longwall mining system) and Sugar Camp (two longwall mining systems)), one continuous mining operation (Macoupin) and the Sitran river terminal on the Ohio River. Additionally, Foresight has resumed continuous miner production at its Hillsboro complex and continues to evaluate potential future mining options. Foresight’s operations are strategically located near multiple rail and river transportation access points, providing transportation cost certainty and flexibility to direct shipments to the domestic and international markets.

Foresight Energy LP

Consolidated Balance Sheets

(In Thousands)

 

 

 

 

 

 

 

 

September 30,

 

 

 

December 31,

 

 

 

2019

 

 

 

 

2018

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

 

42,256

 

 

 

$

 

269

 

Accounts receivable

 

26,394

 

 

 

 

32,248

 

Due from affiliates

 

21,646

 

 

 

 

49,613

 

Financing receivables – affiliate

 

3,597

 

 

 

 

3,392

 

Inventories, net

 

94,644

 

 

 

 

56,524

 

Prepaid royalties – affiliate

 

 

 

 

 

2,000

 

Deferred longwall costs

 

23,627

 

 

 

 

14,940

 

Other prepaid expenses and current assets

 

8,827

 

 

 

 

10,872

 

Contract-based intangibles

 

637

 

 

 

 

1,326

 

Total current assets

 

221,628

 

 

 

 

171,184

 

Property, plant, equipment and development, net

 

2,084,596

 

 

 

 

2,148,569

 

Financing receivables – affiliate

 

57,981

 

 

 

 

60,705

 

Prepaid royalties, net

 

9,211

 

 

 

 

2,678

 

Other assets

 

11,965

 

 

 

 

4,311

 

Contract-based intangibles

 

182

 

 

 

 

726

 

Total assets

$

 

2,385,563

 

 

 

$

 

2,388,173

 

Liabilities and partners’ capital

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Current portion of long-term debt and finance lease obligations

$

 

4,859

 

 

 

$

 

53,709

 

Current portion of sale-leaseback financing arrangements

 

6,444

 

 

 

 

6,629

 

Accrued interest

 

32,976

 

 

 

 

24,304

 

Accounts payable

 

128,804

 

 

 

 

99,735

 

Accrued expenses and other current liabilities

 

55,936

 

 

 

 

67,466

 

Asset retirement obligations

 

6,578

 

 

 

 

6,578

 

Due to affiliates

 

15,220

 

 

 

 

17,740

 

Contract-based intangibles

 

6,688

 

 

 

 

8,820

 

Total current liabilities

 

257,505

 

 

 

 

284,981

 

Long-term debt and finance lease obligations

 

1,316,551

 

 

 

 

1,194,394

 

Sale-leaseback financing arrangements

 

185,983

 

 

 

 

189,855

 

Asset retirement obligations

 

39,568

 

 

 

 

38,966

 

Other long-term liabilities

 

15,845

 

 

 

 

16,428

 

Contract-based intangibles

 

62,176

 

 

 

 

66,834

 

Total liabilities

 

1,877,628

 

 

 

 

1,791,458

 

Limited partners’ capital:

 

 

 

 

 

 

 

 

Common unitholders (80,997 and 80,844 units outstanding as of September 30, 2019 and December 31, 2018, respectively)

 

328,927

 

 

 

 

377,880

 

Subordinated unitholder (64,955 units outstanding as of September 30, 2019 and December 31, 2018)

 

179,008

 

 

 

 

218,835

 

Total partners’ capital

 

507,935

 

 

 

 

596,715

 

Total liabilities and partners’ capital

$

 

2,385,563

 

 

 

$

 

2,388,173

 

 

Foresight Energy LP

Consolidated Statement of Operations

(In Thousands, Except Per Unit Data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months

Ended

September 30,

2019

 

 

Three Months

Ended

September 30,

2018

 

 

 

Nine Months

Ended

September 30,

2019

 

 

Nine Months

Ended

September 30,

2018

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Coal sales

$

 

181,455

 

 

$

 

291,987

 

 

 

$

 

673,280

 

 

$

 

800,366

 

Other revenues

 

1,627

 

 

 

1,949

 

 

 

 

5,790

 

 

 

5,718

 

Total revenues

 

183,082

 

 

 

293,936

 

 

 

 

679,070

 

 

 

806,084

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of coal produced (excluding depreciation, depletion and amortization)

 

93,655

 

 

 

133,670

 

 

 

 

349,852

 

 

 

391,222

 

