HCC - Earnings call transcript Q2 2018

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Operator

Good afternoon, everyone. My name is Gary, and I will be your conference operator today. At this time, I would like to welcome everyone to the Warrior Met Coal Second Quarter 2018 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator

I contain asked results forward-looking those materially begin, today's may note discussion from may statements, discussed. have we to been that differ Before and actual

regarding the tables I have this measures on been the release, information section For has refer the note discussed accompanying call also the Company's earnings statements, the posted located and filings. release during reconciliations asked to of more the of SEC Company's Company's forward-looking at Investors that press the Company www.warriormetcoal.com. to in please financial non-GAAP website

In addition event to this has supplemental at to the the a presentation note, Company Please is earnings being website release, slide its www.warriormetcoal.com. posted the recorded. Investors of section brief

Scheller, Dale Officer and begin Here Met Coal; Chief Warrior Boyles, your Chief Executive Scheller, today the remarks. Mr. to discuss you Mr. of Officer. Company's Financial Mr. results may Walt are

Walter Scheller

demand results. us will to Thanks, discuss and our operator. the additional and will taking Hello, then quarter time my for detail, everyone, operations you thank to may the today to our continuing leverage you you in results After our remarks, join and any strength questions the had our for second review Dale to We product. have the of solid opportunity second another market ask quarter healthy premium have. the performance and

quarter the performance for moderated that mines. the one of volumes for volume line in better volume we in maintenance tracked with roughly shutdown our our was at in somewhat the in production second a expectations. was equivalent or a short quarter, Production scheduled tons the While The from expected than same first the XXXX. quarter saw record with $X.X week we amount the given actual to of entered than produced better our million highs quarter

the than that keeping were first In volumes prior from lower metric were to elevated sales saw ton condition around prices slightly market the $XXX quarter per all second year we quarter period. highs. $XXX the Our

Chinese Cyclone Aurizon On maintenance, issues dispute to the continued issues specific Iris, supply demand be impact. and the continued of heavy conditions. Customer The contributing related global global Chinese Restocking and out New after production side resilient to demand steel production growth supply production continued GDP Australia and with Rail impacted have by had all planned market. also have likely global Year tighter mine policies. the to positive weather a steel delays to buoy the to is Australian

on with per guidance. reflecting second line low-vol was the Our of we premiums sales ton gross achieved pricing full Platts and price X.X% mid-vol in environment coals a the in the for of realization the XXXX our XXX% sales second index first due Australian volume, to quarter the lower quarter the but quarter low-vol was price still premium FOB quarter. throughout higher higher maintenance in of and cost Cost versus year primarily our heightened

our more As more Platts the maintenance units expenses. mining continuous compared to second due XXX ton mining and higher was last including activities, year's to in people, per quarter, ramp higher two cash

our capacity coal for sold and company make through million nameplate good million moves. Warrior's our continuing tons of X production picture the Looking short the produced annual any Halfway we're tons. big at of year the short met longwall to through X progress without

in the We half with the longwall quarter. second of in moves expect XXXX have moves to third three two

the balance global the cover strong quarters, guidance are of we and growth, first the Given details year. production his ongoing for the GDP demand of second raising for in in will Dale results the remarks. our strength our and steel

they environment our most thus market for results strong met have had excellent the would all conditions. far level in the to XXXX. to we've of pricing pushed been to team success hard entire and doing overall like the I work coal the of thank business the Our premium these our achieve deliver make employees product for

first step of strategy remains clearly Our the as most demonstrates a and priority as focused value in pure important safely met Warrior's of to highly the working ultimately working unique a marketplace. business top play coal performance the premium achieving efficiently success producer. and

or environment, and million goal we've past is that capital in operations second efficiently to expenditures. discretionary experienced any quarter in profitably Our and operate extraordinarily end we've over just in favorable our invest to continued devoting towards the $XX pricing sustaining the in not conditions To the year so.

above This the second to base capital significantly the manner reflecting average of Our North our in in enhance we level efforts operations normal strength new remained efficiency our sustaining quarter included requirements the and our a X that spending discussed. completion spending our reliability that previously future. will Mine portal solidify

the of it degree I we to an the shareholders point with a quarter. should Before turn We and completed I secondary over remain out Dale, appropriate capital to two leverage. that structure maintaining special successfully paid during dividend excess to returning cash while offerings committed

We’re pleased strong the in first our business we're to in of and base XXXX. investing on excellent Building to with company's half committed the our ensure the financial success. performance operational continued

our to through year the end second flows strong continue that generating the creating shareholders. for quarter greater now Dale results value continue ask expect detail. We to I'll our in significant cash address

