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Ramaco Resources, Inc. Reports Second Quarter 2018 Financial Results

LEXINGTON, Ky., Aug. 06, 2018 (GLOBE NEWSWIRE) -- Ramaco Resources, Inc. (NASDAQ: METC) today reported net income of $10.2 million, or $0.25 per diluted share for the second quarter of 2018, compared with a net income of $5.3 million, or $0.13 per diluted share for the first quarter of 2018.  The Company’s adjusted earnings before interest, taxes, depreciation, amortization and non-operating expenses (“adjusted EBITDA”) was $14.9 million for the second quarter of 2018, as compared with adjusted EBITDA of $9.2 million for the first quarter of 2018. 

Randall Atkins, Ramaco Resources’ Executive Chairman and Chief Financial Officer remarked, “We are very pleased to report strong, across the board and continued financial growth for both the second quarter and the first six months of 2018. Quarter over quarter, net income rose 94%, revenues rose 17% and our coal production was up 31%.

"From a sales standpoint, for calendar 2018 we have now sold, or have forward sales commitments for approximately 2.2 million tons of coal, of which 1.8 million tons is company mined and roughly 460 thousand tons is purchased coal.  For the first six months of 2018, we both sold and delivered over 1.1 million tons of both company mined and purchased coal.

"From a production standpoint, after encountering some unfavorable geological conditions at the Elk Creek surface mine in the first quarter, we recovered substantially during our second quarter. Cash mining costs fell over $9 per ton to roughly $56 per ton (FOB mine) and brought costs back in line with our annual guidance. Similarly, our cash margins bounced back to almost $36 per ton for the quarter. For the balance of 2018, we continue to expect earnings and cash flows to remain strong. We are also looking ahead to 2019 and have begun preliminary sales discussions with many of our existing domestic customers.”

The Company ended the quarter with $5.9 million of cash on hand and $28.3 million of accounts receivable. Free cash flow generated over the next six months is expected to be used to fund working capital and capital expenditures.

Operational Results

Revenues totaled $65.3 million for the three months ended June 30, 2018, up 17% from the first quarter of 2018.  Total production during the second quarter was 497 thousand tons as compared with 380 thousand tons in the first quarter.

As stated, the Company’s total cash cost per ton sold for the second quarter of 2018 was approximately $56 for produced coal, down from approximately $65 in the first quarter of 2018. This cost improvement illustrates the impact of more favorable weather conditions, a fully operational preparation plant, cost improvements at our surface mine, a full quarter of production from our new No. 2 Gas mine and continued good mining conditions in all of our Elk Creek deep mines.

Michael Bauersachs, Ramaco Resources’ President and CEO commented, “While our Elk Creek deep mines continued to perform at industry leading productivity levels, our surface mine also operated at improved productivity and cost levels.  With many of our haul road capital improvements close to completion, we anticipate future costs to echo this quarter’s performance. With that being said, the second quarter is the only quarter that is typically not impacted by weather issues or normal vacation periods.  Average costs for the year should remain within our prior guidance, which is slightly above this quarter’s record cost levels.”

In the second quarter of 2018, the Company recorded income tax expense of $0.6 million based on an expected effective tax rate of approximately 8.5% for 2018.  Cash taxes payable for 2018 are expected to be less than $0.4 million.

Capital expenditures totaled approximately $14.7 million during the second quarter of 2018. The Company expects to incur approximately $36 to $40 million of capital expenditures for full year 2018.

The exhibit below summarizes some of the key metrics for the sequential periods:

         
  Three months ended   Six months ended  
  June 30,
2018
  March 31,
2018
  June 30, 
2018
 
Sales Volume(a)            
Company   493     403     896  
Purchased   122     119     241  
Total   615     522     1,137  
             
Company Production(a)            
Elk Creek Mining Complex   478     360     838  
Berwind Mine   19     20     39  
Total   497     380     877  
             
Company Financial Metrics(b)            
Average revenue per ton $ 91.21   $ 91.37   $ 91.29  
Average cash costs of coal sold   55.58     64.65     59.66  
Average cash margin per ton $ 35.63   $ 26.72   $ 31.63  
             
Purchased Coal Financial Metrics(b)            
Average revenue per ton $ 101.35   $ 99.62   $ 100.50  
Average cash costs of coal sold   99.99     89.84     94.99  
Average cash margin per ton $ 1.36   $ 9.78   $ 5.51  
             
Capital Expenditures(a) $ 14,709   $ 12,769   $ 27,478  
             
Notes:            
(a) In thousands.            
(b) Excludes transportation.            
             

