Foresight Energy LP Reports First Quarter 2019 Results

First Quarter 2019 Highlights:

  • Coal sales of $267 million on sales volumes of 5.7 million tons.
  • Adjusted EBITDA of $65.5 million.
  • Cash flows from operations of $49.2 million.
  • Net loss of $16.8 million, or ($0.09) per common unit and ($0.15)
    per subordinated unit.

ST. LOUIS–(BUSINESS WIRE)–Foresight Energy LP (“Foresight” or the “Partnership”) (NYSE: FELP)
today reported financial and operating results for the first quarter
ended March 31, 2019. Foresight generated first quarter coal sales
revenues of $267.3 million on sales volumes of nearly 5.7 million tons,
resulting in a net loss of $16.8 million, Adjusted EBITDA of $65.5
million, and cash flows from operations of $49.2 million. Production was
strong with the mines safely and efficiently producing over 6 million
tons during the quarter. Foresight also announced that the Board of
Directors of its General Partner has suspended the quarterly
distribution to common unitholders.

“Despite the difficult flooding conditions experienced on the river and
at our ports on the Gulf, we exported nearly 2.2 million tons during the
quarter and, given our contracted position, we maintained sales
realizations even though we continue to see a decline in API2 pricing,”
remarked Mr. Robert D. Moore, Chairman, President, and Chief Executive
Officer. “These factors, combined with our continued industry-leading
cost structure, allowed us to maintain comparable margins
quarter-over-quarter.”

Mr. Moore further commented, “Regarding the decision to suspend the
quarterly cash distribution at this time, the Board considered the
current export price environment and challenging logistical conditions,
the desire to maintain financial strength and flexibility, and other
factors to conclude that our cash resources would be best directed
towards other uses including, among other things, liquidity improvement
and debt reduction.”

Consolidated Financial Results

Quarter Ended March 31, 2019 Compared to Quarter Ended March 31, 2018

Coal sales totaled $267.3 million for the first quarter 2019 compared to
$238.4 million for the first quarter 2018, representing an increase of
$28.9 million, or over 12%. The increase in coal sales revenues was
driven by a nearly 9%, or 456 thousand ton, increase in tons sold
combined with an increase in coal sales realizations of over 3%, or
$1.44 per ton sold. The increases in sales volumes and sales
realizations per ton were primarily the result of increased export
sales. Although API2 pricing has declined during the first quarter 2019,
Foresight’s contracted position allowed it to maintain comparable coal
sales realizations on export tons.

Cost of coal produced was $134.0 million for the first quarter 2019
compared to $120.6 million for the first quarter 2018. The increase in
cost of coal produced was primarily due to higher sales volumes during
the first quarter 2019, as the cost per ton sold was comparable
quarter-over-quarter.

Transportation costs increased approximately $12.4 million from the
first quarter 2018 to the first quarter 2019 because of higher sales
volumes and a higher percentage of sales going to the export market
during the current quarter and the additional transportation and
transloading costs associated therewith.

The small increase in selling, general and administrative expense during
the first quarter 2019 was primarily due to increased sales and
marketing expense associated with increased export sales volumes.

Interest expense during the first quarter 2019 increased $1.0 million
compared to interest expense during the first quarter 2018 primarily due
to outstanding borrowings on the revolving credit facility and overall
higher variable interest rates during the current quarter, offset by
lower overall outstanding principal balances.

During the first quarter 2019, Foresight generated operating cash flows
of $49.2 million and ended the quarter with $3.5 million in cash and
$112.7 million of available borrowing capacity, net of outstanding
borrowings and letters of credit, under its revolving credit facility.
Capital expenditures for the first quarter 2019 totaled $35.1 million
compared $16.5 million for the first quarter 2018. The increase in
capital expenditures was primarily the result of land purchases, a new
portal at the Sugar Camp complex, and development of the Hillsboro
complex.

