Ramaco Resources, Inc. Reports Third Quarter 2018 Financial Results
LEXINGTON, Ky., Nov. 7, 2018 /PRNewswire/ -- Ramaco Resources, Inc. (NASDAQ: METC) today reported net income of $6.2 million, or $0.15 per diluted share for the third quarter of 2018, compared with a net income of $10.2 million, or $0.25 per diluted share for the second quarter of 2018. The Company's adjusted earnings before interest, taxes, depreciation, amortization and non-operating expenses ("adjusted EBITDA") was $11.0 million for the third quarter of 2018, as compared with adjusted EBITDA of $14.9 million for the second quarter of 2018.
Randall Atkins, Ramaco Resources' Executive Chairman and Chief Financial Officer remarked, "As reported, we experienced a partial structural failure earlier this week at one 2,000-ton silo at our Elk Creek complex in West Virginia. For some perspective, we have over 350,000 tons of raw coal storage capacity at Elk Creek. The significance of the Elk Creek silo failure is that the silo system served as the conduit for delivery of coal to the preparation plant through various conveying belts and equipment. Given the damage to the silo, we will now plan to build an alternative conveying system to the preparation plant from an existing stockpile area."
Atkins continued, "At this stage of our review we are not able to provide clear guidance relative to the timing that this construction will take or when we will resume normal coal washing and loading. We hope to have this completed during the fourth quarter. I would also point out that all Elk Creek mines are continuing to operate under normal schedules."
"We are of course hopeful that both this interruption will have only near- to intermediate-term impacts at Elk Creek, and that we will resume coal preparation and loading during the fourth quarter. We will be reporting more information on our earnings call on November 8th and more afterward as additional information becomes available."
In terms of our performance for the recent quarter, coming on the back of a strong second quarter, we saw our third quarter results decline by larger than expected amounts, primarily based on geological issues. This included a $3.9 million decrease in EBITDA and a 10% decline in production to roughly 450,000 tons. We experienced geological related productivity issues during the third quarter, primarily related to a large number of section moves and hard cutting conditions in two of our Elk Creek deep mines. These challenges led to an approximately $2.5 million decrease in EBITDA, or over 60% of our quarterly decline. The remainder of the EBITDA decrease related to both fewer operating days due to a planned July 4th miner vacation period and a slight decrease in sales price for export tons sold during the third quarter.
To provide a comparison of our quarterly metrics in summary form (third quarter 2018 compared to second quarter 2018):
- Revenues declined by 5% to $62.2 million
- Production declined by 10% to roughly 450,000 tons
- Cash margins declined from roughly $36 per ton to $24 per ton
- Cash mine costs on company produced and sold coal rose to $65.42 from $55.58
- Net income declined by 39%
- EBITDA declined by 26%
Randall Atkins continued, "From a 2019 sales standpoint, we have sold forward, or have sales commitments for 1.5 million tons of coal, of which 1.24 million tons are being sold to domestic customers at an average price of $113 per ton, and an additional 250,000 tons are being sold for export at adjusted index prices. The selling price is an increase of over $34 per ton versus our realized 2018 domestic pricing and also represents what we hope to be substantial cash margins per ton based on anticipated cash mining costs. We believe that 2019 should be the year that we realize more of our overall operation's revenue potential on the back of both strong domestic and international markets."
"We are also very pleased to announce the closing of a $40 million combined equipment line and revolver facility with KeyBank, N.A. of Cleveland, Ohio. The facility has been used to retire roughly $15 million of existing short-term loans and will be used for future operational and working capital requirements. We regard this facility as validation that we have 'graduated' from our former development company status to the ranks of a more seasoned operating coal company," Atkins said.
Michael Bauersachs, Ramaco Resources' President and CEO commented, "While experiencing some temporary challenging conditions at two of our Elk Creek deep mines during the third quarter, we also had some noteworthy positive developments. Our Elk Creek surface mine continues to steadily improve its operating performance. Additionally, our exploration efforts associated with the work around at our Berwind mine continue to indicate positive results and a well-defined development corridor. During October our Berwind production team completed the difficult task of entering an adjacent mine, sealing off old works, and resuming development production in the Pocahontas #3 seam. We expect Berwind to produce approximately 90,000 tons for the year.
