Warrior Met Coal Reports Fourth Quarter and Full Year 2022 Results
Achieved full year strong net income of $641.3 million and all-time record Adjusted EBITDA of $994.2 million
Achieved all-time record annual cash flows from operations of $841.9 million
Ended 2022 with total liquidity of $952.8 million
Sets out guidance for 2023
BROOKWOOD, Ala.–(BUSINESS WIRE)–Warrior Met Coal, Inc. (NYSE:HCC) (“Warrior” or the “Company”) today announced results for the fourth quarter and full-year 2022. Warrior is the leading dedicated U.S.-based producer and exporter of high quality metallurgical (“met”) coal for the global steel industry.
Warrior reported fourth quarter 2022 net income of $99.7 million, or $1.93 per diluted share, compared to net income of $138.5 million, or $2.68 per diluted share, in the fourth quarter of 2021. Adjusted net income for the fourth quarter of 2022 was $1.90 per diluted share compared to an adjusted net income of $3.17 per diluted share in the fourth quarter of 2021. The Company reported Adjusted EBITDA of $147.5 million in the fourth quarter of 2022, compared to Adjusted EBITDA of $240.2 million in the fourth quarter of 2021. While sales volumes were flat quarter over quarter, average net selling prices were 17% lower in the fourth quarter of 2022 compared to 2021, primarily due to stronger met coal market pricing in late 2021.
“In the fourth quarter, we delivered strong results despite shipment delays due to mechanical failures at the McDuffie Terminal and bad weather at the Port of Mobile, which continued to drive higher than normal inventories and lower shipment volumes,” commented Walt Scheller, CEO of Warrior. “We were pleased to see customer demand and coal prices hold firm despite lower steel production globally. As we jointly address the mechanical challenges with our partner at the McDuffie Terminal and as rail transportation performance continues to improve, we expect to ship higher volumes, returning our inventories to normal levels. We have already seen significant improvement from these joint efforts in the first six weeks of the year. Our fourth quarter results marked the conclusion of an exceedingly strong financial year for Warrior, which posted strong net income, record operating cash flows and set Company records for Adjusted EBITDA, more than double our 2021 Adjusted EBITDA at nearly $1 billion, as well as free cash flow and total liquidity. As a result, we are able to move ahead more rapidly with our transformational Blue Creek mine development project, which we believe will drive meaningful future growth, profitability and cash generation.”
“Overall, Warrior enters 2023 with excellent financial and operational momentum. Our current liquidity, which is at a record high, will enable us to continue to return excess cash to stockholders while investing in the future growth of the business through the rapid development of the Blue Creek mine,” Scheller concluded.
Warrior reported strong full year 2022 net income of $641.3 million and adjusted net income of $666.1 million, or net income of $12.40 per diluted share and adjusted net income of $12.88 per diluted share, compared to net income of $150.9 million and adjusted net income of $227.7 million, or net income of $2.93 per diluted share and adjusted net income of $4.43 per diluted share, in 2021. The Company reported an all-time record high Adjusted EBITDA of $994.2 million for the full year 2022 compared to $457.0 million for the full year 2021.
Operating Results
The Company produced 1.5 million short tons of met coal in the fourth quarter of 2022 compared to 1.1 million short tons in the fourth quarter of 2021. Fourth quarter production was the result of running both longwalls and five continuous miner units at Mine No. 7 and one longwall and three continuous miner units at Mine No. 4. For the full year of 2022, the Company produced 6.3 million short tons, or an increase of 12.7% compared to 2021. Sales volume in the fourth quarter of 2022 was 1.5 million short tons compared to 1.4 million short tons in the fourth quarter of 2021. Sales volumes for the full year 2022 were 5.6 million short tons, or a decrease of 10.5% compared to 2021 primarily due to the shipment delays caused by the Port of Mobile and low rail transportation performance throughout the year. Inventory levels increased to 855 thousand short tons at the end of December 31, 2022 from the 243 thousand short tons at the end of 2021 primarily due to the shipment delays.
Additional Financial Results
Total revenues were $344.8 million for the fourth quarter of 2022, including $329.9 million in mining revenues, which consisted of met coal sales of 1.5 million short tons at an average net selling price of $227.21 per short ton, net of demurrage and other charges. This compares to total revenues of $415.5 million in the fourth quarter of 2021. The average net selling price of the Company’s met coal decreased 17% from $273.84 per short ton in the fourth quarter of 2021 to $227.21 per short ton in the fourth quarter of 2022 due to stronger met coal market pricing last year.
