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Press release from PR Newswire

Peabody Energy Announces Results for the Quarter Ended September 30, 2011

Tuesday, October 25, 2011

Peabody Energy Announces Results for the Quarter Ended September 30, 201108:00 EDT Tuesday, October 25, 2011- Revenues rise 9% to record $2.04 billion - EBITDA totals $504 million with operating profit of $376 million - Diluted EPS is $1.01 with adjusted diluted EPS of $0.87 - Cash flow from operations increases 34% to $575 million - Targeting record year with expected EBITDA of $2.125 - $2.325 billion and adjusted diluted EPS of $3.70 - $4.15 - Completing acquisition of Macarthur CoalST. LOUIS, Oct. 25, 2011 /PRNewswire/ -- Peabody Energy (NYSE: BTU) today reported third quarter 2011 EBITDA of $504.4 million on record quarterly revenues of $2.04 billion.  Income from continuing operations was $283.5 million, with diluted earnings per share from continuing operations of $1.01.  Adjusted diluted earnings per share from continuing operations totaled $0.87, compared with $0.99 in the prior year.  Results reflect $21.9 million in expenses ($0.07 per share after tax) related to the takeover of Macarthur Coal. This includes $12.7 million of interest expense related to bridge financing fees for the transaction."Peabody delivered solid third quarter results and we remain on track for our best year ever," said Peabody Energy Chairman and Chief Executive Officer Gregory H. Boyce.  "The market supply-demand indicators largely remain positive, with Asian and European coal-fueled generation rising, recent Chinese coal imports setting new records, and U.S. coal inventories falling dramatically. Peabody is well positioned in the United States with strong committed sales and low-cost production.  Globally, we are growing to serve increasing Asia-Pacific demand by expanding existing mines and completing the acquisition of Macarthur Coal." RESULTS FROM CONTINUING OPERATIONSThird quarter revenues rose 9 percent over the prior year to $2.04 billion, driven by higher realized pricing in all regions and increased U.S. volumes.  Total sales were 63.6 million tons compared with 64.0 million tons in the prior year. EBITDA totaled $504.4 million, compared to $571.3 million in the prior year. Contributions from U.S. Mining Operations rose 10 percent over the prior year to $322.7 million on higher volumes and realized pricing. Australia EBITDA was $243.3 million compared with $323.2 million in the prior year, as the benefits of higher metallurgical and thermal coal pricing were offset by approximately $120 million in impacts from a previously announced roof fall and delayed completion of the planned longwall move at the North Goonyella Mine.  These impacts included reduced shipments of high quality hard coking coal and higher costs resulting from lower production and roof fall rehabilitation.  The North Goonyella longwall is now in startup mode following completion of the longwall relocation. Trading and Brokerage contributed $57.4 million in EBITDA, a 30 percent increase over the prior year.  Operating profit for the quarter was $375.7 million. Operating cash flow of $574.9 million increased 34 percent over the prior year led by higher revenues.  Income from continuing operations totaled $283.5 million with adjusted income from continuing operations of $244.8 million.  Diluted earnings per share from continuing operations was $1.01 while adjusted diluted earnings per share totaled $0.87.Summary of Adjusted Income and Diluted Earnings Per Share Quarter Ended (Unaudited) Nine Months Ended (Unaudited) (Dollars in Millions, Except Per Share Data) Sept. Sept. Sept. Sept. 2011201020112010Income from Continuing Operations$ 283.5$ 237.6$ 756.1$ 589.4Remeasurement Expense (Benefit) Related to    Foreign Income Tax Accounts(38.7)42.7(16.9)28.8Adjusted Income from Continuing Operations (1)$ 244.8$ 280.3$ 739.2$ 618.2Diluted EPS$   1.01$   0.83$   2.72$   2.09Remeasurement Expense (Benefit) Related to    Foreign Income Tax Accounts(0.14)0.16(0.06)0.11Adjusted Diluted EPS (1)$   0.87$   0.99$   2.66$   2.20(1)  Represents non-GAAP financial measures defined at the end of this release and illustrated in the reconciliation of EBITDA tables after this release.GLOBAL COAL MARKETS AND PEABODY'S POSITIONCoal-fueled electricity generation continues to rise in Asia and Europe, driven by growing power demand in emerging nations and increased coal usage to backfill the reduction of nuclear power in Japan and Germany.  