Rhino Resource Partners LP (NYSE:RNO) ("Rhino" or the
"Partnership") announced today its financial and operating results
for the quarter ended June 30, 2014. For the quarter, the
Partnership reported a net loss of $6.9 million and Adjusted EBITDA
of $3.0 million, compared to net income of $5.9 million and
Adjusted EBITDA of $18.6 million in the second quarter of 2013.
Diluted net loss per common unit was $0.23 for the quarter compared
to diluted net income per unit of $0.21 for the second quarter of
2013. Total revenues for the quarter were $55.9 million, with coal
sales generating $46.9 million of the total, compared to total
revenues of $65.6 million and coal revenues of $57.0 million in the
second quarter of 2013. (Refer to "Reconciliations of Adjusted
EBITDA" included later in this release for reconciliations to the
most directly comparable GAAP financial measures).
On July 21, 2014, the Partnership announced a cash distribution
of $0.445 per common unit, or $1.78 per unit on an annualized
basis. This distribution will be paid on August 14, 2014 to all
common unit holders of record as of the close of business on July
31, 2014. No distribution will be paid on the subordinated
units.
Chris Walton, President and Chief Executive Officer of Rhino's
general partner, stated, "During the quarter, we experienced the
same problems that have been affecting nearly all coal companies.
Market conditions, which appeared promising at the beginning of the
quarter, have weakened with the cool summer and lower gas prices.
At Hopedale, costs were significantly higher as we advanced through
thin coal while developing the 7-seam reserve. We have mined more
coal from the 7-seam in the past four weeks than the total we mined
in the six months since starting the project, so we are optimistic
costs will improve going forward. Hopedale was also negatively
impacted due to poor rail service, likely due in part to the
exceptional level of oil and gas activity in the Utica. In addition
to the higher costs at Hopedale, we experienced one-time charges
during the quarter totaling approximately $1.6 million, which
included expenses due to a large number of unanticipated claims
under our employee healthcare plan and the cost to settle a
potential legal claim.
"We are pleased that the new Pennyrile mine has gone into
production as expected and shipments began in early July. The
initial shipments are part of the base 800,000 ton per year
contract and we have begun test shipments with additional customers
that we expect will result in more long-term sales. Pennyrile gives
us additional diversification and we expect it to be a significant
generator of stable cash flow as it ramps up to its full potential
run rate of two million tons per year.
"Market conditions in Central Appalachia have remained
challenging due to the weak met prices and the retracement of
prices in the steam market. Mine 28 was temporarily idled at the
end of May due to a fire in a rail tunnel that shut off rail
service. Although rail service has been restored, we have not yet
reopened the mine due to high stockpiles.
"Since completing the sale of our Utica oil and gas interests,
we have kept debt levels low with approximately $30 million drawn
on the bank line at the end of the quarter. We currently have no
planned growth capital expenditures, and the spending to develop
Pennyrile is essentially complete. There are several distressed
assets offered in the market, and our low debt level gives us the
flexibility to evaluate these and other opportunities. We
anticipate cash flow to grow at Pennyrile, and expect costs to
improve at Hopedale and Castle Valley.
"Hopedale is sold out this year and about 75% in 2015. We expect
to finalize a sales agreement at Castle Valley that will leave it
fully committed through the end of 2015. We expect test burns to
lead to additional sales at Pennyrile, and it could expand to a two
section mine in mid-2015. In Central Appalachia, we have remained
focused on safe operations while keeping costs as low as possible
with reduced levels of production and sales."
Further, Walton stated "At Rhino Eastern we have fully
transitioned to the Eagle #3 mine as we have completed mining the
Eagle #1 reserve. We encountered adverse mining conditions at Rhino
Eastern in the quarter, which included a roof fall in the mine that
resulted in 10 days of lost production. The results at Rhino
Eastern have been below our expectations and we instituted a number
of management changes at this operation. With these changes, we
expect cost improvement in the Eagle #3 mine."
Coal Operations Update
Pennyrile*
- Initial production commenced in late May 2014 and the first
barge shipments of coal were completed in early July.
- The initial five-year sales contract with a regional utility
customer for 800,000 tons per year provides a solid base for this
operation while discussions continue with additional
customers.
- The Pennyrile complex will mine a large contiguous fully
permitted, proven reserve of 32.6 million tons located on the
navigable Green River in western Kentucky, with unique low cost
access to large customer base, including export markets.
*Beginning next quarter, we will be reporting Pennyrile as part
of our Northern Appalachia segment now that it is an operating
mine.
Northern Appalachia
- For the second quarter, year over year coal revenues per ton
increased $1.09 to $59.37 while cost of operations costs per ton
rose by $11.79 to $56.04. At Hopedale, we encountered
approximately 1,250 feet of rock as we advanced to the 7-seam,
which resulted in significantly higher per ton expense. All
mine headings are now operating in coal seams with expected
thickness and we have gained access to an estimated 8.7 million ton
reserve block at the Hopedale operation.
- Sales volume was 252,000 tons, versus 314,000 tons in the prior
year and 262,000 tons in the prior quarter. Hopedale
experienced significant rail transportation issues during the
quarter, which negatively impacted its results.
- Sands Hill has contracted additional sales with an existing
customer that will increase its volumes beginning in the second
half of 2014. Limestone sales were relatively flat during the
quarter.
Rhino Western
- Coal revenue per ton in the quarter increased to $42.43 versus
$40.24 in the prior year and $41.34 in the prior quarter.
Sales volume was 236,000 tons versus 235,000 tons in the
prior year and 231,000 tons in the prior quarter.
- Cost of operations was $37.05 versus $32.85 in the prior year
and $33.43 in the prior quarter. Costs were impacted by high
maintenance expenses and other non-recurring expenses.
