James River Coal Company Reports Third Quarter 2012 Operating Results

    James River Coal Company Reports Third Quarter 2012 Operating Results  -- Maintaining a Strong Balance Sheet with Available Liquidity of $172 Million  -- Through October 12, 2012, Repurchased $61.4 Million Principal Amount of Debt for $23.9 Million (Average of $0.39 on the Dollar)  -- Conference Call Slides Posted to Company Website  PR Newswire  RICHMOND, Va., Nov. 7, 2012  RICHMOND, Va., Nov. 7, 2012 /PRNewswire/ --James River Coal Company (NASDAQ: JRCC),today announced that it had net loss of $20.6 million or $0.59 per diluted share for the third quarter of 2012 and net loss of $62.0 million or $1.78 per diluted share for the nine months ended September 30, 2012.Included in the third quarter results is a gain of $22.2 million from the repurchase of outstanding notes in open market purchases. The 2012 results are compared to net loss of $3.7 million or $.11 per diluted share for the third quarter of 2011 and net loss of $10.5 million or $0.33 per diluted share for the nine months ended September 30, 2011.  Peter T. Socha, Chairman and Chief Executive Officer commented: "We are very pleased to have the uncertainty of the U.S. presidential election behind us. We believe that this issue caused a temporary slowdown in economic growth both in the United States and globally. The slowdown in growth, combined with warm weather last winter, has contributed to an unusually weak market for thermal and metallurgical coal. Hopefully, this condition will be corrected shortly.  "Despite the soft coal markets, we continue to be pleased with the performance of our mine operations team. They made a series of adjustments to their operating plans in response to the current markets. In the financial area, we decided to take the opportunity to reduce our debt at very advantageous market prices due to external events. We believe that we were able to successfully balance our desire for a strong and liquid balance sheet with a window of opportunity that was available to us."  FINANCIAL RESULTS  The following tables show selected operating results for the quarter and nine months ended September 30, 2012 compared to the quarter and nine months ended September 30, 2011 (in 000's except per ton amounts).  Total Results    Three Months Ended September      Nine Months Ended September                  30,                              30,                  2012              2011            2012            2011                  Total     Per     Total    Per    Total    Per    Total    Per                            Ton              Ton             Ton             Ton Company and contractor       2,229             2,816           7,571           7,578 production (tons) Coal purchased from other       631               284             1,428           896 sources (tons) Total coal available to     2,860             3,100           8,999           8,474 ship (tons) Coal shipments   3,164             3,163           9,125           8,497 (tons) Coal sales       $        83.64   $       92.18  $      88.11  $       92.22 revenue          264,633           291,575         804,024         783,612 Freight and handling         23,469    7.42    12,283   3.88   63,421   6.95   36,865   4.34 revenue Cost of coal     244,365   77.23   245,240  77.53  705,568  77.32  642,167  75.58 sold Freight and      23,469    7.42    12,283   3.88   63,421   6.95   36,865   4.34 handling costs Depreciation, depletion, &     35,518    11.23   31,234   9.87   98,152   10.76  75,479   8.88 amortization Gross profit     (15,250)  (4.82)  15,101   4.77   304      0.03   65,966   7.76 (loss) Selling, general &        14,672    4.64    16,344   5.17   45,504   4.99   40,525   4.77 administrative Acquisition      -                 -               -               8,504 costs Adjusted EBITDA  $              $             $            $  plus acquisition 7,556     2.39    32,265   10.20  59,638   6.54   110,416  12.99 costs (1) (1)        Adjusted EBITDA plus acquisition costs is defined under            "Reconciliation of Non-GAAP Measures" in this release.            Adjusted EBITDA is used to determine compliance with            financial covenants in our revolving credit facility.                    Three Months Ended September 30,   Nine Months Ended September 30, Segment Results                2012              2011              2012              2011     CAPP       Total     Per     Total     Per     Total     Per     Total     Per                          Ton               Ton               Ton               Ton Company and contractor     1,607             2,225             5,784             5,703 production (tons) Coal purchased from other     631               284               1,428             896 sources (tons) Total coal available to   2,238             2,509             7,212             6,599 ship (tons) Coal shipments (tons)  Steam     1,540             1,983             4,716             5,257 (tons)  Metallurgical  1,007             582               2,632             1,343 (tons) Total Shipments      2,547             2,565             7,348             6,600 (tons) Coal sales revenue  Steam     $        79.30   $        87.91   $        82.95   $        90.88                122,116          174,325          391,211          477,742            115,104   114.30  90,434    155.38  333,859   126.85  225,078   167.59 Metallurgical Total coal     237,220   93.14   264,759   103.22  725,070   98.68   702,820   106.49 sales revenue Freight and handling       23,105    9.07    11,757    4.58    61,575    8.38    35,073    5.31 revenue Cost of coal   $        87.15   $        86.35   $        86.86   $        86.51 sold           221,961          221,482          638,266          570,975 Freight and handling       23,105    9.07    11,757    4.58    61,575    8.38    35,073    5.31 costs                Three Months Ended September 30,   Nine Months Ended September 30,                2012              2011              2012              2011     Midwest    Total     Per     Total     Per     Total     Per     Total     Per                          Ton               Ton               Ton               Ton Company and contractor     622               591               1,787             1,875 production (tons) Coal purchased from other     -                 -                 -                 - sources (tons) Total coal available to   622               591               1,787             1,875 ship (tons) Coal shipments      617               598               1,777             1,897 (tons) Coal sales     $       44.43   $       44.84   $       44.43   $       42.59 revenue        27,413           26,816           78,954           80,792 Freight and handling       364       0.59    526       0.88    1,846     1.04    1,792     0.94 revenue Cost of coal   $       36.31   $       39.73   $       37.87   $       37.53 sold           22,404           23,758           67,302           71,192 Freight and handling       364       0.59    526       0.88    1,846     1.04    1,792     0.94 costs  LIQUIDITY AND CASH FLOW  As of September 30, 2012, the Company had available liquidity of $171.7 million calculated as follows (in millions):   Unrestricted Cash                           $ 151.4  Availability under the Revolver               81.2  Letters of Credit Issued under the Revolver   (60.9)  Available Liquidity                         $ 171.7  Restricted Cash                             $ 29.6  Capital expenditures for the third quarter were $20.6 million and $66.5 million for the nine months ended September 30, 2012.  During the third quarter of 2012, the Company repurchased $53.7 million of its outstanding debt, consisting of $5.0 million principal amount of the 2019 Senior Notes, $19.9 million principal amount of the 2018 Convertible Senior Notes and $28.8 million principal amount of the 2015 Convertible Senior Notes. The debt repurchases were made at a cost of $20.9 million, plus accrued interest of $0.8 million, in open market purchases. The repurchases resulted in a gain of $22.2 million, which includes the write-off of $0.9 million of financing costs. Additionally, in October 2012, the Company repurchased an additional $7.7 million its outstanding debt at a cost of $2.9 million, in open market purchases, consisting of $5.2 million principal amount of the 2018 Convertible Senior Notes and $2.5 million principal amount of the 2015 Convertible Senior Notes.  SALES POSITION  As of November 6, 2012, we had the following agreements to ship coal at a fixed and known price (in 000's except per ton amounts):                 2013 Priced                As of August 8, 2012   As of November 6,   Change                                       2012                          Avg Price            Avg Price          Avg Price                Tons      Per Ton      Tons    Per         Tons   Per                                               Ton                Ton  CAPP (1)      1,337     $         3,405   $      2,068  $                               79.32                 74.04            70.63  Midwest (2)   2,140     $         2,342   $      202    $                               45.35                 45.25            44.19                2014 Priced                As of August 8, 2012   As of November 6,   Change                                       2012                          Avg Price            Avg Price          Avg Price                Tons      Per Ton      Tons    Per         Tons   Per                                               Ton                Ton  CAPP (1)      300       $         300     $      -      $                               75.75                 75.75                -  Midwest       700       $         900     $      200    $       (2)(3)                  49.00                 47.64            42.88  (1) Priced tons in CAPP in 2013 do not include approximately 1,100,000  tons of met coal that have been sold but not yet priced.  (2) The prices for the Midwest are minimum base price amounts adjusted  for projected fuel escalators.  (3) 200,000 tons of 2012 coal moved to 2014.  CONFERENCE CALL, WEBCAST AND REPLAY: The Company will hold a conference call with management to discuss the quarterly earnings November 7, 2012 at 11:00 a.m. Eastern Time. The conference call can be accessed by dialing 877-340-2553, or through the James River Coal Company website at http://www.jamesrivercoal.com/. International callers, please dial 678-224-7860. A replay of the conference call will be available on the Company's website.  