- Peabody delivers record third quarter volumes, revenue, EBITDA, operating profit, earnings and cash flow
ST. LOUIS, Oct. 16 /PRNewswire-FirstCall/ -- Peabody Energy (NYSE: BTU)
today reported record third quarter revenues of $1.91 billion on 66.0 million
tons sold. EBITDA grew 190 percent to $609.8 million, driving income from
continuing operations to a new high of $377.1 million with earnings per share
of $1.38.
"Peabody had an outstanding quarter, delivering record results that
reflect the benefits of our recent investments and expanding global platform,"
said Peabody Chairman and Chief Executive Officer Gregory H. Boyce. "We
continue to differentiate ourselves with a very strong financial and operating
performance, rising cash flows, major contract backlog and rapidly growing
international contributions. In the face of current economic conditions, we
are pleased to be raising our outlook."
RESULTS FROM CONTINUING OPERATIONS
Third quarter volumes reached 66.0 million tons, 6 percent above year-ago
levels. Higher volumes combined with improved pricing in all regions led to
record revenues of $1.91 billion, a $707.2 million increase over the prior
year.
Peabody's Australian coal shipments grew 21 percent over the prior year
quarter and 15 percent year to date. Higher contracted prices led to
significantly improved realized revenues per ton: 114 percent above the
year-ago quarter and 66 percent year to date. U.S. operations also delivered
improved performance over last year, reflecting a 15 percent increase in
realized prices and contributions from the new El Segundo Mine in the
Southwest.
EBITDA for the quarter was $609.8 million versus $210.0 million in the
prior year, a 190 percent improvement. EBITDA from mining operations nearly
tripled, and Trading and Brokerage increased 168 percent. EBITDA margins grew
to a record 32 percent of revenues. Operating profit rose 324 percent to
$490.2 million.
Third quarter income from continuing operations was a record $377.1
million with earnings of $1.38 per share. This compares with $55.0 million
and $0.20 per share in the comparable prior-year quarter. During the quarter,
operating cash flows reached a new high of $462.0 million, and the company
repaid more than $100 million in debt.
"We are seeing the first full quarter of benefits from our multi-year
capital investment program," said Executive Vice President and Chief Financial
Officer Michael C. Crews. "We have improved volumes, stabilized costs,
expanded margins and generated strong cash flows that enabled us to repay debt
and repurchase shares during the quarter."
Also in the quarter, Standard & Poor's upgraded Peabody's corporate credit
rating to 'BB+' on the basis of strengthened credit measures due to the
company's financial performance and favorable outlook.
Through nine months, the company also set records on all financial
measures. Sales volumes rose 7 percent to 187.0 million tons; revenues
increased 40 percent to $4.71 billion; EBITDA rose 86 percent to $1.33
billion; operating profit improved 128 percent to $1.01 billion; earnings per
share from continuing operations increased 188 percent to $2.53; and operating
cash flow climbed 48 percent to $783.0 million.
Peabody operations recorded a 27 percent safety improvement year to date
and are on track for the safest year ever. Also, Peabody's Miller Creek Mine
was honored for reclamation excellence, receiving the U.S. Department of the
Interior's National Award of Excellence in Surface Mining for innovative
techniques to restore prime farmland and wildlife habitat in Indiana.
GLOBAL COAL MARKETS AND PEABODY'S POSITION
"While there is uncertainty in today's economy, any easing of demand
growth is likely to be offset by diminished global coal supply," said Peabody
President and Chief Commercial Officer Richard A. Navarre. "Supply challenges
around the world and lack of capital to respond to market shortages will
continue to drive a tight global supply-demand balance for coal. In addition,
we believe that the long-term coal demand profile is very strong and will
continue to be led by emerging economies."
Global coal use continues to increase to satisfy steel demand and serve a
growing number of coal-fueled generating plants.
International steel consumption is projected to be 3 percent higher than
last year, representing approximately 25 million tons of incremental
annualized metallurgical coal demand. Global thermal coal demand is growing
as nations attempt to replenish stockpiles and fuel new coal plants. Physical
coal prices are above published coal prices in most markets, as an exodus of
financial participants has created a temporary overhang on financial coal
products.