Central Appalachia
- Coal revenue per ton was $71.94 versus $80.42 in the prior year
and $72.89 in the prior quarter. Metallurgical coal revenue
per ton was $79.12 versus $88.87 in the prior year and $81.17 in
the prior quarter. Steam coal revenue was $70.56 per ton
versus $75.72 in the prior year and $70.21 in the prior quarter.
Sales volume was 305,000 tons in the quarter versus 363,000 in the
prior year and 353,000 tons in the prior quarter.
- Cost of operations per ton in the quarter was $67.09 versus
$70.56 in the prior year and $59.70 in the prior
quarter.
- Rhino continues to focus on minimizing costs while fulfilling
our sales commitments. The Rob Fork facility has been
temporarily idled since the beginning of June due to a fire that
closed the rail tunnel to this location.
- Rhino continues to make limited spot met sales and steam sales
at both the Tug River and Rob Fork complexes.
Eastern Met
- Coal revenue per ton was $97.33 versus $106.71 in the prior
year and $98.17 in the prior quarter. Cost of operations per
ton was $144.10 versus $146.92 in the prior year and $105.48 in the
prior quarter. Sales volumes were 53,000 tons versus 72,000 tons in
the prior year and 76,000 tons in the prior
quarter.
- Rhino Eastern's production and operations have been completely
transitioned to the lower-cost Eagle #3 mine.
Capital Expenditures
- Maintenance capital expenditures for the second quarter were
approximately $3.6 million.
- Expansion capital expenditures for the second quarter were
approximately $16.4 million, which consisted primarily of the
development of Pennyrile, along with other internal development
projects.
Sales Commitments
The table below displays Rhino's committed coal sales for the
periods indicated.
| |
2H 2014 |
Year 2015 |
| |
Avg Price |
Tons |
Avg Price |
Tons |
| Northern Appalachia/Illinois Basin |
$ 55.50 |
770,352 |
$ 53.99 |
1,790,000 |
| Rhino Western * |
$ 41.16 |
601,500 |
$ 38.43 |
1,000,000 |
| Central Appalachia |
$ 67.76 |
516,352 |
$ 63.00 |
75,240 |
| Total |
$ 54.29 |
1,888,204 |
$ 48.80 |
2,865,240 |
| * Includes 400,000
tons for 2015 awaiting final contract closure |
|
|
|
|
Evaluating Financial Results
Rhino management uses a variety of financial measurements to
analyze the Partnership's performance, including (1) Adjusted
EBITDA, (2) coal revenues per ton and (3) cost of operations per
ton.
Adjusted EBITDA. Adjusted EBITDA
represents net income before deducting interest expense, income
taxes and depreciation, depletion and amortization, including
Rhino's proportionate share of these expense items from its Rhino
Eastern LLC joint venture, while also excluding certain non-cash
and/or non-recurring items. Adjusted EBITDA is used by management
primarily as a measure of the Partnership's operating performance.
Because not all companies calculate Adjusted EBITDA identically,
the Partnership's calculation may not be comparable to similarly
titled measures of other companies. Adjusted EBITDA should not be
considered an alternative to net income, income from operations,
cash flows from operating activities or any other measure of
financial performance or liquidity presented in accordance with
GAAP. (Refer to "Reconciliations of Adjusted EBITDA" included
later in this release for reconciliations of Adjusted EBITDA to the
most directly comparable GAAP financial measures).
Coal Revenues Per Ton. Coal revenues per
ton sold represents coal revenues divided by tons of coal sold.
Coal revenues per ton is a key indicator of Rhino's effectiveness
in obtaining favorable prices for the Partnership's product.
Cost of Operations Per Ton. Cost of
operations per ton sold represents the cost of operations
(exclusive of depreciation, depletion and amortization) divided by
tons of coal sold. Rhino management uses this measurement as a key
indicator of the efficiency of operations.
Overview of Financial Results
Results for the three months ended June 30, 2014 included:
- Adjusted EBITDA from continuing operations of $3.1 million and
net loss from continuing operations of $6.8 million compared to
Adjusted EBITDA from continuing operations of $17.5 million and net
income from continuing operations of $5.5 million in the second
quarter of 2013. Including a net loss from discontinued
operations of approximately $0.1 million, total net loss and
Adjusted EBITDA for the three months ended June 30, 2014 were $6.9
million and $3.0 million, respectively. Both of the 2014 and
2013 figures also include $1.8 million and $2.1 million,
respectively, of net loss from the Partnership's joint venture,
Rhino Eastern LLC, which also contributes to the Partnership's
consolidated Adjusted EBITDA.
- Basic and diluted net loss per common unit from continuing
operations of $0.23 compared to basic and diluted net income per
common unit from continuing operations of $0.20 for the second
quarter of 2013. Including (loss)/income from discontinued
operations, total basic and diluted net loss per common unit
remained at $0.23 for the second quarter of 2014 compared to total
basic and diluted net income per common unit of $0.21 for the
second quarter of 2013.
- Coal sales were 0.8 million tons compared to 0.9 million for
the second quarter of 2013.
- Total revenues and coal revenues of $55.9 million and $46.9
million, respectively, compared to $65.6 million and $57.0 million,
respectively, for the same period of 2013.
- Coal revenues per ton of $59.17 compared to $62.47 for the
second quarter of 2013, a decrease of 5.3%.
- Cost of operations from continuing operations of $46.5 million
compared to $51.5 million for the same period of 2013.
- Cost of operations per ton from continuing operations of $58.69
compared to $56.44 for the second quarter of 2013, an increase of
4.0%.