"When adding this to our Elk Creek production, the overall Company produced tons for 2018 are expected to be approximately 1.75 million tons, depending on our ability to manage our stockpiles associated with the actual impacts of the silo failure. To the extent this figure will be impacted by the silo incident at Elk Creek and that we are operating under force majeure, we will provide guidance on the new level of proposed production as soon as such information is available," Bauersachs continued.
"As we look at the fourth quarter," Bauersachs concluded, "despite the obvious distractions, we will continue to focus on doing the right things at our operations. We will continue to focus on safety, production, productivity and retention. We are also of course working both internally and externally to find solutions to allow us to resume coal preparation and shipments at Elk Creek as soon as possible."
Additional Results
The Company ended the quarter with approximately $5.5 million of cash on hand and $31.3 million of accounts receivable. Free cash flow generated over the next six months is expected to be used to fund working capital and capital expenditures.
In the third quarter of 2018, the Company recorded income tax expense of $0.1 million based on an expected effective tax rate of approximately 6.2% for 2018. Cash taxes payable for 2018 are expected to be less than $0.4 million.
Capital expenditures totaled approximately $12.4 million during the third quarter of 2018 and $39.9 million year to date. We expect to end the year with increased total 2018 capital expenditures beyond the higher end of our previous guidance of $40 million, due in part to repair and related infrastructure expense at our Elk Creek complex due to the announced silo partial structural failure. The Company intends to provide guidance on the new level of proposed expenditure as such information becomes available.
As of November 7, 2018, the Company has notified all of its Elk Creek coal customers of its declaration of force majeure with respect to the remaining 2018 coal contract obligations due to the aforementioned partial structural failure of one of the silos at the Elk Creek complex. It is not anticipated at this time that any 2019 coal sales will be affected or a declaration of force majeure will be needed with respect to 2019 commitments.
The Company has property damage and business interruption insurance with respect to its preparation plant and loading facilities, which the Company believes is sufficient to cover costs necessary to restore processing capability and provide significant protection from business interruption. The Company has provided notice to its insurance carriers of the damaged silo and management believes that the Company has sufficient business interruption and replacement coverages.
The exhibit below summarizes some of the key sales, production and financial metrics for the sequential periods:
Three months ended |
Nine months ended |
||||
September 30, |
June 30, |
September 30, |
|||
Sales Volume(a) |
|||||
Company |
510 |
493 |
1,406 |
||
Purchased |
90 |
122 |
331 |
||
Total |
600 |
615 |
1,737 |
||
Company Production(a) |
|||||
Elk Creek Mining Complex |
422 |
478 |
1,260 |
||
Berwind Mine |
27 |
19 |
66 |
||
Total |
449 |
497 |
1,326 |
||
Company Financial Metrics(b) |
|||||
Average revenue per ton |
$ 89.78 |
$ 91.21 |
$ 90.74 |
||
Average cash costs of coal sold |
65.42 |
55.58 |
61.93 |
||
Average cash margin per ton |
$ 24.36 |
$ 35.63 |
$ 28.81 |
||
Purchased Coal Financial Metrics(b) |
|||||
Average revenue per ton |
$ 101.31 |
$ 101.35 |
$ 100.72 |
||
Average cash costs of coal sold |
96.81 |
99.99 |
94.71 |
||
Average cash margin per ton |
$ 4.51 |
$ 1.36 |
$ 6.01 |
||
Capital Expenditures(a) |
$ 12,405 |
$ 14,709 |
$ 39,883 |
||
Notes: |
|||||
(a) In thousands. |
|||||
(b) Excludes transportation. |
|||||
About Ramaco Resources, Inc.