Coal demand growth and tight global supplies are expected to continue,
given a number of factors:
- Currently, approximately 300 gigawatts of new coal-fueled generation
is under construction around the world and expected to come on line
over the next several years, requiring up to 1 billion tons of annual
coal supply.
- Australia exports have grown just 3 percent this year, as coal chain
logistics issues persist in Australia. Peabody's mine developments
have allowed the company to raise market share, increasing its
Australian production 15 percent.
- China continues to restrain exports by reducing and delaying export
licenses, while increasing export taxes on both metallurgical and
thermal coals, as well as coke.
- Other major coal exporting nations have struggled to meet increasing
demand. South African exports are 6 percent lower than last year and
on track for their third consecutive yearly decrease; both Russian and
Vietnamese coal exports are running below prior-year levels; and
Indonesian coal exports are well below the 5 to 10 percent growth
originally expected.
- International demand for U.S. coal continues to rise. U.S. exports
are running 44 percent ahead of 2007 and on track to reach 85 million
tons by year end, with continued increases expected in 2009. Strong
exports have led to demand for U.S. coal that exceeds supply, even
with mild late-summer weather that suppressed generation. Peabody has
now entered into 7 million tons of coal export transactions in 2008,
including the sale of Powder River Basin coal to China.
- The Powder River Basin is the fastest-growing region for U.S. coal
demand, with consumption up 4.3 percent year to date due to fuel
switching, new coal plants, interbasin backfill and 'coal-by-wire'
generation from the Midwest into the Northeast.
- Appalachian coal production is being diminished by permitting issues,
safety-related slowdowns and costs, difficult geology and the credit
crunch. This has already resulted in force majeures, production
shortfalls and rising costs by multiple producers.
- Longer term U.S. growth will be driven by increasing exports, greater
use by existing coal plants and the continued build-out of new
coal-fueled plants. New coal-fueled generation totaling approximately
15 gigawatts is under construction, with another 5 to 10 gigawatts in
late-stage permitting and planning. Peabody estimates the current and
new U.S. coal-fueled plants represent approximately 200 million tons
of additional annual coal demand.
These conditions have led to significant global price increases year over
year. Physical coal prices have remained near the strong contract levels set
in April for both met and thermal coal products. Long-term Powder River Basin
prices remain much higher than current spot prices and are approximately
double the spot prices of early 2007.
During the quarter, Peabody priced premium Powder River Basin products at
levels 49 percent above realized 2007 pricing. Pricing for Illinois Basin
coal has doubled since the start of the year, due to its proximity to Eastern
U.S. and export markets. Peabody is the number-one producer in both the
Powder River Basin and Illinois Basin.
Peabody is now largely contracted for 2009. The company has 10 to 20
million tons of U.S. production unpriced for 2009 and 75 to 85 million tons
for 2010. Peabody has 6 to 7 million tons of Australian-based metallurgical
coal available to be priced for the last three quarters of 2009 and 10 to 11
million tons for 2010. Unpriced Australian thermal coal volumes include 6 to
7 million tons for the last three quarters of 2009 and 12 to 13 million tons
for 2010.
APPROACH AND OUTLOOK
The company has a growing earnings profile, strong balance sheet, solid
liquidity and access to credit and low sustaining capital needs. "Peabody has
never been better positioned to capitalize on market opportunities," said
Boyce. "We are taking prudent steps to navigate through the near-term
economic conditions, while positioning for long-term growth in what remains an
energy-short world."
Peabody will continue to exercise tight capital discipline and a balanced
capital structure to best utilize rising cash flows and capitalize on
long-term opportunities. Peabody continues to advance long-term projects that
expand access to high-growth markets. For instance, the company is joining
with Chinese partners to explore development of a large surface mine and coal
conversion facility. And construction of the new NCIG terminal at Newcastle
is on time and on budget, with startup targeted for 2010. As the second
largest sponsor of the export facility, Peabody will receive nearly 6 million
tons of dedicated allocation.
Peabody is raising its targets for the full year. 2008 EBITDA is targeted
at $1.75 to $1.85 billion, as much as 92 percent higher than 2007. 2008
earnings per share from continuing operations is targeted at $3.00 to $3.25,
an increase of as much as 103 percent from 2007. Final 2008 results will be
contingent on a number of factors, including the level of export shipments in
the fourth quarter.
