Alpha Announces First Quarter 2022 Results
• Reports first quarter net income from continuing operations of $401.0 million
• Posts Adjusted EBITDA of $503.8 million for the first quarter 2022
• Continues aggressive prepayment of debt, bringing outstanding term loan borrowings to just under $100 million
• Increases existing share repurchase program authorization to $600 million
• Announces $1.50 per share annual cash dividend to be paid quarterly
• Adjusts full-year guidance for metallurgical cost of coal sales per ton and cash interest expense
BRISTOL, Tenn., May 5, 2022 – Alpha Metallurgical Resources, Inc. (NYSE: AMR), a leading U.S. supplier of metallurgical products for the steel industry, today reported results for the first quarter ending March 31, 2022.
(millions, except per share)
| Three months ended Mar. 31, 2022 | Three months ended Dec. 31, 2021 | Three months ended Mar. 31, 2021 | |
|---|---|---|---|
| Net income (loss)(2) | $401.0 | $254.5 | ($32.7) |
| Net income (loss)(2) per diluted share | $20.52 | $13.30 | ($1.78) |
| Adjusted EBITDA(1) | $503.8 | $315.8 | $28.9 |
| Operating cash flow(3) | $336.1 | $104.3 | ($19.1) |
| Capital expenditures(3) | ($28.1) | ($22.9) | ($20.4) |
| Tons of coal sold(2) | 4.0 | 4.0 | 4.1 |
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1. These are non-GAAP financial measures. A reconciliation of Net Income to Adjusted EBITDA is included in tables accompanying the financial schedules.
2. From continuing operations.
3. Includes discontinued operations.
“Our team has performed exceptionally well, beating last quarter’s record performance and hitting a new milestone of over $500 million in Adjusted EBITDA for the quarter,” said David Stetson, Alpha’s chair and chief executive officer. “The current met market strength has significantly accelerated Alpha’s progress in deleveraging the company. Together with the unwavering vision of our management team, these conditions have laid the groundwork for a new chapter in our company’s history, and we now expect to fully extinguish our term loan in the second quarter. I am looking forward to the day when we can announce this important target has been achieved. For now, having brought Alpha’s term loan balance to under $100 million with a payment subsequent to quarter end, I am pleased to celebrate yet another step toward this goal.”
Stetson continued: “Additionally, as we continue to prioritize shareholder value and capital return, our board of directors approved a substantial increase in authorization for our current share buyback program, bringing that to a level of $600 million. The board is also instituting a dividend at an annualized rate of $1.50 per share to be paid quarterly, with the first quarterly payment of $0.375 per share to be paid on July 1st to shareholders of record on June 15, 2022. With increased visibility into our cash flow projections for the balance of this year, we believe these are prudent and important steps to share Alpha’s success with our investors.”
The company’s annual meeting of stockholders was held on May 3, 2022, and all members of Alpha’s board of directors were re-elected to continue their service. The complete voting results from our annual meeting will be filed with the SEC on Form 8-K.
Financial Performance
Alpha reported net income from continuing operations of $401.0 million, or $20.52 per diluted share, for the first quarter 2022. In the prior period, the company had net income from continuing operations of $254.5 million or $13.30 per diluted share for the fourth quarter 2021.
First quarter 2022 total Adjusted EBITDA was $503.8 million, compared with $315.8 million in the fourth quarter 2021.
Coal Revenues
| (millions) | Three months ended Mar. 31, 2022 | Three months ended Dec. 31, 2021 |
|---|---|---|
| Met Segment | $1,054.3 | $811.5 |
| All Other | $15.4 | $15.0 |
| Met Segment (excl. freight & handling)(1) | $910.3 | $683.6 |
| All Other (excl. freight & handling)(1) | $15.4 | $15.0 |
Tons Sold
| (millions) | Three months ended Mar. 31, 2022 | Three months ended Dec. 31, 2021 |
|---|---|---|
| Met Segment | 3.8 | 3.8 |
| All Other | 0.3 | 0.2 |
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1. Represents Non-GAAP coal revenues which is defined and reconciled under “Non-GAAP Financial Measures” and “Results of Operations.”