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 2019:

Sales Volumes – Based on current committed position and
expectations for 2019, Foresight is projecting sales volumes to be
between 20.0 and 22.0 million tons, with over 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 $260 to $300 million.

Capital Expenditures – Total 2019 capital expenditures are
estimated to be between $70 and $85 million.

Forward-Looking Statements

This press release contains “forward-looking” statements within the
meaning of the federal securities laws. These statements contain words
such as “possible,” “intend,” “will,” “if” and “expect” and can be
impacted by numerous factors, including risks relating to the securities
markets, the impact of adverse market conditions affecting business of
the Partnership, adverse changes in laws including with respect to tax
and regulatory matters and other risks. There can be no assurance that
actual results will not differ from those expected by management of the
Partnership. Known material factors that could cause actual results to
differ from those in the forward-looking statements are described in
Part I, “Item 1A. Risk Factors” of the Partnership’s Annual Report on
Form 10-K filed on February 27, 2019. The Partnership undertakes no
obligation to update or revise such forward-looking statements to
reflect events or circumstances that occur, or which the Partnership
becomes aware of, after the date hereof.

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 recently 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)

 

 

  March 31,   December 31,
2019 2018
Assets
Current assets:
Cash and cash equivalents $ 3,486 $ 269
Accounts receivable 27,274 32,248
Due from affiliates 38,658 49,613
Financing receivables – affiliate 3,459 3,392
Inventories, net 63,625 56,524
Prepaid royalties – affiliate 1,619 2,000
Deferred longwall costs 26,401 14,940
Other prepaid expenses and current assets 8,603 10,872
Contract-based intangibles   1,031   1,326
Total current assets 174,156 171,184
Property, plant, equipment and development, net 2,134,244 2,148,569
Financing receivables – affiliate 59,815 60,705
Prepaid royalties, net 3,054 2,678
Other assets 12,431 4,311
Contract-based intangibles   545   726
Total assets $ 2,384,245 $ 2,388,173
Liabilities and partners’ capital
Current liabilities:
Current portion of long-term debt and finance lease obligations $ 43,000 $ 53,709
Current portion of sale-leaseback financing arrangements 6,807 6,629
Accrued interest 31,684 24,304
Accounts payable 116,797 99,735
Accrued expenses and other current liabilities 66,235 67,466
Asset retirement obligations 6,578 6,578
Due to affiliates 16,304 17,740
Contract-based intangibles   8,211   8,820
Total current liabilities 295,616 284,981
Long-term debt and finance lease obligations 1,203,094 1,194,394
Sale-leaseback financing arrangements 187,976 189,855
Asset retirement obligations 39,578 38,966
Other long-term liabilities 17,454 16,428
Contract-based intangibles   65,281   66,834
Total liabilities 1,808,999 1,791,458
Limited partners’ capital:
Common unitholders (80,939 and 80,844 units outstanding as of March
31, 2019 and December 31, 2018, respectively)
366,064 377,880
Subordinated unitholder (64,955 units outstanding as of March 31,
2019 and December 31, 2018)
  209,182   218,835
Total partners’ capital   575,246   596,715
Total liabilities and partners’ capital $ 2,384,245 $ 2,388,173
 
 

Foresight Energy LP

Consolidated Statement of Operations

(In Thousands, Except Per Unit Data)

 

Three Months Ended
March 31, 2019

 

Three Months Ended
March 31, 2018

Revenues:
Coal sales $ 267,337 $ 238,387
Other revenues   1,735     2,339  
Total revenues 269,072 240,726
 
Costs and expenses:
Cost of coal produced (excluding depreciation, depletion and
amortization)
133,981 120,570
Cost of coal purchased 2,375 1,751
Transportation 58,834 46,443
Depreciation, depletion and amortization 46,548 51,420
Contract amortization (1,686 ) (1,420 )
Accretion on asset retirement obligations 551 731
Selling, general and administrative 8,647 7,775
Other operating (income) expense, net   (67 )   (648 )
Operating income 19,889 14,104
Other expenses
Interest expense, net   36,710     35,673  
Net loss $ (16,821 ) $ (21,569 )
 
