Cloud Peak Energy Inc. Announces Results for the First Quarter of 2012

  Cloud Peak Energy Inc. Announces Results for the First Quarter of 2012

Business Wire

GILLETTE, Wyo. -- April 30, 2012

Cloud Peak Energy Inc. (NYSE:CLD), one of the largest U.S. coal producers and
the only pure-play Powder River Basin (PRB) coal company, today announced
results for the first quarter of 2012.

2012 First Quarter Highlights

  *Adjusted EBITDA^(1) of $75.7 million in the first quarter of 2012 compared
    with $82.6 million in the first quarter of 2011.
  *Net income of $26.6 million resulting in Adjusted EPS^(1) of $0.47
    compared to net income of $26.8 million and Adjusted EPS of $0.44 in the
    first quarter of 2011.
  *Diluted EPS of $0.44 compared to $0.44 in the first quarter of 2011.
  *Asian exports were up nearly 10% to 971,000 tons from 887,000 tons in the
    first quarter of 2011.
  *Cash and investments increased to $585.7 million as the Company generated
    cash from operations of $53.0 million and obtained release of $71.2
    million of restricted cash.

“Given the challenging domestic environment facing the industry, we are
pleased with our strong balance sheet position and our operational and
financial performance in the first quarter. Our strategy to enter a calendar
year with our production essentially fully sold has again proven to be a
prudent approach that enables us to plan our business and manage our costs.
The Asian export market continues to be strong and we were able to
incrementally increase our exports even while our main shipping terminal at
Westshore completed a scheduled outage associated with its expansion work,”
said Colin Marshall, President and Chief Executive Officer.

(1) Defined later.

Operating Highlights^(1)               Q1        Q1
                                       2012      2011
Tons sold (in millions)                  22.5      23.1
Realized price per ton sold            $ 13.31   $ 12.73
Average cost of product sold per ton   $ 9.78    $ 8.94

(1) Includes the three company-operated mines only.

For the first quarter, sales from our three company-operated mines were 22.5
million tons, down from 23.1 million tons in the first quarter of 2011 due
primarily to reduced domestic demand for electricity caused by a
warmer-than-average winter. The reduced electricity and home heating demand
depressed the near term price of coal and natural gas allowing some utilities
to increase their generation from natural gas while stockpiling previously
contracted coal. Adjusted EBITDA declined slightly to $75.7 million, driven by
lower volumes. Realized price per ton increased to $13.31. Average cost of
product sold per ton was in line with our expectations at $9.78, up from last
year primarily due to higher royalties and severance taxes resulting from the
higher sales prices, higher diesel prices, and the impact of fixed costs on
fewer tons sold.

Health, Safety and Environment Record

During the first three months of 2012, of our approximately 1,400 mine site
employees, two suffered minor reportable injuries resulting in a year-to-date
MSHA All Injury Frequency Rate of 0.53, a decrease over the full year 2011
rate of 1.18. During the 77 MSHA inspector days in the first quarter of 2012,
we were issued 11 substantial and significant (S&S) citations, all of which
have been satisfactorily resolved and resulted in total proposed fines of
$6,938. “We continue to focus on the safety of all of our employees and
contractors and are proud to be one of the founding members of the National
Mining Association CORESafety program,” said Marshall.

Balance Sheet and Cash Flow

Cash flow from operations totaled $53.0 million for the first quarter of 2012.
Cash spent on capital expenditures was $14.3 million.

Unrestricted cash and investments as of March 31, 2012 were $585.7 million up
from $479.5 million at December 31, 2011. During the first quarter 2012, we
obtained release of $71.2 million of restricted cash. Cloud Peak Energy’s
balance sheet continues to be well positioned with total available liquidity
of $1.1 billion as of March 31, 2012.


International demand for our coal continues to grow, and international thermal
coal prices remain robust. Cloud Peak Energy’s total 2012 Asian exports are
expected to be approximately 4.3 million tons. While demand from our Asian
customers remains strong, this year’s exports will again be limited by
available terminal capacity out of the Pacific Northwest. During the quarter
we shipped approximately 971,000 tons to our Asian customers, up nearly 10%
from 887,000 tons shipped in the first quarter 2011. This was achieved while
the Westshore Terminal was undergoing one-of-two expansion shutdowns scheduled
this year. We have shipped one vessel out of the Ridley terminal in the first
quarter of 2012 and expect one in the second quarter. As exports through the
Ridley terminal incur significantly higher rail costs than through Westshore
due to the longer multi-railroad haul, we will only make additional sales
through Ridley when they are economic.