Total coal revenues decreased approximately 17.7% due to a
decrease in tons sold and lower selling prices resulting from the
ongoing weakness in the met and steam coal markets. Coal
revenues per ton decreased primarily because of lower prices for
metallurgical coal sold in the second quarter of 2014 compared to
the same period of 2013, as well as the expiration of an
above-market steam coal contract in Central Appalachia. Total
dollars spent on cost of operations decreased year to year due to
decreased production from ongoing weakness in the met and steam
coal markets. Rhino experienced increased cost of operations
per ton during the quarter primarily due to increased per ton costs
incurred in Northern Appalachia associated with adverse mining
conditions and reduced volumes at Sands Hill due to weak market
conditions. These increases in per ton costs were partially
offset by a decrease in Central Appalachia's cost of operations per
ton.
Results for the six months ended June 30, 2014 included:
- Adjusted EBITDA from continuing operations of $10.8 million and
net loss from continuing operations of $11.8 million compared to
Adjusted EBITDA from continuing operations of $30.5 million and net
income from continuing operations of $5.3 million for the six
months ended June 30, 2013. Including income from
discontinued operations of approximately $130.5 million, total net
income and Adjusted EBITDA for the six months ended June 30, 2014
were $118.7 million and $141.3 million, respectively. Income from
discontinued operations consisted primarily of the gain of
approximately $121.7 million from the sale of the Utica Shale oil
and natural gas properties. Both of the 2014 and 2013 figures
also include $2.7 million and $3.3 million, respectively, of net
loss from the Partnership's joint venture, Rhino Eastern LLC, which
also contributes to the Partnership's consolidated Adjusted
EBITDA.
- Basic and diluted net loss per common unit from continuing
operations of $0.40 compared to basic and diluted net income per
common unit from continuing operations of $0.19 for the six months
ended June 30, 2013. Including income from discontinued
operations, total basic and diluted net income per common unit was
$4.00 for the six months ended June 30, 2014 compared to total
basic and diluted net income per common unit of $0.20 for the six
months ended June 30, 2013.
- Coal sales were 1.6 million tons compared to 1.9 million for
the six months ended June 30, 2013.
- Total revenues and coal revenues of $115.8 million and $98.1
million, respectively, compared to $140.1 million and $124.4
million, respectively, for the same period of 2013.
- Coal revenues per ton of $59.87 compared to $64.85 for the six
months ended June 30, 2013, a decrease of 7.7%.
- Cost of operations from continuing operations of $92.9 million
compared to $106.2 million for the same period of 2013.
- Cost of operations per ton from continuing operations of $56.69
compared to $55.39 for the six months ended June 30, 2013, an
increase of 2.3%.
Total coal revenues decreased approximately 21.1% due to a
decrease in tons sold and lower selling prices resulting from the
ongoing weakness in the met and steam coal markets as mentioned
above. Coal revenues per ton decreased primarily because of
lower prices for metallurgical coal sold in the first six months of
2014 compared to the same period of 2013, as well as the expiration
of an above-market steam coal contract in Central
Appalachia. Total cost of operations decreased and cost of
operations per ton increased because of the same factors discussed
for the second quarter.
Segment Information
The Partnership produces and markets coal from surface and
underground mines in Kentucky, West Virginia, Ohio and
Utah. Through its Elk Horn subsidiary, the Partnership also
leases coal reserves to third parties in exchange for royalty
revenues. For the quarter ended June 30, 2014, the
Partnership had four reportable business segments: Central
Appalachia (includes results for Elk Horn), Northern Appalachia,
Rhino Western, and Eastern Met (comprised solely of the Rhino
Eastern joint venture with Patriot). Beginning with 2013 year-end
reporting, the Partnership had included a reportable business
segment for its oil and natural gas activities since the total
assets for these operations met the quantitative threshold for
separate segment reporting. The Oil and Natural Gas segment
included the Partnership's former Utica Shale properties and its
current Cana Woodford activities as well as its Razorback drill pad
construction operations and its Muskie joint venture to provide
sand for fracking operations. Prior to 2013, the Partnership's oil
and natural gas activities were included in its Other category for
segment reporting purposes. Since the majority of the Partnership's
oil and natural gas activities were in the Utica Shale and the
Utica Shale financial results are now included in discontinued
operations due to their sale, the segment data for the
Partnership's remaining oil and natural gas activities has been
included in the Other category for segment reporting purposes for
2014 and the 2013 comparable period since they are immaterial. The
Partnership's Other category is comprised of its ancillary
businesses and its remaining oil and natural gas activities.
The Partnership accounts for the Rhino Eastern joint venture
under the equity method. Under the equity method of accounting,
only limited information (net income) is presented in the
Partnership's consolidated financial statements. The
Partnership has presented additional financial and operating
details of the Rhino Eastern joint venture toward the end of this
section.
