James River Coal CO - FORM 8-K - EX-99.1

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8-K - CURRENT REPORT ON FORM 8-K - James River Coal CO	jrcc_8k-022610.htm
EX-99.3 - PRESENTATION - James River Coal CO	jrcc_8k-ex9903.htm
EX-99.2 - James River Coal CO	jrcc_8k-ex9902.htm

Exhibit 99.1

FOR IMMEDIATE RELEASE

CONTACT:

James River Coal Company

Elizabeth M. Cook

Director of Investor Relations

(804) 780-3000

JAMES RIVER COAL COMPANY REPORTS FOURTH QUARTER

AND FULL YEAR 2009 OPERATING RESULTS

2009 Earnings Per Share of $1.85 Compared with ($3.91) in 2008

Net Income of $51.0 Million in 2009 Compared with ($96.0) Million in 2008

Fourth Quarter Results Impacted by Winter Weather and $2.5 Million of Interest and Expenses from New Financing

RICHMOND, VA, February 26, 2010 - James River Coal Company (NASDAQ: JRCC), a producer of steam and industrial-grade coal, today announced that it had net income of $51.0 million or $1.85 per fully diluted share for the year ended December 31, 2009 and a net loss of $3.2 million or $0.12 per fully diluted share for the fourth quarter of 2009. This is compared to a net loss of $96.0 million or $3.91 per fully diluted share for the year ended December 31, 2008 and a net loss of $33.6 million or $1.26 per fully diluted share for the fourth quarter of 2008.

Peter T. Socha, Chairman and Chief Executive Officer, commented: “This was the most profitable year in the history of James River Coal Company. We strengthened every aspect of our company during a severe recession and a very weak coal market. While still early, we are beginning to see signs of strength in both the economy and the coal markets. We will enter this new period with improved operations assets, continued close customer relationships, and a much stronger financial profile. We are very optimistic about our future prospects.”

ANNUAL RESULTS

The following tables show selected operating results for the year ended December 31, 2009 compared to the year ended December 31, 2008 (in 000’s except per ton amounts).

Total Results	Year Ended December 31,
	2009				2008
	Total		Per Ton		Total			Per Ton

Company and contractor production (tons)		9,770				11,112
Coal purchased from other sources (tons)		107				243
Total coal available to ship (tons)		9,877				11,355
Coal shipments (tons)		9,623				11,383
Coal sales revenue	$	681,558		70.83	$	568,507			49.94
Cost of coal sold		508,888		52.88		527,888			46.38
Depreciation, depletion, & amortization		62,078		6.45		70,277			6.17
Gross profit (loss)		110,592		11.49		(29,658	)		(2.61	)
Selling, general & administrative		39,720		4.13		34,992			3.07

Adjusted EBITDA (1)	$	146,099		15.18	$	17,571			1.54

(1)

Adjusted EBITDA is defined under "Reconciliation of Non-GAAP Measures" in this release. Adjusted EBITDA is used to determine compliance with financial covenants in our senior secured credit facilities.

Segment Results	Year Ended December 31,
	2009				2008

	CAPP		Midwest		CAPP		Midwest

Company and Contractor Production (tons)		6,643		3,127		8,006		3,106
Coal purchased from other sources (tons)		107		-		243		-
Total coal available to ship (tons)		6,750		3,127		8,249		3,106
Coal shipments (tons)		6,525		3,098		8,271		3,112
Coal sales revenue	$	579,108		102,450	$	467,609		100,898
Average sales price per ton		88.75		33.07		56.54		32.42
Cost of coal sold	$	416,721		92,167	$	433,781		94,107
Cost of coal sold per ton		63.87		29.75		52.45		30.24

C.K. Lane, Senior Vice President and Chief Operating Officer commented: “Our mine operations had a very good year in 2009. We continued to show dramatic improvement in both safety and regulatory compliance. We also acquired several reserve areas that will be strategically important to our future. Lastly, we have made significant progress on a number of mine development projects in both Central Appalachia (CAPP) and the Midwest.