Coal Sales Realization(1)
| (per ton) | Three months ended Mar. 31, 2022 | Three months ended Dec. 31, 2021 |
|---|---|---|
| Met Segment | $240.82 | $180.66 |
| All Other | $57.39 | $62.56 |
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1. Represents Non-GAAP coal sales realization which is defined and reconciled under “Non-GAAP Financial Measures” and “Results of Operations.”
Our net realized pricing for the Met segment was $240.82 per ton in the first quarter 2022, while net realization in the All Other category was $57.39.
“As expected, we continue to see the positive impact of the metallurgical coal market dynamics flowing through our realizations,” said Andy Eidson, Alpha’s president and chief financial officer. “Led by tonnage linked to the Australian indices, our export business remained strong and average realizations on our met coal increased by more than 30% to $241 per ton in the first quarter, with average realizations on total export tons exceeding $278 per ton.”
The table below provides a breakdown of our Met segment coal sold in the first quarter by pricing mechanism.
(in millions, except per ton data)
Three months ended Mar. 31, 2022
| Met Segment Sales | Tons Sold | Coal Revenues | Realization/ton(1) | % of Met Tons Sold |
|---|---|---|---|---|
| Export - Other Pricing Mechanisms | 1.5 | $359.2 | $247.59 | 41% |
| Domestic | 0.9 | $156.6 | $179.99 | 24% |
| Export - Australian Indexed | 1.2 | $388.5 | $315.06 | 35% |
| Total Met Coal Revenues | 3.6 | $904.3 | $254.45 | 100% |
| Thermal Coal Revenues | 0.2 | $6.0 | $26.57 | |
| Total Met Segment Coal Revenues (excl. freight & handling)(1) | 3.8 | $910.3 | $240.82 |
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1. Represents Non-GAAP coal sales realization which is defined and reconciled under “Non-GAAP Financial Measures” and “Results of Operations.”
Cost of Coal Sales
| (in millions, except per ton data) | Three months ended Mar. 31, 2022 | Three months ended Dec. 31, 2021 |
|---|---|---|
| Cost of Coal Sales | $555.3 | $497.4 |
| Cost of Coal Sales (excl. freight & handling/idle)(1) | $405.0 | $364.4 |
| (per ton) | Three months ended Mar. 31, 2022 | Three months ended Dec. 31, 2021 |
|---|---|---|
| Met Segment(1) | $103.61 | $92.46 |
| All Other(1) | $49.89 | $60.77 |
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1. Represents Non-GAAP cost of coal sales and Non-GAAP cost of coal sales per ton which is defined and reconciled under “Non-GAAP Financial Measures” and “Results of Operations.”
The company’s Met segment cost of coal sales increased to an average of $103.61 per ton in the first quarter 2022 as compared to $92.46 per ton in the prior quarter. Cost of coal sales for the All Other category decreased to $49.89 per ton in the first quarter 2022 from an average cost of $60.77 per ton in the fourth quarter 2021.
Liquidity and Capital Resources
“For nearly two years, we have stated our intention to dramatically improve the company’s financial position and our balance sheet is reflecting those efforts,” said Eidson. “With our voluntary principal prepayments on the term loan since the beginning of the year, our term loan balance is now under $100 million. On a parallel path, we are pleased to be returning value to shareholders through our newly increased $600 million share repurchase program and the establishment of a quarterly dividend. We plan to continue these efforts while we also engage in further discussions with the board about future uses of excess cash.”
For the first quarter 2022, cash provided by operating activities significantly increased to $336.1 million as compared to $104.3 million in the fourth quarter 2021. Cash provided by operating activities includes discontinued operations. Capital expenditures for the first quarter 2022 were $28.1 million compared to $22.9 million for the fourth quarter of 2021.
