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Ramaco Resources, Inc. Reports Third Quarter 2019 Financial Results

- Ramaco's strong balance sheet, low liabilities, and low-cost mine profile position us well to withstand and opportunistically take advantage of current market weakness. Our strategy of prudent production growth remains intact.

- Adjusted EBITDA was $13.6 million in the third quarter of 2019, which was 24% above the same period in 2018. Cash costs per ton sold were negatively affected by an unusually high inventory reduction in the third quarter, with sales volume meaningfully exceeding production volume, as Ramaco worked down inventory that had built up as a result of last year's silo failure.

- Third quarter sales of Company produced tons totaled 510,000, equaling our strongest quarter on record.

- Third quarter realized pricing of $111/ton on Company produced coal was our second highest quarter on record at prices in excess of 120% of the Platt's index at our quality levels as of this release. The higher pricing secured was reflective of our decision in 2018 to commit the majority of our 2019 sales tons into the domestic markets.

LEXINGTON, Ky., Nov. 5, 2019 /PRNewswire/ -- Ramaco Resources, Inc. (METC) ("Ramaco Resources" or the "Company") today reported third quarter net income of $5.5 million, or $0.14 per fully diluted share for the quarter ended September 30, 2019, as compared to a net income of $6.2 million, or $0.15 per fully diluted share in the prior year quarter ended September 30, 2018. The Company's adjusted earnings before interest, taxes, depreciation, amortization and equity-based compensation expenses ("Adjusted EBITDA") was $13.6 million for the three months ended September 30, 2019, as compared with Adjusted EBITDA of $11.0 million for the three months ended September 30, 2018. Adjusted EBITDA for the nine months, year over year was roughly 32% higher in 2019. Key operational and financial metrics are presented below:










Key Metrics










3Q19

2Q19

Change

3Q18

Change

3Q19 YTD

3Q18 YTD

Change

Sales of Company Produced Tons ('000)

510

499

2%

510

0%

1,452

1,406

3%

Revenue ($mm)

$61.4

$65.8

-7%

$62.2

-1%

$184.6

$183.4

1%

Cost of Sales ($mm)

$45.0

$43.2

4%

$49.4

-9%

$129.2

$141.6

-9%

Pricing of Company Produced ($/Ton)

$111

$116

-4%

$90

23%

$110

$91

21%

Cash Cost of Sales - Company Produced ($/Ton)

$80

$71

13%

$65

23%

$73

$62

18%

Cash Margins on Company Produced ($/Ton)

$31

$45

-31%

$25

24%

$37

$29

29%

Net Income ($mm)

$5.5

$10.6

-48%

$6.2

-11%

$23.0

$21.7

6%

Adjusted EBITDA ($mm)

$13.6

$19.1

-29%

$11.0

24%

$46.4

$35.2

32%

Capex ($mm)

$14.3

$11.5

24%

$12.4

15%

$34.0

$39.9

-15%

Diluted Earnings per Share

$0.14

$0.26

-46%

$0.15

-7%

$0.56

$0.54

4%










Third Quarter 2019 Summary

Year over Year Quarterly Comparison
Overall sales of Company produced tons in the third quarter of 2019 were 510,000 thousand tons, the same as in the third quarter of 2018. Cash margins on Company produced coal were $31 per ton in the third quarter of 2019, up 24% over the same period of last year, arising from 2019 pricing improvements, partially offset by higher production costs.  Similarly, Adjusted EBITDA improved by 24% in the 2019 period.

2019 Quarter Over Quarter Comparison
Overall sales volumes of Company produced tons in the third quarter of 2019 were up 2% from the second quarter of 2019.  Our cash margin on Company produced coal declined in the sequential period.  This decline was caused principally by higher costs.  Cash costs per ton sold on Company produced coal were $80 in the third quarter of 2019 compared to $71 in the second quarter of 2019. The $80 per ton figure includes costs of our Berwind mine, which is still in development and thus has higher cash costs. At Elk Creek, cash costs per ton sold were $73 in the third quarter of 2019. Adjusted EBITDA for the third quarter of 2019 was $13.6 million as compared to $19.1 million for the second quarter of 2019, down 29%. Third quarter 2019 cash costs per ton sold were negatively affected by an unusually high inventory reduction, with sales volume meaningfully exceeding production volume, as Ramaco worked down inventory that had built up as a result of last year's silo failure.

Randall Atkins, Ramaco Resources' Executive Chairman remarked, "The met coal space is experiencing one of its periodic price downdrafts. The depth and extent of this downturn remains to be seen. Since the Company was essentially created in a similar period of market turbulence, we feel comfortable that we are structured to withstand market pressures such as today. We also remain poised to take advantage of opportunities to continue to prudently expand production, while maintaining our low cost, low debt profile."

