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Foresight Energy LP Reports Full-Year and Fourth Quarter 2019 Results

04/06/2020

ST. LOUIS --(BUSINESS WIRE)-- Foresight Energy LP (“Foresight” or the “Partnership”) (OTC Pink: FELPQ) today reported financial and operating results for the fourth quarter and year ended December 31, 2019 . Foresight generated fiscal year coal sales revenues of $834 million on sales volumes of 19.7 million tons, resulting in a net loss of $320 million , and Adjusted EBITDA of $185 million . Foresight mines safely and efficiently produced nearly 19.9 million tons during the year.

In March 2020 , Foresight resumed longwall mining production at its Hillsboro complex and idled continuous mining production at its Macoupin complex.

Filing Under Chapter 11 of the United States Bankruptcy Code

On March 10, 2020 , Foresight filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code (the “Foresight Chapter 11 Cases”) in the United States Bankruptcy Court for the Eastern District of Missouri (the “Bankruptcy Court”). For additional information on the Foresight Chapter 11 Cases, refer to Foresight’s amended Current Reports on Form 8-K filed with the Securities and Exchange Commission on March 10, 2020 .

Consolidated Financial Results

Year Ended December 31, 2019 Compared to Year Ended December 31, 2018

Coal sales totaled $834.4 million for 2019 compared to $1.097 billion for 2018, representing a decrease of nearly $263.0 million , or 24%. The decrease in coal sales revenue from the prior year was due to lower coal sales volumes combined with lower coal sales realization per ton sold. Coal sales volumes for the current year were lower as compared to the prior year due primarily to lower sales volumes placed into the export market. Declining API2 pricing on export volumes resulted in lower overall coal sales realizations.

Cost of coal produced was $468.7 million for 2019 compared to nearly $527.0 million for 2018. The decrease in cost of coal produced from the prior year was due to an overall decrease in produced tons sold, offset by a higher cash cost per ton sold. The increase in cash cost per ton sold resulted primarily from reduced production at our Williamson complex during the fourth quarter in response to challenging export market conditions.

Transportation costs decreased $52.5 million as compared to the year ended December 31, 2018 due to a decrease in produced tons sold and a larger percentage of our sales going to the export market during the prior year, which have higher associated transportation and transloading costs. These decreases were slightly offset by additional transloading-related costs in the current year due to high river levels at the export facilities near New Orleans .

The decrease in selling, general and administrative expense for the year ended December 31, 2019 as compared to the year ended December 31, 2018 was primarily due to decreased sales and marketing expenses resulting from lower export sales volumes and legal expenses incurred in the prior year associated with the Hillsboro and Macoupin litigation matters settled in October of 2018.

During the year ended December 31, 2019 , we recognized an aggregate impairment charge of $143.6 million related to certain long-lived assets and mineral reserves associated with our Macoupin complex. During the year ended December 31, 2018 , we recognized an aggregate impairment charge of $110.7 million related to certain long-lived assets and mineral reserves associated with our Hillsboro complex.

During the year ended December 31, 2019 , we recorded a reserve of $60.4 million on our financing receivables as a result of uncertainty in collection due to the Chapter 11 bankruptcy filing of Murray Energy Corporation .

In 2019, other operating (income) expense, net consisted primarily of $25.4 million in payments from insurance companies related to the final settlement of claims associated with the Hillsboro combustion event. In 2018, other operating (income) expense, net consisted of $43.0 million in payments from insurance companies offset by $25.0 million for the settlement of litigation related to the Hillsboro and Macoupin matters.

Interest expense, net for the current year was comparable to the prior year primarily as a result of lower overall outstanding principal balances on our long-term debt and longwall financing arrangements, offset by additional outstanding borrowings on our revolving credit facility.

The $7.7 million of debt restructuring costs consist of legal and financial advisor fees related to our debt restructuring efforts and the Foresight Chapter 11 Cases. We expect debt restructuring costs to continue to be substantial until such time that these issues are remediated, if at all.

Adjusted EBITDA was $185.0 million for 2019 compared to $313.6 million for 2018. The decrease in Adjusted EBITDA was due primarily to the overall decreased sales volumes and lower coal sales realization per ton in the current year.