2018 Guidance

Updated sales guidance for 2018 is presented in the following table: 

       
       
Committed 2018 Sales Volume(a) Volume   Avg Price
Company:      
Domestic, fixed priced   1,056   $ 79
Export, fixed priced   454   $ 108
Export, indexed   259    
       
Total Committed Company Tons   1,769    
       
Purchased:      
Domestic, fixed priced   433   $ 100
Export, fixed priced   29   $ 127
Total Purchased Tons   462   $ 102
       
Total Committed Sales Volume   2,231    
       
Notes:      
(a)  Volumes in thousands.      
       

About Ramaco Resources, Inc.

Ramaco Resources is an operator and developer of high-quality, low cost metallurgical coal in southern West Virginia, southwestern Virginia and southwestern Pennsylvania. 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.

Conference Call

Ramaco Resources will hold its quarterly conference call and webcast at 9:00 AM Eastern Time (ET) on Tuesday, August 7, 2018 to present its results for the second quarter of 2018.

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/m6/p/h9299sag.

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 future events, 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
  June 30, 2018   March 31, 2018   June 30, 2017
           
Revenues $ 65,278,057     $ 55,943,148     $ 11,073,502  
           
Cost and expenses          
Cost of sales (exclusive of items shown separately below)   47,860,149       44,330,847       11,774,961  
Other operating costs and expenses               96,690  
Asset retirement obligation accretion   123,467       123,468       101,276  
Depreciation and amortization   2,955,382       2,437,500       310,889  
Selling, general and administrative   3,692,254       3,431,144       2,499,280  
Total cost and expenses   54,631,252       50,322,959       14,783,096  
           
Operating income (loss)   10,646,805       5,620,189       (3,709,594 )
           
Interest and dividend income   1,998       1,237       100,343  
Other income   512,693       489,317       121,492  
Interest expense   (315,761 )     (101,159 )     (212 )
           
Income (loss) before taxes   10,845,735       6,009,584       (3,487,971 )
           
Income tax expense   642,299       743,307        
           
Net income (loss) $ 10,203,436     $ 5,266,277     $ (3,487,971 )
           
Basic and diluted earnings (loss) per share          
Basic $ 0.25     $ 0.13     $ (0.09 )
Diluted $ 0.25     $ 0.13     $ (0.09 )
           
Weighted average common shares outstanding          
Basic   40,082,467       39,905,327       39,072,394  
Diluted   40,339,749       40,141,652       39,072,394  


Ramaco Resources, Inc.
Consolidated Balance Sheets
       
  June 30, 2018   December 31, 2017
Assets      
Current assets:      
Cash and cash equivalents $ 5,911,310     $ 5,934,043  
Short-term investments         5,199,861  
Accounts receivable   28,265,692       7,165,487  
Inventories   11,294,596       10,057,787  
Prepaid expenses   2,870,297       1,104,437  
Total current assets   48,341,895       29,461,615  
       
Property, plant and equipment, net   136,574,558       115,450,841  
       
Advanced coal royalties   2,785,748       2,867,369  
Other assets   524,648       318,206  
Total Assets $ 188,226,849     $ 148,098,031  
       
Liabilities and Stockholders' Equity      
Liabilities      
Current liabilities      
Accounts payable $ 20,062,221     $ 19,532,531  
Accrued expenses   8,824,787       2,821,422  
Asset retirement obligations   512,997       70,616  
Note payable, net   14,758,593        
Other   361,918        
Total current liabilities   44,520,516       22,424,569  
Deferred tax liability   1,385,717      
Asset retirement obligations   12,208,126       12,276,176  
Total liabilities   58,114,359       34,700,745  
       
Commitments and contingencies          
       
Stockholders' Equity      
Preferred stock, $0.01 par value, 50,000,000 shares authorized, none issued and outstanding          
Common stock, $0.01 par value, 260,000,000 shares authorized, 40,082,467 and 39,559,366 shares issued and outstanding, respectively   400,825       395,594  
Additional paid-in capital   149,533,523       148,293,263  
Accumulated deficit   (19,821,858 )     (35,291,571 )
Total stockholders' equity   130,112,490       113,397,286  
Total Liabilities and Stockholders' Equity $ 188,226,849     $ 148,098,031  
       

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. The Company believes Adjusted EBITDA is useful because it allows us to more effectively evaluate our operating performance.