Warmer-than-average temperatures since December led to the fourth warmest
winter on record for the contiguous U.S., according to U.S. Energy Information
Administration. Heating degree days for the 2011/2012 winter season were down
16% from the 30-year norm and down nearly 20% from the 2010/2011 winter
season. During the winter season for 2011/2012, electric generation was down
5% from the norm and down nearly 6.5% from the prior year’s winter season. The
warm winter led to both reduced electricity and gas demand for commercial and
residential heating. The reduced demand, together with increased supplies of
natural gas, has depressed near-term gas prices significantly and has allowed
some utilities to increase their generation from natural gas to take advantage
of near-term low gas prices. During this short-term period, coal burn has been
significantly reduced and utility coal stockpiles have increased rapidly.
However, the level of coal-to-natural gas switching appears to currently be
limited by infrastructure constraints. In March 2012, shipments of coal from
our mines slowed as some utility stockpiles approached full capacity and
utilities reduced their immediate shipment schedules.

Shipments are expected to continue to be slow in the second quarter which is
traditionally the lowest shipment quarter of the year due to normal mild
spring weather reducing electricity and gas demand combined with the customary
power plant maintenance outages. As a result of these conditions, a small
number of our customers have contacted us to discuss potential options to
reduce their 2012 tonnage commitments. At this early stage in the year, no
deferrals have been agreed.

While the outlook for coal demand for the rest of the year will depend on
summer temperatures, economic growth and the level of gas production and gas
prices, the warm and dry conditions during the 2011/2012 winter season limited
snowfall for many locations. Consequently hydro-electric generation is
expected to be significantly reduced, which should support incremental demand
for both natural gas and coal generated electricity in the coming months.

For 2012, Cloud Peak Energy has contracted to sell 94.3 million tons, of which
90.5 million tons are under fixed-price contracts with a weighted-average
price of $13.41 per ton. Assuming current low OTC prices for the contracted
but unpriced tons in 2012, our weighted-average price would be $13.20 per ton.
We are not expecting to make any significant additional sales for delivery in
2012 and will be focusing on working with our customers to help ensure
delivery of contracted tonnages. During the first quarter of 2012, our
contracted position for 2013 only increased by 1.5 million tons to 74.8
million tons due to limited activity in the markets. Of this committed 2013
production, 61.7 million tons are under fixed-price contracts with a
weighted-average price of $14.18 per ton.

The current regulatory environment is making it increasingly difficult for
coal burning utilities to operate existing, or invest in new, coal power
plants. The regulations include the Cross State Air Pollution Rule, Utility
MATS, coal ash regulation and the proposed carbon dioxide new source
performance standard, the combined impacts of which are highly uncertain. It
is possible some of the regulations will increase demand for low sulfur PRB
coal, such as from our Antelope mine, however, we believe the cumulative
effect will be to decrease U.S. demand for coal and significantly increase the
cost of domestic electricity.

Marshall said, “Our business has performed very well during the difficult
market conditions experienced during the first quarter. The mines are in good
shape and we are making prudent capital investments to ensure we look after
our plant and equipment. While the very mild winter and subsequent low gas
prices have led to increased coal being stockpiled, our strong 2012 contracted
position and operations in the lowest cost domestic coal basin should position
Cloud Peak Energy well for the rest of the year. Full year results can still
vary widely initially depending on the summer temperatures and associated
cooling power demand, economic growth, and levels of hydro-electric
generation. Coal-to-gas switching appears to be limited by infrastructure
constraints, which currently limits further switching. Consequently, we do not
expect significantly more switching from PRB coal to gas even if gas prices
continue to fall. Conversely, we expect to see switching from gas back to coal
to start once gas prices exceed $2.50 per mmBtu. We have adjusted our full
year 2012 guidance to indicate our current expectations of the likely range of
shipments assuming a normal summer.”