Global steel production has risen 9 percent year to date, driving a proportionate increase in metallurgical coal demand.  Trends remain favorable in the Asia-Pacific markets.  Chinese power generation has increased 13 percent year to date, while steel production is up 11 percent.  China's third quarter net coal imports were 36 percent higher than the prior year, led by a record 18 million tons of net imports in September.  In India, thermal coal imports have increased more than 40 percent year to date.  In South Korea, coal imports have risen 9 percent year to date and are at record levels.  European coal-fueled generation rose 5 percent in the third quarter due to sustained high gas prices and reduced nuclear power.  Looking forward, Peabody expects continued economic strength in emerging Asia to offset slow growth in developed economies. Seaborne coal supplies are likely to remain challenged due to geological issues, labor actions and tightened regulations. Longer term, infrastructure buildouts related to new five-year plans in China and India are expected to add more than a trillion dollars of investment in the power and rail sectors alone through 2015, continuing to fuel the acceleration of coal demand in Asia.Australian thermal and metallurgical coal prices continue to reflect market fundamentals, evidenced by the recent settlements for Oct. 1 commencement.  Australia seaborne thermal coal contracts settled at $126.50 per tonne, within 2 percent of the year's high.  Metallurgical coal prices settled at $285 per tonne for quarterly benchmark contracts, up 36 percent over the prior year. Peabody is settling fourth quarter metallurgical coal shipments in line with these recent settlements, with essentially all metallurgical coal production unpriced for 2012.  The company is targeting total 2011 metallurgical coal sales of approximately 8.5 to 9.5 million tons.In Australia, the company has less than 1 million tons of seaborne thermal coal unpriced for the fourth quarter and 75 to 80 percent of seaborne thermal volumes unpriced for 2012.  The company is targeting 2011 Australian thermal exports of 12 to 13 million tons. In the United States, while weak economic performance and manufacturing activity has resulted in lower electricity generation than the prior year, a number of coal trends have been positive. Higher cooling degree days this summer, greater U.S. coal exports and lower Western shipments as a result of Midwest flooding have led to the largest year-to-date inventory reduction since 1993.  Powder River Basin inventories at electricity generators are at an estimated 49 days of use or 17 percent below prior-year levels. New U.S. regulations on electric generating plants call for reduced sulfur dioxide (SO2) emissions.  These regulations are expected to further drive the shift toward low sulfur Powder River Basin (PRB) coal, and will be largely neutral for Illinois Basin products that primarily supply generators with scrubbers already installed to reduce SO2 emissions.  The price premium related to ultra-low sulfur coal is expected to be enhanced under these rules.  Peabody's North Antelope Rochelle Mine, which produces more than half of Peabody's U.S. sales volumes and nearly 10 percent of U.S. production, contains approximately 40 percent less sulfur than the benchmark PRB product.  Reflecting these U.S. trends, forward Illinois Basin and Powder River Basin prices have risen since the beginning of the year even as Central Appalachian prices have declined.  Peabody is sold out for 2011 U.S. coal sales.  The company has 10 to 15 percent of its expected U.S. coal production unpriced for 2012, and 50 to 60 percent unpriced for 2013.MACARTHUR ACQUISITIONPEAMCoal has now achieved majority control of Macarthur Coal, the world's largest seaborne low-vol PCI supplier.  