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James River Coal (JRCC)

Q4 2012 Earnings Call

March 07, 2013 10:00 am ET

Executives

Elizabeth M. Cook - Director of Investor Relations

Peter T. Socha - Chairman, Chief Executive Officer and President

Coy K. Lane - Chief Operating Officer and Senior Vice President

Joseph Czul - President - Logan & Kanawha

Samuel M. Hopkins - Principal Financial Officer, Chief Accounting Officer and Vice President

Analysts

James M. Rollyson - Raymond James & Associates, Inc., Research Division

Michael S. Dudas - Sterne Agee & Leach Inc., Research Division

Lucas Pipes - Brean Capital LLC, Research Division

Shneur Z. Gershuni - UBS Investment Bank, Research Division

Justine Fisher - Goldman Sachs Group Inc., Research Division

J. Christopher Haberlin - Davenport & Company, LLC, Research Division

Caleb M.J. Dorfman - Simmons & Company International, Research Division

Brett M. Levy - Jefferies & Company, Inc. Fixed Income Research

Brandon Blossman - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division

Lance Ettus

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the James River Coal Fourth Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Ms. Beth Cook, you may begin.

Elizabeth M. Cook

Thank you, Mimi, and good morning. Welcome to James River Coal Co.'s Fourth Quarter and Full Year Earnings Call. We released our earnings this morning, and our current release and investor presentation are posted on our website and were furnished to the SEC on Form 8-K. With me on the call today are Peter Socha, Chairman and Chief Executive Officer; C.K. Lane, Senior Vice President and Chief Operating Officer; Sam Hopkins, Vice President and Chief Accounting Officer; and Joe Czul, President of Logan & Kanawha.

Before we begin this morning, I need to remind you that this call will contain forward-looking statements. These statements should be considered along with the risk factors that we note at the end of our press release as well as in our annual report on Form 10-K and other SEC filings. Now I'll turn the call over to Peter.

Peter T. Socha

Good morning, everyone. Thanks, Beth. I appreciate it. I was driving into work this morning, and I was thinking about our comment, our first comment in the press release in the close that I know all of us in the industry are glad that 2012 is over with, and I was sort of thinking back on what the year looked like, and it was really, from a coal industry perspective and from a James River perspective, it was just as an unbelievable year of events coming together if everyone sort of reflects back to natural gas prices collapsing in March and April because of the winter that didn't show up, and then thermal prices, particularly eastern thermal prices, collapsing in April and May, and then metallurgical prices collapsing in July and August.

So with the whole confluence of things coming together that really made it just a terrible, terrible year for all of us in the coal industry, really not just in the U.S., but also internationally. And as we move forward into 2013, it's actually looking a little bit better, the met market has come up off the bottom and have shown some real life. The thermal market is bouncing along sort of some up, some down, but bouncing along, and I'll talk about going out and seeing the utilities in just a few minutes.

Natural gas prices are good, but not bad. They're better, but they're not really good yet, but they're certainly better than where they were. The U.S. economy seems to be doing a little bit better than it was and Europe appears to be stabilized.

So yes, overall, we're pretty optimistic heading into 2013. We made a lot of changes, as you can see. We changed both in operations and in SG&A. C.K. and his team have just ripped into the cost structure of the company. A lot of these were painful changes, but we had to do -- we had to adapt to the new reality, and the new reality for us is going to be that we're going to have 3 main elements to the business. One will be the met business and the international met business, in particular, that will run out of West Virginia and through L&K. Two will be the thermal business in Kentucky that is specialty coals. It'll be a high-value add. It'll be high-quality, thermal coals that can go either domestically or internationally. It will be the PCIs, and it will be the industrial stoker coals. And then we have Triad out in Indiana, which just keeps plugging along, and we've been very happy with that asset since we acquired it.

You can see on Slide 1, we kind of highlighted some of the changes that we made as I mentioned. We didn't talk about SG&A here, but we also did things on the SG&A lines as well. That's more recent. That was more of a January, early February activity, and one thing I did not put on this slide, and I thought about it at 6:00 this morning, and that is the tons that we sold, I should have put it on the slide and on the press release. I asked Beth if we could add it, and she gave me a Heisman and said, "No, too late. We're locked and loaded." But we did sell during the quarter -- we did price during the quarter 1.6 million tons at $96.97 a ton. As you might guess, that was mostly metallurgical coal. It was about 80-some-odd percent met coal, and the balance was a combination of thermal, PCI and of stoker, but we're very happy to get that done.

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