Updated Guidance – 2012 Financial and Operational Estimates

The following table provides our current outlook and assumptions for selected
2012 financial and operational metrics:

Item                                          Estimate or Estimated Range
Coal shipments for our three operated mines   90 - 95 million tons
Committed sales with fixed prices             Approximately 90.5 million tons
Anticipated realized price of produced coal   Approximately $13.41 per ton
with fixed prices
Adjusted EBITDA                               $300 - $350 million
Net interest expense                          Approximately $30 million
Depreciation, depletion and accretion         $105 - $115 million
Effective income tax rate (1)                 Approximately 36%
Capital expenditures (2)                      $60 - $80 million
Committed federal coal lease payments         $129 million
(1) Excluding impact of the Tax Receivable Agreement.

(2) Excluding capitalized interest and federal coal lease payments.

Conference Call Details

A conference call with management is scheduled at 5:00 p.m. ET on April 30,
2012, to review the results and current business conditions. The call will be
webcast live over the Internet from the Company’s website at under “Investor Relations.” Participants should follow
the instructions provided on the website for downloading and installing the
audio applications necessary to join the webcast. Interested individuals also
can access the live conference call via telephone at 866.362.4832 (domestic)
or 617.597.5364 (international) and entering pass code 15715577.

Following the live webcast, a replay will be available at the same URL on the
Company’s website for seven days. A telephonic replay will also be available
approximately two hours after the call and can be accessed by dialing
888.286.8010 (domestic) or 617.801.6888 (international) and entering pass code
39275541. The telephonic replay will be available for seven days.

About Cloud Peak Energy^®

Cloud Peak Energy Inc. (NYSE:CLD) is headquartered in Wyoming and is one of
the largest U.S. coal producers and the only pure-play PRB coal company. As
one of the safest coal producers in the nation, Cloud Peak Energy specializes
in the production of low sulfur, subbituminous coal. The company owns and
operates three surface coal mines in the PRB, the lowest cost major coal
producing region in the nation. The Antelope and Cordero Rojo mines are
located in Wyoming and the Spring Creek mine is located near Decker, Montana.
With approximately 1,600 employees, the Company is widely recognized for its
exemplary performance in its safety and environmental programs. Cloud Peak
Energy is a sustainable fuel supplier for approximately 4% of the nation’s

Cautionary Note Regarding Forward-Looking Statements

This release and our related presentation contain “forward-looking statements”
within the meaning of the safe harbor provisions of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
Forward-looking statements are not statements of historical facts and often
contain words such as “may,” “will,” “expect,” “believe,” “anticipate,”
“plan,” “estimate,” “seek,” “could,” “should,” “intend,” “potential,” or words
of similar meaning. Forward-looking statements are based on management’s
current expectations, beliefs, assumptions and estimates regarding our
company, industry, economic conditions, government regulations and energy
policies and other factors. Forward-looking statements may include, for
example, (1) our outlook for 2012 and future periods for our company, the PRB
and the industry in general, and our operational, financial and export
guidance, including any development of future terminal capacity or increased
access to existing capacity; (2) anticipated economic conditions and demand by
domestic and foreign utilities, including the anticipated impact on demand
driven by regulatory developments and uncertainties; (3) the impact of
competition from natural gas and other alternative sources of energy used to
generate electricity; (4) coal stockpile levels and the impacts on future
demand; (5) our plans to replace and/or grow our coal tons; (6) business
development and growth initiatives; (7) operational plans for our mines; (8)
our cost management efforts; (9) industry estimates of the EIA and other third
party sources; (10) estimated Tax Receivable Agreement liabilities; and (11)
other statements regarding our plans, strategies, prospects and expectations
concerning our business, operating results, financial condition and other
matters that do not relate strictly to historical facts. These statements are
subject to significant risks, uncertainties, and assumptions that are
difficult to predict and could cause actual results to differ materially and
adversely from those expressed or implied in the forward-looking statements.
Factors that could adversely affect our future results include, for example,
(a) future economic and weather conditions; (b) coal-fired power plant
capacity and utilization, demand for our coal by the domestic electric
generation industry, export demand and terminal capacity and the prices we
receive for our coal; (c) reductions or deferrals of contracted tons or future
purchases by major customers and our ability to renew sales contracts; (d)
competition from other coal producers, natural gas producers and other sources
of energy, domestically and internationally, (e) environmental, health,
safety, endangered species or other legislation, regulations, treaties, court
decisions or government actions, or related third-party legal challenges or
changes in interpretations, including new requirements or uncertainties
affecting the use, demand or price for coal or imposing additional costs,
liabilities or restrictions on our mining operations or the utility industry;
(f) public perceptions, third-party legal challenges or governmental actions
and energy policies relating to concerns about climate change, air quality or
other environmental considerations, including emissions restrictions and
governmental subsidies or mandates that make wind, solar or other alternative
fuel sources more cost-effective and competitive with coal; (g) operational,
geological, equipment, permit, labor, weather-related and other risks inherent
in surface coal mining; (h) our ability to efficiently and safely conduct our
mining operations, (i) transportation and export terminal availability,
performance and costs; (j) availability, timing of delivery and costs of key
supplies, capital equipment or commodities such as diesel fuel, steel,
explosives and tires; (k) our ability to acquire future coal tons through the
federal LBA process and necessary surface rights and permits in a timely and
cost-effective manner and the impact of third-party legal challenges, (l)
access to capital and credit markets and availability and costs of credit,
surety bonds, letters of credit, and insurance; (m) litigation and other
contingent liabilities; and (n) other risk factors described from time to time
in the reports and registration statements we file with the Securities and
Exchange Commission (“SEC”), including those in Item 1A - Risk Factors in our
most recent Form 10-K and any updates thereto in our Forms 10-Q and current
reports on Forms 8-K. There may be other risks and uncertainties that are not
currently known to us or that we currently believe are not material. We make
forward-looking statements based on currently available information, and we
assume no obligation to, and expressly disclaim any obligation to, update or
revise publicly any forward-looking statements made in this release or our
related presentation, whether as a result of new information, future events or
otherwise, except as required by law.

