 
|
Signature Sponsor
November 2, 2023 -
Alpha Metallurgical Resources, Inc. (NYSE: AMR), a leading U.S. supplier of metallurgical products for the steel industry, has reported financial results for the third quarter ending September 30, 2023. "As we recently disclosed, our third quarter results were impacted by some challenging events that resulted in lowered shipment guidance for the year," said Andy Eidson, Alpha's chief executive officer. "Part of this was due to a mechanical failure experienced during the quarter at Dominion Terminal Associates, the Newport News facility where we export a majority of our coal. The port infrastructure is in need of capital investment to minimize downtime and operational interruptions. Therefore, we are developing plans to make the necessary investments over a period of several years, both to spread out the expenditures and to methodically work through the improvements in the least disruptive way, allowing for use of the facility while renovations occur." Eidson continued: "Despite the challenges of Q3, our team continues to operate safely, perform well, and advance our long-term goals. The share buyback program is a significant example of our ability to execute, with nearly $940 million in repurchases completed since the start of the program and approximately $560 million left on the board's newly-increased authorization. Following the dividend payment for this quarter, we will consolidate our capital return efforts to focus on share repurchases and expect to continue with that approach as long as buybacks make sense from a market, trading price, and valuation perspective. Additionally, we have successfully refinanced our ABL, achieving superior terms to the previous facility thanks to the company's improved financial position, the most important of which was achieving a four-year term on the facility. On the operational side, our years-long transition to a pure-play metallurgical coal producer is now complete following the closure of Slabcamp, our final remaining thermal mine. Our outlook for 2024 is bright, with a solid base of committed tonnage to domestic customers and the balance of our output available for export." Financial Performance Alpha reported net income of $93.8 million, or $6.65 per diluted share, for the third quarter 2023, as compared to net income of $181.4 million, or $12.16 per diluted share, in the second quarter. For the third quarter, total Adjusted EBITDA was $153.9 million, compared to $258.5 million in the second quarter. Coal Revenues Third quarter net realized pricing for the Met segment was $154.73 per ton and net realization in the All Other category was $68.32 per ton. Cost of Coal Sales Alpha's Met segment cost of coal sales increased to an average of $109.95 per ton in the third quarter, compared to $106.35 per ton in the second quarter of 2023. Cost of coal sales for the All Other category improved to $84.73 per ton in the third quarter, compared to $88.59 per ton in the second quarter. Liquidity and Capital Resources Cash provided by operating activities in the third quarter decreased to $157.2 million as compared to $317.2 million in the second quarter. Capital expenditures for the third quarter were $54.7 million compared to $54.9 million for the second quarter. As of September 30, 2023, the company had total liquidity of $390.1 million, including cash and cash equivalents of $296.1 million and $94.1 million of unused availability under the ABL. As of September 30, 2023, the company had no borrowings and $60.9 million in letters of credit outstanding under the ABL. Total long-term debt, including the current portion of long-term debt as of September 30, 2023, was $10.5 million and consisted primarily of equipment financing obligations. Asset-Based Revolving Credit Facility (ABL) Refinance The company successfully completed the refinancing of its Asset-Based Revolving Credit Facility, which was previously set to expire in December 2024. On October 27, 2023, the company terminated its existing ABL agreement and entered into a new facility that matures in October 2027, with Regions Bank as the administrative agent and lead arranger along with ServisFirst Bank and Texas Capital Bank serving as joint lead arrangers. The new ABL facility allows the company to borrow cash or obtain letters of credit on a revolving basis up to $155 million. Under the terms of the agreement, interest on letters of credit will be 3.3 percent. The terms of the credit facility include customary representations and warranties, customary affirmative and negative covenants, and customary events of default. 