During 2019, Foresight generated $74.8 million in cash flows from operations, had capital expenditures totaling $90.7 million , and had cash provided from financing activities of $46.1 million , consisting of additional borrowings on the Partnership’s revolving credit facility offset by the regularly scheduled final installments on the Partnership’s longwall financing arrangements and finance lease obligations.

Three Months Ended December 31, 2019 Compared to Three Months Ended December 31, 2018

Coal sales were $161.1 million for the three months ended December 31, 2019 compared to $297.0 million for the three months ended December 31, 2018 . The decrease in coal sales revenue from the prior period was due decreased coal sales volumes combined with lower coal sales realization per ton sold. Coal sales volumes for the fourth quarter 2019 were lower as compared to the fourth quarter 2018 due primarily to lower sales volumes placed into the export market. Declining API2 pricing on export volumes resulted in lower overall coal sales realizations.

Cost of coal produced for the three months ended December 31, 2019 was $118.8 million compared to $135.8 million for the three months ended December 31, 2018 . The decrease in cost of coal produced resulted from an overall decrease in produced tons sold during the fourth quarter 2019, offset by a higher cash cost per ton sold. The increase in cash cost per ton sold resulted primarily from reduced production at the Williamson complex during the fourth quarter 2019 in response to challenging export market conditions.

Guidance for 2020

Based on the Foresight Chapter 11 Cases and the uncertainty, social and economic, surrounding the domestic and global impact the coronavirus disease (COVID – 19) pandemic will have on our coal markets, the Partnership is not providing guidance for 2020 at this time.

Cautionary Statement Regarding Forward-Looking Statements

This press release, and certain oral statements made by our representatives from time to time, may contain “forward-looking” statements within the meaning of the federal securities laws. The words “propose,” “believe,” “expect,” “anticipate,” “plan,” “intend,” “foresee,” “outlook,” “estimate,” “potential,” “continues,” “may,” “will,” “seek,” “approximately,” “predict,” “anticipate,” “should,” “would,” “could” or other similar expressions are intended to identify forward-looking statements, which are generally not historical in nature. Forward-looking statements also include statements about our liquidity, our capital structure and expected results of operations. These forward-looking statements are based on our current expectations and beliefs concerning future developments and their potential effect on us. While management believes that these forward-looking statements are reasonable as and when made, there can be no assurance that the future developments affecting us will be those that we anticipate.

We continue to experience substantial financial, business, operational and reputational risks that threaten our ability to continue as a going concern and could materially affect our present expectations and projections. For additional information regarding known material factors that could cause our actual results to differ from those contained in or implied by forward-looking statements, please see the section entitled “Risk Factors” in the Partnership’s: (i) Annual Report on Form 10-K for the year ended December 31, 2018 , filed with the Securities and Exchange Commission on February 27, 2019 , (ii) subsequently filed Quarterly Reports on Form 10-Q, and (iii) subsequently filed Current Reports on Form 8-K.

You are cautioned not to place undue reliance on forward-looking statements, which are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise, except as required by law.

Non-GAAP Financial Measures

Adjusted EBITDA is a non-GAAP supplemental financial measure that management and external users of the Partnership’s consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, may use to assess:

  • the Partnership’s operating performance as compared to other publicly traded partnerships, without regard to historical cost basis or, in the case of Adjusted EBITDA, financing methods;
  • the Partnership’s ability to incur and service debt and fund capital expenditures; and
  • the viability of acquisitions and other capital expenditure projects and the returns on investment of various expansion and growth opportunities.

The Partnership defines Adjusted EBITDA as net income (loss) before interest, income taxes, depreciation, depletion, amortization and accretion. Adjusted EBITDA is also adjusted for equity-based compensation, losses/gains on commodity derivative contracts, settlements of derivative contracts, contract amortization and write-off, a change in the fair value of the warrant liability and material nonrecurring or other items, which may not reflect the trend of future results. As it relates to commodity derivative contracts, the Adjusted EBITDA calculation removes the total impact of derivative gains/losses on net income (loss) during the period and then adds/deducts to Adjusted EBITDA the amount of aggregate settlements during the period. Adjusted EBITDA also includes any insurance recoveries received, regardless of whether they relate to the recovery of mitigation costs, the receipt of business interruption proceeds, or the recovery of losses on machinery and equipment.