As of March 31, 2022, Alpha had $159.5 million in unrestricted cash and $137.5 million in restricted cash, deposits and investments. Total long-term debt, including the current portion of long-term debt as of March 31, 2022, was $251.4 million. At the end of the first quarter, the company had total liquidity of $193.4 million, including cash and cash equivalents of $159.4 million and $34.0 million of unused availability under the ABL. The future available capacity under the ABL is subject to inventory and accounts receivable collateral requirements and the maintenance of certain financial ratios. As of March 31, 2022, the company had no borrowings and $121.1 million in letters of credit outstanding under the ABL.
Dividend Program
Alpha also announced today that its board of directors has expanded the company’s previously announced capital return program to include a dividend policy. Under this policy the board intends to pay aggregate cash dividends of $1.50 per share of common stock per year, with $0.375 per share paid each quarter. The board has declared the first quarterly dividend payment will become payable on July 1, 2022 for holders of record as of June 15, 2022. Future dividend payments will be targeted to be paid in the first month of each calendar quarter. Any decision to pay future cash dividends will, however, be made by the board and depend on Alpha’s future earnings and financial condition and other relevant factors.
Share Repurchase Program
As announced last quarter, Alpha’s board of directors authorized a share repurchase program allowing for the expenditure of up to $150 million for the repurchase of the company’s common stock. Alpha’s board has increased this authorization by $450 million, bringing the share repurchase program to $600 million. As of May 3, the company has acquired 295,684 shares of common stock at a cost of $39.4 million.
As previously announced, the timing and amount of share repurchases will 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.
Long-Term Strategic Plan
“As we progress toward completion of our deleveraging goals, we have also been refining the management team’s long-term vision for the company and how we can take steps today to bring that future to fruition,” said Eidson. “As we mentioned last quarter, senior leaders across the company just completed an exercise to analyze Alpha’s next fifteen years. We evaluated our expected operational portfolio, reserve life, coal qualities, and sales opportunities.”
“While our long-term plan was developed using specific information that I can’t detail here, such as economic projections and the proprietary details of our operations, there are a few high-level takeaways that I believe will provide helpful context to investors, employees, and all Alpha stakeholders,” Eidson continued. “First, we believe our existing portfolio, together with currently-held reserve bases, should allow the company to maintain a consistent level of production, similar to Alpha’s current average production, across the next fifteen years without the need for inorganic growth. Second, we expect to be able to gradually improve the company’s average coal quality to a higher rank while maintaining the flexibility and optionality provided by a diverse product mix. Third, we see strategic opportunities over the next decade and a half to build on existing customer bases and develop new relationships by expanding our sales and marketing efforts, particularly in regions that are expected to exhibit the most growth in demand for met coal; this work has already begun and will continue to evolve as the macroeconomic circumstances shift. Lastly, I believe Alpha is well positioned to continue as a leader in the global metallurgical coal space for many years to come. That final takeaway is my own opinion, but I believe it represents the excitement and confidence of the team as we concluded this exercise, especially as the important work to deleverage the company should only strengthen Alpha’s ability to both succeed and be resilient, in the near and long term.”
2022 Full-Year Guidance Adjustments
“I commend the operations teams on their continued diligence amid these higher-cost market circumstances,” said Jason Whitehead, executive vice president and chief operating officer. “While the team has done an excellent job in continually finding productivity enhancements to offset some of the increased costs we have experienced, today we are raising cost guidance for 2022. This change is due to elevated pricing dynamics that have far exceeded the pricing projections used to calculate our previous cost estimates for the year. I see this change as a necessary response to market circumstances outside of our control. As we have reiterated in prior quarters, we remain committed to safely managing the costs within our direct control.”