With a relevant interest of more than 60 percent as of Oct. 24, the offer has been declared unconditional.  The offer price for all shareholders will increase from A$16.00 to A$16.25 per share if PEAMCoal acquires relevant interests in at least 90 percent of Macarthur shares by 7 p.m. (Brisbane time) on Nov. 11, 2011. ArcelorMittal also has announced its intention to sell its interest to Peabody, in lieu of proceeding with the joint venture.  As a result, Peabody will own 100% of PEAMCoal and become the sole acquirer of Macarthur under the takeover offer.  "The Macarthur acquisition expands Peabody's presence in the highest-growth coal markets with a quality metallurgical coal product," said Boyce.  "It provides a large resource base, significant potential synergies and a major growth pipeline.  The investment continues our global market focus and increases the financial contribution from international assets.  We will now target internal growth through an unmatched pipeline of organic development opportunities."According to Boyce, ?While we anticipated a positive joint venture with ArcelorMittal, we have always preferred a larger ownership.  We partnered with ArcelorMittal to increase the likelihood of achieving control of Macarthur, which has now occurred.  ArcelorMittal's decision accelerates our ability to realize synergies, integrate the operations and benefit from results."  To finance the Macarthur acquisition, Peabody is obtaining a new senior unsecured term loan of up to $1 billion, and intends to fund its requirements related to the acquisition with cash and debt.  Peabody believes it has good access to the bank and debt markets.  ArcelorMittal must continue to fund its share of PEAMCoal obligations for up to 90 days, which will cover all takeover acceptances.PEAMCoal intends to appoint representatives to the Macarthur Board on Wednesday, Oct. 26. PROJECT UPDATEPeabody continues to invest organically to satisfy the rising demand in emerging markets.  Peabody's major Australian mine expansion program continues to advance, with three of the six projects expected to add volumes by the end of this year. In the fourth quarter, the company expects to complete the expansion of the Wilpinjong Mine where operations at the upgraded preparation plant have begun.  Peabody also expects to receive final permitting to increase production at the Millennium Mine, and start operations in the expanded Wambo open cut.  Peabody continues to target 35 to 40 million tons of Australian capacity by 2014 to 2015, including 12 to 15 million tons of metallurgical coal capacity and 15 to 17 million tons of export thermal coal capacity. These targets currently exclude the additional volumes Peabody expects to achieve through Macarthur's extensive growth pipeline. In Mongolia, Peabody has entered into a memorandum of understanding with Winsway Coking Coal Holdings Limited to market coal in China and the Asia-Pacific region.  The company is advancing discussions with the Xinjiang Province in China regarding reserve allocations to develop a 50 million ton-per-year surface mine, with startup planned for the 2014 to 2015 timeframe. Peabody opened an office in Essen, Germany, further expanding its coal trading platform in the European coal markets.  The company continues to target full-year capital expenditures of $900 to $950 million.OUTLOOKPeabody continues to target 2011 EBITDA of $2.125 to $2.325 billion and adjusted diluted earnings per share of $3.70 to $4.15.  The fourth quarter is expected to benefit from higher volumes in the Unites States and Australia, partly offset by effects related to the resumption of production and recovery of shipments at the North Goonyella Mine as well as any industrywide impacts due to weather and transportation challenges. Peabody targets total 2011 sales of 245 to 255 million tons including 27 to 29 million tons from Australia, 200 to 205 million tons from the United States and the remainder from Trading and Brokerage activities.  