Dale Boyles

Walt. Thanks

diluted of basis $XXX $X.XX million of per income XXXX quarter share the was $X.XX to second diluted on of net GAAP quarter net income $XX second a in share XXXX. million compared or or the For per

and diluted net expense revenues same and to primarily XX% with million higher secondary quarter, compared last compensation shutdown adjusted share. last occurred million the associated the be of second up by XXXX realized activities and original Excluding were were guidance in ramp EBITDA $XX highest These early The to the XXXX full-year pricing, year offerings quarter lower the And and one-time for the sales quarter to continued share not of XX% stock to by are the QX costs expenses impacting current quarter-over-quarter from the period results company's year. In maintenance, $XXX lower as built coal and into the quarter we were prior other higher the volumes. slightly met lower we of weak costs summary, mining already the of expected non-cash a the the tons net Adjusted company's and Total $X.XX which income the income same industry some was calculate year. an than transaction was believe coal $XXX incremental incremental. quarter in the XXXX of second average largest EBITDA in of which the factor in X% included ton. short than negatively expenses selling price last on XXXX volume are non-GAAP $XXX million X% second in XXXX. Adjusted quarter the of Total for short results met net compared Debbie adjusted decrease or lower Cyclone IPO Remember in EBITDA quarter net for per second per met margins the revenues sales million second of which ton. decrease per in revenues the of were short adjusted and price in diluted associated in average coal part X.X per sales period $XX XXXX early lower $X.XX the selling at million prices due with was for million. approximately total excluded was the of EBITDA divided quarter million $XX of as second adjusted year. was $XXX

premium characteristics price represents our a FOB gross ton volume on calculation Australia average low-vol quarter and daily realization price second sales, was of Platts approximately realized and low XXX% realization a based of weighted of other products. whereas the quality gross result excludes demurrage demonstrates percentage as high mid-vol price premium, price. Our This and of per the Index our which charges

over realizations price. be XXX% longer we the index term of As our we have gross said before price nearly the to expect

in in approximately mining was XX% second lower quarter shutdown million period of of FOB with sales of of in volumes in $XXX and Cash or XXXX. of up the net mining XXXX other the average to of short price port the maintenance in associated X% in to selling impact attributable the of XX% same coal the a primarily second quarter net compared second short cash the or mining approximately prices second reduced ton, Australian compared our $XXX to $XX Cyclone ramp activities revenues X% sales of to year. and costs Met quarter due $XXX XXXX. per to of continued Mining quarter were selling price Our second the quarter a quarter per of quarter and early short XXXX. supply the last realization second revenues same April million was Debbie charges in sales higher XXXX. the the of by primarily early gross $XX to of on in a ton from decreased per Demurrage XXXX, cost compared of week's driven price average the ton cost of higher

While per quarter ton our expectations full year, not the year our with and guidance cash our line cost fluctuation last second higher has the which was quarterly changed. was than in within

costs addition, included quarter of period SG&A $X to of revenues year. divesting the This professional originally expected. associated that than stock expenses our higher or were $X per primarily million being is company. a is million previous as year-to-date of In with other total shares about planned fees our million second incremental in cost not $X short tracking May with the the higher same cash last in expense of $XX million due of traded ton X% offering $XX remaining was and The non-cash secondary and compensation in connection approximately guidance. publicly increase

compliant secured second capital required were Transaction be and the XXXX. our This XXXX second the Interest costs year example, other our the to notes were depletion X% and higher quarter to million plus November rate March note, the year and million the ended in XXXX a and regulations related our about quarter over in promissory and in expense high and For the interest is primarily quarter. SOX completion than second expenses was The spending in depletion attributable the second for $XX million the quarter rules secondary million XXXX. $X half. increase company revenues the with senior of second debt $XX secured total and to or of approximately those two of almost on of SEC equipment, included the for compared associated offerings expenses depreciation expenses was the year's was offerings notes ABL. amortization in to due last issuance quarter under senior to of facilities and XXXX. calendar $XX and last Depreciation and the

Warrior of net did incur operating to its losses income any taxes not or anticipated, NOLs. utilization due As

we liability tax utilized to its income and the zero and the expect expire. of state the will or long-term reduce are NOLs which is of strengths until One fully assets company our federal NOLs key

flow cash years. over free expect significant the next conversion several We continue will this to drive

