Ramaco Resources, Inc. Reports First Quarter 2020 Financial

|May 12|magazine41 min read

LEXINGTON, Ky., May 12, 2020 /PRNewswire/ -- Ramaco Resources, Inc. (NASDAQ: METC) ("Ramaco Resources" or the "Company") today reported quarterly net income of $2.0 million, or $0.05 per diluted share for the three months ended March 31, 2020, as compared to $6.9 million or $0.17 per diluted share for the three months ended March 31, 2019. The Company's adjusted earnings before interest, taxes, depreciation, amortization and equity-based compensation expenses ("Adjusted EBITDA") was $8.4 million for the three months ended March 31, 2020, as compared with $13.7 million for the three months ended March 31, 2019. For reference, the average sales price of coal that Ramaco has contracted for thus far in 2020 is close to $93.50 per ton, roughly 17% less as compared to the $113 per ton average fixed price contract in 2019.

Key operational and financial metrics are presented below:












Key Metrics












1Q20


4Q19

Change


1Q19

Change

Sales of Company Produced Tons ('000)


416



420

-1%



443

-6%

Revenue ($mm)

$

41.9


$

45.6

-8%


$

57.5

-27%

Cost of Sales ($mm)

$

30.9


$

33.3

-7%


$

41.0

-25%

Pricing of Company Produced ($/Ton)

$

93


$

104

-11%


$

103

-10%

Cash Cost of Sales - Company Produced ($/Ton)

$

67


$

74

-9%


$

68

-1%

Cash Margins on Company Produced ($/Ton)

$

26


$

30

-13%


$

35

-26%

Net Income ($mm)

$

2.0


$

1.9

4%


$

6.9

-71%

Adjusted EBITDA ($mm)

$

8.4


$

9.0

-6%


$

13.7

-38%

Capex ($mm)

$

8.9


$

11.7

-24%


$

8.2

9%

Diluted Earnings per Share

$

0.05


$

0.05

0%


$

0.17

-71%












First Quarter 2020 Summary

Year over Year Quarterly Comparison

Overall sales of Company produced tons in the first quarter of 2020 was 416,000 tons, down from 443,000 tons in the first quarter of 2019. Cash margins on Company produced coal were $26 per ton in the first quarter of 2020, down 26% from the same period of 2019, because of lower realized pricing, on the back of large declines on the various metallurgical coal indices.  

Sequential Quarter Comparison

Overall sales volumes of Company produced tons in the first quarter of 2020 was down 1% from the fourth quarter of 2019.  Our cash margin on Company produced coal declined 13% in the sequential period.  This decline was caused primarily by lower realized pricing.  Cash costs per ton sold on Company produced coal were $67 in the first quarter of 2020 compared to $74 in the fourth quarter of 2019. The $67 per ton figure includes costs of our Berwind development mine. At Elk Creek, cash costs per ton sold were $61 on a standalone basis in the first quarter of 2020, which compared to $66 in the fourth quarter of 2019.

Additional Financial Results

At March 31, 2020, the Company had $15.3 million of cash on hand and $13.5 million of availability under its revolving credit facility. In April, we borrowed an additional $13.2 million under two promissory notes and expect to use the funds to further improve our liquidity, to retain employees, maintain payroll and make lease and utility payments.

In the first quarter of 2020, the Company recorded income tax expense of $110 thousand, for an effective tax rate of approximately 5%. Actual cash taxes paid in 2020 are expected to be less than $10 thousand. Ramaco expects to continue to pay minimal taxes for the foreseeable future.

Capital expenditures totaled $8.9 million for the three months ended March 31, 2020, including $6.7 million of growth capex primarily for the development of the Berwind mining complex.  