Ramaco Resources is an operator and developer of high-quality, low cost metallurgical coal in southern West Virginia, southwestern Virginia and southwestern Pennsylvania. The Company has five active mines within two mining complexes at this time.
News and additional information about Ramaco Resources, including filings with the Securities and Exchange Commission, are available at http://www.ramacoresources.com. For more information, contact investor relations at (859) 244-7455.
Conference Call
Ramaco Resources will hold its quarterly conference call and webcast at 9:00 AM Eastern Time (ET) on Thursday, November 8, 2018 to present its results for the second quarter of 2018.
The conference call can be accessed by calling (844) 852-8392 domestically or (703) 639-1226 internationally. The webcast for this release will be accessible by visiting https://edge.media-server.com/m6/p/o3wrbcpc.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this news release constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements represent Ramaco Resources' expectations or beliefs concerning future events, and it is possible that the results described in this news release will not be achieved. These forward-looking statements are subject to risks, uncertainties and other factors, many of which are outside of Ramaco Resources' control, which could cause actual results to differ materially from the results discussed in the forward-looking statements. These factors include, without limitation, structural failures of our assets and the impact of any business interruptions resulting therefrom, commodity prices, unexpected delays in our current mine development activities or changes in operating conditions, unanticipated geologic problems, failure of our sales commitment counterparties to perform, increased government regulation of coal in the United States or internationally, or unexpected decline of demand for coal in export markets and underperformance of the railroads. Any forward-looking statement speaks only as of the date on which it is made, and, except as required by law, Ramaco Resources does not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. New factors emerge from time to time, and it is not possible for Ramaco Resources to predict all such factors. When considering these forward-looking statements, you should keep in mind the risk factors and other cautionary statements found in Ramaco Resources' filings with the Securities and Exchange Commission ("SEC"), including its Annual Report on Form 10-K. The risk factors and other factors noted in Ramaco Resources' SEC filings could cause its actual results to differ materially from those contained in any forward-looking statement.
Ramaco Resources, Inc. |
|||||
Consolidated Statements of Operations |
|||||
Three months ended |
|||||
September 30, |
June 30, 2018 |
September 30, |
|||
Revenues |
$ 62,165,738 |
$ 65,278,057 |
$ 14,404,979 |
||
Cost and expenses |
|||||
Cost of sales (exclusive of items shown separately below) |
49,406,271 |
47,860,149 |
16,525,352 |
||
Other operating costs and expenses |
— |
— |
111,668 |
||
Asset retirement obligation accretion |
123,468 |
123,467 |
101,276 |
||
Depreciation and amortization |
3,347,777 |
2,955,382 |
867,967 |
||
Selling, general and administrative |
3,484,395 |
3,692,254 |
3,141,237 |
||
Total cost and expenses |
56,361,911 |
54,631,252 |
20,747,500 |
||
Operating income (loss) |
5,803,827 |
10,646,805 |
(6,342,521) |
||
Interest and dividend income |
23,155 |
1,998 |
75,130 |
||
Other income |
1,036,418 |
512,693 |
31,869 |
||
Interest expense |
(589,199) |
(315,761) |
(21) |
||
Income (loss) before taxes |
6,274,201 |
10,845,735 |
(6,235,543) |
||
Income tax expense |
62,873 |
642,299 |
— |
||
Net income (loss) |
$ 6,211,328 |
$ 10,203,436 |
$ (6,235,543) |
||
Basic and diluted earnings (loss) per share |
|||||
Basic |
$ 0.15 |
$ 0.25 |
$ (0.16) |
||
Diluted |
$ 0.15 |
$ 0.25 |
$ (0.16) |
||
Weighted average common shares outstanding |
|||||
Basic |
40,082,467 |
40,082,467 |
39,509,311 |
||
Diluted |
40,329,309 |
40,339,749 |
39,509,311 |
||
Ramaco Resources, Inc. |