Turning $XX to in of $XXX higher cash capital of of quarter cash compared was second $XXX used provided flows flow, activities This for primarily capital plus free cash expenditures by of million. during XXXX. of cash XXXX. results attributable million in generated operating to and flow we to quarter of $XXX result the second lower cash of which the the operating is This result second million flow free quarter spending the million

capital spending and to over during Our Last the on evenly was the and spent was double is spread same capital XXXX. more discretionary year's the more company's second meet year expenditures expectations is year. loaded spending backend the quarter for track amount and the this year quarter on of the entire sustaining

XXXX. common the increase XXXX spending under capital the quarter. to cash $XXX activities reflects as flows mentioned, financing X of company financing completion dividend in million shares April. were quarter in Cash program quarter with the included in in stock used As million in compared of the million the XXX,XXX second used The used of portal in the Mine May new second of repurchase the secondary repurchase payment the activities and announced the the of earlier $XXX second quarter XXXX $X at the second primarily special in previously of the offering in stock

adjusted well short be XXX,XXX volume, XXX,XXX of tons after driven increase week by the Our quarter. the the leverage for of first from capital net compared liquidity. the primarily $X lower ample from third sales slight of the inventories $XX to to The in year. and last and balance of million at by company to a X XXXX tons prices demand. ratio collections, customer one at times shutdown increased the decreased a XXXX decreased lower and company's second quarter the strong quarter maintenance less first half net end one with Mine EBITDA into of the selling sheet positions than end heading the million continues quarter at short working first of Coal XXXX, in inventory

was consisting as equivalents under of of available of XX, total of cash and million. our million facility, $XXX $XX XXXX June outstanding of letters $XX net approximate cash liquidity $X Our of and credit million million ABL

cash of mentioned earlier, hand with million on announced declare per the dividend of offering pricing the of to an XX, of the X early used Warrior's The did June April of cash underwritten of announced million. shares of May million the due special stockholders its agreed repurchase offering completed its a approximately together dividend proceeds offering second and another notes paid quarter. not special $XXX stock million of during pricing totaling of from and in of to common by Walt XXXX offerings which early shares secondary aggregate offering company existing of $XXX stock of quarter. company company X% its the X a proceeds the $X.XX from its certain stock an by stock XXX,XXX the of share As million. On or of the common In Warrior $XX company underwriter And common two payment stockholders. secondary during secondary existing either underwritten shares common its secondary secured receive net of the any senior certain the company

conditions and first higher for quarters, the to expected In and carryforwards remainder the market of raising its our year second turning full Warrior year. in performance successful light of reflect is the Now of for XXXX outlook sales the NOL volumes. XXXX guidance for our rest to the our the and production

compensation secondary to $XX million of to million, a coal expense $XXX X%. rate X.X guidance production Our the timing tons, to update $XXX the million, $XX and million sales additional XX.X of number million expenditures $XX expense stock of short X.X factors expenses and X.X affect interest the of of capital $XX reflecting of short-ton, cash of coal is per as to non-cash port low-vol number the FOB cost follows: sales may of our FOB Platts including pricing. tons, offering, SG&A tax and short million $XX longwall of outlook to May moves associated Australia to $XX Permian A with cash of Index million

production final the longwall on two that for XXXX QX capital and guidance We Under These we one of to in in our move in portal that to of was quarters. $XX at those this expect spend April to expect discretionary XXXX current support for have in this benefits moves Mine his include year, QX longwall million and will X to new lower that the completed approximately million down $XX projects. new developing to now on XXXX it in our comments. projects Due the payment to strategic turn long expect and we of times projects beyond. the lead Walt these shields spending a set will back year other the I'll of of goals. majority realize of

Walter Scheller

we do quarter's to we move we would did from summarize like Q&A, Dale, call. before what last In where standpoint. to an on operations short, stand I we we said Thanks would on

Our first reflected quarter. operations first We we year. ran plan an first environment moves we to the in an take took into of during the advantage and extra move earlier forward we originally for ran during resulted high extra the bringing quarter decisions off XXXX price longwall three the than XXXX. mines the six days of the in that Coming second this planned the quarter harder quarter longwall the

projects. expected second We complete the six-day to quarter a also planned maintenance outage several during

than not in production. completed tons expected XXX,XXX the of resulting at we reduce will more mines, both this approximately production While better process necessarily

quarter in its get this production better mining second two longwall of panels result of less record the This first third a neared year, As rebuilding. the and also quarter. in we production planned nears coal scenes the of in the slightly as the we quarter equipment back-to-back moves end because required the meant

previous operations run us year. environment flexible the and issue said we've with around the pricing next throughout on allow corner the targets that is if as I've calls adjust downturn changes to it and to business just market conservative the As geological if

two our short Given is in our and outlook in Warrior's the our tons. year the about good balance that operations we remains ranges. quarters strong prospects performance conclusion of we in for strides acreage the capacity feel Xmillion In strong as real of first the reflected returning our nameplate guidance make to

our and highly cost flows enable like through the CSR questions. open that, we'd industry-leading We coal structure generate this will high with coupled us expect cash to margins call continue cycle. premium, to for strong flexible to With Operator? Warrior's

Operator

[Operator first ahead. question comes Clarksons. Jeremy Sussman with Please from Instructions] The go

Jeremy Sussman

much Hi, thanks my for taking very question.