The Partnership believes the presentation of Adjusted EBITDA provides useful information to investors in assessing the Partnership’s financial condition and results of operations. Adjusted EBITDA should not be considered an alternative to net (loss) income, operating income, cash flow from operations, or any other measure of financial performance presented in accordance with U.S. GAAP, nor should Adjusted EBITDA be considered an alternative to operating surplus, adjusted operating surplus or other definitions in the Partnership’s partnership agreement. Adjusted EBITDA has important limitations as an analytical tool because it excludes some, but not all, of the items that affects net (loss) income. Additionally, because Adjusted EBITDA may be defined differently by other companies in the industry, and the Partnership’s definition of Adjusted EBITDA may not be comparable to similarly titled measures of other companies, the utility of such a measure is diminished. For a reconciliation of Adjusted EBITDA to net (loss) income, please see the table below.

About Foresight Energy LP

Foresight Energy is a leading producer and marketer of thermal coal controlling nearly 2.1 billion tons of coal reserves in the Illinois Basin . Foresight Energy operates three longwall mining complexes with four longwall mining systems ( Williamson (one longwall mining system), Sugar Camp (two longwall mining systems), and Hillsboro (one longwall mining system), which has fully resumed longwall mining operations in March 2020 ), and the Sitran river terminal on the Ohio River . With the resumption of longwall mining at Hillsboro , Foresight Energy has temporarily idled continuous miner production at its Macoupin complex. Foresight Energy’s operations are strategically located near multiple rail and river transportation access points, providing transportation cost certainty and flexibility to direct shipments to the domestic and international markets.

Foresight Energy LP

Unaudited Consolidated Balance Sheets

(In Thousands)

December 31 ,

December 31 ,

2019

2018

Assets

Current assets:

Cash and cash equivalents

$

33,905

$

269

Accounts receivable

19,241

32,248

Due from affiliates

23,131

49,613

Financing receivables - affiliate

297

3,392

Inventories, net

58,784

56,524

Prepaid royalties

2,000

Deferred longwall costs

20,641

14,940

Other prepaid expenses and current assets

13,402

10,872

Contract-based intangibles

726

1,326

Total current assets

170,127

171,184

Property, plant, equipment, and development, net

1,923,625

2,148,569

Financing receivables - affiliate

60,705

Prepaid royalties

11,382

2,678

Other assets

13,985

4,311

Contract-based intangibles

726

Total assets

$

2,119,119

$

2,388,173

Liabilities and partners’ capital

Current liabilities:

Current portion of long-term debt and finance lease obligations

$

1,317,302

$

53,709

Current portion of sale-leaseback financing arrangements

12,190

6,629

Accrued interest

45,885

24,304

Accounts payable

109,909

99,735

Accrued expenses and other current liabilities

58,123

67,466

Asset retirement obligations

3,313

6,578

Due to affiliates

15,836

17,740

Contract-based intangibles

6,268

8,820

Total current liabilities

1,568,826

284,981

Long-term debt and finance lease obligations

1,194,394

Sale-leaseback financing arrangements

147,915

189,855

Asset retirement obligations

55,643

38,966

Other long-term liabilities

14,480

16,428

Contract-based intangibles

60,624

66,834

Total liabilities

1,847,488

1,791,458

Limited partners' capital:

Common unitholders (80,997 and 80,844 units outstanding as of December 31, 2019 and 2018, respectively)

197,586

377,880

Subordinated unitholders (64,955 units outstanding as of December 31, 2019 and 2018)

74,045

218,835

Total limited partners' capital

271,631

596,715

Total liabilities and partners' capital

$

2,119,119

$

2,388,173

Foresight Energy LP

Unaudited Consolidated Statement of Operations

(In Thousands, Except Per Unit Data)