|||
Consolidated Balance Sheets |
|||
September 30, |
December 31, |
||
Assets |
|||
Current assets: |
|||
Cash and cash equivalents |
$ 5,482,285 |
$ 5,934,043 |
|
Short-term investments |
— |
5,199,861 |
|
Accounts receivable |
31,288,010 |
7,165,487 |
|
Inventories |
7,950,960 |
10,057,787 |
|
Prepaid expenses |
3,322,037 |
1,104,437 |
|
Total current assets |
48,043,292 |
29,461,615 |
|
Property, plant and equipment, net |
144,470,229 |
115,450,841 |
|
Advanced coal royalties |
3,039,153 |
2,867,369 |
|
Other assets |
624,920 |
318,206 |
|
Total Assets |
$ 196,177,594 |
$ 148,098,031 |
|
Liabilities and Stockholders' Equity |
|||
Liabilities |
|||
Current liabilities |
|||
Accounts payable |
$ 22,723,150 |
$ 19,532,531 |
|
Accrued expenses |
6,630,213 |
2,821,422 |
|
Asset retirement obligations |
734,188 |
70,616 |
|
Note payable, net |
14,836,754 |
— |
|
Other |
603,258 |
— |
|
Total current liabilities |
45,527,563 |
22,424,569 |
|
Deferred tax liability |
1,448,478 |
||
Asset retirement obligations |
12,183,049 |
12,276,176 |
|
Total liabilities |
59,159,090 |
34,700,745 |
|
Commitments and contingencies |
— |
— |
|
Stockholders' Equity |
|||
Preferred stock, $0.01 par value, 50,000,000 shares authorized, none |
— |
— |
|
Common stock, $0.01 par value, 260,000,000 shares authorized, |
400,825 |
395,594 |
|
Additional paid-in capital |
150,228,209 |
148,293,263 |
|
Accumulated deficit |
(13,610,530) |
(35,291,571) |
|
Total stockholders' equity |
137,018,504 |
113,397,286 |
|
Total Liabilities and Stockholders' Equity |
$ 196,177,594 |
$ 148,098,031 |
|
Ramaco Resources, Inc. |
|||
Nine months ended September 30, |
|||
2018 |
2017 |
||
Cash flows from operating activities |
|||
Net income (loss) |
$ 21,681,041 |
$ (12,816,658) |
|
Adjustments to reconcile net income (loss) to net cash from operating activities |
|||
Accretion of asset retirement obligations |
370,403 |
303,829 |
|
Depreciation and amortization |
8,740,659 |
1,334,983 |
|
Amortization of debt issuance costs |
406,044 |
— |
|
Equity-based compensation |
1,940,177 |
2,465,340 |
|
Deferred income tax expense |
1,448,479 |
— |
|
Changes in operating assets and liabilities |
|||
Accounts receivable |
(24,122,523) |
(1,701,986) |
|
Prepaid expenses |
(941,529) |
(1,084,917) |
|
Inventories |
2,106,827 |
(2,433,262) |
|
Advanced coal royalties |
(171,784) |
(934,482) |
|
Other assets and liabilities |
(306,714) |
(364,160) |
|
Accounts payable |
5,235,807 |
2,327,052 |
|
Accrued expenses |
4,086,599 |
382,831 |
|
Net cash from operating activities |
20,473,486 |
(12,521,430) |
|
Cash flow from investing activities |
|||
Purchases of property, plant and equipment |
(39,883,002) |
(53,280,926) |
|
Purchase of investment securities |
— |
(14,913,824) |
|
Proceeds from maturities of investment securities |
5,199,861 |
55,490,696 |
|
Net cash from investing activities |
(34,683,141) |
(12,704,054) |
|
Cash flows from financing activities |
|||
Proceeds from issuance of common stock |
— |
47,709,000 |
|
Payments of equity offering costs |
— |
(1,755,687) |
|
Repayments to Ramaco Coal, LLC |
— |
(10,629,275) |
|
Repayments of financed insurance payable |
(672,813) |
(127,048) |
|
Proceeds from notes payable |
13,000,000 |
— |
|
Proceeds from notes payable to related party |
3,000,000 |
— |
|
Payment of debt issuance costs |
(569,290) |
— |
|
Repayment of note payable |
(1,000,000) |
(500,000) |
|
Payment of distributions |
— |
(5,405,064) |
|
Net cash from financing activities |
13,757,897 |
29,291,926 |
|
Net change in cash and cash equivalents |
(451,758) |
4,066,442 |
|
Cash and cash equivalents, beginning of period |
5,934,043 |
5,196,914 |
|
Cash and cash equivalents, end of period |
$ 5,482,285 |
$ 9,263,356 |
|
Reconciliation of Non-GAAP Measure
Adjusted EBITDA
Adjusted EBITDA is used as a supplemental non-GAAP financial measure by management and external users of our financial statements, such as industry analysts, investors, lenders and rating agencies. The Company believes Adjusted EBITDA is useful because it allows us to more effectively evaluate our operating performance.