The following summarizes key sales, production and financial metrics for the periods noted:














Three months ended




March 31,


December 31,


March 31,


In thousands, except per ton amounts


2020


2019


2019













Sales Volume











Company



416



420



443


Purchased







35


Total



416



420



478













Company Production











Elk Creek Mining Complex



452



400



440


Berwind Development Deep Mine



66



47



33


Total



518



447



473













Company Financial Metrics (a)











Average revenue per ton


$

93


$

104


$

103


Average cash costs of coal sold



67



74



68


Average cash margin per ton


$

26


$

30


$

35













Elk Creek Financial Metrics (a)











Average revenue per ton


$

92


$

102


$

102


Average cash costs of coal sold



61



66



63


Average cash margin per ton


$

31


$

36


$

39













Purchased Coal Financial Metrics (a)











Average revenue per ton


$


$


$

127


Average cash costs of coal sold







108


Average cash margin per ton


$


$


$

19













Capital Expenditures











Maintenance


$

2,154


$

4,480


$

6,754


Growth



6,746



7,199



1,445


Total


$

8,900


$

11,679


$

8,199













(a)         Excludes transportation.

Outlook and Comment

Randall Atkins, Ramaco Resources' Executive Chairman remarked, "When we look back at the first quarter, we began a period of both extraordinary market and societal upheaval, which we are continuing to live through. I believe we have been able to position the Company both defensively to ride out the storm, yet opportunistically to capitalize on increasing future production when we see the market clarify itself. We are proud of the resilience that the Ramaco team has shown in this uncharted environment."

"While Ramaco has one of the most compelling growth stories in the metallurgical coal space, we decided our two most immediate goals are keeping our workforce safe, and protecting our liquidity. We hit the pause button on all discretionary spending, until there is more market clarity and also took additional measures to increase our near-term liquidity. Because we are dealing with uncertainty on every front, we also have additional plans in place which could add even more liquidity if we needed it, largely through additional cuts. We are also planning for the near-term to keep capex to be maintained at roughly $6/ton maintenance levels. With that said, we continue to position ourselves for growth once there is positive market clarity. In addition to our Berwind slope project, we have now added two other new near-term development projects. Within six months of greenlighting, these three projects could add over 1.2 million tons of annual low-vol and mid-vol production at full capacity, which would normalize at about 900,000 additional tons per year over time. These three combined mines would require an estimated capital expenditure level of roughly $11 million to complete and would produce at an average cash mining cost in the low $60 per ton range." 

Atkins continued, "I would also note that our operating team did another excellent job controlling mining costs, with Elk Creek first quarter cash costs of $61 among the lowest in Central Appalachia. Unfortunately, given the deteriorating market for metallurgical coal throughout the first quarter, inventory increased by over $8 million since year-end 2019. We have now seen a reversal of that inventory trend, given the hard, but necessary short-term furloughs taken at Elk Creek on April 1. Of positive note, however, we have now been able to recall that entire workforce, in large part due to our new additional liquidity. With that said, for perhaps the next two quarters our operational and financial challenge will be to navigate through these unprecedented times and treacherous markets." 

Michael Bauersachs, Ramaco Resources' President and CEO commented, "Echoing Randy's comments, given current market uncertainty, Ramaco is suspending production guidance other than continuing to provide current sales commitments. To that end, I would remind everyone that we made a strategic decision in the second half of 2019 to lock in domestic sales for the majority of our planned 2020 volumes at levels above current spot prices. It was clear last fall that the market was trending into a decline. We believe that we made the right decision to reduce our exposure to index-based seaborne pricing for 2020."

Bauersachs continued, "In the medium- to long-term, we remain confident that the global supply/demand balance of high quality metallurgical coal will remain tight. This is especially true in light of the lack of capital available to the space, as well as the likelihood that some high cost producers with too much debt will not survive the current downturn. To that end, I am extremely excited with the appointment of Jason T. Fannin as Senior Vice President and Chief Marketing Officer.  Mr. Fannin brings to Ramaco more than two decades of coal sales and marketing experience, and is regarded as one of the top marketing executives in the industry. He will join Kevin Karazsia to provide what we believe will be one of the strongest sales teams in the industry."