Three Months
Ended
December 31 ,
2019

Three Months
Ended
December 31 ,
2018

Three Months
Ended
September 30 ,
2019

Year Ended
December 31 ,
2019

Year Ended
December 31 ,
2018

Revenues

Coal sales

$

161,095

$

297,000

$

181,455

$

834,375

$

1,097,366

Other revenues

1,352

1,907

1,627

7,142

7,625

Total revenues

162,447

298,907

183,082

841,517

1,104,991

Costs and expenses

Cost of coal produced (excluding depreciation, depletion and amortization)

118,821

135,762

93,655

468,673

526,984

Cost of coal purchased

1,818

2,603

1,990

8,273

14,572

Transportation

34,773

63,336

34,106

177,503

230,052

Depreciation, depletion and amortization

50,330

53,128

43,850

183,972

212,640

Contract amortization and write-off

(1,880

)

(9,782

)

(2,034

)

(7,436

)

(86,481

)

Accretion and changes in estimates on asset retirement obligations

552

(10,364

)

551

2,206

(8,516

)

Selling, general and administrative

6,462

10,794

6,724

29,841

39,568

Long-lived asset impairments

143,587

143,587

110,689

Reserve on financing receivables - affiliate

60,408

60,408

Other operating (income) expense, net

(27,410

)

(258

)

(55

)

(27,626

)

(19,040

)

Operating (loss) income

(225,014

)

53,688

4,295

(197,884

)

84,523

Other expenses

Interest expense, net

30,819

31,049

31,723

124,526

122,676

Interest (benefit) expense, net - sale-leaseback financing arrangements

(26,517

)

5,760

5,502

(9,671

)

23,460

Debt restructuring costs

6,533

1,176

7,709

Net (loss) income

$

(235,849

)

$

16,879

$

(34,106

)

$

(320,448

)

$

(61,613

)

Net (loss) income available to limited partner units - basic and diluted:

Common unitholders

$

(130,886

)

$

11,394

$

(18,923

)

$

(175,658

)

$

(25,783

)

Subordinated unitholders

$

(104,963

)

$

5,485

$

(15,183

)

$

(144,790

)

$

(35,830

)

Net (loss) income per limited partner unit - basic:

Common unitholders

$

(1.62

)

$

0.14

$

(0.23

)

$

(2.17

)

$

(0.32

)

Subordinated unitholders

$

(1.62

)

$

0.08

$

(0.23

)

$

(2.23

)

$

(0.55

)

Net (loss) income per limited partner unit - diluted:

Common unitholders

$

(1.62

)

$

0.14

$

(0.23

)

$

(2.17

)

$

(0.32

)

Subordinated unitholders

$

(1.62

)

$

0.08

$

(0.23

)

$

(2.23

)

$

(0.55

)

Weighted average limited partner units outstanding - basic:

Common units

80,997

80,844

80,959

80,953

80,016

Subordinated units

64,955

64,955

64,955

64,955

64,955

Weighted average limited partner units outstanding - diluted:

Common units

80,997

81,650

90,959

80,016

80,016

Subordinated units

64,955

64,955

64,955

64,955

64,955

Distributions declared per limited partner unit

$

$

0.0565

$

$

0.0600

$

0.2260

Foresight Energy LP

Unaudited Consolidated Statements of Cash Flows

(In Thousands)

Year Ended
December 31, 2019

Year Ended
December 31, 2018

Cash flows from operating activities

Net loss

$

(320,448

)

$

(61,613

)

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation, depletion and amortization

183,972

212,640

Amortization of debt issuance costs, debt discount, and change in sale-leaseback assumptions

(23,742

)

2,716

Contract amortization and write-off

(7,436

)

(86,481

)

Accretion and changes in estimates on asset retirement obligations

2,206

(8,516

)

Equity-based compensation

162

729

Insurance proceeds included in investing activities

(42,947

)

Long-lived asset impairments

143,587

110,689

Reserve on financing receivables - affiliate

60,408

Changes in operating assets and liabilities:

Accounts receivable

13,007

2,910

Due from/to affiliates, net

24,578

(6,565

)