Atkins continued, "We locked in 2019 domestic sales last year at what is now comfortably above current market prices. This year we have entered into domestic forward sales for 2020 mostly from our lower quality coal portfolio. We have preserved the sales optionality to sell our more valuable higher quality coals for export in 2020. We have additionally maintained optionality to pivot production levels to between 1.8 to 2.3 million tons next year depending on then current market conditions. Given competitive weakness with some of our higher leveraged and higher cost peers, we are also sensing both new market and asset disposition opportunities. We look forward to finishing 2019 as our strongest year ever. We approach 2020 with a sense of both discipline and opportunity."

Additional Financial Results

At September 30, 2019, the Company had approximately $5.5 million of cash on hand, $30.1 million of accounts receivable and $16.4 million of availability under its revolving credit facility. Free cash flow generated during 2019, as well as borrowings available through our revolving credit facility, are expected to be used to fund working capital, mine expansion and related capital expenditures.

In the nine months ended September 30, 2019, the Company recorded income tax expense of $4.7 million for an annual effective tax rate of approximately 17%. Estimated cash taxes payable for 2019 are expected to be less than $0.1 million.

Capital expenditures totaled approximately $14.3 million during the third quarter of 2019 and approximately $34.0 million through the nine months ended September 30, 2019. Year to date capital expenditures includes $9.2 million of capitalized development costs primarily for the Company's Berwind development mine.  

The following summarizes some of the key sales, production and financial metrics for the periods noted:



















Three months ended


Nine months ended



September 30,


June 30,


September 30,


September 30,


September 30,

In thousands, except per ton amounts


2019


2019


2018


2019


2018

















Sales Volume
















Company



510



499



510



1,452



1,406

Purchased



17



26



90



78



331

Total



527



525



600



1,530



1,737

















Company Production
















Elk Creek Mining Complex



405



423



422



1,269



1,260

Berwind Development Deep Mine



55



53



27



140



67

Total



460



476



449



1,409



1,327

















Company Financial Metrics(a)
















Average revenue per ton


$

111


$

116


$

90


$

110


$

90

Average cash costs of coal sold



80



71



65



73



62

Average cash margin per ton


$

31


$

45


$

25


$

37


$

28

















Elk Creek Financial Metrics(a)
















Average revenue per ton


$

109


$

115


$

88


$

109


$

89

Average cash costs of coal sold



73



66



63



68



60

Average cash margin per ton


$

36


$

49


$

25


$

41


$

29

















Purchased Coal Financial Metrics(a)
















Average revenue per ton


$

131


$

124


$

101


$

127


$

100

Average cash costs of coal sold



113



123



97



114



95

Average cash margin per ton


$

18


$

1


$

4


$

13


$

5

















Capital Expenditures


$

14,306


$

11,538


$

12,405


$

34,043


$

39,883


(a)  Excludes transportation.

Michael Bauersachs, Ramaco Resources' President and CEO commented, "It is no secret that current market conditions are challenging. However, Ramaco's low cost, low debt, and low legacy liability profile allows us to make prudent, long-term decisions, that many others don't have the luxury of doing."

"Our decision to sell the majority of our tons into the domestic market has served us well in 2019. We are essentially sold out for 2019, with approximately 1.9 million tons of committed fixed priced business at roughly $110 per ton. For 2020, we have entered into new commitments totaling roughly 1.3 million tons at average prices of $91 per ton. The placement of these tons in 2020 creates a predictable baseload level of sales to support our existing mines. While the overall pricing decline is due to a number of factors, including weak domestic and export steel markets, I would note that two thirds of the coal that we committed for 2020 is our lesser quality product. This change from last year was largely due to more higher quality high vol A coal having come back to the domestic market in 2020, putting pressure on the high vol A/B type coals. As a result, we targeted shipping the majority of our higher quality coal into the export market in 2020."

 

2019 Estimated Production, Sales, Cost and Capital Expenditure Guidance

(In thousands, except per ton amounts)










2019 Guidance


2018 Actuals








Company Production







Elk Creek



1,630



1,669

Berwind Development Deep Mine



200



81

Total



1,830



1,750








Sales Mix







Metallurgical



1,920



2,066

Steam



50



82

Total



1,970



2,148








Cost Per Ton (a)







Elk Creek


$

66


$

60








Capital Expenditures (b)


$

34,500


$

43,400


(a)  Cost per ton guidance does not include the potential impact of inventory adjustments.

(b)  Capital expenditure guidance excludes capitalized development costs.