| (In millions, except per ton data and
%) |
Second Quarter 2014 |
Second Quarter 2013 |
% Change* 2Q14 / 2Q13 |
Year to Date 2014 |
Year to Date 2013 |
% Change* 2014 / 2013 |
| Central
Appalachia |
|
|
|
|
|
|
| Coal revenues |
$21.9 |
$29.2 |
(24.9%) |
$47.6 |
$66.8 |
(28.6%) |
| Total revenues |
$27.3 |
$34.2 |
(20.2%) |
$57.8 |
$76.1 |
(24.0%) |
| Coal revenues per ton* |
$71.94 |
$80.42 |
(10.5%) |
$72.45 |
$85.19 |
(15.0%) |
| Cost of operations |
$20.5 |
$25.6 |
(20.2%) |
$41.5 |
$54.3 |
(23.6%) |
| Cost of operations per ton* |
$67.09 |
$70.56 |
(4.9%) |
$63.13 |
$69.30 |
(8.9%) |
| Tons produced |
0.340 |
0.436 |
(22.0%) |
0.682 |
0.824 |
(17.2%) |
| Tons sold |
0.305 |
0.363 |
(16.1%) |
0.658 |
0.784 |
(16.1%) |
| Northern
Appalachia |
|
|
|
|
|
|
| Coal revenues |
$15.0 |
$18.4 |
(18.3%) |
$30.9 |
$38.6 |
(19.9%) |
| Total revenues |
$17.4 |
$20.3 |
(14.0%) |
$36.2 |
$42.2 |
(14.1%) |
| Coal revenues per ton* |
$59.37 |
$58.28 |
1.9% |
$60.12 |
$58.18 |
3.3% |
| Cost of operations |
$14.1 |
$13.9 |
1.6% |
$28.5 |
$27.9 |
2.4% |
| Cost of operations per ton* |
$56.04 |
$44.25 |
26.6% |
$55.51 |
$42.02 |
32.1% |
| Tons produced |
0.264 |
0.309 |
(14.5%) |
0.493 |
0.656 |
(28.6%) |
| Tons sold |
0.252 |
0.314 |
(19.8%) |
0.514 |
0.663 |
(22.5%) |
| Rhino Western |
|
|
|
|
|
|
| Coal revenues |
$10.0 |
$9.4 |
6.2% |
$19.6 |
$19.0 |
2.9% |
| Total revenues |
$10.0 |
$9.4 |
6.2% |
$19.6 |
$19.0 |
3.0% |
| Coal revenues per ton* |
$42.43 |
$40.24 |
5.4% |
$41.89 |
$40.37 |
3.7% |
| Cost of operations |
$8.7 |
$7.7 |
13.6% |
$16.5 |
$15.3 |
8.0% |
| Cost of operations per ton* |
$37.05 |
$32.85 |
12.8% |
$35.26 |
$32.40 |
8.8% |
| Tons produced |
0.256 |
0.212 |
20.5% |
0.505 |
0.420 |
20.5% |
| Tons sold |
0.236 |
0.235 |
0.7% |
0.467 |
0.471 |
(0.8%) |
| Other** |
|
|
|
|
|
|
| Coal revenues |
n/a |
n/a |
n/a |
n/a |
n/a |
n/a |
| Total revenues |
$1.2 |
$1.7 |
(32.0%) |
$2.2 |
$2.8 |
(20.9%) |
| Coal revenues per ton |
n/a |
n/a |
n/a |
n/a |
n/a |
n/a |
| Cost of operations |
$3.2 |
$4.3 |
(24.2%) |
$6.4 |
$8.7 |
(27.4%) |
| Cost of operations per ton |
n/a |
n/a |
n/a |
n/a |
n/a |
n/a |
| Total |
|
|
|
|
|
|
| Coal revenues |
$46.9 |
$57.0 |
(17.7%) |
$98.1 |
$124.4 |
(21.1%) |
| Total revenues |
$55.9 |
$65.6 |
(14.8%) |
$115.8 |
$140.1 |
(17.3%) |
| Coal revenues per ton* |
$59.17 |
$62.47 |
(5.3%) |
$59.87 |
$64.85 |
(7.7%) |
| Cost of operations |
$46.5 |
$51.5 |
(9.6%) |
$92.9 |
$106.2 |
(12.5%) |
| Cost of operations per ton* |
$58.69 |
$56.44 |
4.0% |
$56.69 |
$55.39 |
2.3% |
| Tons produced |
0.860 |
0.957 |
(10.1%) |
1.680 |
1.900 |
(11.5%) |
| Tons sold |
0.793 |
0.912 |
(13.1%) |
1.639 |
1.918 |
(14.5%) |
| Eastern Met 100% Basis
† |
|
|
|
|
|
|
| Coal revenues |
$5.1 |
$7.6 |
(32.8%) |
$12.6 |
$13.8 |
(8.8%) |
| Total revenues |
$5.2 |
$7.6 |
(32.0%) |
$12.7 |
$13.8 |
(7.9%) |
| Coal revenues per ton* |
$97.33 |
$106.71 |
(8.8%) |
$97.83 |
$112.77 |
(13.3%) |
| Cost of operations |
$7.6 |
$10.5 |
(27.7%) |
$15.6 |
$18.1 |
(13.5%) |
| Cost of operations per ton* |
$144.10 |
$146.92 |
(1.9%) |
$121.30 |
$147.51 |
(17.8%) |
| Net income/(loss) |
($3.5) |
($4.1) |
(13.6%) |
($5.3) |
($6.5) |
(19.0%) |
| Partnership's portion of net
income/(loss) |
($1.8) |
($2.1) |
(13.6%) |
($2.7) |
($3.3) |
(19.0%) |
| Tons produced*** |
0.040 |
0.043 |
(5.2%) |
0.120 |
0.079 |
51.2% |
| Tons sold*** |
0.053 |
0.072 |
(26.3%) |
0.129 |
0.122 |
5.2% |
* Percentages, totals and per ton amounts are calculated based
on actual amounts and not the rounded amounts presented in this
table.
** The Oil and Natural Gas segment do not relate to coal
production. The Other category includes results for Rhino's
ancillary businesses. The activities performed by these ancillary
businesses do not directly relate to coal production. As a result,
coal revenues, coal revenues per ton and cost of operations per ton
are not presented for the Oil and Natural Gas segment or the Other
category.
*** Rhino Eastern currently produces and sells only premium
mid-vol met coal.
† Eastern Met includes the financial data for
the Rhino Eastern joint venture in which the Partnership has a 51%
membership interest and for which the Partnership serves as
manager. The Partnership's consolidated revenue and costs do
not include any portion of the revenue or costs of Rhino Eastern
since the Partnership accounts for this operation under the equity
method. The Partnership only records its proportionate share
of net income of Rhino Eastern as a single item in its financial
statements, but the Partnership believes the presentation of these
items for Rhino Eastern provides additional insight into how this
operation contributes to the overall performance of the
Partnership.