Cost of coal purchased

 

1,990

 

 

 

6,312

 

 

 

 

6,455

 

 

 

11,969

 

Transportation

 

34,106

 

 

 

61,239

 

 

 

 

142,730

 

 

 

166,716

 

Depreciation, depletion and amortization

 

43,850

 

 

 

52,780

 

 

 

 

133,642

 

 

 

159,512

 

Contract amortization and write-off

 

(2,034

)

 

 

(4,855

)

 

 

 

(5,556

)

 

 

(76,699

)

Accretion on asset retirement obligations

 

551

 

 

 

558

 

 

 

 

1,654

 

 

 

1,848

 

Selling, general and administrative

 

6,724

 

 

 

10,465

 

 

 

 

23,379

 

 

 

28,774

 

Long-lived asset impairments

 

 

 

 

 

 

 

 

 

 

 

110,689

 

Other operating (income) expense, net

 

(55

)

 

 

24,849

 

 

 

 

(216

)

 

 

(18,782

)

Operating income

 

4,295

 

 

 

8,918

 

 

 

 

27,130

 

 

 

30,835

 

Other expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

37,225

 

 

 

36,619

 

 

 

 

110,553

 

 

 

109,327

 

Debt restructuring costs

 

1,176

 

 

 

 

 

 

 

1,176

 

 

 

 

Net loss

$

 

(34,106

)

 

$

 

(27,701

)

 

 

$

 

(84,599

)

 

$

 

(78,492

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss available to limited partner units – basic and diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common unitholders

$

 

(18,923

)

 

$

 

(13,298

)

 

 

$

 

(44,772

)

 

$

 

(37,177

)

Subordinated unitholder

$

 

(15,183

)

 

$

 

(14,403

)

 

 

$

 

(39,827

)

 

$

 

(41,315

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per limited partner unit – basic and diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common unitholders

$

 

(0.23

)

 

$

 

(0.17

)

 

 

$

 

(0.55

)

 

$

 

(0.47

)

Subordinated unitholder

$

 

(0.23

)

 

$

 

(0.22

)

 

 

$

 

(0.61

)

 

$

 

(0.64

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average limited partner units outstanding – basic and diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common units

 

80,959

 

 

 

80,505

 

 

 

 

80,938

 

 

 

79,737

 

Subordinated units

 

64,955

 

 

 

64,955

 

 

 

 

64,955

 

 

 

64,955

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Distributions declared per limited partner unit

$

 

 

 

$

 

0.0565

 

 

 

$

 

0.0600

 

 

$

 

0.1695

 

 

Foresight Energy LP

Consolidated Statements of Cash Flows

(In Thousands)

 

 

 

 

 

 

 

Nine Months Ended

September 30, 2019

 

 

Nine Months Ended

September 30, 2018

 

Cash flows from operating activities

 

 

 

 

 

 

 

Net loss

$

 

(84,599

)

 

$

 

(78,492

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

 

 

 

 

Depreciation, depletion and amortization

 

133,642

 

 

 

159,512

 

Amortization of debt discount

 

2,157

 

 

 

2,015

 

Contract amortization and write-off

 

(5,556

)

 

 

(76,699

)

Accretion on asset retirement obligations

 

1,654

 

 

 

1,848

 

Equity-based compensation

 

700

 

 

 

530

 

Long-lived asset impairments

 

 

 

 

110,689

 

Insurance proceeds included in investing activities

 

 

 

 

(42,947

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Accounts receivable

 

5,854

 

 

 

(3,425

)

Due from/to affiliates, net

 

25,447

 

 

 

16,637

 

Inventories

 

(26,927

)

 

 

(10,307

)

Prepaid expenses and other assets

 

(5,764

)

 

 

(244

)

Prepaid royalties

 

(4,533

)

 

 

2,955

 

Accounts payable

 

29,069

 

 

 

19,626

 

Accrued interest

 

8,672

 

 

 

12,932

 

Accrued expenses and other current and long-term liabilities

 

(16,062

)

 

 

18,667

 

Other

 

(517

)

 

 

307

 

Net cash provided by operating activities

 

63,237

 

 

 

133,604

 

Cash flows from investing activities

 

 

 

 

 

 

 

Investment in property, plant, equipment and development

 

(80,862

)

 

 

(50,872

)

Return of investment on financing arrangements with Murray Energy (affiliate)

 

2,519

 

 

 

2,394

 

Insurance proceeds

 

 

 

 