The company is increasing its cost of coal sales guidance due to the elevated pricing environment in global coal markets. Higher sales prices result in higher royalties and severance taxes, which are part of our costs of coal sales. These circumstances, alongside increased labor costs and persistent inflationary pressure on certain materials, have contributed to the guidance change announced today. Met segment cost of coal sales are now expected to be between $101.00 per ton and $107.00 per ton for the full year, up from the prior guidance range of $88.00 per ton to $92.00 per ton. Cost of coal sales for the All Other category are expected to remain unchanged in the range of $58.00 per ton to $62.00 per ton. Additionally, due to the company’s aggressive debt reduction efforts, guidance for 2022 cash interest expense is now expected to be between $18 million and $22 million, down from the previously provided range of $40 million to $45 million.
As of April 20, 2022, Alpha has committed and priced approximately 53% of its metallurgical coal within the Met segment at an average price of $243.88 per ton and 96% of thermal coal in the Met segment at an average expected price of $53.26 per ton. In the All Other category the company is 100% committed and priced at an average price of $57.70 per ton.
2022 Guidance
| in millions of tons | Low | High |
|---|---|---|
| Metallurgical | 14.0 | 15.0 |
| Thermal | 0.8 | 1.2 |
| Met Segment | 14.8 | 16.2 |
| All Other | 0.6 | 0.8 |
| Total Shipments | 15.4 | 17.0 |
| Committed/Priced1,2,3 | Committed | Average Price |
|---|---|---|
| Metallurgical - Domestic | $189.22 | |
| Metallurgical - Export | $297.01 | |
| Metallurgical Total | 53% | $243.88 |
| Thermal | 96% | $53.26 |
| Met Segment | 56% | $222.63 |
| All Other | 100% | $57.70 |
| Committed/Unpriced1,3 | Committed | |
|---|---|---|
| Metallurgical Total | 40% | |
| Thermal | --% | |
| Met Segment | 38% | |
| All Other | --% |
| Costs per ton4 | Low | High |
|---|---|---|
| Met Segment | $101.00 | $107.00 |
| All Other | $58.00 | $62.00 |
| In millions (except taxes) | Low | High |
|---|---|---|
| SG&A5 | $50 | $54 |
| Idle Operations Expense | $30 | $40 |
| Cash Interest Expense | $18 | $22 |
| DD&A | $90 | $110 |
| Capital Expenditures | $160 | $190 |
| Tax Rate6 | 5% | 15% |
Notes:
1. Based on committed and priced coal shipments as of April 20, 2022. Committed percentage based on the midpoint of shipment guidance range.
2. Actual average per-ton realizations on committed and priced tons recognized in future periods may vary based on actual freight expense in future periods relative to assumed freight expense embedded in projected average per-ton realizations.
3. Includes estimates of future coal shipments based upon contract terms and anticipated delivery schedules. Actual coal shipments may vary from these estimates.
4. Note: The Company is unable to present a quantitative reconciliation of its forward-looking non-GAAP cost of coal sales per ton sold financial measures to the most directly comparable GAAP measures without unreasonable efforts due to the inherent difficulty in forecasting and quantifying with reasonable accuracy significant items required for the reconciliation. The most directly comparable GAAP measure, GAAP cost of sales, is not accessible without unreasonable efforts on a forward-looking basis. The reconciling items include freight and handling costs, which are a component of GAAP cost of sales. Management is unable to predict without unreasonable efforts freight and handling costs due to uncertainty as to the end market and FOB point for uncommitted sales volumes and the final shipping point for export shipments. These amounts have historically varied and may continue to vary significantly from quarter to quarter and material changes to these items could have a significant effect on our future GAAP results.
5. Excludes expenses related to non-cash stock compensation and non-recurring expenses.
6. Rate assumes no further ownership change limitations on the usage of net operating losses.
Conference Call
The company plans to hold a conference call regarding its first quarter 2022 results on May 5, 2022, at 10:00 a.m. Eastern time. The conference call will be available live on the investor section of the company’s website at https://investors.alphametresources.com/investors. Analysts who would like to participate in the conference call should dial 844-200-6205 (domestic toll-free) or 929-526-1599 (international) approximately 15 minutes prior to start time. Please use the access code 475225 to join the call.