Walter Scheller

Sure, Jeremy.

Jeremy Sussman

to if rate to million raising the as Well, that couple as X to how I next over this still you should guess dynamic? the that run see nice – X.X is years we tons about guess look the forward year. of I I X.X plan, ton million think guidance million of sort

Walter Scheller

is X ton Yes, million our plan achieve still rate. to that run

able As half up few will a and X that got longwall X the year rate and these million, a and [ph] we the million growing ton first three X over you the the expect we're plan million still in have run half moves little first of to can year we of and still we toward get things this see to tweaking be to there. operating in R&R

Jeremy Sussman

should look we start from and for to Okay perspective, a timing that? when

Walter Scheller

to looks we've a by we're you like sure year are way end guys is getting lot goal there. say still going performed Our that the

Jeremy Sussman

in flow think I dividends generated you with I I a agree operating guess, $XXX strong I now I target million some cash if of curve that million $XX should sort with level you are and second about? think have so and the medical half Obviously of a generate special reasonably would we cash guess of that activities. should accurate. quarter very from is cash kind yearend Perfect Do you cash assuming hand, the on the about nice of think or

Dale Boyles

for we our minimal the have its everything targets we Thanks the now no can business with Jeremy time we soon. on payments with of do before question. any cash for of structure. cost fix Obviously run because Dale. interest said and a The Hey cash amount maturities notes as some really this debt on

to look levels continue from that low run but time. structure So every capital capital pretty opportunities specific targets the all the at kind or no will and are we we presented opportunities can capital still other optimize and of at either manage standpoint at a and this cash quarter on expenditures

out just but me it make Business and you I it it a www.warriormetcoal.com. issuing has website, to is space, technical Let Wire up the issue some just X-K with my – on see our News to had website attention it our was you pick can that off filed in so in our came note wire it don't if at their believe

Jeremy Sussman

Dale, I you've how allocation it, deviation Thanks sounds from understand no sure it a running of like sounds make capital business, it been like sort there is characterize? standpoint fair is that to from and to just the

Dale Boyles

Jeremy. right, That's

capital extent We same will cash there is allocation excess the our with available. continue to policy

stock back through plans have repurchase just had that at to or various delever special upon shareholders other or will depending time. We what use opportunities that return we to plan it the other may now that on we or in dividends forms either

Jeremy Sussman

Great, it, guys. thanks appreciate I

Dale Boyles

you. Thank

Operator

with Lucas Please comes question from [Operator FBR. B. Instructions] go Riley Our ahead. Pipes next

Lucas Pipes

Hey, good afternoon everybody.

Dale Boyles

Hi Lucas.

Lucas Pipes

would the past prices wanted because the But steel on industry. little I you bit, not you so for to large from capital job quarter that obviously know of Good seeing could the wonder impact? that are is are also that's remainder impact then if a news are for I months a side have have what as cost longwall the some miner side and to pressure and to steel tremendously follow cost maybe I you but obviously, up as cost and mean and others, an maybe year [indiscernible] you’re selling you. degree the I on the increased over you XX on steel the the so good Thank it pressures your costs guidance. pertinent seeing components to and by you to rising

Dale Boyles

this to as allocations at already been significant and our of nothing our see has look built. point and most we we expectations, that Sure, capital

we rest So not inflationary no, had a we will this any be throughout see, factor. we think year the don’t we had that as don’t and look of significant that pressures

Lucas Pipes

the steel Okay, terms percent of and would product? with your structure, cost what in be associated

Walter Scheller

It’s huge of nothing percentage, significance. so a small any

have would You material. XXX% of inflation all really to in have to significant something of experience that

Lucas Pipes

Got helpful. you. that's it, okay, Thank

Walter Scheller

you. Thank

Operator

are comments. the any time, turn questions. Mr. this will back no there further call At for over now to I Scheller

Walter Scheller

and afternoon. Met your Thank concludes call joining us we today again you this Warrior interest That for our for appreciate in Coal.

Operator

you conference. for today’s And participating. you. Thank Thank that concludes all

You may now disconnect.

Warrior Met Coal (HCC) 1 Aug 182018 Q2 Earnings call transcript