Net loss available to limited partner units – basic and diluted:
Common unitholders $ (7,168 ) $ (9,789 )
Subordinated unitholder $ (9,653 ) $ (11,780 )
 
Net loss per limited partner unit – basic and diluted:
Common unitholders $ (0.09 ) $ (0.12 )
Subordinated unitholder $ (0.15 ) $ (0.18 )
 
Weighted average limited partner units outstanding – basic and
diluted:
Common units 80,915 78,846
Subordinated units 64,955 64,955
 
Distributions declared per limited partner unit $ 0.0600 $ 0.0565
 
 

Foresight Energy LP

Consolidated Statements of Cash Flows

(In Thousands)

 
 

Three Months
Ended
March 31, 2019

 

Three Months
Ended
March 31, 2018

Cash flows from operating activities
Net loss $ (16,821 ) $ (21,569 )
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation, depletion and amortization 46,548 51,420
Amortization of debt discount 700 655
Contract amortization (1,686 ) (1,420 )
Accretion on asset retirement obligations 551 731
Equity-based compensation 233 177
Changes in operating assets and liabilities:
Accounts receivable 4,974 6,547
Due from/to affiliates, net 9,519 11,392
Inventories (4,228 ) (12,927 )
Prepaid expenses and other assets (9,235 ) (6,424 )
Prepaid royalties 5 2,004
Accounts payable 17,062 9,218
Accrued interest 7,380 13,315
Accrued expenses and other current liabilities (6,157 ) (1,466 )
Other   322     53  
Net cash provided by operating activities 49,167 51,706
Cash flows from investing activities
Investment in property, plant, equipment and development (35,096 ) (16,531 )
Return of investment on financing arrangements with Murray Energy
(affiliate)
  823     778  
Net cash used in investing activities (34,273 ) (15,753 )
Cash flows from financing activities
Borrowings under revolving credit facility 21,000
Payments on revolving credit facility (13,000 )
Payments on long-term debt and finance lease obligations (10,709 ) (12,608 )
Distributions paid (4,856 ) (4,510 )
Payments on sale-leaseback and short-term financing arrangements   (4,112 )   (2,461 )
Net cash used in financing activities   (11,677 )   (19,579 )
Net increase in cash, cash equivalents, and restricted cash 3,217 16,374
Cash, cash equivalents, and restricted cash, beginning of period   269     2,179  
Cash, cash equivalents, and restricted cash, end of period $ 3,486   $ 18,553  
 
 

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

 

Three Months
Ended
March 31, 2019

 

Three Months
Ended
March 31, 2018

 

Three Months
Ended
December 31, 2018

Net (loss) income $ (16,821 ) $ (21,569 ) $ 16,879
Interest expense, net 36,710 35,673 36,809
Depreciation, depletion and amortization 46,548 51,420 53,128
Accretion and changes in estimates on asset retirement obligations 551 731 (10,364 )
Contract amortization (1,686 ) (1,420 ) (9,782 )
Equity-based compensation   233     177     199  
Adjusted EBITDA $ 65,535   $ 65,012   $ 86,869  
 
 

Operating Metrics (In Thousands, Except Per Ton Data)

 

Three Months
Ended
March 31, 2019

 

Three Months
Ended
March 31, 2018

 

Three Months
Ended
December 31, 2018

Produced tons sold 5,646 5,199 6,087
Purchased tons sold   50   41   58
Total tons sold   5,696   5,240   6,145
 
Tons produced 6,065 5,667 6,061
 
Coal sales realization per ton sold(1) $ 46.93 $ 45.49 $ 48.33
Cash cost per ton sold(2) $ 23.73 $ 23.19 $ 22.30
Netback to mine realization per ton sold(3) $ 36.61 $ 36.63 $ 38.03
 
(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
[email protected]
[email protected]

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