James River Coal Company is one of the leading coal producers in Central Appalachia and the Illinois Basin. The company sells metallurgical, bituminous steam and industrial-grade coal to electric utility companies and industrial customers both domestically and internationally. The Company's operations are managed through eight operating subsidiaries located throughout eastern Kentucky, southern West Virginia and southern Indiana. Additional information about James River Coal can be found at its web site www.jamesrivercoal.com  FORWARD-LOOKING STATEMENTS: Certain statements in this press release and other written or oral statements made by or on behalf of us are "forward-looking statements" within the meaning of the federal securities laws. Statements regarding future events and developments and our future performance, as well as management's expectations, beliefs, plans, estimates or projections relating to the future, are forward-looking statements within the meaning of these laws. Forward looking statements include, without limitation, statements regarding future sales and contracting activity, and projected fuel escalators. These forward-looking statements are subject to a number of risks and uncertainties. These risks and uncertainties include, but are not limited to, the following: our cash flows, results of operation or financial condition; the consummation of acquisition, disposition or financing transactions and the effect thereof on our business; our ability to successfully integrate International Resource Partners LP and its related entities (IRP); governmental policies, regulatory actions and court decisions affecting the coal industry or our customers' coal usage; legal and administrative proceedings, settlements, investigations and claims; our ability to obtain and renew permits necessary for our existing and planned operation in a timely manner; environmental concerns related to coal mining and combustion and the cost and perceived benefits of alternative sources of energy; inherent risks of coal mining beyond our control, including weather and geologic conditions or catastrophic weather-related damage; our production capabilities; availability of transportation; our ability to timely obtain necessary supplies and equipment; market demand for coal, electricity and steel; competition; our relationships with, and other conditions affecting, our customers; employee workforce factors; our assumptions concerning economically recoverable coal reserve estimates; future economic or capital market conditions; our plans and objectives for future operations and expansion or consolidation; and the other risks detailed in our reports filed with the Securities and Exchange Commission (SEC). Management believes that these forward-looking statements are reasonable; however, you should not place undue reliance on such statements. These statements are based on current expectations and speak only as of the date of such statements. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of future events, new information or otherwise.    JAMES RIVER COAL COMPANY AND SUBSIDIARIES Consolidated Balance Sheets (in thousands, except share data)                                                       September 30,  December                                                       2012           31, 2011                                Assets                 (unaudited) Current assets:       Cash and cash equivalents                     $ 151,435        199,711       Trade receivables                               95,318         107,557       Inventories:                Coal                                   37,268         52,717                Materials and supplies                 17,754         17,800                             Total inventories         55,022         70,517       Prepaid royalties                               8,371          8,465       Other current assets                            12,315         11,461                             Total current assets      322,461        397,711 Property, plant, and equipment, net                   877,203        909,294 Goodwill                                              26,492         26,492 Restricted cash and short term investments           29,624         29,510 Other assets                                          33,442         41,575                             Total assets            $ 1,289,222      1,404,582                             Liabilities and                             Shareholders' Equity Current liabilities:       Accounts payable                              $ 75,755         110,557       Accrued salaries, wages, and employee           15,304         12,996       benefits       Workers' compensation benefits                  9,200          9,200       Black lung benefits                             2,512          2,512       Accrued taxes                                   6,594          7,563       Other current liabilities                       27,055         27,861                             Total current             136,420        170,689                             liabilities Long-term debt, less current