While we are very pleased with our progress for the year, we are not as pleased with our results for the fourth quarter. As previously discussed, due to the soft coal markets, we have been running all of our CAPP mines at reduced rates of production for the past six months. We realized that this strategy would lead to higher costs for a short period of time due to lower absorption of fixed costs. This quarter, we also saw lower production and higher costs due to severe winter weather and a couple of isolated issues with difficult geology.

We are pleased to report that, despite the continued severe winter weather, our mines are returning to expected levels of production and costs.”

QUARTERLY RESULTS

The following tables show selected operating results for the quarter ended December 31, 2009 compared to the quarter ended December 31, 2008 (in 000’s except per ton amounts).

Total Results	Three Months Ended December 31,
	2009				2008
	Total		Per Ton		Total			Per Ton

Company and contractor production (tons)		2,027				2,734
Coal purchased from other sources (tons)		28				15
Total coal available to ship (tons)		2,055				2,749
Coal shipments (tons)		2,146				2,792
Coal Sales Revenue	$	149,468		69.65	$	140,774			50.42
Cost of coal sold		120,099		55.96		134,418			48.14
Depreciation, depletion, & amortization		16,111		7.51		18,277			6.55
Gross profit (loss)		13,258		6.18		(11,921	)		(4.27	)
Selling, general & administrative		9,608		4.48		9,869			3.53

Adjusted EBITDA (1)	$	22,700		10.58	$	(203	)		(0.07	)

(1)

Segment Results	Three Months Ended December 31,
	2009				2008

	CAPP		Midwest		CAPP		Midwest

Company and Contractor production (tons)		1,319		708		1,944		790
Coal purchased from other sources (tons)		28		-		15		-
Total coal available to ship (tons)		1,347		708		1,959		790
Coal Shipments (tons)		1,433		713		1,981		811
Coal sales revenue	$	125,249		24,219	$	114,221		26,553
Average sales price per ton		87.40		33.97		57.66		32.74
Cost of coal sold	$	97,339		22,760	$	111,232		23,186
Cost of coal sold per ton		67.93		31.92		56.15		28.59

Cost Bridge (per ton)	Q-3 2009 vs. Q-4 2009
	CAPP			Midwest

Beginning cash costs (Q-3 2009)	$	63.11			30.83
Fixed cost absorption		4.20			0.20
Variable		0.82			(0.12	)
Other		(0.20	)		1.01
Ending cash costs (Q-4 2009)		67.93			31.92

LIQUIDITY AND KEY BALANCE SHEET DATA

During the fourth quarter we issued $172.5 million of 4.5% Convertible Senior Notes due in 2015. In connection with the issuance of the Convertible Senior Notes, we terminated our letter of credit facility and used $62.0 million of our cash to collateralize the existing letters of credit. In January, 2010, we amended our Revolver resulting in an increase in availability to $65.0 million. Our intention is to use the Revolver to support our existing letters of credit. As we secure the letters of credit with our Revolver, our cash that is currently being held as security for the existing letters of credit will become unrestricted and be available to us for use. In connection with the financing we paid early termination fees of $1.6 million and recorded interest on the new notes of $1.5 million and lowered our letter of credit facility fees by $0.6 million.

The table below shows our liquidity as of December 31, 2008 and 2009 and on a proforma basis to reflect the January, 2010 amendment of our Revolver as if it had occurred on December 31, 2009. (in millions)

Liquidity
					Proforma
	December 31, 2008		December 31, 2009		December 31, 2009

Unrestricted Cash	$	3.3	$	107.9	$	107.9
Availability under revolver		-		35.0		65.0

Total Liquidity	$	3.3	$	142.9	$	172.9

Restricted Cash	$	5.2	$	62.0	$	62.0

Other Key Balance Sheet Data
(in 000's)
	December 31, 2008			December 31, 2009
Current Assets
Accounts receivable	$	33,561		$	43,549
Inventories		16,428			33,189

Current Liabilities
Current maturities of long-term debt		18,000			-
Accounts payable		57,068			46,472

Working Capital (Deficit)		(54,961	)		109,998

For the year ended and three months ended December 31, 2009 capital expenditures were $72.2 million and $23.5 million respectively.