Cost of sales for the fourth quarter of 2022 was $180.7 million compared to $155.2 million for the fourth quarter of 2021. Cash cost of sales (including mining, transportation and royalty costs) for the fourth quarter of 2022 were $179.2 million, or 54.3% of mining revenues, compared to $153.3 million, or 38.6% of mining revenues in the same period of 2021. Cash cost of sales (free-on-board port) per short ton increased to $123.40 in the fourth quarter of 2022 from $105.80 in the fourth quarter of 2021, primarily reflecting the delayed impact of transportation and royalty costs and rising inflation in 2022. The full year 2022 cash cost of sales per short ton was $125.50 compared to $87.48 in for the full year 2021. Inflation accounted for approximately $5 per short impact during the fourth quarter and $4 per short ton for the full year 2022 primarily due to increases in the costs of diesel fuel, belt structure, roof bolts, cable, chemicals and other supplies, plus labor and parts on equipment repair and rebuilds.
Selling, general and administrative expenses for the fourth quarter of 2022 were $11.8 million, or 3.4% of total revenues. Depreciation and depletion costs for the fourth quarter of 2022 were $28.3 million, or 8.2% of total revenues. Warrior incurred net interest income of $1.7 million during the fourth quarter of 2022, compared to net interest expense of $9.4 million in the fourth quarter of 2021. Interest income earned on our cash investments exceeded interest expense on our outstanding notes and equipment leases.
Business interruption expenses were $3.4 million in the fourth quarter of 2022 and represent non-recurring expenses that are directly attributable to the ongoing labor strike for incremental safety and security, labor negotiations and other expenses. Idle mine expenses were $2.0 million in the fourth quarter of 2022 and represent expenses incurred with the reduced operations at the mines, such as electricity, insurance and maintenance labor.
Income tax expense was $19.7 million in the fourth quarter of 2022 due to income before income taxes of $119.3 million and primarily reflects the utilization of our net operating losses offset partially by an income tax benefit for depletion. This compares to an income tax expense of $26.7 million in the fourth quarter of 2021.
Cash Flow and Liquidity
The Company generated cash flows from operating activities in the fourth quarter of 2022 of $195.0 million, compared to $174.7 million in the fourth quarter of 2021. Capital expenditures for the fourth quarter of 2022 were $98.5 million, resulting in free cash flow of $96.5 million. Free cash flow was $54.4 million less than the fourth quarter of 2021 and reflected lower realized prices and higher capital expenditures and mine development costs.
Net working capital, excluding cash, for the fourth quarter of 2022 decreased by $46.7 million from the third quarter of 2022, primarily reflecting a decrease in accounts receivable due to lower average net selling prices, partially offset by higher inventories and lower accounts payable.
Cash flows used in financing activities for the fourth quarter of 2022 were $12.7 million, primarily due to payments of capital lease obligations of $7.9 million, the payment of the regular quarterly dividend of $3.1 million, and retirements of debt of $1.6 million.
The Company generated an all-time record $841.9 million of cash flows from operating activities for the full year 2022 compared to $351.5 million in 2021. Capital expenditures and mine development costs for the full year 2022 were $254.2 million, including $47.1 million for the development of Blue Creek. Cash flows used in financing activities for the full year 2022 were $153.1 million, primarily due to the payment of regular and special cash dividends of $79.7 million, retirements of debt of $39.4 million, and payments on capital lease obligations of $30.3 million.
The Company’s total liquidity as of December 31, 2022 was a record high $952.8 million, consisting of cash and cash equivalents of $829.5 million and available liquidity under its ABL Facility of $123.3 million, net of outstanding letters of credit of $8.7 million.
Capital Allocation
On February 9, 2023, the Board of Directors (the “Board”) declared a regular quarterly cash dividend of $0.07 per share, which was an increase of 17% over the regular cash dividend declared by the Board on October 24, 2022, totaling approximately $3.7 million, which will be paid on February 27, 2023 to stockholders of record as of the close of business on February 20, 2023.
In addition, on February 13, 2023, the Board declared a special cash dividend (the “March 2023 Special Dividend”) of $0.88 per share, totaling approximately $46.3 million, which will be paid on March 7, 2023, to stockholders of record as of the close of business on February 28, 2023. The Company continues to demonstrate its previous commitment to returning excess cash to stockholders while driving long-term growth with its investment in the development of its Blue Creek reserves.