maturities              549,070        582,193 Other liabilities:       Noncurrent portion of workers' compensation     64,110         60,721       benefits       Noncurrent portion of black lung benefits       58,590         56,152       Pension obligations                             26,461         29,121       Asset retirement obligations                    100,105        94,654       Other                                           12,592         14,390                             Total other liabilities   261,858        255,038                             Total liabilities         947,348        1,007,920 Commitments and contingencies Shareholders' equity:       Preferred stock, $1.00 par value. Authorized   -              -       10,000,000 shares       Common stock, $.01 par value. Authorized       100,000,000 shares; issued and outstanding                35,887,611 and 35,671,953 shares as of                September 30, 2012 and December 31,    359            357                2011       Paid-in-capital                                 544,881        541,362       Accumulated deficit                             (159,656)      (97,682)       Accumulated other comprehensive loss            (43,710)       (47,375)                             Total shareholders'       341,874        396,662                             equity                                Total liabilities                                and shareholders'    $ 1,289,222      1,404,582                                equity    JAMES RIVER COAL COMPANY AND SUBSIDIARIES Consolidated Statements of Operations (in thousands, except per share data) (unaudited)                                         Three Months Ended  Nine Months Ended                                         September 30,       September 30,                                         2012      2011      2012      2011 Revenues       Coal sales revenue              $ 264,633   291,575   804,024   783,612       Freight and handling revenue      23,469    12,283    63,421    36,865               Total revenue             288,102   303,858   867,445   820,477 Cost of sales:       Cost of coal sold                 244,365   245,240   705,568   642,167       Freight and handling costs        23,469    12,283    63,421    36,865       Depreciation, depletion, and      35,518    31,234    98,152    75,479       amortization               Total cost of sales       303,352   288,757   867,141   754,511               Gross profit (loss)      (15,250)  15,101    304       65,966 Selling, general and administrative     14,672    16,344    45,504    40,525 expenses Acquisition costs                       -         -         -         8,504               Total operating income    (29,922)  (1,243)   (45,200)  16,937               (loss) Interest expense                        13,200    13,215    40,112    36,673 Interest income                         (217)     (173)     (602)     (356) (Gain) loss on debt transactions       (22,231)  -         (22,231)  740 Miscellaneous income, net               (147)     (271)     (580)     (573)               Total other (income)      (9,395)   12,771    16,699    36,484               expense, net               Net loss before income    (20,527)  (14,014)  (61,899)  (19,547)               taxes Income tax expense (benefit)            25        (10,282)  75        (9,000) Net loss                              $ (20,552)  (3,732)   (61,974)  (10,547) Earnings (loss) per common share       Basic earnings (loss) per       $ (0.59)    (0.11)    (1.78)    (0.33)       common share       Diluted earnings (loss) per     $ (0.59)    (0.11)    (1.78)    (0.33)       common share    JAMES RIVER COAL COMPANY AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited)                                                           Nine Months Ended                                                           September 30,                                                           2012      2011 Cash flows from operating activities:  Net loss                                               $ (61,974)  (10,547)  Adjustments to reconcile net loss to net cash provided  by operating activities           Depreciation, depletion, and amortization      98,152    75,479           Accretion of asset retirement obligations       3,948     3,215           Amortization of debt discount and issue costs   12,914    10,479           Stock-based compensation                        3,808     3,948           Deferred income tax benefit                     -         (10,026)           Gain on sale or disposal of property, plant     (121)     -           and equipment           (Gain) loss on debt transactions                (22,231)  740           Changes in operating assets and liabilities:                 Receivables                               12,239    93,449                 Inventories                               16,084    (1,294)                 Prepaid royalties and other current       (760)     3,972                 assets                 Restricted cash                           (114)     (6,010)                 Other assets                              5,202     (2,808)                 Accounts payable                          (34,802)  (44,431)                 