Contura Announces Updated 2020 Guidance and Certain Preliminary, Unaudited Fourth Quarter 2019 Results
March 18, 2020 - Contura Energy, Inc. (NYSE: CTRA), a leading U.S. coal supplier, today reported results for the fourth quarter ending December 31, 2019.
"As we recently announced, Contura made significant progress in achieving operational efficiencies and overhead cost containment improvements in the fourth quarter, and we remain steadfastly committed to progress on these goals," said chairman and chief executive officer, David Stetson. "In the early months of 2020 we have continued to build on the momentum, executing our strategy through a more nimble operating culture that is yielding additional operational productivity advances."
"In addition to achieving nearly a 10% increase in feet per shift at our CAPP underground mines in the fourth quarter, we are pleased to announce that the Road Fork 52 mine started production as scheduled on February 26," said Jason Whitehead, Contura's chief operating officer. "This low vol met mine, which we expect to largely serve as replacement tons for existing operations that are mining out, has annual production capacity up to 1.3 million tons a year with expected cost of coal sales of approximately $70 per ton."
Contura reported a net loss from continuing operations of $191.9 million, or $10.54 per diluted share, for the fourth quarter 2019. The fourth quarter loss includes a pre-tax non-cash asset impairment charge of $60.5 million and a goodwill impairment of $124.4 million. In the third quarter 2019, the company had a net loss from continuing operations of $43.6 million or $2.29 per diluted share.
Total Adjusted EBITDA was $31.5 million for the fourth quarter, compared with $40.0 million in the third quarter.
The CAPP - Met revenue decline in the fourth quarter was driven by a 12 percent decline in price realizations relative to the third quarter, partially offset by increased volumes, while CAPP - Thermal revenues declined as a result of lower prices and fewer tons sold. In the NAPP segment, the revenues were reduced due to slightly lower shipments in the fourth quarter versus the third quarter.
As a result of further weakening in the metallurgical coal market in the fourth quarter, our average CAPP - Met coal sales realization for the fourth quarter 2019 declined 12 percent to $94.98 per ton over the prior quarter. Thermal markets also saw softer prices in the fourth quarter as our CAPP - Thermal coal average price was down 9 percent from the third quarter, while the average NAPP realization was essentially flat with the prior quarter.
All the segments saw improvements in cost of coal sales compared to third quarter, with costs in CAPP - Met for the quarter averaging more than $5.00 lower than in the third quarter. The primary driver was higher productivity as measured by clean tons per foot and feet per shift.
Our productivity continued to show similar improvements in the early part of the first quarter 2020. Overall, our deep mines in the CAPP region realized a 9 percent increase in feet per shift in the fourth quarter over the prior quarter.
The fourth quarter NAPP cost of coal sales also saw meaningful reduction as a longwall move and employee vacations had resulted in an elevated third quarter 2019 cost per ton. CAPP - Thermal cost of coal sales were significantly lower in the fourth quarter as the thermal deep mines feet per shift increased by 12 percent over the third quarter. In addition, the third quarter CAPP - Thermal cost was negatively impacted by approximately a $3.00 per ton environmental settlement.
As a result of our management restructuring in the fourth quarter 2019, SG&A expenses, excluding non-cash stock compensation expense of $4.7 million and one-time expenses of $8.0 million, primarily associated with management restructuring, declined by more than $2 million from the third quarter to $13.1 million.
Liquidity and Capital Resources
"Despite the difficult market conditions in the fourth quarter, Contura's cash balance increased by more than $60 million over that period, ending the year with more than $325 million in liquidity," said Andy Eidson, Contura's chief financial officer. "In these early months of 2020, we continue to be keenly focused on cost savings and cash optimization amid widespread uncertainty related to the coronavirus and its potential impact on global economies and specifically met markets."
Cash used in operating activities for the fourth quarter 2019, including discontinued operations, was $5.7 million, and capital expenditures for the fourth quarter were $48.2 million. In the prior period, the cash provided by operating activities was $20.4 million and capital expenditures were $60.3 million.
At the end of December 2019, Contura had $212.8 million in unrestricted cash and $165.7 million in restricted cash, deposits and investments. Unrestricted cash increased $60.2 million in the fourth quarter, which included a tax refund of $65.3 million. Total long-term debt, including the current portion of long-term debt as of December 31, 2019, was approximately $593.0 million. At the end of the fourth quarter, the company had total liquidity of $327.8 million, including cash and cash equivalents of $212.8 million and $115.0 million of unused commitments available under the Asset-Based Revolving Credit Facility. As of December 31, 2019, the company had no borrowings and $99.8 million in letters of credit outstanding under the Asset-Based Revolving Credit Facility.
2020 Full-Year Guidance
The company is maintaining its total 2020 coal shipments guidance range of 20.7 million tons to 22.7 million tons, with CAPP - Met volume remaining at 12.0 million to 12.6 million tons and CAPP - Thermal volume remaining at 2.7 million tons to 3.3 million tons. NAPP volumes also remain at the previous range of 6.0 million tons to 6.8 million tons.
For 2020, Contura has committed and priced approximately 52% of CAPP - Met at an average expected price of $97.91 per ton, while we are 100% committed and priced at an average price of $55.95 per ton for CAPP - Thermal and 100% committed and priced for NAPP at an average price of $43.43 per ton.
The company also expects 2020 costs to remain unchanged with CAPP - Met cost of coal sales per ton at a range of $76.00 to $81.00. CAPP - Thermal is expected to be in the range of $56.00 to $60.00 per ton and NAPP in the range of $34.00 to $38.00 per ton.
For 2020, the company expects its SG&A to be in the range of $50 million to $55 million, excluding non-recurring items and stock compensation. We are reducing our 2020 capital expenditures guidance by $30 million to a range of $145 million to $165 million; maintaining depreciation, depletion and amortization between $230 million and $260 million; and cash interest expense in the range of $48 million and $52 million.
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