Any future special dividends or stock repurchases from excess cash flows will be at the discretion of the Board and subject to consideration of several factors including business and market conditions, future financial performance and other strategic investment opportunities. The Company will also seek to optimize its capital structure to improve returns to stockholders while allowing flexibility for the Company to pursue very selective strategic growth opportunities that can provide compelling stockholder returns.
Company Outlook
The Company’s outlook for 2023 is subject to many risks that may impact performance, such as the labor strike, ongoing mechanical issues at the McDuffie Terminal at the Port of Mobile, ongoing rail transportation issues, market conditions in the steel and met coal industries and overall global economic and competitive conditions, all as more fully described under Forward-Looking Statements. The Company’s guidance for the full year 2023 is outlined below.
|
Coal sales |
6.6 – 7.2 million short tons |
|
|
Coal production |
6.3 – 6.9 million short tons |
|
|
Cash cost of sales (free-on-board port) |
$109 – $125 per short ton |
|
|
Capital expenditures for sustaining existing mines |
$95 – $105 million |
|
|
Blue Creek project and other discretionary capital expenditures |
$325 – $345 million |
|
|
Mine development costs |
$10 – $14 million |
|
|
Selling, general and administrative expenses |
$42 – $48 million |
|
|
Interest expense, net of interest income |
$5 – $10 million |
|
|
Income tax expense |
18% – 20% |
Key factors that may affect outlook include:
- Four planned longwall moves (Q1, Q2, and Q3 has two moves),
- HCC index pricing,
- Exclusion of other non-recurring costs,
- New labor contract, and
- Inflationary pressures.
The Company’s guidance for its capital expenditures consists of sustaining capital spending of approximately $95-$105 million, including regulatory and gas requirements, and discretionary capital spending of $325-$345 million for the development of the Blue Creek reserves, final payments on two new sets of longwall shields originally purchased in 2022, and the final 4 North portal construction.
Environmental, Social and Governance Sustainability
The Company recently published its annual corporate environmental, social and governance sustainability report for 2022, which is located at http://www.warriormetcoal.com/corporate-sustainability/. The report was prepared in accordance with the codified standards of the Sustainability Accounting Standards Board. The Company is committed to transparency and open conversations surrounding environmental, social and governance topics. Although Warrior’s underground metallurgical (met) coal operations have a minimal environment impact compared to surface-mined thermal coal, the Company strives to be an environmental steward by focusing on preservation of the environment, monitoring energy use, reducing greenhouse gas (GHG) emissions and effective land reclamation.
Use of Non-GAAP Financial Measures
This release contains the use of certain non-GAAP financial measures. These non-GAAP financial measures are provided as supplemental information for financial measures prepared in accordance with GAAP. Management believes that these non-GAAP financial measures provide additional insights into the performance of the Company, and they reflect how management analyzes Company performance and compares that performance against other companies. These non-GAAP financial measures may not be comparable to other similarly titled measures used by other entities. The definition of these non-GAAP financial measures and a reconciliation of non-GAAP to GAAP financial measures is provided in the financial tables section of this release.
Conference Call
The Company will hold a conference call to discuss its fourth quarter 2022 results today, February 15, 2023, at 4:30 p.m. ET. To listen to the event live or access an archived recording, please visit http://investors.warriormetcoal.com/. To listen to the event, live or access an archived recording, please visit http://investors.warriormetcoal.com/. Analysts and investors who would like to participate in the conference call should dial 1-844-340-9047 (domestic) or 1-412-858-5206 (international) 10 minutes prior to the start time and reference the Warrior Met Coal conference call. Telephone playback will also be available from 6:30 p.m. ET February 15, 2023, until 6:30 p.m. ET on February 22, 2023. The replay will be available by calling: 1-877-344-7529 (domestic) or 1-412-317-0088 (international) and entering passcode 7984367.
About Warrior
Warrior is a U.S.-based, environmentally and socially minded supplier to the global steel industry. It is dedicated entirely to mining non-thermal met coal used as a critical component of steel production by metal manufacturers in Europe, South America and Asia. Warrior is a large-scale, low-cost producer and exporter of premium quality met coal, also known as hard-coking coal (HCC), operating highly efficient longwall operations in its underground mines based in Alabama. The HCC that Warrior produces from the Blue Creek coal seam contains very low sulfur, has strong coking properties and is of a similar quality to coal referred to as the premium HCC produced in Australia. The premium nature of Warrior’s HCC makes it ideally suited as a base feed coal for steel makers and results in price realizations near the S&P Global Platts Index price. For more information, please visit www.warriormetcoal.com.