'We are pleased to complete the process of refinancing the ABL, which serves as an important tool for the company," said Todd Munsey, Alpha's chief financial officer. "Alpha's improved credit metrics positively influenced our ability to negotiate more favorable terms and a longer duration than our prior facility, all of which benefits the company and further strengthens our financial position." Dividend Program On October 31, 2023, Alpha's board of directors declared a quarterly cash dividend payment of $0.50 per share, which will become payable on December 15, 2023 for holders of record as of December 1, 2023. As previously announced, the fixed dividend program will cease at year-end to fully focus the company's capital return efforts on its share buyback program. Share Repurchase Program On October 31, 2023, Alpha's board of directors increased its authorization for the company's share repurchase program by $300 million, bringing the authorization to $1.5 billion for the repurchase of the company's common stock. As of October 27, 2023, the company has acquired approximately 6.1 million shares of common stock at a cost of approximately $940 million. The number of common stock shares outstanding as of October 27, 2023 was 13,283,594, not including the potentially dilutive effect of unvested equity awards. The timing and amount of share repurchases will continue to be determined by the company's management based on its evaluation of market conditions, the trading price of the stock, applicable legal requirements, compliance with the provisions of the company's debt agreements, and other factors. Dominion Terminal Associates Multi-Year Capital Investment Plan The Dominion Terminal Associates (DTA) facility in Newport News, Virginia, in which Alpha has a sixty-five percent ownership interest, is in need of capital investment to maximize functionality and minimize downtime due to mechanical issues. Together with DTA leadership and ownership partners, Alpha is evaluating a needs assessment and rough timeline for the recommended work. Beyond the company's share of routine operating costs which are expected to be approximately $20 million in 2024, Alpha expects that it will invest up to an incremental $25 million per year for infrastructure and equipment upgrades at DTA over the next 6 years. Eidson commented on the capital spending needs: "DTA is one of Alpha's most important strategic assets because it connects us with our customers across the globe. We rely on its equipment to unload our coal from railcars, sort it into stockpiles, and then load the product into seafaring vessels, all of which occurs on a tight timeline. As we have experienced this year, a mechanical repair or equipment outage can disrupt these intricate logistics schedules, causing delays in shipments and revenue. Therefore, Alpha is proactively planning for a multi-year investment that we expect will significantly reduce downtime and benefit the company well into the future." Issuance of 2024 Operational Guidance The company is issuing operational guidance for the 2024 calendar year. Due to the closure of Slabcamp, Alpha's last remaining thermal coal mine, the company expects virtually all of its 2024 financial activity to be reported within the Met segment. For sales volumes, the company expects to ship between 15.5 million and 16.5 million metallurgical tons in 2024, as well as incidental thermal coal of between 0.9 million and 1.3 million tons, bringing total expected 2024 shipments to a range of 16.4 million to 17.8 million tons. For cost of coal sales, Alpha is guiding to a range of $110.00 to $116.00 per ton. The 2024 guidance range for selling, general and administrative costs is $60 million to $66 million, excluding non-recurring expenses and non-cash stock compensation. Idle operations expense is anticipated to be between $18 million and $28 million. The company expects net cash interest income of between $2 million to $8 million, and depreciation, depletion and amortization between $140 million to $160 million. Capital expenditures for 2024 are expected to be between $210 million and $240 million, which includes sustaining maintenance capital, planned projects to invest in mine development, and some carryover from 2023 due to timing and availability of supplies and contract labor. In connection with expected capital investments at DTA, Alpha is guiding to a 2024 range of $40 million to $50 million for capital contributions to equity affiliates. The cash contribution range includes both the cash needed for normal operations of the facility along with the amounts expected to be spent in 2024 related to the facility upgrades. In 2024, the company expects a tax rate of between 12% to 17%. 2023 Performance Update The company is increasing its 2023 guidance range for depreciation, depletion and amortization to a range of $135 million to $145 million, up from the prior guidance of $115 million to $135 million. As of October 25, 2023 for the 2023 calendar year, Alpha has committed and priced approximately 88% of its metallurgical coal within the Met segment at an average price of $182.08 per ton and 100% of thermal coal in the Met segment at an average expected price of $102.45 per ton. In the All Other category, the company is 95% committed and priced at an average price of $92.23 per ton. To see the full results with financial figures included, click here. |
|