Non-GAAP Financial Measures

This release and our related presentation include the non-GAAP financial
measures of (1) Adjusted EBITDA and (2) Adjusted Earnings Per Share (“Adjusted
EPS”). Adjusted EBITDA and Adjusted EPS are intended to provide additional
information only and do not have any standard meaning prescribed by generally
accepted accounting principles in the U.S., or GAAP. A quantitative
reconciliation of historical net income to Adjusted EBITDA and EPS (as defined
below) to Adjusted EPS is found in the tables accompanying this release.

EBITDA represents net income, or income from continuing operations, as
applicable, before (1) interest income (expense) net, (2) income tax
provision, (3) depreciation and depletion, (4) amortization, and (5)
accretion. Adjusted EBITDA represents EBITDA as further adjusted for
specifically identified items that management believes do not directly reflect
our core operations. The specifically identified items are the impacts, as
applicable, of: (1) the Tax Receivable Agreement including tax impacts of our
2009 initial public offering and 2010 secondary offering, (2) adjustments for
derivative financial instruments including unrealized marked-to-market amounts
and cash settlements realized, and (3) our significant broker contract that
expired in the first quarter of 2010. Because of the inherent uncertainty
related to the items identified above, management does not believe it is able
to provide a meaningful forecast of the comparable GAAP measures or a
reconciliation to any forecasted GAAP measures.

Adjusted EPS represents diluted earnings (loss) per common share attributable
to controlling interest, or diluted earnings (loss) per common share
attributable to controlling interest from continuing operations, as applicable
(“EPS”), adjusted to exclude the estimated per share impact of the same
specifically identified items used to calculate Adjusted EBITDA and described
above, adjusted at the statutory tax rate of 36%.

Adjusted EBITDA is an additional tool intended to assist our management in
comparing our performance on a consistent basis for purposes of business
decision-making by removing the impact of certain items that management
believes do not directly reflect our core operations. Adjusted EBITDA is a
metric intended to assist management in evaluating operating performance,
comparing performance across periods, planning and forecasting future business
operations and helping determine levels of operating and capital investments.
Period-to-period comparisons of Adjusted EBITDA are intended to help our
management identify and assess additional trends potentially impacting our
company that may not be shown solely by period-to-period comparisons of net
income or income from continuing operations. Adjusted EBITDA is also used as
part of our incentive compensation program for our executive officers and

We believe Adjusted EBITDA and Adjusted EPS are also useful to investors,
analysts and other external users of our consolidated financial statements in
evaluating our operating performance from period to period and comparing our
performance to similar operating results of other relevant companies. Adjusted
EBITDA allows investors to measure a company’s operating performance without
regard to items such as interest expense, taxes, depreciation and depletion,
amortization and accretion and other specifically identified items that are
not considered to directly reflect our core operations. Similarly, we believe
our use of Adjusted EPS provides an appropriate measure to use in assessing
our performance across periods given that this measure provides an adjustment
for certain specifically identified significant items that are not considered
to directly reflect our core operations, the magnitude of which may vary
drastically from period to period and, thereby, have a disproportionate effect
on the earnings per share reported for a given period.