Targets do not incorporate potential results attributable to Macarthur or additional transaction-related expenses incurred in the fourth quarter. Peabody Energy is the world's largest private-sector coal company and a global leader in clean coal solutions.  Its coal products fuel approximately 10 percent of U.S. power 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 October 25, 2011. 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: demand for coal in the United States and the seaborne thermal and metallurgical coal markets; price volatility and demand, particularly in higher-margin products and in our trading and brokerage businesses; impact of weather on demand, production and transportation; reductions and/or deferrals of purchases by major customers and ability to renew sales contracts; credit and performance risks associated with customers, suppliers, co-shippers, trading, banks and other financial counterparties; geologic, equipment, permitting and operational risks related to mining; transportation availability, performance and costs; availability, timing of delivery and costs of key supplies, capital equipment or commodities such as diesel fuel, steel, explosives and tires; successful implementation of business strategies, including our Btu Conversion and generation development initiatives; negotiation of labor contracts, employee relations and workforce availability; changes in postretirement benefit and pension obligations and funding requirements; replacement and development of coal reserves; access to capital and credit markets and availability and costs of credit, margin capacity, surety bonds, letters of credit, and insurance; effects of changes in interest rates and currency exchange rates (primarily the Australian dollar); effects of acquisitions or divestitures, including the takeover of Macarthur Coal; economic strength and political stability of countries in which we have operations or serve customers; legislation, regulations and court decisions or other government actions, including new environmental and mine safety requirements, changes in income tax regulations or other regulatory taxes; litigation, including claims not yet asserted; and other risks detailed in the company's reports filed with the Securities and Exchange Commission (SEC).Included in our release of financial information accounted for in accordance with generally accepted accounting principles (GAAP) are certain non-GAAP financial measures, as defined by SEC regulations.  We have defined below the non-GAAP financial measures that we use and have included in the following tables of this release reconciliations of these measures to the most directly comparable GAAP measures.  EBITDA (also called Adjusted EBITDA) is defined as income from continuing operations before deducting net interest expense, income taxes, 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 or cash flow as determined in accordance with United States generally accepted accounting principles.  Management uses EBITDA as a key measure of operating performance and also believes it is a useful indicator of the company's ability to meet debt service and capital expenditure requirements.Adjusted Income from Continuing Operations and Adjusted EPS are defined as income from continuing operations and diluted earnings per share excluding the impact of the remeasurement of foreign income tax accounts.  Management has included these measures because, in management's opinion, excluding such impact is a better indicator of the company's ongoing effective tax rate and diluted earnings per share, and is therefore more useful in comparing the company's results with prior and future periods.CONTACT:Vic Svec(314) 342-7768Condensed Consolidated Statements of Operations (Unaudited)For the Quarters Ended Sept. 30, 2011 and 2010 and Nine Months Ended Sept. 30, 2011 and 2010(Dollars in Millions, Except Per Share Data)Quarter EndedNine Months EndedSept.Sept.Sept.Sept.2011201020112010Tons Sold (In Millions)63.664.0183.0182.0Revenues$2,035.9$1,864.7$5,788.8$5,041.7Operating Costs and Expenses1,458.81,243.34,119.73,526.7Depreciation, Depletion