The Company was in compliance with all covenants in its debt facilities as of December 31, 2009.

SALES POSTION

As of February 25, 2010, we had the following priced sales position:

	2010 Priced
	As of October 31, 2009				As of February 25, 2010				Change
	Tons		Avg Price Per Ton		Tons		Avg Price Per Ton		Tons		Avg Price Per Ton
CAPP		5,171	$	98.49		5,892	$	95.10		721	$	70.79
Midwest (1)		2,642	$	41.47		3,004	$	41.13		362	$	38.65

	2011 Priced
	As of October 31, 2009				As of February 25, 2010				Change
	Tons		Avg Price Per Ton		Tons		Avg Price Per Ton		Tons		Avg Price Per Ton
CAPP		2,389	$	121.80		2,389	$	121.80		-	$	-
Midwest (1)		1,375	$	44.66		1,422	$	44.64		47	$	44.05

	2012 Priced
	As of October 31, 2009				As of February 25, 2010				Change
	Tons		Avg Price Per Ton		Tons		Avg Price Per Ton		Tons		Avg Price Per Ton
CAPP		350	$	108.31		350	$	108.31		-	$	-
Midwest (1)		500	$	45.00		500	$	45.00		-	$	-

(1) The prices for the Midwest are miniumum base price amounts adjusted for projected fuel escalators.

Mr. Socha continued: “The changes in our 2010 CAPP sales position were the result of approximately 300,000 carryover tons at $84.88 from 2009 and 362,000 carryover tons in the Midwest. Our carryover tons were due to extremely high utility inventories at the end of the year and severe winter weather in December. We believe that our carryover tons will be shipped during the first three quarters of 2010. As discussed in our guidance release, our sales focus for the near future will be on our specialty coals. We will be selling these coals to both the domestic and international markets. The market for these coals in currently stronger than the domestic utility market.”

CONFERENCE CALL, WEBCAST AND REPLAY: The Company will hold a conference call with management to discuss the fourth quarter earnings on February 26, 2010 at 11:00 a.m. Eastern Time. The conference call can be accessed by dialing 866-564-7439, or through the James River Coal Company website at http://www.jamesrivercoal.com. International callers, please dial 719-325-2120. A replay of the conference call will be available on the Company’s website and also by telephone, at 888-203-1112 for domestic callers. International callers, please dial 719-457-0820: pass code 5489698.

James River Coal Company mines, processes and sells bituminous steam and industrial-grade coal primarily to electric utility companies and industrial customers. The Company’s mining operations are managed through six operating subsidiaries located throughout eastern Kentucky and in southern Indiana.

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. 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: changes in the demand for coal by electric utility customers; the loss of one or more of our largest customers; inability to secure new coal supply agreements or to extend existing coal supply agreements at market prices; failure to diversify our operations; failure to exploit additional coal reserves; the risk that reserve estimates are inaccurate; increased capital expenditures; encountering difficult mining conditions; increased costs of complying with mine health and safety regulations; our dependency on one railroad for transportation of a large percentage of our products; bottlenecks or other difficulties in transporting coal to our customers; delays in the development of new mining projects; increased costs of raw materials; lack of availability of financing sources; our compliance with debt covenants; the effects of litigation, regulation and competition; 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)