42,947

 

Net cash used in investing activities

 

(78,343

)

 

 

(5,531

)

Cash flows from financing activities

 

 

 

 

 

 

 

Borrowings under revolving credit facility

 

133,000

 

 

 

50,000

 

Payments on revolving credit facility

 

(13,000

)

 

 

(22,000

)

Payments on long-term debt and finance lease obligations

 

(48,850

)

 

 

(93,877

)

Distributions paid

 

(4,856

)

 

 

(13,574

)

Payments on sale-leaseback and short-term financing arrangements

 

(9,201

)

 

 

(7,731

)

Net cash provided by (used in) financing activities

 

57,093

 

 

 

(87,182

)

Net increase in cash and cash equivalents

 

41,987

 

 

 

40,891

 

Cash and cash equivalents, beginning of period

 

269

 

 

 

2,179

 

Cash and cash equivalents, end of period

$

 

42,256

 

 

$

 

43,070

 

 

 

 

 

 

 

 

 

 

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

 

 

Three Months

Ended

September 30,

2019

 

 

Three Months

Ended

September 30,

2018

 

 

Three Months

Ended

June 30,

2019

 

 

Nine Months

Ended

September 30,

2019

 

 

Nine Months

Ended

September 30,

2018

 

Net loss

$

 

(34,106

)

 

$

 

(27,701

)

 

$

 

(33,672

)

 

$

 

(84,599

)

 

$

 

(78,492

)

Interest expense, net

 

37,225

 

 

 

36,619

 

 

 

36,618

 

 

 

110,553

 

 

 

109,327

 

Depreciation, depletion and amortization

 

43,850

 

 

 

52,780

 

 

 

43,244

 

 

 

133,642

 

 

 

159,512

 

Accretion on asset retirement obligations

 

551

 

 

 

558

 

 

 

552

 

 

 

1,654

 

 

 

1,848

 

Contract amortization and write-off

 

(2,034

)

 

 

(4,855

)

 

 

(1,836

)

 

 

(5,556

)

 

 

(76,699

)

Equity-based compensation

 

233

 

 

 

178

 

 

 

234

 

 

 

700

 

 

 

530

 

Debt restructuring costs

 

1,176

 

 

 

 

 

 

 

 

 

1,176

 

 

 

 

Long-lived asset impairments

 

 

 

 

 

 

 

 

 

 

 

 

 

110,689

 

Adjusted EBITDA

$

 

46,895

 

 

$

 

57,579

 

 

$

 

45,140

 

 

$

 

157,570

 

 

$

 

226,715

 

Operating Metrics (In Thousands, Except Per Ton Data)

 
 

 

Three Months

Ended

September 30,

2019

 

 

Three Months

Ended

September 30,

2018

 

 

Three Months

Ended

June 30,

2019

 

 

Nine Months

Ended

September 30,

2019

 

 

Nine Months

Ended

September 30,

2018

 

Produced tons sold

 

4,632

 

 

 

6,000

 

 

 

4,960

 

 

 

15,238

 

 

 

16,978

 

Purchased tons sold

 

42

 

 

 

143

 

 

 

45

 

 

 

137

 

 

 

272

 

Total tons sold

 

4,674

 

 

 

6,143

 

 

 

5,005

 

 

 

15,375

 

 

 

17,250

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tons produced

 

4,968

 

 

 

6,167

 

 

 

5,416

 

 

 

16,449

 

 

 

17,252

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Coal sales realization per ton sold(1)

$

 

38.82

 

 

$

 

47.53

 

 

$

 

44.85

 

 

$

 

43.79

 

 

$

 

46.40

 

Cash cost per ton sold(2)

$

 

20.22

 

 

$

 

22.28

 

 

$

 

24.64

 

 

$

 

22.96

 

 

$

 

23.04

 

Netback to mine realization per ton sold(3)

$

 

31.53

 

 

$

 

37.56

 

 

$

 

34.90

 

 

$

 

34.51

 

 

$

 

36.73

 

(1) – Coal sales realization per ton sold is defined as coal sales divided by total tons sold.

(2) – Cash cost per ton sold is defined as cost of coal produced (excluding depreciation, depletion and amortization) divided by produced tons sold.

(3) – Netback to mine realization per ton sold is defined as coal sales less transportation expense divided by tons sold.

 

Contacts

Cody E. Nett

Corporate Secretary

740-338-3100

Investor.relations@foresight.com
Cody.Nett@coalsource.com

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