Forward-Looking Statements
This press release contains, and the Company’s officers and representatives may from time to time make, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, included in this press release that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements, including statements regarding 2023 guidance, sales and production growth, ability to maintain cost structure, demand, the future direction of prices, management of liquidity, cash flows, expenses and expected capital expenditures and working capital, the Company’s pursuit of strategic growth opportunities, the Company’s future ability to return excess cash to stockholders, future effective income tax rates and payment of cash taxes, if any, as well as statements regarding production, the Company’s ability to withstand economic instability, the development of the Blue Creek project, future reduction in shipping delays, and the outcome of negotiations with our labor union, including any potential changes to our production and sales volumes as a result of such outcome. The words “believe,” “expect,” “anticipate,” “plan,” “intend,” “estimate,” “project,” “target,” “foresee,” “should,” “would,” “could,” “potential,” “outlook,” “guidance” or other similar expressions are intended to identify forward-looking statements. However, the absence of these words does not mean that the statements are not forward-looking. These forward-looking statements represent management’s good faith expectations, projections, guidance, or beliefs concerning future events, and it is possible that the results described in this press release will not be achieved. These forward-looking statements are subject to risks, uncertainties and other factors, many of which are outside of the Company’s control, that could cause actual results to differ materially from the results discussed in the forward-looking statements, including, without limitation, fluctuations or changes in the pricing or demand for the Company’s coal (or met coal generally) by the global steel industry; the impact of COVID-19 on its business and that of its customers, including the risk of a decline in demand for the Company’s met coal due to the impact of COVID-19 on steel manufacturers; the impact of inflation on the Company, the impact of geopolitical events, including the effects of the Russia-Ukraine war; the inability of the Company to effectively operate its mines and the resulting decrease in production; the inability of the Company to transport its products to customers due to rail performance issues or the impact of weather and mechanical failures at the McDufffie Terminal at the Port of Mobile; federal and state tax legislation; changes in interpretation or assumptions and/or updated regulatory guidance regarding the Tax Cuts and Jobs Act of 2017; legislation and regulations relating to the Clean Air Act and other environmental initiatives; regulatory requirements associated with federal, state and local regulatory agencies, and such agencies’ authority to order temporary or permanent closure of the Company’s mines; operational, logistical, geological, permit, license, labor and weather-related factors, including equipment, permitting, site access, operational risks and new technologies related to mining and labor strikes or slowdowns; the timing and impact of planned longwall moves; the Company’s obligations surrounding reclamation and mine closure; inaccuracies in the Company’s estimates of its met coal reserves; any projections or estimates regarding Blue Creek, including the expected returns from this project, if any, and the ability of Blue Creek to enhance the Company’s portfolio of assets, the Company’s expectations regarding its future tax rate as well as its ability to effectively utilize its net operating losses to reduce or eliminate its cash taxes; the Company’s ability to develop Blue Creek; the Company’s ability to develop or acquire met coal reserves in an economically feasible manner; significant cost increases and fluctuations, and delay in the delivery of raw materials, mining equipment and purchased components; competition and foreign currency fluctuations; fluctuations in the amount of cash the Company generates from operations, including cash necessary to pay any special or quarterly dividend; the Company’s ability to comply with covenants in its ABL Facility or indenture relating to its senior secured notes; integration of businesses that the Company may acquire in the future; adequate liquidity and the cost, availability and access to capital and financial markets; failure to obtain or renew surety bonds on acceptable terms, which could affect the Company’s ability to secure reclamation and coal lease obligations; costs associated with litigation, including claims not yet asserted; and other factors described in the Company’s Form 10-K for the year ended December 31, 2022 and other reports filed from time to time with the Securities and Exchange Commission (the “SEC”), which could cause the Company’s actual results to differ materially from those contained in any forward-looking statement. The Company’s filings with the SEC are available on its website at www.warriormetcoal.com and on the SEC’s website at www.sec.gov.