Inventories

(287

)

(13,712

)

Prepaid expenses and other assets

(12,339

)

974

Prepaid royalties

(6,704

)

572

Accounts payable

10,174

23,077

Accrued interest

21,581

10,894

Accrued expenses and other current liabilities

(11,906

)

(12,276

)

Other

(1,966

)

276

Net cash provided by operating activities

74,847

133,367

Cash flows from investing activities

Investment in property, plant, equipment and development

(90,684

)

(84,147

)

Insurance proceeds included in investing activities

42,947

Return of investment on financing arrangements with Murray Energy (affiliate)

3,392

3,138

Net cash used in investing activities

(87,292

)

(38,062

)

Cash flows from financing activities

Borrowings under revolving credit facility

136,000

61,000

Payments on revolving credit facility

(16,000

)

(24,000

)

Payments on long-term debt and finance lease obligations

(53,359

)

(106,146

)

Distributions paid

(4,856

)

(18,142

)

Payments on sale-leaseback and short-term financing arrangements

(15,704

)

(9,927

)

Net cash provided by (used in) financing activities

46,081

(97,215

)

Net increase (decrease) in cash, cash equivalents, and restricted cash

33,636

(1,910

)

Cash, cash equivalents, and restricted cash, beginning of period

269

2,179

Cash, cash equivalents, and restricted cash, end of period

$

33,905

$

269

Reconciliation of U.S. GAAP Net Loss Attributable to Controlling Interests to Adjusted EBITDA (In Thousands)

Three Months
Ended
December 31 ,
2019

Three Months
Ended
December 31 ,
2018

Three Months
Ended
September 30 ,
2019

Year Ended
December 31 ,
2019

Year Ended
December 31 ,
2018

Net income (loss)

$

(235,849

)

$

16,879

$

(34,106

)

$

(320,448

)

$

(61,613

)

Interest expense, net

30,819

31,049

31,723

124,526

122,676

Interest (benefit) expense, net - sale-leaseback financing arrangements

(26,517

)

5,760

5,502

(9,671

)

23,460

Depreciation, depletion and amortization

50,330

53,128

43,850

183,972

212,640

Accretion and changes in estimates on asset retirement obligations

552

(10,364

)

551

2,206

(8,516

)

Contract amortization and write-off

(1,880

)

(9,782

)

(2,034

)

(7,436

)

(86,481

)

Equity-based compensation

(538

)

199

233

162

729

Long-lived asset impairments

143,587

143,587

110,689

Reserve on financing receivables - affiliate

60,408

60,408

Debt restructuring costs

6,533

1,176

7,709

Adjusted EBITDA

$

27,445

$

86,869

$

46,895

$

185,015

$

313,584

Operating Metrics (In Thousands, Except Per Ton Data)

Three Months
Ended
December 31 ,
2019

Three Months
Ended
December 31 ,
2018

Three Months
Ended
September 30 ,
2019

Year Ended
December 31 ,
2019

Year Ended
December 31 ,
2018

Produced tons sold

4,332

6,087

4,632

19,570

23,065

Purchased tons sold

38

58

42

175

330

Total tons sold

4,370

6,145

4,674

19,745

23,395

Tons produced

3,477

6,061

4,968

19,926

23,313

Coal sales realization per ton sold (1)

$

36.86

$

48.33

$

38.82

$

42.26

$

46.91

Cash cost per ton sold (2)

$

27.43

$

22.30

$

20.22

$

23.95

$

22.85

Netback to mine realization per ton sold (3)

$

28.91

$

38.03

$

31.53

$

33.27

$

37.07

(1) - Coal sales realization per ton sold is defined as coal sales divided by total tons sold.

(2) - Cash cost per ton sold is defined as cost of coal produced (excluding depreciation, depletion and amortization) divided by produced tons sold.

(3) - Netback to mine realization per ton sold is defined as coal sales less transportation expense divided by tons sold.

Cody E. Nett
Corporate Secretary
740-338-3100
Investor.relations@foresight.com
Cody.Nett@coalsource.com

Source: Foresight Energy LP

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