Peabody Energy is the world's largest private-sector coal company. Its
coal products fuel approximately 10 percent of all U.S. electricity generation
and 2 percent of worldwide electricity.
Certain statements in this press release are forward-looking as defined in
the Private Securities Litigation Reform Act of 1995. These forward-looking
statements are based on numerous assumptions that the company believes are
reasonable, but they are open to a wide range of uncertainties and business
risks that may cause actual results to differ materially from expectations as
of Oct. 16, 2008. These factors are difficult to accurately predict and may be
beyond the company's control. The company does not undertake to update its
forward-looking statements. Factors that could affect the company's results
include, but are not limited to: the outcome of commercial negotiations
involving sales contracts or other transactions; credit and performance risk
associated with customers, suppliers, trading and financial counterparties;
the availability, timing of delivery and cost of key equipment and
commodities; transportation availability, performance and costs including
demurrage; geologic, equipment and operational risks associated with mining;
our ability to replace coal reserves; worldwide economic and political
conditions; labor availability and relations; the effects of mergers,
acquisitions and divestitures; legislative and regulatory developments,
including mercury and carbon dioxide-related limitations; the outcome of
pending or future litigation; coal and power market conditions; impact of
weather on demand, production and transportation; availability and costs of
competing energy resources; risks associated with our Btu Conversion
initiatives; global currency exchange and interest rate fluctuation; liquidity
and access to capital; wars and acts of terrorism or sabotage; political
risks, including expropriation; and other risks detailed in the company's
reports filed with the Securities and Exchange Commission (SEC).
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 income from continuing operations 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.
CONTACT:
Vic Svec
(314) 342-7768
Condensed Income Statements (Unaudited)
For the Quarters Ended September 30, 2008, June 30, 2008, and September
30, 2007 and Nine Months Ended September 30, 2008 and 2007
Quarter Ended Nine Months Ended
Sept June Sept Sept Sept
2008 2008 2007 2008 2007
Tons Sold (In Millions) 66.0 59.8 62.1 187.0 174.2
Revenues $1,905.7 $1,530.9 $1,198.5 $4,712.6 $3,377.1
Operating Costs
and Expenses 1,253.0 1,048.5 980.1 3,315.2 2,649.9
Depreciation,
Depletion and
Amortization 103.8 93.6 89.3 291.4 259.7
Asset Retirement
Obligation Expense 15.8 9.2 5.0 31.8 14.5
Selling and
Administrative
Expenses 44.2 43.1 33.2 138.2 97.0
Other Operating
(Income) Loss:
Net Gain on
Disposal or
Exchange of Assets (4.8) (3.6) (21.9) (67.8) (76.3)
(Income) Loss from
Equity Affiliates 3.5 (3.7) (2.9) (2.9) (9.4)
Operating Profit 490.2 343.8 115.7 1,006.7 441.7
Interest Income (3.5) (2.5) (1.5) (7.1) (5.8)
Interest Expense:
Debt-Related Interest 52.5 56.5 57.4 167.0 171.7
Surety Bond and Letter
of Credit Fees 1.6 1.1 1.3 4.0 3.1
Income from Continuing
Operations
Before Income Taxes
and Minority Interests 439.6 288.7 58.5 842.8 272.7
Income Tax Provision 60.2 43.6 6.7 147.9 34.8
Minority Interests 2.3 2.5 (3.2) 5.7 1.3
Income from
Continuing
Operations 377.1 242.6 55.0 689.2 236.6
Loss from Discontinued
Operations, Net
of Tax (7.5) (9.2) (22.7) (29.0) (8.1)
Net Income $369.6 $233.4 $32.3 $660.2 $228.5
Diluted EPS (1):
Income from
Continuing
Operations $1.38 $0.89 $0.20 $2.53 $0.88
Loss from
Discontinued
Operations (0.02) (0.03) (0.08) (0.11) (0.03)
Net Income $1.36 $0.86 $0.12 $2.42 $0.85
EBITDA $609.8 $446.6 $210.0 $1,329.9 $715.9
(1) Weighted average diluted shares outstanding were 272.6 million,
272.7 million, and 268.9 million for the quarters ended
September 30, 2008, June 30, 2008, and September 30, 2007,
respectively, and were 272.5 million and 268.6 million for the
nine months ended September 30, 2008 and 2007, respectively.