Additional information for the Central Appalachia segment
detailing the types of coal produced and sold, premium high-vol met
coal and steam coal, is presented below. Note that the
Partnership's Northern Appalachia and Rhino Western segments
currently produce and sell only steam coal.
| Central Appalachia
Overview of Results by Product † |
|
|
|
|
| (In thousands, except per
ton data and %)** |
Second Quarter 2014 |
Second Quarter 2013 |
% Change* 2Q14 / 2Q13 |
Year to Date 2014 |
Year to Date 2013 |
% Change* 2014 / 2013 |
| Met coal tons sold |
49.3 |
129.8 |
(62.1%) |
135.5 |
311.7 |
(56.5%) |
| Steam coal tons sold |
255.6 |
233.5 |
9.5% |
522.2 |
472.1 |
10.6% |
| Total tons sold |
304.9 |
363.3 |
(16.1%) |
657.7 |
783.8 |
(16.1%) |
| |
|
|
|
|
|
|
| Met coal revenue |
$3,897 |
$11,537 |
(66.2%) |
$10,902 |
$30,318 |
(64.0%) |
| Steam coal revenue |
$18,037 |
$17,682 |
2.0% |
$36,750 |
$36,459 |
0.8% |
| Total coal revenue |
$21,934 |
$29,219 |
(24.9%) |
$47,652 |
$66,777 |
(28.6%) |
| |
|
|
|
|
|
|
| Met coal revenues per ton |
$79.12 |
$88.87 |
(11.0%) |
$80.42 |
$97.25 |
(17.3%) |
| Steam coal revenues per
ton |
$70.56 |
$75.72 |
(6.8%) |
$70.38 |
$77.23 |
(8.9%) |
| Total coal revenues per
ton |
$71.94 |
$80.42 |
(10.5%) |
$72.45 |
$85.19 |
(15.0%) |
| |
|
|
|
|
|
|
| Met coal tons produced |
81.4 |
173.0 |
(52.9%) |
188.5 |
289.7 |
(34.9%) |
| Steam coal tons produced |
258.7 |
262.9 |
(1.6%) |
494.0 |
534.2 |
(7.5%) |
| Total tons produced |
340.1 |
435.9 |
(22.0%) |
682.5 |
823.9 |
(17.2%) |
* Percentages are calculated based on actual amounts and not the
rounded amounts presented in this table.
** Excludes data for the Rhino Eastern mining complex located in
West Virginia for which the Partnership has a 51% membership
interest and serves as manager.
Guidance
For the second half of 2014, Rhino is providing updated guidance
as follows:
| |
Second Half 2014
Guidance |
| For: |
(in millions) |
| Adjusted EBITDA from continuing
operations |
$16 - $19 |
| Maintenance Capital Expenditures |
$3.0 - $4.5 |
| Cash Interest Expense |
$1.4 - $1.5 |
| Cash Available for Distribution from
continuing operations |
$12 - $14 |
| Production* |
2.0 - 2.2 |
| Sales* |
2.0 - 2.2 |
* Guidance for production tons and sale tons includes 51% of
expected activity from Rhino Eastern
Second Quarter 2014 Financial and Operational Results
Conference Call
Rhino's second quarter 2014 financial and operational results
conference call is scheduled for today at 10:00 am Eastern time.
Participants should call 866-318-8615 (United States/Canada) or
617-399-5134 (International) and utilize the confirmation code
57874141. A live broadcast of the earnings conference call
will also be available via the Internet at www.rhinolp.com under
'Investor Relations'.
A telephonic replay will be available for anyone unable to
participate in the live call. To access the replay, call
888-286-8010 (United States/Canada) or 617-801-6888 (International)
and enter confirmation code 14190920. The recording will be
available from 2:00 pm (ET) on Thursday, July 31, 2014 through
Thursday, August 7, 2014 at 11:59 pm (ET).
The webcast will be archived on the site for one year.
About Rhino Resource Partners LP
Rhino Resource Partners LP is a growth-oriented limited
partnership. Rhino produces metallurgical and steam coal in a
variety of basins throughout the United States and it leases coal
through its Elk Horn subsidiary.
About Wexford Capital LP
Rhino's general partner, Rhino GP LLC, is an affiliate of
Wexford Capital LP ("Wexford"). Wexford is an SEC registered
investment advisor with over $4 billion of assets under
management. Wexford has particular expertise in the
energy/natural resources sector with actively managed investments
in coal, oil and gas exploration and production, energy services
and related sectors. Through Wexford's extensive portfolio of
energy, resource and related investments, it sees an extensive flow
of potential new investment opportunities, many which could be
suitable for Rhino. Although Wexford has no obligation to
provide such investment opportunities to Rhino, it has made
available several of these investments to Rhino and expects to be
in a position to continue to selectively source and underwrite for
Rhino new coal, energy and related investment opportunities.
Additional information regarding Rhino and Wexford is available
on their respective web sites – RhinoLP.com and Wexford.com.