We define Adjusted EBITDA as net income (loss) plus net interest expense, equity-based compensation, depreciation and amortization expenses and any transaction related costs. A reconciliation of income (loss) from continuing operations, 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
  June 30, 2018   March 31, 2018   June 30, 2017
Reconciliation of Net Income (Loss) to Adjusted EBITDA            
Net income (loss) $ 10,203,436   $ 5,266,277   $ (3,487,971)
Depreciation and amortization   2,955,382     2,437,500     310,889
Interest and dividend income, net   313,763     99,922     (100,131)
Income taxes   642,299     743,307    
EBITDA   14,114,880     8,547,006     (3,277,213)
Equity-based compensation   694,686     550,805    
Accretion of asset retirement obligation   123,467     123,468     101,276
Adjusted EBITDA $ 14,933,033   $ 9,221,279   $ (3,175,937)
           
           
  Six months ended     
  June 30, 2018   June 30, 2017    
           
Reconciliation of Net Income (Loss) to Adjusted EBITDA          
Net income (loss) $ 15,469,713   $ (6,581,114)    
Depreciation and amortization   5,392,882     467,016    
Interest and dividend income, net   413,685     (193,952)    
Income taxes   1,385,606        
EBITDA   22,661,886     (6,308,050)    
Equity-based compensation   1,245,491     2,145,333    
Accretion of asset retirement obligation   246,935     202,553    
Adjusted EBITDA $ 24,154,312   $ (3,960,164)    
           

Non-GAAP revenue and cash cost per ton  

Non-GAAP revenue per ton (FOB mine) is calculated as coal sales revenues 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 it enables 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 revenues 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 June 30, 2018   Three Months Ended March 31, 2018
  Company
Produced
  Purchased
Coal
  Total   Company
Produced
  Purchased
Coal
  Total
                       
Revenues $ 52,050,730   $ 13,227,327   $ 65,278,057   $ 42,958,746   $ 12,984,402   $ 55,943,148
Less:  Adjustments to reconcile to Non-GAAP revenues (FOB mine)                      
Transportation costs   7,118,210     807,669     7,925,879     6,105,814     1,147,582     7,253,396
Non-GAAP revenues (FOB mine) $ 44,932,520   $ 12,419,658   $ 57,352,178   $ 36,852,932   $ 11,836,820   $ 48,689,752
Tons sold   492,603     122,544     615,147     403,318     118,817     522,135
Revenues per ton sold (FOB mine) $ 91.21   $ 101.35   $ 93.23   $ 91.37   $ 99.62   $ 93.25
                       
                       
  Six Months Ended June 30, 2018  
  Company
Produced
  Purchased
Coal
  Total  
             
Revenues $ 95,009,476   $ 26,211,729   $ 121,221,205  
Less:  Adjustments to reconcile to Non-GAAP revenues (FOB mine)            
Transportation costs   13,224,024     1,955,251     15,179,275  
Non-GAAP revenues (FOB mine) $ 81,785,452   $ 24,256,478   $ 106,041,930  
Tons sold   895,921     241,361     1,137,282  
Revenues per ton sold (FOB mine) $ 91.29   $ 100.50   $ 93.24  

Non-GAAP cash cost per ton

  Three Months Ended June 30, 2018   Three Months Ended March 31, 2018
Three Months Ended June 30, 2018 Company
Produced
  Purchased
Coal
  Total   Company
Produced
  Purchased
Coal
  Total
                       
Cost of sales $ 34,739,384   $ 13,120,765   $ 47,860,149   $ 32,434,959   $ 11,895,886   $ 44,330,845
Less:  Adjustments to reconcile to Non-GAAP cash cost of coal sales                      
Transportation costs   7,360,223     867,874     8,228,097     6,361,282     1,221,399     7,582,681
Non-GAAP cash cost of coal sales $ 27,379,161   $ 12,252,891   $ 39,632,052   $ 26,073,677   $ 10,674,487   $ 36,748,164
Tons sold   492,603     122,544     615,147     403,318     118,817     522,135
Cash cost per ton sold $ 55.58   $ 99.99   $ 64.43   $ 64.65   $ 89.84   $ 70.38
               
               
  Six Months Ended June 30, 2018  
Six Months Ended June 30, 2018 Company
Produced
  Purchased
Coal
  Total  
             
Cost of sales $ 67,174,343   $ 25,016,651   $ 92,190,994  
Less:  Adjustments to reconcile to Non-GAAP cash cost of coal sales            
Transportation costs   13,721,505     2,089,273     15,810,778  
Non-GAAP cash cost of coal sales $ 53,452,838   $ 22,927,378   $ 76,380,216  
Tons sold   895,921     241,361     1,137,282  
Cash cost per ton sold $ 59.66   $ 94.99   $ 67.16  

POINT OF CONTACT:
Michael P. Windisch, Chief Accounting Officer
mpw@ramacocoal.com
859-244-7455

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