Any forward-looking statement speaks only as of the date on which it is made, and, except as required by law, the Company 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 the Company to predict all such factors.
|
WARRIOR MET COAL, INC. CONDENSED STATEMENTS OF OPERATIONS ($ in thousands, except per share) |
||||||||||||||
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|
|
|
|
|||||||||||
|
|
For the three months ended |
|
For the twelve months ended |
|||||||||||
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|||||||
|
Revenues: |
|
|
|
|
|
|
|
|||||||
|
Sales |
$ |
329,914 |
|
$ |
396,790 |
|
|
$ |
1,707,579 |
|
|
$ |
1,028,283 |
|
|
Other revenues |
|
14,836 |
|
|
18,755 |
|
|
|
31,159 |
|
|
|
30,933 |
|
|
Total revenues |
|
344,750 |
|
|
415,545 |
|
|
|
1,738,738 |
|
|
|
1,059,216 |
|
|
Costs and expenses: |
|
|
|
|
|
|
|
|||||||
|
Cost of sales (exclusive of items shown separately below) |
|
180,736 |
|
|
155,194 |
|
|
|
710,605 |
|
|
|
554,282 |
|
|
Cost of other revenues (exclusive of items shown separately below) |
|
927 |
|
|
6,107 |
|
|
|
27,047 |
|
|
|
28,899 |
|
|
Depreciation and depletion |
|
28,306 |
|
|
39,397 |
|
|
|
115,279 |
|
|
|
141,418 |
|
|
Selling, general and administrative |
|
11,806 |
|
|
9,411 |
|
|
|
48,791 |
|
|
|
35,593 |
|
|
Business interruption |
|
3,371 |
|
|
7,480 |
|
|
|
23,455 |
|
|
|
21,372 |
|
|
Idle mine |
|
1,996 |
|
|
13,696 |
|
|
|
12,137 |
|
|
|
33,899 |
|
|
Total costs and expenses |
|
227,142 |
|
|
231,285 |
|
|
|
937,314 |
|
|
|
815,463 |
|
|
Operating income |
|
117,608 |
|
|
184,260 |
|
|
|
801,424 |
|
|
|
243,753 |
|
|
Interest income (expense), net |
|
1,711 |
|
|
(9,435 |
) |
|
|
(18,995 |
) |
|
|
(35,389 |
) |
|
Loss on early extinguishment of debt |
|
— |
|
|
(9,678 |
) |
|
|
— |
|
|
|
(9,678 |
) |
|
Other income |
|
— |
|
|
— |
|
|
|
675 |
|
|
|
1,291 |
|
|
Income before income tax expense |
|
119,319 |
|
|
165,147 |
|
|
|
783,104 |
|
|
|
199,977 |
|
|
Income tax expense |
|
19,665 |
|
|
26,657 |
|
|
|
141,806 |
|
|
|
49,096 |
|
|
Net income |
$ |
99,654 |
|
$ |
138,490 |
|
|
$ |
641,298 |
|
|
$ |
150,881 |
|
|
Basic and diluted net income per share: |
|
|
|
|
|
|
|
|||||||
|
Net income per share—basic |
$ |
1.93 |
|
$ |
2.69 |
|
|
$ |
12.42 |
|
|
$ |
2.94 |
|
|
Net income per share—diluted |
$ |
1.93 |
|
$ |
2.68 |
|
|
$ |
12.40 |
|
|
$ |
2.93 |
|
|
Weighted average number of shares outstanding—basic |
|
51,654 |
|
|
51,430 |
|
|
|
51,622 |
|
|
|
51,382 |
|
|
Weighted average number of shares outstanding—diluted |
|
51,760 |
|
|
51,580 |
|
|
|
51,715 |
|
|
|
51,445 |
|
|
Dividends per share: |
$ |
0.06 |
|
$ |
0.05 |
|
|
$ |
1.54 |
|
|
$ |
0.20 |
|
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WARRIOR MET COAL, INC.
QUARTERLY SUPPLEMENTAL FINANCIAL DATA AND |
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QUARTERLY SUPPLEMENTAL FINANCIAL DATA: |
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For the three months ended |
|
For the twelve months ended |
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|
(short tons in thousands)(1) |
2022 |
|
2021 |
|
2022 |
|
2021 |
||||
|
Tons sold |
|
1,452 |
|
|
1,449 |
|
|
5,621 |
|
|
6,282 |
|
Tons produced |
|
1,468 |
|
|
1,108 |
|
|
6,315 |
|
|
5,604 |
|
Average net selling price |
$ |
227.21 |
|
$ |
273.84 |
|
$ |
303.79 |
|
$ |
163.69 |
|
Cash cost of sales (free on board port) per short ton(2) |
$ |
123.40 |
|
$ |
105.80 |
|
$ |
125.50 |
|
$ |
87.48 |
|
(1) 1 short ton is equivalent to 0.907185 metric tons. |
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Contacts
For Investors:
Dale W. Boyles, 205-554-6129
dale.boyles@warriormetcoal.com
For Media:
D’Andre Wright, 205-554-6131
dandre.wright@warriormetcoal.com