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, 2008, June 30, 2008, and
September 30, 2007 and Nine Months Ended September 30, 2008 and 2007
Quarter Ended Nine Months Ended
Sept June Sept Sept Sept
2008 2008 2007 2008 2007
Revenue Summary
(Dollars in Millions)
U.S. Mining Operations $930.7 $939.1 $805.5 $2,728.1 $2,298.7
Australian
Mining Operations 789.0 523.5 307.6 1,612.7 844.0
Trading and
Brokerage Operations 181.5 61.3 76.0 352.9 211.7
Other 4.5 7.0 9.4 18.9 22.7
Total $1,905.7 $1,530.9 $1,198.5 $4,712.6 $3,377.1
Tons Sold (In Millions)
Eastern U.S. Mining
Operations 8.1 8.0 7.9 23.7 23.4
Western U.S. Mining
Operations 42.8 39.2 42.7 124.3 118.9
Australian
Mining Operations 7.0 5.5 5.8 18.0 15.6
Trading and
Brokerage Operations 8.1 7.1 5.7 21.0 16.3
Total(1) 66.0 59.8 62.1 187.0 174.2
Revenues per Ton -
Mining Operations
Eastern U.S. $37.74 $36.72 $32.78 $36.60 $32.96
Western U.S.(2) 14.59 16.44 12.81 14.96 12.84
Total - U.S. (2) 18.27 19.88 15.92 18.43 16.15
Australia 113.43 95.01 53.07 89.59 54.09
Operating Costs per Ton -
Mining Operations(3)
Eastern U.S. $32.45 $32.01 $26.21 $31.80 $26.51
Western U.S. 10.96 11.65 9.33 10.96 9.27
Total - U.S. 14.37 15.10 11.96 14.30 12.10
Australia 52.59 51.32 50.83 52.50 46.42
Gross Margin per Ton -
Mining Operations(3)
Eastern U.S. $5.29 $4.71 $6.57 $4.80 $6.45
Western U.S.(2) 3.63 4.79 3.48 4.00 3.57
Total - U.S.(2) 3.90 4.78 3.96 4.13 4.05
Australia 60.84 43.69 2.24 37.09 7.67
Operating Profit
per Ton $7.43 $5.75 $1.86 $5.38 $2.54
Dollars in Millions
EBITDA - U.S. Mining
Operations $198.6 $225.7 $200.2 $611.0 $576.1
EBITDA - Australian
Mining Operations 423.1 240.8 13.0 667.7 119.7
EBITDA - Trading and
Brokerage Operations 52.7 38.1 19.7 182.5 82.7
EBITDA - Resource
Management(4) 2.4 4.2 22.0 65.9 82.9
Selling and
Administrative
Expenses (44.2) (43.1) (33.2) (138.2) (97.0)
Other Operating
Costs, Net(5) (22.8) (19.1) (11.7) (59.0) (48.5)
EBITDA 609.8 446.6 210.0 1,329.9 715.9
Depreciation, Depletion
and Amortization (103.8) (93.6) (89.3) (291.4) (259.7)
Asset Retirement
Obligation Expense (15.8) (9.2) (5.0) (31.8) (14.5)
Operating Profit 490.2 343.8 115.7 1,006.7 441.7
Operating Cash Flow from
Continuing Operations 462.0 232.9 227.2 783.0 530.3
Coal Reserve Lease
Expenditures 55.0 63.6 54.8 178.4 178.2
Capital Expenditures
(Excludes Acquisitions) 64.2 50.6 125.3 174.1 387.1
(1) Metallurgical sales totaled 2.5 million tons, 1.9 million tons,
and 2.4 million tons for the quarters ended September 30, 2008,
June 30, 2008, and September 30, 2007, respectively, and 6.5
million tons and 6.3 million tons for the nine months ended
September 30, 2008 and 2007, respectively. Total non-U.S. sales were
11.0 million tons, 9.5 million tons, and 8.9 million tons for the
quarters ended September 30, 2008, June 30, 2008, and September 30,
2007, respectively, and 28.8 million tons and 23.2 million tons for
the nine months ended September 30, 2008 and 2007, respectively.
(2) The favorable effect of the recovery of postretirement healthcare
and reclamation costs on revenues per ton and gross margin per
ton for the quarter ended June 30, 2008 on the Western U.S. and
Total - U.S. Operations amounted to $1.45 and $1.21, respectively.