Forward Looking Statements
Except for historical information, statements made in this press
release are "forward-looking statements." All statements, other
than statements of historical facts, included in this press release
that address activities, events or developments that Rhino expects,
believes or anticipates will or may occur in the future are
forward-looking statements, including the statements and
information included under the heading "Coal Operations Update,"
"Oil and Gas," and "Guidance." These forward-looking statements are
based on Rhino's current expectations and beliefs concerning future
developments and their potential effect on Rhino's business,
operating results, financial condition and similar
matters. While management believes that these forward-looking
statements are reasonable as and when made, there can be no
assurance that future developments affecting Rhino will turn out as
Rhino anticipates. Whether actual results and developments in
the future will conform to expectations is subject to significant
risks, uncertainties and assumptions, many of which are beyond
Rhino's control or ability to predict. Therefore, actual results
and developments could materially differ from Rhino's historical
experience, present expectations and what is expressed, implied or
forecast in these forward-looking statements. Important
factors that could cause actual results to differ materially from
those in the forward-looking statements include, but are not
limited to, the following: decline in coal prices, which depend
upon several factors such as the supply of domestic and foreign
coal, the demand for domestic and foreign coal, governmental
regulations, price and availability of alternative fuels for
electricity generation and prevailing economic conditions;
increased competition in global coal markets and declines in demand
for coal; current and future environmental laws and regulations
which could materially increase operating costs or limit Rhino's
ability to produce and sell coal; extensive government regulation
of mine operations, especially with respect to mine safety and
health, which imposes significant actual and potential costs;
difficulties in obtaining and/or renewing permits necessary for
operations; a variety of operating risks, such as unfavorable
geologic conditions, natural disasters, mining and processing
equipment unavailability, failures and unexpected maintenance
problems and accidents, including fire and explosions from methane;
fluctuations in transportation costs or disruptions in
transportation services could increase competition or impair
Rhino's ability to supply coal; a shortage of skilled labor;
increases in raw material costs, such as steel, diesel fuel and
explosives; Rhino's ability to acquire replacement coal reserves
that are economically recoverable; inaccuracies in Rhino's
estimates of coal reserves and non-reserve coal deposits; existing
and future laws and regulations regulating the emission of sulfur
dioxide and other compounds could affect coal consumers and as a
result reduce demand for coal; federal and state laws restricting
the emissions of greenhouse gases; Rhino's ability to acquire or
failure to maintain, obtain or renew surety bonds used to secure
obligations to reclaim mined property; Rhino's dependence on a few
customers and its ability to find and retain customers under
favorable supply contracts; changes in consumption patterns by
utilities away from the use of coal, such as resulting from low
natural gas prices; disruption in supplies of coal produced by
contractors operating Rhino's mines; defects in title in properties
that Rhino owns or losses of any of Rhino's leasehold interests;
increased labor costs or work stoppages; the ability to retain and
attract senior management and other key personnel; and assumptions
underlying reclamation and mine closure obligations are materially
inaccurate.
Other factors that could cause Rhino's actual results to differ
from its projected results are described in its filings with the
Securities and Exchange Commission, including its Annual Report on
Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on
Form 8-K.
Readers are cautioned not to place undue reliance on
forward-looking statements, which speak only as of the date
hereof. Rhino undertakes no obligation to publicly update or
revise any forward-looking statements after the date they are made,
whether as a result of new information, future events or otherwise,
unless required by law.
| RHINO RESOURCE PARTNERS
LP |
| UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION |
| AS OF JUNE 30, 2014 AND
DECEMBER 31, 2013 |
| (in
thousands) |
| |
|
|
| |
June 30, 2014 |
December 31,
2013 |
| ASSETS |
|
|
| CURRENT ASSETS: |
|
|
| Cash and cash
equivalents |
$ 570 |
$ 423 |
| Accounts receivable, net
of allowance |
21,465 |
25,461 |
| Inventories |
20,360 |
18,580 |
| Prepaid expenses and
other |
5,445 |
4,751 |
| Current assets held for
sale |
-- |
454 |
| Total current assets |
47,840 |
49,669 |
| Net property, plant & equipment, incl
coal properties, mine development and construction costs |
439,622 |
424,990 |
| Investment in unconsolidated affiliates |
19,709 |
21,243 |
| Other non-current assets |
15,271 |
16,368 |
| Non-current assets held for sale |
-- |
55,497 |
| TOTAL |
$ 522,442 |
$ 567,767 |
| LIABILITIES AND EQUITY |
|
|
| CURRENT LIABILITIES: |
|
|
| Accounts payable |
$ 15,196 |
$ 17,710 |
| Current portion of long-term
debt |
615 |
1,024 |
| Accrued expenses and
other |
20,579 |
22,515 |
| Current liabilities held for
sale |
-- |
5,241 |
| Total current
liabilities |
36,390 |
46,490 |
| NON-CURRENT LIABILITIES: |
|
|
| Long-term debt |
32,630 |
170,022 |
| Asset retirement
obligations |
30,493 |
32,837 |
| Other non-current
liabilities |
23,271 |
22,006 |
| Non-current liabilities held
for sale |
-- |
41 |
| Total non-current
liabilities |
86,394 |
224,906 |
| Total liabilities |
122,784 |
271,396 |
| COMMITMENTS AND CONTINGENCIES |