Our management recognizes that using Adjusted EBITDA and Adjusted EPS as
performance measures has inherent limitations as compared to net income,
income from continuing operations, EPS or other GAAP financial measures, as
these non-GAAP measures exclude certain items, including items that are
recurring in nature, which may be meaningful to investors. Adjusted EBITDA and
Adjusted EPS should not be considered in isolation and do not purport to be
alternatives to net income, income from continuing operations, EPS or other
GAAP financial measures as a measure of our operating performance. Because not
all companies use identical calculations, our presentations of Adjusted EBITDA
and Adjusted EPS may not be comparable to other similarly titled measures of
other companies. Moreover, our presentation of Adjusted EBITDA is different
than EBITDA as defined in our debt financing agreements.

(in thousands, except per share data)
                                                     Three Months Ended
                                                     March 31,
                                                     2012         2011
Revenues                                             $ 372,903    $ 356,545 
Costs and expenses
Cost of product sold (exclusive of depreciation,
amortization and accretion, shown separately)          282,945       261,181
Depreciation and depletion                             23,391        25,115
Accretion                                              2,649         3,340
Selling, general and administrative expenses          14,835      13,027  
Total costs and expenses                              323,820     302,663 
Operating income                                      49,083      53,882  
Other income (expense)
Interest income                                        446           135
Interest expense                                       (5,850  )     (12,218 )
Other, net                                            (1,998  )    162     
Total other expense                                   (7,402  )    (11,921 )
Income before income tax provision and earnings       41,681      41,961  
from unconsolidated affiliates
Income tax expense                                     (15,101 )     (15,293 )
Earnings from unconsolidated affiliates, net of       38          105     
Net income                                            26,618      26,773  
Other comprehensive income
Retiree medical plan amortization of prior service    310         209     
cost, net of tax
Other comprehensive income                            310         209     
Total comprehensive income                           $ 26,928     $ 26,982  
Net income per common share:
Basic                                                $ 0.44        $ 0.45
Diluted                                              $ 0.44       $ 0.44    
Weighted-average shares outstanding - basic           60,008      60,000  
Weighted-average shares outstanding - diluted         60,761      60,663  

(in thousands)
                                                 March 31,       December 31,
                                                 2012            2011
ASSETS                                           (unaudited)     (audited)
Current assets
Cash and cash equivalents                        $ 488,040       $ 404,240
Investments in marketable securities               97,647          75,228
Restricted cash                                    —               71,245
Accounts receivable                                93,421          95,247
Due from related parties                           703             471
Inventories                                        75,455          71,648
Deferred income taxes                              33,897          37,528
Other assets                                      27,414        15,294    
Total current assets                              816,577       770,901   
Noncurrent assets
Property, plant and equipment, net                 1,348,236       1,350,135
Goodwill                                           35,634          35,634
Deferred income taxes                              124,408         132,828
Other assets                                      33,574        29,821    
Total assets                                     $ 2,358,429    $ 2,319,319 
Current liabilities
Accounts payable                                 $ 59,682        $ 71,427
Royalties and production taxes                     142,520         136,072
Accrued expenses                                   76,248          65,928
Current portion of tax agreement liability         19,113          19,113
Current portion of federal coal lease              102,198         102,198
Other liabilities                                 4,973         4,971     
Total current liabilities                         404,734       399,709   
Noncurrent liabilities
Tax agreement liability, net of current            151,523         151,523
Senior notes                                       596,182         596,077
Federal coal lease obligations, net of current     186,119         186,119
Asset retirement obligations, net of current       194,763         192,707
Other liabilities                                 44,559        42,795    
Total liabilities                                 1,577,880     1,568,930 
Common stock ($0.01 par value; 200,000 shares
authorized; 61,029 and 60,923 shares
issued and outstanding at March 31, 2012 and       610             609
December 31, 2011, respectively)
Additional paid-in capital                         539,532         536,301
Retained earnings                                  258,711         232,093
Accumulated other comprehensive loss              (18,304   )    (18,614   )
Total equity                                      780,549       750,389   
Total liabilities and equity                     $ 2,358,429    $ 2,319,319 

