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Narrower-than-Expected Loss at Alpha Natural Resources (Revised)

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Coal producer Alpha Natural Resources reported a loss of 52 cents per share for the fourth quarter of 2013, narrower than the Zacks Consensus Estimate of a loss of 61 cents. The loss per share in the quarter was however much wider than the year-ago loss of 19 cents.

GAAP loss during the quarter was $1.62 per share versus a loss of 58 cents incurred in the year-ago quarter. The difference between GAAP and operating loss in the reporting quarter was primarily due to impairments, merger related expenses and amortization of acquired assets.

The company’s 2013 operating loss was $2.15 per share, narrower than the Zacks Consensus Estimate of a loss of $2.28. However, the bottom line was substantially wider than the 2012 loss of 94 cents per share.

Total Revenue

Alpha Natural Resources’ total revenue of $1.09 billion in the fourth quarter was lower than the Zacks Consensus Estimate of $1.16 billion and the year-ago figure of $1.56 billion.

Alpha Natural Resources’ total revenue of $4.95 billion in 2013 was marginally lower than the Zacks Consensus Estimate of $5.05 billion. The results were also lower than the 2012 figure of $6.97 billion by 28.9%.

In 2013, the company registered a 26.8% decline in Freight and Handling revenues, while Coal revenues decreased 29.2% and Other Revenues plunged 30.2%, resulting in the overall decline.

Highlights of the Release

Coal tons sold in 2013 decreased 20.1% to 86.9 million tons. In 2013, the company also experienced an 11.4% year-over-year decline in average realized price per ton sold to $48.99 per ton. The combination of these two factors impacted the top line of the company.

Selling, general and administrative (SG&A) expense in 2013 was $158.9 million, compared with $209.8 million in 2012. The SG&A decline was an outcome of Alpha's restructuring initiatives.

Financial Update

Cash and cash equivalents of the company as of Dec 31, 2013 were $0.62 billion versus $0.73 billion as of Dec 31, 2012.

Long-term debt as of Dec 31, 2013 was $3.34 billion versus $3.29 billion as of Dec 31, 2012.

In 2013, the company issued $0.69 billion senior convertible debts, a major portion of which were utilized to redeem its existing debts.  Alpha Natural Resources lowered its outstanding convertible notes maturing in 2015 from $0.82 billion to $0.19 billion during 2013.

Cash from operating activities during 2013 was $0.10 billion versus $0.52 billion in the prior year. Capital expenditure in 2013 was $0.21 billion versus $0.42 billion in 2012.

During the year the company repurchased shares worth $1.4 million versus $7.5 million in 2012.


The company expects to ship 77 to 90 million tons of coal in 2014, which will include 16 to 20 million tons of Eastern metallurgical coal, 24 to 30 million tons of Eastern steam coal, and 37 to 40 million tons of Western steam coal out of the PRB.

Selling, general and administrative expenses are expected to range from $110 million to $140 million for 2014. Interest expense and depreciation, depletion and amortization expense are anticipated in the range of $240 million to $255 million and $650 million to $750 million, respectively.

Capital expenditure for 2014 is expected to be in a range of $250 million to $300 million.

Other Company Release

Arch Coal Inc. reported fourth-quarter 2013 pro forma loss of 45 cents per share, wider than the Zacks Consensus Estimate of a loss of 36 cents.

Peabody Energy Corporation (BTU - Free Report) broke even in the fourth quarter versus the Zacks Consensus Estimate of a loss of 8 cents per share.

CONSOL Energy Inc. (CNX - Free Report) reported fourth-quarter 2013 earnings of 3 cents per share, lagging the Zacks Consensus Estimate of 8 cents.

Our View

Alpha Natural Resources was affected by the softness in coal demand and the decline in realized prices per ton made matters worse. The company does not expect a dramatic change in the coal market in 2014.

In the quarter under review the company decided to let go of its 50% interest in Alpha Shale Resources Joint Venture to Rice Energy for $300 million. The proceeds will help the company to sustain its development activities.

Alpha Natural Resources currently has a Zacks Rank #4 (Sell).

(We are reissuing this article to correct a mistake. The original article should no longer be relied upon.)

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