Accrued salaries, wages, and employee     2,308     3,851                 benefits                 Accrued taxes                             (1,256)   (525)                 Other current liabilities                 (1,014)   9,594                 Workers' compensation benefits            3,389     2,960                 Black lung benefits                       3,596     2,640                 Pension obligations                       (153)     (1,335)                 Asset retirement obligations              (495)     (3,807)                 Other liabilities                         (224)     (149)                          Net cash provided by operating   38,496    129,395                          activities Cash flows from investing activities:  Additions to property, plant, and equipment              (66,466)  (95,118)  Payment for acquisition, net of cash acquired            -         (515,962)  Proceeds from sale of property, plant and equipment      610       -                          Net cash used in investing       (65,856)  (611,080)                          activities Cash flows from financing activities:  Proceeds from issuance of long-term debt                 -         505,000  Repayment of long-term debt                              (20,916)  (150,000)  Net proceeds from issuance of common stock               -         170,545  Debt issuance costs                                      -         (15,668)                          Net cash (used in) provided by   (20,916)  509,877                          financing activities                          Increase (decrease) in cash      (48,276)  28,192 Cash and cash equivalents at beginning of period          199,711   180,376 Cash and cash equivalents at end of period              $ 151,435   208,568    JAMES RIVER COAL COMPANY AND SUBSIDIARIES Reconciliation of Non GAAP Measures (in thousands) (unaudited)  EBITDA is used by management to measure operating performance. We define EBITDA as net income or loss plus interest expense (net), income tax expense (benefit) and depreciation, depletion and amortization (EBITDA), to better measure our operating performance. We regularly use EBITDA to evaluate our performance as compared to other companies in our industry that have different financing and capital structures and/or tax rates. In addition, we use EBITDA in evaluating acquisition targets.  Adjusted EBITDA is defined as EBITDA as further adjusted for certain cash and non-cash charges as specified in our revolving credit facility and is used in several of the covenants in that facility. Adjusted EBITDA plus acquisition costs further adjusts Adjusted EBITDA to add back certain non-recurring costs incurred in connection with the IRP acquisition that may not reflect the trend of future results. We believe that Adjusted EBITDA plus acquisition cost presents a useful measure of our ability to service and incur debt on an ongoing basis.  EBITDA, Adjusted EBITDA, Adjusted EBITDA plus acquisition costs are not recognized terms under GAAP and are not an alternative to net income, operating income or any other performance measures derived in accordance with GAAP or an alternative to cash flow from operating activities as a measure of operating liquidity. Because not all companies use identical calculations, this presentation of EBITDA, Adjusted EBITDA, Adjusted EBITDA plus acquisition costs may not be comparable to other similarly titled measures of other companies. Additionally, EBITDA, Adjusted EBITDA, Adjusted EBITDA plus acquisition costs are not intended to be a measure of free cash flow for management's discretionary use, as they do not reflect certain cash requirements such as tax payments, interest payments and other contractual obligations.                             Three Months Ended        Nine Months Ended                            September    September    September    September                            30           30           30           30                            2012         2011         2012         2011 Net income (loss)        $ (20,552)     (3,732)      (61,974)     (10,547) Income tax expense        25           (10,282)     75           (9,000) Interest expense          13,200       13,215       40,112       36,673 Interest income            (217)        (173)        (602)        (356) Depreciation, depletion,   35,518       31,234       98,152       75,479 and amortization EBITDA (before           $ 27,974       30,262       75,763       92,249 adjustments) Other adjustments specified  in our current debt agreement  Direct acquisition    -            -            -            8,504 costs       (Gain) loss on       (22,231)     -            (22,231)     740       debt transactions  Other                1,813        2,003        6,106        6,174 Adjusted EBITDA          $ 7,556        32,265       59,638       107,667 Write-up of IRP            -            -            -            2,749 inventory Adjusted EBITDA plus     $ 7,556        32,265       59,638       110,416 acquisition costs    CONTACT: James River Coal Company          Elizabeth M. Cook          Director of Investor Relations          (804) 780-3000    SOURCE James River Coal Company  Website: http://www.jamesrivercoal.com