	December 31, 2009		December 31, 2008
Assets

Current assets:
Cash and cash equivalents	$	107,931		3,324
Receivables:
Trade		43,289		33,086
Other		260		475
Total receivables		43,549		33,561
Inventories:
Coal		22,727		6,847
Materials and supplies		10,462		9,581
Total inventories		33,189		16,428
Prepaid royalties		6,045		2,803
Other current assets		3,292		5,094
Total current assets		194,006		61,210
Property, plant, and equipment, at cost:
Land		7,194		6,693
Mineral rights		231,919		229,841
Buildings, machinery and equipment		362,654		320,982
Mine development costs		41,069		39,596
Total property, plant, and equipment		642,836		597,112
Less accumulated depreciation, depletion, and amortization		288,748		252,264
Property, plant and equipment, net		354,088		344,848
Goodwill		26,492		26,492
Restricted cash		62,042		5,222
Other assets		32,684		25,774
Total assets	$	669,312		463,546

JAMES RIVER COAL COMPANY

AND SUBSIDIARIES

Consolidated Balance Sheets

(in thousands, except share data)

	December 31, 2009			December 31, 2008
Liabilities and Shareholders' Equity

Current liabilities:
Current maturities of long-term debt	$	-			18,000
Accounts payable		46,472			57,068
Accrued salaries, wages, and employee benefits		6,982			6,642
Workers' compensation benefits		8,950			9,300
Black lung benefits		1,782			1,539
Accrued taxes		4,383			4,457
Other current liabilities		15,439			19,165
Total current liabilities		84,008			116,171
Long-term debt, less current maturities		278,268			150,000
Other liabilities:
Noncurrent portion of workers' compensation benefits		50,385			46,477
Noncurrent portion of black lung benefits		31,017			29,029
Pension obligations		14,827			19,693
Asset retirement obligations		39,843			36,409
Other		622			529
Total other liabilities		136,694			132,137
Total liabilities		498,970			398,308

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 27,544,878 and 27,393,493 shares as of December 31, 2009 and 2008, respectively		275			274
Paid-in-capital		320,079			272,366
Accumulated deficit		(136,758	)		(187,712	)
Accumulated other comprehensive loss		(13,254	)		(19,690	)
Total shareholders' equity		170,342			65,238

Total liabilities and shareholders' equity	$	669,312			463,546

JAMES RIVER COAL COMPANY

AND SUBSIDIARIES

Consolidated Statements of Operations

(in thousands, except per share data)

	Year			Year			Year
	Ended			Ended			Ended
	December 31,			December 31,			December 31,
	2009			2008			2007

Revenues	$	681,558			568,507			520,560
Cost of sales:
Cost of coal sold		508,888			527,888			473,347
Gain on curtailment of pension plan		-			-			(6,091	)
Depreciation, depletion, and amortization		62,078			70,277			71,856
Total cost of sales		570,966			598,165			539,112
Gross profit (loss)		110,592			(29,658	)		(18,552	)
Selling, general, and administrative expenses		39,720			34,992			32,191
Total operating income (loss)		70,872			(64,650	)		(50,743	)
Interest expense		17,057			17,746			19,764
Interest income		(60	)		(469	)		(471	)
Charges associated with repayment and amendment of debt		1,643			15,618			2,421
Miscellaneous income, net		(281	)		(1,279	)		(598	)
Total other expenses, net		18,359			31,616			21,116
Income (loss) before income taxes		52,513			(96,266	)		(71,859	)
Income tax expense (benefit)		1,559			(273	)		(17,844	)
Net income (loss)	$	50,954			(95,993	)		(54,015	)
Income (loss) per common share
Basic income (loss) per common share	$	1.85			(3.91	)		(3.29	)

Diluted income (loss) per common share	$	1.85			(3.91	)		(3.29	)

JAMES RIVER COAL COMPANY

AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(in thousands)