Committed 2020 Sales Volume (a)

(In thousands, except per ton amounts)









Volume


Average Price

Domestic, fixed priced


1.1


$

95

Export, fixed priced


0.5


$

90

Total, fixed priced


1.5


$

93

Indexed priced


-




Total committed tons


1.5


$

93








(a)     Amounts include no purchased coal and no thermal coal by-product. Totals may not add due to rounding..

About Ramaco Resources, Inc.

Ramaco Resources, Inc. is an operator and developer of high-quality, low cost metallurgical coal in southern West Virginia, southwestern Virginia and southwestern Pennsylvania. Its executive offices are in Lexington, Kentucky, with operational offices in Charleston, West Virginia. 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.

Earnings Conference Call

Ramaco Resources will hold its quarterly conference call and webcast at 9:00 AM Eastern Time (ET) on Wednesday, May 13, 2020. An accompanying slide deck will be available at https://www.ramacoresources.com/investors-center/events-calendar/ immediately before the conference call.

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/mmc/p/ywcyhuhv.

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 guidance, future events, anticipated revenue, costs and expectations regarding operating results, 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, risks related to the impact of the COVID-19 global pandemic, 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 further 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 and Quarterly Report on Form 10-Q. 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 March 31, 

In thousands, except per share amounts


2020


2019








Revenue


$

41,935


$

57,460








Costs and expenses







Cost of sales (exclusive of items shown separately below)



30,934



41,006

Asset retirement obligation accretion



141



128

Depreciation and amortization



5,002



4,116

Selling, general and administrative



4,717



3,960

Total costs and expenses



40,794



49,210

Operating income



1,141



8,250

Other income



1,210



298

Interest expense, net



(279)



(307)

Income before tax



2,072



8,241

Income tax expense



110



1,358

Net income


$

1,962


$

6,883








Earnings per common share







Basic earnings per share


$

0.05


$

0.17

Diluted earnings per share


$

0.05


$

0.17








Basic weighted average shares outstanding



41,760



40,604

Diluted weighted average shares outstanding



41,760



40,652









 

Ramaco Resources, Inc.

Consolidated Balance Sheets


In thousands, except share amounts


March 31, 2020


December 31, 2019








Assets







Current assets







Cash and cash equivalents


$

15,319


$

5,532

Accounts receivable



14,420



19,256

Inventories



23,458



15,261

Prepaid expenses and other



4,943



4,274

Total current assets



58,140



44,323








Property, plant and equipment, net



181,896



178,202

Advanced coal royalties



3,640



3,271

Other assets



983



1,017

Total Assets


$

244,659


$

226,813








Liabilities and Stockholders' Equity







Liabilities







Current liabilities







Accounts payable


$

13,099


$

10,663

Accrued expenses



11,484



11,740

Asset retirement obligations



361



19

Current portion of long-term debt



3,333



3,333

Other



375



656

Total current liabilities



28,652



26,411








Asset retirement obligations



14,394



14,586

Long-term debt, net



22,295



9,614

Deferred tax liability



5,375



5,265

Other long-term liabilities



975



854

Total liabilities



71,691



56,730








Commitments and contingencies












Stockholders' Equity







Preferred stock, $0.01 par value





Common stock, $0.01 par value



427



410

Additional paid-in capital



155,863



154,957

Retained earnings



16,678



14,716

Total stockholders' equity



172,968



170,083

Total Liabilities and Stockholders' Equity


$

244,659


$

226,813

 

Ramaco Resources, Inc.

Statement of Cash Flows




Three months ended March 31, 

In thousands


2020


2019








Cash flows from operating activities







Net income


$

1,962


$

6,883

Adjustments to reconcile net income to net cash from operating activities:







Accretion of asset retirement obligations



141



128

Depreciation and amortization



5,002



4,116

Amortization of debt issuance costs



14



14

Stock-based compensation



923



894

Deferred income taxes



110



1,341

Changes in operating assets and liabilities:







Accounts receivable



4,836



(16,556)

Prepaid expenses and other current assets



(554)



1,010

Inventories



(8,197)



(842)

Other assets and liabilities



(214)



63

Accounts payable



2,649



(4,159)

Accrued expenses



(256)