|
|
| PARTNERS' CAPITAL: |
|
|
| Limited partners |
384,961 |
283,339 |
| General partner |
12,650 |
10,801 |
| Accumulated other comprehensive
income |
2,047 |
2,231 |
| Total partners' capital |
399,658 |
296,371 |
| TOTAL |
$ 522,442 |
$ 567,767 |
| |
| RHINO RESOURCE PARTNERS
LP |
| UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS |
| (in thousands, except
per unit data) |
| |
|
|
|
|
| |
Three Months
Ended June 30, |
Six Months Ended
June 30, |
| |
2014 |
2013 |
2014 |
2013 |
| REVENUES: |
|
|
|
|
| Coal sales |
$ 46,907 |
$ 56,963 |
$ 98,142 |
$ 124,377 |
| Other revenues |
8,979 |
8,650 |
17,686 |
15,704 |
| Total revenues |
55,886 |
65,613 |
115,828 |
140,081 |
| COSTS AND EXPENSES: |
|
|
|
|
| Cost of operations (exclusive
of depreciation, depletion and amortization) |
46,529 |
51,465 |
92,928 |
106,237 |
| Freight and handling
costs |
363 |
319 |
664 |
554 |
| Depreciation, depletion and
amortization |
8,930 |
9,906 |
18,162 |
19,997 |
| Selling, general and
administrative (exclusive of depreciation, depletion and
amortization) |
4,700 |
4,995 |
10,257 |
10,483 |
| (Gain) loss on sale/disposal of
assets—net |
(191) |
(10,618) |
(870) |
(9,692) |
| Total costs and
expenses |
60,331 |
56,067 |
121,141 |
127,579 |
| INCOME FROM OPERATIONS |
(4,445) |
9,546 |
(5,313) |
12,502 |
| INTEREST AND OTHER (EXPENSE)/INCOME : |
|
|
|
|
| Interest expense and
other |
(762) |
(1,925) |
(3,946) |
(3,779) |
| Interest income and
other |
266 |
-- |
269 |
-- |
| Equity in net income (loss) of
unconsolidated affiliate |
(1,885) |
(2,076) |
(2,803) |
(3,449) |
| Total interest and other
(expense) |
(2,381) |
(4,001) |
(6,480) |
(7,228) |
| NET (LOSS) BEFORE INCOME TAXES FROM
CONTINUING OPERATIONS |
(6,826) |
5,545 |
(11,793) |
5,274 |
| NET (LOSS) FROM CONTINUING OPERATIONS |
(6,826) |
5,545 |
(11,793) |
5,274 |
| DISCONTINUED OPERATIONS |
|
|
|
|
| (Loss)/income from discontinued
operations |
(52) |
352 |
130,459 |
446 |
| NET (LOSS)/INCOME |
$ (6,878) |
$ 5,897 |
$ 118,666 |
$ 5,720 |
| |
|
|
|
|
| General partner's interest in net
(loss)/income: |
|
|
|
|
| Net (loss)/income from
continuing operations |
$ (136) |
$ 111 |
$ (236) |
$ 105 |
| Net (loss)/income from
discontinued operations |
(1) |
7 |
2,609 |
9 |
| General partner's interest in
net (loss)/income |
$ (137) |
$ 118 |
$ 2,373 |
$ 114 |
| Common unitholders' interest in net
(loss)/income: |
|
|
|
|
| Net (loss)/income from
continuing operations |
$ (3,839) |
$ 3,008 |
$ (6,634) |
$ 2,860 |
| Net (loss)/income from
discontinued operations |
(30) |
191 |
73,312 |
242 |
| Common unitholders' interest in
net (loss)/income |
$ (3,869) |
$ 3,199 |
$ 66,678 |
$ 3,102 |
| Subordinated unitholders' interest in net
(loss)/income: |
|
|
|
|
| Net (loss)/income from
continuing operations |
$ (2,851) |
$ 2,426 |
$ (4,923) |
$ 2,309 |
| Net (loss)/income from
discontinued operations |
(21) |
154 |
54,538 |
195 |
| Subordinated unitholders'
interest in net (loss)/income |
$ (2,872) |
$ 2,580 |
$ 49,615 |
$ 2,504 |
| Net (loss)/income per limited partner unit,
basic: |
|
|
|
|
| Common units: |
|
|
|
|
| Net (loss)/income per unit from
continuing operations |
$ (0.23) |
$ 0.20 |
$ (0.40) |
$ 0.19 |
| Net (loss)/income per unit from
discontinued operations |
(0.00) |
0.01 |
4.40 |
0.01 |
| Net (loss)/income per common
unit, basic |
$ (0.23) |
$ 0.21 |
$ 4.00 |
$ 0.20 |
| Subordinated units |
|
|
|
|
| Net (loss)/income per unit from
continuing operations |
$ (0.23) |
$ 0.20 |
$ (0.40) |
$ 0.19 |
| Net (loss)/income per unit from
discontinued operations |
(0.00) |
0.01 |
4.40 |
0.01 |
| Net (loss)/income per
subordinated unit, basic |
$ (0.23) |
$ 0.21 |
$ 4.00 |
$ 0.20 |
| Net (loss)/income per limited partner unit,
diluted: |
|
|
|
|
| Common units |
|
|
|
|
| Net (loss)/income per unit from
continuing operations |
$ (0.23) |
$ 0.20 |
$ (0.40) |
$ 0.19 |
| Net (loss)/income per unit from
discontinued operations |
(0.00) |
0.01 |
4.40 |
0.01 |
| Net (loss)/income per common
unit, diluted |
$ (0.23) |
$ 0.21 |
$ 4.00 |
$ 0.20 |
| Subordinated units |
|
|
|
|
| Net (loss)/income per unit from
continuing operations |
$ (0.23) |
$ 0.20 |
$ (0.40) |
$ 0.19 |
| Net (loss)/income per unit from
discontinued operations |
(0.00) |
0.01 |
4.40 |
0.01 |
| Net (loss)/income per
subordinated unit, diluted |
$ (0.23) |
$ 0.21 |
$ 4.00 |
$ 0.20 |
| |
|
|
|
|
| Distributions paid per limited partner unit
(1) |
$ 0.445 |
$ 0.445 |
$ 0.89 |
$ 0.89 |
| Weighted average number of limited partner
units outstanding, basic: |
|
|
|
|
| Common units |
16,677 |
15,371 |
16,668 |
15,358 |
| Subordinated units |
12,397 |
12,397 |
12,397 |
12,397 |
| Weighted average number of limited partner
units outstanding, diluted: |
|
|
|
|
| Common units |
16,677 |
15,379 |
16,675 |
15,363 |
| Subordinated units |
12,397 |
12,397 |
12,397 |
12,397 |
| |
|
|
|
|
| (1) No distributions
were paid on the subordinated units for the three and six months
ended June 30, 2014 and 2013. |
|
|
Reconciliations of Adjusted EBITDA
The following tables present reconciliations of Adjusted EBITDA
to the most directly comparable GAAP financial measures for each of
the periods indicated (note: DD&A refers to depreciation,
depletion and amortization). Rhino management believes the
presentation of Adjusted EBITDA that includes the proportionate
share of DD&A and interest expense for Rhino Eastern is
appropriate since the Partnership's portion of Rhino Eastern's net
income that is recognized as a single line item in its financial
statements is affected by these expense items. Since Rhino
does not reflect these proportionate expense items of DD&A and
interest expense in its consolidated financial statements,
management believes that the adjustment for these expense items in
the Adjusted EBITDA calculation is more representative of how
management reviews the results of the Partnership and provides
investors with additional information that they can use to evaluate
Rhino's results.