 

Committed 2019 Sales Volume (c)

(In thousands, except per ton amounts)









Volume


Average Price

Committed 2019 Sales Volume






Domestic, fixed priced


1,458


$

110

Export, fixed priced


447


$

111

Total, fixed priced


1,905


$

110

Indexed priced


90




Total committed tons


1,995





(c)  As of September 30, 2019, amounts include less than 0.1 million tons of purchased coal and less than 0.1 million tons of thermal coal by-product.

 

About Ramaco Resources, Inc.

Ramaco Resources, Inc. is an operator and developer of high-quality, low cost metallurgical coal in southern West Virginia, southwestern Virginia and southwestern Pennsylvania. Its executive offices are in Lexington, Kentucky, with operational offices in Charleston, West Virginia. The Company has five active mines within two mining complexes at this time.

News and additional information about Ramaco Resources, including filings with the Securities and Exchange Commission, are available at http://www.ramacoresources.com. For more information, contact investor relations at (859) 244-7455.

Third Quarter Earnings Conference Call

Ramaco Resources will hold its quarterly conference call and webcast at 9:00 AM Eastern Time (ET) on Wednesday, November 6, 2019 to present its results for the third quarter of 2019. Our third quarter 2019 slide deck will be available at https://www.ramacoresources.com/investors-center/events-calendar/ immediately before the conference call.

The conference call can be accessed by calling (844) 852-8392 domestically or (703) 639-1226 internationally. The webcast for this release will be accessible by visiting https://edge.media-server.com/mmc/p/4rvreh2o.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained in this news release constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements represent Ramaco Resources' expectations or beliefs concerning 2019 guidance, future events, anticipated revenue, costs and expectations regarding operating results, and it is possible that the results described in this news release will not be achieved. These forward-looking statements are subject to risks, uncertainties and other factors, many of which are outside of Ramaco Resources' control, which could cause actual results to differ materially from the results discussed in the forward-looking statements. These factors include, without limitation, unexpected delays in our current mine development activities, failure of our sales commitment counterparties to perform, increased government regulation of coal in the United States or internationally, or unexpected decline of demand for coal in export markets and underperformance of the railroads. Any forward-looking statement speaks only as of the date on which it is made, and, except as required by law, Ramaco Resources does not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. New factors emerge from time to time, and it is not possible for Ramaco Resources to predict all such factors. When considering these forward-looking statements, you should keep in mind the risk factors and other cautionary statements found in Ramaco Resources' filings with the Securities and Exchange Commission ("SEC"), including its Annual Report on Form 10-K. The risk factors and other factors noted in Ramaco Resources' SEC filings could cause its actual results to differ materially from those contained in any forward-looking statement.

 

Ramaco Resources, Inc.
Consolidated Statements of Operations

















Three months ended September 30, 


Nine months ended September 30, 

In thousands, except per share amounts


2019


2018


2019


2018














Revenue


$

61,380


$

62,166


$

184,601


$

183,387














Cost and expenses













Cost of sales (exclusive of items shown separately below)



44,983



49,406



129,208



141,597

Asset retirement obligation accretion



128



124



383



370

Depreciation and amortization



5,353



3,348



14,291



8,741

Selling, general and administrative



4,464



3,484



13,127



10,608

Total cost and expenses



54,928



56,362



157,009



161,316

Operating income



6,452



5,804



27,592



22,071

Other income



573



1,036



1,063



2,038

Interest expense, net



(342)



(566)



(951)



(980)

Income before tax



6,683



6,274



27,704



23,129

Income tax expense



1,133



63



4,658



1,448

Net income


$

5,550


$

6,211


$

23,046


$

21,681














Earnings per common share













Basic earnings per share


$

0.14


$

0.15


$

0.56


$

0.54

Diluted earnings per share


$

0.14


$

0.15


$

0.56


$

0.54














Basic weighted average shares outstanding



40,936



40,082



40,804



40,024

Diluted weighted average shares outstanding



40,936



40,329



40,804



40,271














 

Ramaco Resources, Inc.