The favorable per ton impact for the nine months ended September 30,
2008 on the Western U.S. and Total - U.S. Operations amounted to
$0.46 and $0.38, respectively.
(3) Includes revenue-based production taxes and royalties; excludes
depreciation, depletion and amortization; asset retirement
obligation expense; selling and administrative expenses; and
certain other costs related to post-mining activities.
(4) Includes asset sales and exchanges, property management costs and
revenues, and coal royalty expense.
(5) Includes generation development costs, coalbed methane
development activities, costs associated with post-mining
activities, and income from an equity interest in a Venezuelan
joint venture.
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, 2008, June 30, 2008 and December 31, 2007
(Dollars in Millions)
(Unaudited) (Unaudited)
September 30, June 30, December 31,
2008 2008 2007
Cash and Cash Equivalents $104.0 $74.8 $45.3
Receivables 412.9 296.0 256.9
Inventories 275.1 296.3 264.7
Assets from Coal Trading Activities(1) 710.7 1,392.5 349.8
Deferred Income Taxes 105.8 98.6 98.6
Other Current Assets 210.1 456.6 295.2
Total Current Assets 1,818.6 2,614.8 1,310.5
Net Property, Plant, Equipment and
Mine Development 7,387.4 7,342.5 7,323.9
Investments and Other Assets 397.3 531.2 417.1
Total Assets $9,603.3 $10,488.5 $9,051.5
Current Maturities of Debt $44.2 $135.9 $134.4
Liabilities from Coal Trading
Activities(1) 549.1 1,459.9 301.8
Accounts Payable and Accruals 1,340.3 1,155.2 1,134.0
Total Current Liabilities 1,933.6 2,751.0 1,570.2
Long-Term Debt 3,107.6 3,122.7 3,138.7
Deferred Income Taxes 100.5 325.0 315.6
Other Long-Term Liabilities 1,526.2 1,478.3 1,506.6
Total Liabilities 6,667.9 7,677.0 6,531.1
Minority Interests 1.3 4.0 0.7
Stockholders' Equity 2,934.1 2,807.5 2,519.7
Total Liabilities and
Stockholders' Equity $9,603.3 $10,488.5 $9,051.5
(1) Assets and liabilities from coal trading activities have been
presented on a net counterparty aggregation basis consistent with
accounting guidance effective January 1, 2008. December 31, 2007
amounts have been conformed to this presentation requirement.
This information is intended to be reviewed in conjunction with the
company's filings with the Securities and Exchange Commission.
Reconciliation of EBITDA to Income from Continuing Operations (Unaudited)
For the Quarters Ended September 30, 2008, June 30, 2008, and September
30, 2007 and Nine Months Ended September 30, 2008 and 2007
(Dollars in Millions)
Quarter Ended Nine Months Ended
Sept June Sept Sept Sept
2008 2008 2007 2008 2007
EBITDA $609.8 $446.6 $210.0 $1,329.9 $715.9
Depreciation,
Depletion and
Amortization 103.8 93.6 89.3 291.4 259.7
Asset Retirement
Obligation Expense 15.8 9.2 5.0 31.8 14.5
Interest Income (3.5) (2.5) (1.5) (7.1) (5.8)
Interest Expense 54.1 57.6 58.7 171.0 174.8
Income Tax Provision 60.2 43.6 6.7 147.9 34.8
Minority Interests 2.3 2.5 (3.2) 5.7 1.3
Income from Continuing
Operations $377.1 $242.6 $55.0 $689.2 $236.6
Reconciliation of EBITDA to Income from Continuing Operations -
2008 Targets (Unaudited)
(Dollars in Millions, Except Per Share Data)
Year Ended December 31, 2008
Targeted Results
Low High
EBITDA $1,750 $1,850
Depreciation, Depletion and Amortization 405 425
Asset Retirement Obligation Expense 45 50
Interest Income (8) (10)
Interest Expense 233 223
Income Tax Provision 250 265
Minority Interests 8 12
Income from Continuing Operations $817 $885
Diluted Earnings Per Share $3.00 $3.25
This information is intended to be reviewed in conjunction with the
company's filings with the Securities and Exchange Commission.
SOURCE Peabody Energy
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