and Amortization113.7116.7327.8327.3Asset Retirement Obligation Expense15.09.943.930.3Selling and Administrative Expenses71.254.1191.4163.6Other Operating (Income) Loss:Net Gain on Disposal or Exchange of Assets(1.7)(6.7)(31.4)(15.4)Loss (Income) from Equity Affiliates3.22.79.0(2.1)Operating Profit375.7444.71,128.41,011.3Interest Income(4.1)(2.8)(11.7)(5.4)Interest Expense:Interest Expense46.553.8144.9152.4Refinancing Charges?8.41.717.7Bridge Facility12.7?12.7?Interest Expense59.262.2159.3170.1Income from Continuing Operations Before Income Taxes320.6385.3980.8846.6Income Tax Provision:   Provision75.8105.0241.6228.4   Remeasurement Expense (Benefit) Related to Foreign    Income Tax Accounts(38.7)42.7(16.9)28.8     Income Tax Provision37.1147.7224.7257.2Income from Continuing Operations, Net of Income Taxes283.5237.6756.1589.4Loss from Discontinued Operations, Net of Income Taxes(2.0)(1.3)(3.7)(2.2)Net Income281.5236.3752.4587.2Less: Net Income Attributable to Noncontrolling Interests7.412.217.023.2Net Income Attributable to Common Stockholders$274.1$224.1$735.4$564.0Diluted EPS (1):Income (Loss) Attributable to Common Stockholders:Continuing Operations (2)$1.01$0.83$2.72$2.09Discontinued Operations(0.01)?(0.01)(0.01)Net Income Attributable to Common Stockholders$1.00$0.83$2.71$2.08EBITDA$504.4$571.3$1,500.1$1,368.9Adjusted Diluted EPS (1):Adjusted Income from Continuing Operations:Continuing Operations (2)$1.01$0.83$2.72$2.09Remeasurement Expense (Benefit) Related to Foreign  Income Tax Accounts(0.14)0.16(0.06)0.11Adjusted Income from Continuing Operations$0.87$0.99$2.66$2.20(1)Weighted average diluted shares outstanding were 270.6 million and 268.6 million for the quarters ended Sept. 30, 2011 and 2010, respectively, and 270.5 million and 268.4 million for the nine months ended Sept. 30, 2011 and 2010, respectively.  We compute EPS using a two-class method using an earnings allocation method that determines EPS separately for common stock and participating securities. As a result, it may not be possible to recalculate EPS as presented in our condensed consolidated statements of operations.  For the quarter and nine months ended Sept. 30, 2011 and 2010, there was no dilutive impact of our Convertible Junior Subordinated Debentures on diluted EPS.(2)Reflects income from continuing operations, net of income taxes less net income attributable to noncontrolling interests.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 Sept. 30, 2011 and 2010 and Nine Months Ended Sept. 30, 2011 and 2010Quarter EndedNine Months EndedSept.Sept.Sept.Sept.2011201020112010Revenue Summary (Dollars in Millions)U.S. Mining Operations$1,143.6$1,024.5$3,204.5$2,971.4Australian Mining Operations757.4733.42,223.31,777.3Trading and Brokerage Operations131.5101.8329.5273.7Other3.45.031.519.3  Total$2,035.9$1,864.7$5,788.8$5,041.7Tons Sold (In Millions)Midwestern U.S. Mining Operations7.87.222.321.6Western U.S. Mining Operations43.741.9127.2121.7Australian Mining Operations6.67.419.120.0Trading and Brokerage Operations5.57.514.418.7  Total (1)63.664.0183.0182.0Revenues per Ton - Mining OperationsMidwestern U.S.$49.06$43.95$48.43$43.91Western U.S.17.3816.8716.7116.62  Total - U.S.22.2120.8521.4520.74Australia115.13100.14116.2688.99Operating Costs per Ton - Mining Operations (2)Midwestern U.S.$35.81$33.24$35.16$33.61Western U.S.12.3711.7312.5211.43  Total - U.S.15.9414.8915.9114.78Australia78.1656.0173.8755.44Gross Margin per Ton - Mining Operations (2)Midwestern U.S.$13.25$10.71$13.27$10.30Western U.S.  Total - U.S.6.275.965.545.96Australia36.9744.1342.3933.55Operating Profit per Ton$5.91$6.95$6.17$5.56Quarter EndedNine Months EndedSept.     Sept.     Sept.     Sept.     (Dollars in Millions)2011    2010    2011    2010    EBITDA - U.S. Mining Operations$322.7$292.9$828.1$853.6EBITDA - Australian Mining Operations243.3323.2810.7670.1EBITDA - Trading and Brokerage Operations57.444.3134.691.0EBITDA - Resource Management (3) and Administrative Expenses(71.2)(54.1)(191.4)(163.6)Other Operating Costs, Net (4)(48.0)(40.0)(107.8)(91.5)EBITDA504.4571.31,500.11,368.9Depreciation, Depletion and Amortization(113.7)(116.7)(327.8)(327.3)Asset Retirement Obligation Expense(15.0)(9.9)(43.9)(30.3)Operating Profit375.7444.71,128.41,011.3Operating Cash Flows574.9427.81,190.5892.2Coal Reserve Lease Expenditures42.4?42.4?Capital Expenditures (Excludes Acquisitions)269.7125.8646.0343.8(1)Metallurgical coal sales totaled 1.6 million and 2.4 million tons for the quarters ended Sept. 30, 2011 and 2010, respectively, and 6.0 million and 6.9 million tons for the nine months ended Sept. 30, 2011 and 2010, respectively.(2)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.(3)Includes certain asset sales, property management costs and revenues, and coal royalty expense.(4)Includes Generation Development and Btu Conversion development costs, costs associated with post-mining activities, (income) losses from equity interests and provisions for litigation.This information is intended to be reviewed in conjunction with the company's filings with the Securities and Exchange Commission.Condensed Consolidated Balance SheetsSept. 30, 2011 and Dec. 31, 2010(Dollars in Millions)(Unaudited)Sept. 30, 2011Dec. 31, 2010Cash and Cash Equivalents$1,401.6$1,295.2Receivables, Net591.4558.2Inventories351.9332.9Assets from Coal Trading Activities, Net66.0192.5Deferred Income Taxes90.9120.4Other Current Assets503.2459.0  Total Current Assets3,005.02,958.2Net Property, Plant, Equipment and Mine Development7,808.17,426.1Investments and Other Assets878.5978.8    Total Assets$11,691.6$11,363.1Current Maturities of Debt$43.8$43.2Liabilities from Coal Trading Activities, Net62.6181.7Accounts Payable and Accruals1,334.91,288.8  Total Current Liabilities1,441.31,513.7Long-Term Debt2,458.62,706.8Deferred Income Taxes499.6539.8Other Long-Term Liabilities1,969.61,913.5  Total Liabilities6,369.16,673.8Stockholders' Equity5,322.54,689.3    Total Liabilities and Stockholders' Equity$11,691.6$11,363.1This 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, Net of Income Taxes (Unaudited)For the Quarters Ended Sept. 30, 2011 and 2010 and the Nine Months Ended Sept. 30, 2011 and 2010(Dollars in Millions)Quarter EndedNine Months EndedSept.Sept.Sept.Sept.2011201020112010EBITDA$504.4$571.3$1,500.1$1,368.9Depreciation, Depletion and Amortization113.7116.7327.8327.3Asset Retirement Obligation Expense15.09.943.930.3Interest Income(4.1)(2.8)(11.7)(5.4)Interest Expense59.262.2159.3170.1Income Tax Provision Before Remeasurement of Foreign Income  Tax Accounts75.8105.0241.6228.4Adjusted Income from Continuing Operations (1)244.8280.3739.2618.2Remeasurement Expense (Benefit) Related to Foreign Income Tax Accounts(38.7)42.7(16.9)28.8Income from Continuing Operations, Net of Income Taxes$283.5$237.6$756.1$589.4Net Income Attributable to Noncontrolling Interests$7.4$12.2$17.0$23.2Reconciliation of EBITDA to Income from Continuing Operations, Net of Income Taxes - 2011 Targets (Unaudited)(Dollars in Millions)Year Ending Dec. 31, 2011Targeted ResultsLowHighEBITDA$2,125$2,325Depreciation, Depletion and Amortization465475Asset Retirement Obligation Expense5450Interest Income(12)(14)Interest Expense200198Bridge Facility1717Income Tax Provision Before Remeasurement of Foreign Income  Tax Accounts360430Adjusted Income from Continuing Operations (1)1,0411,169Remeasurement Benefit Related to Foreign Income Tax Accounts(17)(17)Income from Continuing Operations, Net of Income Taxes$1,058$1,186Net Income Attributable to Noncontrolling Interests$30$34Adjusted Diluted EPS:Adjusted Income from Continuing Operations:Continuing Operations (2)$3.76$4.21Remeasurement Benefit Related to Foreign Income Tax Accounts(0.06)(0.06)Adjusted Income from Continuing Operations$3.70$4.15(1)In order to arrive at the numerator used to calculate adjusted diluted EPS, it is necessary to deduct net income attributable to noncontrolling interests from this amount.(2)Reflects income from continuing operations, net of income taxes less net income attributable to noncontrolling interests.This information is intended to be reviewed in conjunction with the company's filings with the Securities and Exchange Commission.SOURCE Peabody Energy