Consolidated Balance Sheets








In thousands, except share amounts


September 30, 2019


December 31, 2018








Assets







Current assets







Cash and cash equivalents


$

5,498


$

6,951

Accounts receivable



30,054



10,729

Inventories



12,644



14,185

Prepaid expenses and other



3,324



3,154

Total current assets



51,520



35,019








Property, plant and equipment, net



171,945



149,205

Advanced coal royalties



3,250



3,045

Other assets



1,041



975

Total Assets


$

227,756


$

188,244








Liabilities and Stockholders' Equity







Liabilities







Current liabilities







Accounts payable


$

13,851


$

16,393

Accrued expenses



11,156



8,094

Asset retirement obligations



734



71

Current portion of long-term debt



5,000



5,000

Other





287

Total current liabilities



30,741



29,845








Asset retirement obligations



12,665



12,707

Long-term debt, net



11,766



4,474

Deferred tax liability



4,670



109

Other long-term liabilities



701



Total liabilities



60,543



47,135








Commitments and contingencies












Stockholders' Equity







Preferred stock, $0.01 par value





Common stock, $0.01 par value



409



401

Additional paid-in capital



153,976



150,926

Retained earnings (deficit)



12,828



(10,218)

Total stockholders' equity



167,213



141,109

Total Liabilities and Stockholders' Equity


$

227,756


$

188,244

 

Ramaco Resources, Inc.

Statement of Cash Flows










Nine months ended
September 30, 

In thousands


2019


2018








Cash flows from operating activities







Net income


$

23,046


$

21,681

Adjustments to reconcile net income to net cash from operating activities:







Accretion of asset retirement obligations



383



370

Depreciation and amortization



14,291



8,741

Amortization of debt issuance costs



43



406

Stock-based compensation



3,058



1,940

Deferred income taxes



4,561



1,448

Changes in operating assets and liabilities:







Accounts receivable



(19,325)



(24,122)

Prepaid expenses and other current assets



(170)



(942)

Inventories



1,541



2,107

Advanced coal royalties



(205)



(172)

Other assets and liabilities



634



(307)

Accounts payable



(5,291)



5,236

Accrued expenses



3,062



4,087

Net cash from operating activities



25,628



20,473








Cash flow from investing activities:







Purchases of property, plant and equipment



(34,043)



(39,883)

Proceeds from maturities of investment securities





5,200

Net cash from investing activities



(34,043)



(34,683)








Cash flows from financing activities







Proceeds from borrowings



58,050



13,000

Proceeds from notes payable - related party





3,000

Payments of debt issuance cost





(569)

Repayment of borrowings



(50,801)



(1,000)

Repayments of financed insurance payable



(287)



(673)

Net cash from financing activities



6,962



13,758








Net change in cash and cash equivalents



(1,453)



(452)

Cash and cash equivalents, beginning of period



6,951



5,934

Cash and cash equivalents, end of period


$

5,498


$

5,482








 

Reconciliation of Non-GAAP Measure

Adjusted EBITDA

Adjusted EBITDA is used as a supplemental non-GAAP financial measure by management and external users of our financial statements, such as industry analysts, investors, lenders and rating agencies. We believe Adjusted EBITDA is useful because it allows us to more effectively evaluate our operating performance.

We define Adjusted EBITDA as net income plus net interest expense, equity-based compensation, depreciation and amortization expenses and any transaction related costs. A reconciliation of income, net of income taxes to Adjusted EBITDA is included below. Adjusted EBITDA is not intended to serve as an alternative to U.S. GAAP measures of performance and may not be comparable to similarly-titled measures presented by other companies.
















Three months ended September 30, 


Nine months ended September 30, 

(In thousands)


2019


2018


2019


2018














Reconciliation of Net Income to Adjusted EBITDA













Net income


$

5,550


$

6,211


$

23,046


$

21,681

Depreciation and amortization



5,353



3,348



14,291



8,741

Interest expense, net



342



566



951



980

Income taxes



1,133



63



4,658



1,448

EBITDA



12,378



10,188



42,946



32,850

Stock-based compensation



1,104



695



3,058



1,940

Accretion of asset retirement obligation



128



124



383



370

Adjusted EBITDA


$

13,610


$

11,007


$

46,387


$

35,160














 

Non-GAAP revenue and cash cost per ton

Non-GAAP revenue per ton (FOB mine) is calculated as coal sales revenue less transportation costs, divided by tons sold. Non-GAAP cash cost per ton sold is calculated as cash cost of coal sales less transportation costs, divided by tons sold.  We believe revenue per ton (FOB mine) and cash cost per ton provides useful information to investors as these enable investors to compare revenue per ton and cash cost per ton for the Company against similar measures made by other publicly-traded coal companies and more effectively monitor changes in coal prices and costs from period to period excluding the impact of transportation costs which are beyond our control. The adjustments made to arrive at these measures are significant in understanding and assessing the Company's financial condition.  Revenue per ton sold (FOB mine) and cash cost per ton are not measures of financial performance in accordance with U.S. GAAP and therefore should not be considered as an alternative to revenue and cost of sales under U.S. GAAP.  The tables below show how we calculate non-GAAP revenue and cash cost per ton:

Non-GAAP revenue per ton






















Three months ended September 30, 2019


Three months ended September 30, 2018



Company


Purchased





Company


Purchased




(In thousands, except per ton amounts)


Produced


Coal


Total


Produced


Coal


Total




















Revenue


$

59,083


$

2,297


$

61,380


$

51,963


$

10,203


$

62,166

Less: Adjustments to reconcile to Non-GAAP revenue (FOB mine)



















Transportation costs



(2,384)



(52)



(2,436)



(6,185)



(1,091)



(7,276)

Non-GAAP revenue (FOB mine)


$

56,699


$

2,245


$

58,944


$

45,778


$

9,112


$

54,890

Tons sold



510



17



527



510



90



600

Revenue per ton sold (FOB mine)


$

111


$

131


$

112


$

90


$

101


$

91

 













Three months ended June 30, 2019



Company


Purchased




(In thousands, except per ton amounts)


Produced


Coal


Total











Revenue


$

62,516


$

3,245


$

65,761

Less: Adjustments to reconcile to Non-GAAP revenue (FOB mine)










Transportation costs



(4,695)



(42)



(4,737)

Non-GAAP revenue (FOB mine)


$

57,821


$

3,203


$

61,024

Tons sold



499



26



525

Revenue per ton sold (FOB mine)


$

116


$

123


$

116

 






















Nine months ended September 30, 2019


Nine months ended September 30, 2018



Company


Purchased





Company


Purchased




(In thousands, except per ton amounts)


Produced


Coal


Total


Produced


Coal


Total




















Revenue


$

174,299


$

10,302


$

184,601


$

145,736


$

37,651


$

183,387

Less:  Adjustments to reconcile to Non-GAAP revenue (FOB mine)



















Transportation costs



(14,098)



(424)



(14,522)



(18,173)



(4,283)



(22,456)

Non-GAAP revenue (FOB mine)


$

160,201


$

9,878


$

170,079


$

127,563


$

33,368


$

160,931

Tons sold



1,452



78



1,530



1,406



331



1,737

Revenue per ton sold (FOB mine)


$

110


$

127


$

111


$

91


$

101


$

93

 

Non-GAAP cash cost per ton






















Three months ended September 30, 2019


Three months ended September 30, 2018



Company


Purchased





Company


Purchased




(In thousands, except per ton amounts)


Produced


Coal


Total


Produced


Coal


Total




















Cost of sales


$

42,996


$

1,987


$

44,983


$

39,584


$

9,822


$

49,406

Less: Adjustments to reconcile to Non-GAAP cash cost of sales



















Transportation costs



(2,384)



(52)



(2,436)



(6,227)



(1,116)



(7,343)

Non-GAAP cash cost of sales


$

40,612


$

1,935


$

42,547


$

33,357


$

8,706


$

42,063

Tons sold



510



17



527



510



90



600

Cash cost per ton sold


$

80


$

113


$

81


$

65


$

97


$

70

 













Three months ended June 30, 2019



Company


Purchased




(In thousands, except per ton amounts)


Produced


Coal


Total











Cost of sales


$

39,811


$

3,408


$

43,219

Less: Adjustments to reconcile to Non-GAAP cash cost of sales










Transportation costs



(4,504)



(234)



(4,738)

Non-GAAP cash cost of sales


$

35,307


$

3,174


$

38,481

Tons sold



499



26



525

Cash cost per ton sold


$

71


$

122


$

73

 






















Nine months ended September 30, 2019


Nine months ended September 30, 2018



Company


Purchased





Company


Purchased




(In thousands, except per ton amounts)


Produced


Coal


Total


Produced


Coal


Total




















Cost of sales


$

119,911


$

9,297


$

129,208


$

105,805


$

35,792


$

141,597

Less:  Adjustments to reconcile to Non-GAAP cash cost of sales



















Transportation costs



(14,031)



(424)



(14,455)



(18,738)



(4,416)



(23,154)

Non-GAAP cash cost of sales


$

105,880


$

8,873


$

114,753


$

87,067


$

31,376


$

118,443

Tons sold



1,452



78



1,530



1,406



331



1,737

Cash cost per ton sold


$

73


$

114


$

75


$

62


$

95


$

68

 

We do not provide reconciliations of our outlook for cash cost per ton to cost of sales in reliance on the unreasonable efforts exception provided for under Item 10(e)(1)(i)(B) of Regulation S-K. We are unable, without unreasonable efforts, to forecast certain items required to develop the meaningful comparable GAAP cost of sales. These items typically include non-cash asset retirement obligation accretion expenses, mine idling expenses and other non-recurring indirect mining expenses that are difficult to predict in advance in order to include a GAAP estimate.

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