1,031

Net cash from operating activities



6,416



(6,077)








Cash flow from investing activities:







Purchases of property, plant and equipment



(8,900)



(8,199)








Cash flows from financing activities







Proceeds from borrowings



22,200



26,500

Repayment of borrowings



(9,533)



(17,251)

Repayments of financed insurance payable



(281)



(171)

Net cash from financing activities



12,386



9,078








Net change in cash and cash equivalents and restricted cash



9,902



(5,198)

Cash and cash equivalents and restricted cash, beginning of period



6,865



7,380

Cash and cash equivalents and restricted cash, end of period


$

16,767


$

2,182








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. We believe Adjusted EBITDA is useful because it allows us to more effectively evaluate our operating performance.

We define Adjusted EBITDA as net income plus net interest expense, equity-based compensation, depreciation and amortization expenses and any transaction related costs. Its most comparable GAAP measure is net income. A reconciliation of net income 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 March 31, 

(In thousands)


2020


2019








Reconciliation of Net Income to Adjusted EBITDA







Net income


$

1,962


$

6,883

Depreciation and amortization



5,002



4,116

Interest expense, net



279



307

Income taxes



110



1,358

EBITDA



7,353



12,664

Stock-based compensation



923



894

Accretion of asset retirement obligation



141



128

Adjusted EBITDA


$

8,417


$

13,686








Non-GAAP revenue and cash cost per ton

Non-GAAP revenue per ton (FOB mine) is calculated as coal sales revenue 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 these enable 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 revenue 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 March 31, 2020


Three months ended March 31, 2019



Company


Purchased





Company


Purchased




(In thousands, except per ton amounts)


Produced


Coal


Total


Produced


Coal


Total




















Revenue


$

41,935


$


$

41,935


$

52,700


$

4,760


$

57,460

Less: Adjustments to reconcile to Non-GAAP
revenue (FOB mine)



















Transportation costs



(3,186)





(3,186)



(7,020)



(330)



(7,350)

Non-GAAP revenue (FOB mine)


$

38,749


$


$

38,749


$

45,680


$

4,430


$

50,110

Tons sold



416





416



443



35



478

Revenue per ton sold (FOB mine)


$

93


$


$

93


$

103


$

127


$

105

 













Three months ended December 31, 2019



Company


Purchased




(In thousands, except per ton amounts)


Produced


Coal


Total











Revenue


$

45,612


$


$

45,612

Less: Adjustments to reconcile to Non-GAAP
revenue (FOB mine)










Transportation costs



(2,155)





(2,155)

Non-GAAP revenue (FOB mine)


$

43,457


$


$

43,457

Tons sold



420





420

Revenue per ton sold (FOB mine)


$

104


$


$

104

 

Non-GAAP cash cost per ton






















Three months ended March 31, 2020


Three months ended March 31, 2019



Company


Purchased





Company


Purchased




(In thousands, except per ton amounts)


Produced


Coal


Total


Produced


Coal


Total




















Cost of sales


$

30,934


$


$

30,934


$

36,911


$

4,095


$

41,006

Less: Adjustments to reconcile to Non-GAAP
cash cost of sales



















Transportation costs



(3,186)





(3,186)



(6,952)



(330)



(7,282)

Non-GAAP cash cost of sales


$

27,748


$


$

27,748


$

29,959


$

3,765


$

33,724

Tons sold



416





416



443



35



478

Cash cost per ton sold


$

67


$


$

67


$

68


$

108


$

71

 













Three months ended December 31, 2019



Company


Purchased




(In thousands, except per ton amounts)


Produced


Coal


Total











Cost of sales


$

42,996


$

1,987


$

44,983

Less: Adjustments to reconcile to Non-GAAP
cash cost of sales










Transportation costs



(2,384)



(52)



(2,436)

Non-GAAP cash cost of sales


$

40,612


$

1,935


$

42,547

Tons sold



510



17



527

Cash cost per ton sold


$

80


$

113


$

81

 


 

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SOURCE Ramaco Resources, Inc.