(in thousands)
                                                     Three Months Ended
                                                     March 31,
                                                     2012         2011
Cash flows from operating activities
Net income                                           $ 26,618      $ 26,773
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and depletion                             23,391        25,115
Accretion                                              2,649         3,340
Earnings from unconsolidated affiliates                (38     )     (105    )
Distributions of income from unconsolidated            —             2,000
Deferred income taxes                                  11,854        14,605
Stock compensation expense                             3,232         2,386
Unrealized derivative loss                             2,056         —
Other                                                  2,229         2,461
Changes in operating assets and liabilities:
Accounts receivable, net                               2,220         (4,956  )
Inventories                                            (3,731  )     (8,293  )
Due to or from related parties                         (232    )     (618    )
Other assets                                           (14,201 )     (17,441 )
Accounts payable and accrued expenses                  (1,572  )     36,218
Asset retirement obligations                          (1,466  )    (1,334  )
Net cash provided by operating activities             53,009      80,151  
Investing activities
Purchases of property, plant and equipment             (14,338 )     (46,328 )
Investments in marketable securities                   (28,349 )     —
Maturity and redemption of investments                 5,930         —
Return of restricted cash                              71,245        21,321
Partnership escrow deposit                             (4,470  )     —
Other                                                 773         530     
Net cash provided by (used in) investing              30,791      (24,477 )
Net increase in cash and cash equivalents              83,800        55,674
Cash and cash equivalents at beginning of period      404,240     340,101 
Cash and cash equivalents at end of period           $ 488,040    $ 395,775 
Supplemental cash flow disclosures
Interest paid                                        $ 653         $ 744
Non-cash interest capitalized                        $ 14,520      $ 4,939
Income taxes paid                                    $ 12,638      $ 95



(in millions, except per share data)

Adjusted EBITDA
                                    Three Months Ended
                                     March 31,
                                     2012                    2011
Net income                           $    26.6               $     26.8   
Interest income                           (0.4    )                 (0.1   )
Interest expense                          5.9                       12.2
Income tax expense (benefit)              15.1                      15.3
Depreciation and depletion                23.4                      25.1
Accretion                                2.6                     3.3    
EBITDA                               $    73.2                $     82.6
Tax agreement expense(1)                  —                         —
Derivative financial                      2.6                       —
Expired significant broker               —                       —      
Adjusted EBITDA                      $    75.7               $     82.6   

(1)Changes to related deferred taxes are included in income tax expense.
(2)Derivative financial instruments including unrealized marked-to-market
amounts and cash settlements realized.

Adjusted EPS
                                     Three Months Ended
                                     March 31,
                                     2012                      2011
Diluted earnings per common          $    0.44                  $   0.44   
Tax agreement expense including
tax impacts of IPO
and Secondary Offering                    —                         —
Derivative financial                      0.03                      —
Expired significant broker               —                        —      
Adjusted EPS                         $    0.47                  $   0.44   
Weighted-average dilutive
shares outstanding (in                    60.8                      60.7

(1)Derivative financial instruments including unrealized marked-to-market
amounts and cash settlements realized.

Tons Sold                                                       
(in thousands)    Q1       Q4       Q3       Q2       Q1       Q4       Year
                  2012     2011     2011     2011     2011     2010     2011
Antelope          8,752    9,948    8,901    9,059    9,166    9,011    37,075
Cordero Rojo      10,007   10,070   9,968    9,225    10,193   9,223    39,456
Spring Creek      3,788    5,161    5,502    4,729    3,714    5,082    19,106
Decker (50%       245      473      432      426      218      369      1,549
Total             22,792   25,652   24,803   23,439   23,291   23,685   97,186


Cloud Peak Energy Inc.
Karla Kimrey, 720-566-2900
Vice President, Investor Relations
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