We define Adjusted EBITDA as net income (loss) plus net interest expense, equity-based compensation, depreciation and amortization expenses and any transaction related costs. A reconciliation of income (loss) from continuing operations, net of income taxes to Adjusted EBITDA is included below. Adjusted EBITDA is not intended to serve as an alternative to U.S. GAAP measures of performance and may not be comparable to similarly-titled measures presented by other companies.
Three months ended |
|||||
September 30, |
June 30, |
September 30, |
|||
Reconciliation of Net Income (Loss) to Adjusted EBITDA |
|||||
Net income (loss) |
$ 6,211,328 |
$ 10,203,436 |
$ (6,235,543) |
||
Depreciation and amortization |
3,347,777 |
2,955,382 |
867,967 |
||
Interest and dividend income, net |
566,044 |
313,763 |
(75,109) |
||
Income taxes |
62,873 |
642,299 |
— |
||
EBITDA |
10,188,022 |
14,114,880 |
(5,442,685) |
||
Equity-based compensation |
694,686 |
694,686 |
320,007 |
||
Accretion of asset retirement obligation |
123,468 |
123,467 |
101,276 |
||
Adjusted EBITDA |
$ 11,006,176 |
$ 14,933,033 |
$ (5,021,402) |
||
Nine months ended |
|||||
September 30, |
September 30, |
||||
Reconciliation of Net Income (Loss) to Adjusted EBITDA |
|||||
Net income (loss) |
$ 21,681,041 |
$ (12,816,658) |
|||
Depreciation and amortization |
8,740,659 |
1,334,983 |
|||
Interest and dividend income, net |
979,729 |
(269,060) |
|||
Income taxes |
1,448,479 |
— |
|||
EBITDA |
32,849,908 |
(11,750,735) |
|||
Equity-based compensation |
1,940,177 |
2,465,340 |
|||
Accretion of asset retirement obligation |
370,403 |
303,829 |
|||
Adjusted EBITDA |
$ 35,160,488 |
$ (8,981,566) |
|||
Non-GAAP revenue and cash cost per ton
Non-GAAP revenue per ton (FOB mine) is calculated as coal sales revenues less transportation costs, divided by tons sold. Non-GAAP cash cost per ton sold is calculated as cash cost of coal sales less transportation costs, divided by tons sold. We believe revenue per ton (FOB mine) and cash cost per ton provides useful information to investors as it enables investors to compare revenue per ton and cash cost per ton for the Company against similar measures made by other publicly-traded coal companies and more effectively monitor changes in coal prices and costs from period to period excluding the impact of transportation costs which are beyond our control. The adjustments made to arrive at these measures are significant in understanding and assessing the Company's financial condition. Revenue per ton sold (FOB mine) and cash cost per ton are not measures of financial performance in accordance with U.S. GAAP and therefore should not be considered as an alternative to revenues and cost of sales under U.S. GAAP. The tables below show how we calculate Non-GAAP revenue and cash cost per ton:
Non-GAAP revenue per ton
Three Months Ended September 30, 2018 |
Three Months Ended June 30, 2018 |
||||||||||
Company |
Purchased |
Total |
Company |
Purchased |
Total |
||||||
Revenues |
$ 51,963,193 |
$10,202,545 |
$ 62,165,738 |
$52,050,730 |
$13,227,327 |
$ 65,278,057 |
|||||
Less: Adjustments to reconcile to |
|||||||||||
Transportation costs |
6,185,300 |
1,090,911 |
7,276,211 |
7,118,210 |
807,669 |
7,925,879 |
|||||
Non-GAAP revenues (FOB mine) |
$ 45,777,893 |
$ 9,111,634 |
$ 54,889,527 |
$44,932,520 |
$12,419,658 |
$ 57,352,178 |
|||||
Tons sold |
509,918 |
89,935 |
599,853 |
492,603 |
122,544 |
615,147 |
|||||
Revenues per ton sold (FOB mine) |
$ 89.78 |
$ 101.31 |
$ 91.50 |
$ 91.21 |
$ 101.35 |
$ 93.23 |
|||||
Nine Months Ended September 30, 2018 |
|||||||||||
Company |
Purchased |
Total |
|||||||||
Revenues |
$145,736,255 |
$37,650,688 |
$183,386,943 |
||||||||
Less: Adjustments to reconcile to |
|||||||||||
Transportation costs |
18,172,910 |
4,282,576 |
22,455,486 |
||||||||
Non-GAAP revenues (FOB mine) |
$127,563,345 |
$33,368,112 |
$160,931,457 |
||||||||
Tons sold |
1,405,839 |
331,296 |
1,737,135 |
||||||||
Revenues per ton sold (FOB mine) |
$ 90.74 |
$ 100.72 |
$ 92.64 |
||||||||
Non-GAAP cash cost per ton
Three Months Ended September 30, 2018 |
Three Months Ended June 30, 2018 |
||||||||||
Company |
Purchased |
Total |
Company |
Purchased |
Total |
||||||
Cost of sales |
$ 39,583,647 |
$ 9,822,624 |
$ 49,406,271 |
$34,739,384 |
$13,120,765 |
$47,860,149 |
|||||
Less: Adjustments to reconcile to |
|||||||||||
Transportation costs |
6,226,914 |
1,116,231 |
7,343,145 |
7,360,223 |
867,874 |
8,228,097 |
|||||
Non-GAAP cash cost of coal sales |
$ 33,356,733 |
$ 8,706,393 |
$ 42,063,126 |
$27,379,161 |
$12,252,891 |
$39,632,052 |
|||||
Tons sold |
509,918 |
89,935 |
599,853 |
492,603 |
122,544 |
615,147 |
|||||
Cash cost per ton sold |
$ 65.42 |
$ 96.81 |
$ 70.12 |
$ 55.58 |
$ 99.99 |
$ 64.43 |
|||||
Nine Months Ended September 30, 2018 |
|||||||||||
Company |
Purchased |
Total |
|||||||||
Cost of sales |
$105,804,845 |
$35,792,420 |
$141,597,265 |
||||||||
Less: Adjustments to reconcile to |
|||||||||||
Transportation costs |
18,738,116 |
4,415,770 |
23,153,886 |
||||||||
Non-GAAP cash cost of coal sales |
$ 87,066,729 |
$31,376,650 |
$118,443,379 |
||||||||
Tons sold |
1,405,839 |
331,296 |
1,737,135 |
||||||||
Cash cost per ton sold |
$ 61.93 |
$ 94.71 |
$ 68.18 |
||||||||
POINT OF CONTACT:
Michael P. Windisch, Chief Accounting Officer
[email protected]
859-244-7455
SOURCE Ramaco Resources
Related Links
http://www.ramacoresources.com
WANT YOUR COMPANY'S NEWS FEATURED ON PRNEWSWIRE.COM?
Newsrooms &
Influencers
Digital Media
Outlets
Journalists
Opted In
Share this article