About Alpha Metallurgical Resources
Alpha Metallurgical Resources (NYSE: AMR) is a Tennessee-based mining company with operations across Virginia and West Virginia. With customers across the globe, high-quality reserves and significant port capacity, Alpha reliably supplies metallurgical products to the steel industry. For more information, visit www.AlphaMetResources.com.
Forward-Looking Statements
This news release includes forward-looking statements. These forward-looking statements are based on Alpha’s expectations and beliefs concerning future events and involve risks and uncertainties that may cause actual results to differ materially from current expectations. These factors are difficult to predict accurately and may be beyond Alpha’s control. Forward-looking statements in this news release or elsewhere speak only as of the date made. New uncertainties and risks arise from time to time, and it is impossible for Alpha to predict these events or how they may affect Alpha. Except as required by law, Alpha has no duty to, and does not intend to, update or revise the forward-looking statements in this news release or elsewhere after the date this release is issued. In light of these risks and uncertainties, investors should keep in mind that results, events or developments discussed in any forward-looking statement made in this news release may not occur.
FINANCIAL TABLES FOLLOW
Non-GAAP Financial Measures
The discussion below contains “non-GAAP financial measures.” These are financial measures which either exclude or include amounts that are not excluded or included in the most directly comparable measures calculated and presented in accordance with generally accepted accounting principles in the United States (“U.S. GAAP” or “GAAP”). Specifically, we make use of the non-GAAP financial measures “Adjusted EBITDA,” “non-GAAP coal revenues,” “non-GAAP cost of coal sales,” “non-GAAP coal margin,” and “Adjusted cost of produced coal sold.” We use Adjusted EBITDA to measure the operating performance of our segments and allocate resources to the segments. Adjusted EBITDA does not purport to be an alternative to net income (loss) as a measure of operating performance or any other measure of operating results or liquidity presented in accordance with GAAP. We use non-GAAP coal revenues to present coal revenues generated, excluding freight and handling fulfillment revenues. Non-GAAP coal sales realization per ton for our operations is calculated as non-GAAP coal revenues divided by tons sold. We use non-GAAP cost of coal sales to adjust cost of coal sales to remove freight and handling costs, depreciation, depletion and amortization – production (excluding the depreciation, depletion and amortization related to selling, general and administrative functions), accretion on asset retirement obligations, amortization of acquired intangibles, net, and idled and closed mine costs. Non-GAAP cost of coal sales per ton for our operations is calculated as non-GAAP cost of coal sales divided by tons sold. Non-GAAP coal margin per ton for our coal operations is calculated as non-GAAP coal sales realization per ton for our coal operations less non-GAAP cost of coal sales per ton for our coal operations. We also use Adjusted cost of produced coal sold to distinguish the cost of captive produced coal from the effects of purchased coal. The presentation of these measures should not be considered in isolation, or as a substitute for analysis of our results as reported under GAAP.
Management uses non-GAAP financial measures to supplement GAAP results to provide a more complete understanding of the factors and trends affecting the business than GAAP results alone. The definition of these non-GAAP measures may be changed periodically by management to adjust for significant items important to an understanding of operating trends and to adjust for items that may not reflect the trend of future results by excluding transactions that are not indicative of our core operating performance. Furthermore, analogous measures are used by industry analysts to evaluate the Company’s operating performance. Because not all companies use identical calculations, the presentations of these measures may not be comparable to other similarly titled measures of other companies and can differ significantly from company to company depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which companies operate, and capital investments.
Included below are reconciliations of non-GAAP financial measures to GAAP financial measures.
ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Amounts in thousands, except share and per share data)
ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(Amounts in thousands, except share and per share data)
ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Amounts in thousands)
ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES
ADJUSTED EBITDA RECONCILIATION
(Amounts in thousands)
ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS
(In thousands, except for per ton data)
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