	Year			Year			Year
	Ended			Ended			Ended
	December 31,			December 31,			December 31,
	2009			2008			2007
Cash flows from operating activities:
Net income (loss)	$	50,954			(95,993	)		(54,015	)
Adjustments to reconcile net loss to net cash provided by operating activities
Depreciation, depletion, and amortization of property, plant, and equipment		62,078			70,277			71,856
Accretion of asset retirement obligations		3,212			2,768			2,270
Amortization of debt discount and issue costs		1,813			1,411			1,569
Stock-based compensation		5,967			5,130			3,853
Deferred income tax benefit		180			4			(18,572	)
Loss on sale or disposal of property, plant, and equipment		(61	)		(163	)		(87	)
Write-off of deferred financing costs		-			2,383			2,421
Gain on curtailment of pension plan		-			-			(6,091	)
Changes in operating assets and liabilities:
Receivables		(9,988	)		7,745			6,930
Inventories		(15,025	)		(2,236	)		(1,232	)
Prepaid royalties and other current assets		(1,440	)		100			(58	)
Restricted cash		(56,820	)		(5,222	)		-
Other assets		(4,233	)		(4,403	)		(2,929	)
Accounts payable		(10,596	)		9,762			4,576
Accrued salaries, wages, and employee benefits		340			632			1,277
Accrued taxes		(1,787	)		(2,251	)		(2,772	)
Other current liabilities		(3,626	)		8,702			(1,030	)
Workers' compensation benefits		3,558			2,185			8
Black lung benefits		1,657			538			1,435
Pension obligations		2,144			(1,395	)		(3,129	)
Asset retirement obligations		(861	)		(1,082	)		(1,457	)
Other liabilities		93			(468	)		(801	)
Net cash provided by (used in) operating activities		27,559			(1,576	)		4,022
Cash flows from investing activities:
Additions to property, plant, and equipment		(72,159	)		(74,697	)		(49,343	)
Proceeds from sale of property, plant and equipment		149			1,108			142
Net cash used in investing activities		(72,010	)		(73,589	)		(49,201	)
Cash flows from financing activities:
Proceeds from issuance of long-term debt		172,500			-			40,000
Repayment of long-term debt		-			(38,800	)		(1,200	)
Proceeds from Revolver		12,500			26,500			31,043
Repayments of Revolver		(30,500	)		(8,500	)		(48,536	)
Net proceeds from issuance of common stock		-			93,820			32,389
Principal payments under capital lease obligations		-			-			(262	)
Debt issuance costs		(5,517	)		(486	)		(4,649	)
Proceeds from exercise of stock options		75			542			-
Net cash provided by financing activities		149,058			73,076			48,785
Increase (decrease) in cash		104,607			(2,089	)		3,606
Cash and cash equivalents at beginning of period		3,324			5,413			1,807
Cash and cash equivalents at end of period	$	107,931			3,324			5,413

JAMES RIVER COAL COMPANY

AND SUBSIDIARIES

Reconciliation of Non-GAAP Measures

(in thousands)

(unaudited)

EBITDA is a measure 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 the amount used in several of the covenants in our senior secured credit facilities. Adjusted EBITDA is defined as EBITDA further adjusted for certain cash and non-cash charges. Adjusted EBITDA is used to determine compliance with financial covenants and our ability to engage in certain activities such as incurring additional debt and making certain payments.

EBITDA and Adjusted EBITDA 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 and Adjusted EBITDA may not be comparable to other similarly titled measures of other companies. Additionally, EBITDA and Adjusted EBITDA 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						Year Ended
	December 31,			December 31,			December 31,			December 31,
	2009			2008			2009			2008

Net income (loss)	$	(3,203	)		(33,587	)		50,954			(95,993	)
Income tax expense (benefit)		42			(273	)		1,559			(273	)
Interest expense		5,267			4,046			17,057			17,746
Interest income		(5	)		(152	)		(60	)		(469	)
Depreciation, depletion, and amortization		16,111			18,277			62,078			70,277
EBITDA (before adjustments)	$	18,212			(11,689	)		131,588			(8,712	)
Other adjustments specified in our current debt agreement:
Charges associated with repayment of debt		1,643			8,382			1,643			15,618
Other adjustments		2,845			3,104			12,868			10,665
Adjusted EBITDA	$	22,700			(203	)		146,099			17,571

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