| ($ in millions) |
Second Quarter 2014 |
Second Quarter 2013 |
Year to Date 2014 |
Year to Date 2013 |
| Net income (loss) from continuing
operations |
$ (6.8) |
$ 5.5 |
$ (11.8) |
$ 5.3 |
| Plus: |
|
|
|
|
| Depreciation, depletion and amortization
(DD&A) |
8.9 |
9.9 |
18.2 |
20.0 |
| Interest expense |
0.8 |
1.9 |
4.0 |
3.8 |
| EBITDA from continuing operations ** |
$ 2.9 |
$ 17.3 |
$ 10.3 |
$ 29.1 |
| Plus: Rhino Eastern DD&A-51% |
0.2 |
0.2 |
0.5 |
0.5 |
| Plus: Rhino Eastern interest expense-51% |
-- |
-- |
-- |
-- |
| Plus: Non-cash write-off of mining equipment
(1) |
-- |
-- |
-- |
1.0 |
| Adjusted EBITDA from continuing operations
** |
3.1 |
17.5 |
10.8 |
30.5 |
| Net (loss)/income from discontinued
operations |
(0.1) |
0.4 |
130.5 |
0.4 |
| DD&A included in net income from
discontinued operations |
-- |
0.7 |
-- |
0.8 |
| Adjusted EBITDA |
$ 3.0 |
$ 18.6 |
$ 141.3 |
$ 31.7 |
** Totals may not foot due to rounding
(1) During the first quarter of 2013, Rhino incurred a
non-cash expense of approximately $1.0 million due to the write-off
of a continuous miner that was damaged at one of the Partnership's
underground mines in Central Appalachia. Management believes
that the isolation and presentation of this specific item to arrive
at Adjusted EBITDA is useful because it enhances investors'
understanding of how management assesses the performance of Rhino's
business. Management believes the adjustment of this item
provides investors with additional information that they can
utilize in evaluating Rhino's performance. Additionally, management
believes the isolation of this item provides investors with
enhanced comparability to prior and future periods of Rhino's
operating results.
| |
Three Months Ended June
30 |
Six Months Ended June
30 |
| ($ in millions) |
2014 |
2013 |
2014 |
2013 |
| Net cash provided by operating
activities |
$ 1.8 |
$ 18.5 |
$ 13.7 |
$ 29.1 |
| Plus: |
|
|
|
|
| Increase in net operating
assets |
2.5 |
-- |
-- |
-- |
| Gain on sale of assets |
0.2 |
10.6 |
131.0 |
9.7 |
| Amortization of deferred
revenue |
0.4 |
0.4 |
0.8 |
0.6 |
| Amortization of actuarial
gain |
0.1 |
-- |
0.2 |
0.1 |
| Interest expense |
0.8 |
1.9 |
4.0 |
3.8 |
| Equity in net income of
unconsolidated affiliate |
-- |
-- |
-- |
-- |
| Less: |
|
|
|
|
| Decrease in net operating
assets |
-- |
9.8 |
2.8 |
7.2 |
| Accretion on interest-free
debt |
-- |
-- |
-- |
0.1 |
| Amortization of advance
royalties |
0.1 |
-- |
0.2 |
0.1 |
| Amortization of debt issuance
costs |
0.2 |
0.4 |
1.6 |
0.6 |
| Equity-based compensation |
0.2 |
0.1 |
0.3 |
0.4 |
| Loss on sale/disposal of
assets |
-- |
-- |
-- |
-- |
| Accretion on asset retirement
obligations |
0.6 |
0.6 |
1.2 |
1.2 |
| Equity in net loss of
unconsolidated affiliates |
1.9 |
2.1 |
2.8 |
3.4 |
| EBITDA |
2.8 |
18.4 |
140.8 |
30.3 |
| Plus: Rhino Eastern DD&A-51% |
0.2 |
0.2 |
0.5 |
0.5 |
| Plus: Rhino Eastern interest expense-51% |
-- |
-- |
-- |
-- |
| Plus: Non-cash write-off of mining equipment
(1) |
-- |
-- |
-- |
1.0 |
| Adjusted EBITDA ** |
3.0 |
18.6 |
141.3 |
31.7 |
| Less: Net (loss)/income from discontinued
operations |
(0.1) |
0.4 |
130.5 |
0.4 |
| Less: DD&A included in net income from
discontinued operations |
-- |
0.7 |
-- |
0.8 |
| Adjusted EBITDA from continuing operations
† |
$ 3.1 |
$ 17.5 |
$ 10.8 |
$ 30.5 |
** Totals may not foot due to rounding
(1) During the first quarter of 2013, Rhino incurred a
non-cash expense of approximately $1.0 million due to the write-off
of a continuous miner that was damaged at one of the Partnership's
underground mines in Central Appalachia. Management believes
that the isolation and presentation of this specific item to arrive
at Adjusted EBITDA is useful because it enhances investors'
understanding of how management assesses the performance of Rhino's
business. Management believes the adjustment of this item
provides investors with additional information that they can
utilize in evaluating Rhino's performance. Additionally, management
believes the isolation of this item provides investors with
enhanced comparability to prior and future periods of Rhino's
operating results.
CONTACT: Investor Contacts:
Scott Morris
+1 859.519.3622
smorris@rhinolp.com