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James River Coal (JRCC)

Q3 2011 Earnings Call

November 08, 2011 11:00 am ET


James Ketron - Vice President, Secretary and General Counsel

Joseph Czul - President - Logan & Kanawha

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

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

Elizabeth M. Cook - Director of Investor Relations

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


Lance Ettus - Mortar Rock Capital Management

David Olkovetsky

Michael Goldenberg - Luminus Management, LLC

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

Justine Fisher - Goldman Sachs Group Inc., Research Division

David E. Beard - Iberia Capital Partners, Research Division

Brian D. Gamble - Simmons & Company International, Research Division

Shneur Z. Gershuni - UBS Investment Bank, Research Division



Good day, ladies and gentlemen, and welcome to the James River Coal Co. Third Quarter Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the call over to your host, Beth Cook, Director of Investor Relations. Please go ahead.

Elizabeth M. Cook

Thanks, Stephanie, and good morning. Welcome to James River Coal Co.'s Third Quarter Earnings Call. We released our earnings this morning and our current release and presentation are posted on our website, and were furnished to the SEC on a 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; Joe Czul, President of Logan & Kanawha; and Jim Ketron, Vice President and General Counsel.

Before we begin this morning, I need to remind you that this call will contain forward-looking statements, and 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 and on Form 10-K and other SEC filings. Now I'll turn the call over to Peter.

Peter T. Socha

Okay. Thank you, Beth, and good morning, everyone. Thanks for joining us. We're going to go through our slides fairly quickly. It's a short deck, and then we'll get right into the Q&A. It was a fairly uneventful quarter here. The mines were doing pretty well. We were still cleaning up from the Jellico flood. But by and large, the mines did well, and we did sell some coal, as we'll talk about in a few minutes. We did miss a couple of ships. We thought that we knew stress when we missed a couple of big trains of thermal coal. But now, when you miss ships, it's 20 times that much. So we're learning to deal with that, but those shipments are back to normal. They're not market related. It was just a delay in price fixing on that, and so the ships got pushed out.

We did sell some coal during the quarter. You could see that we sold 2.4 million tons for 2012 delivery. In total, we sold about 4.2 million tons. What we have left in Central App for the Central App coal in 2012, the vast majority of that is specialty coal, it's high-dollar coal. It's either met coal, stoker or PCI. And actually, if you exclude the West Virginia met coal from the equation and just look in the Eastern Kentucky operations, the majority of the coal that we have left to sell is still met coal, stoker or PCI. The lowest price of which we've gotten for those coals has been in the 90s. So we're feeling pretty good about next year and our pricing for next year right now with what we have left to sell.

The integration of Logan & Kanawha and IRP is done. It's pretty much done. I don't think we've had any conversations recently on any integration issues or synergies or anything like that. We're just functioning as one company, and I'm very happy about that. We are continuing to maintain, we're very focused on our cash balance. As we know, many of you are and it's in our liquidity. We think that the next year or so could be as a result of regulatory issues. The market could stay on the softer side, and so we want to make sure that we have a strong balance sheet when the market does turn back up.

One thing we didn't put on here, you'll notice, that there was some tax changes. Every third quarter, we true-up on taxes. We have NOL complications and we have alternative minimum tax complications and percent depletion. We will be filing the 10-Q this afternoon. It has full notes in it on that. And if you still have any questions, just give Sam a call tomorrow morning. And with that, I'll turn it to C.K.

Coy K. Lane

Thanks, Peter. Just to cover a few things on safety. Our NFDL rate, which is our non-fatal days lost, was 1.44 year-to-date. That's well below the national average, and it's also below our 2010 rates. So we're very pleased with that. Bevin's Branch won the MSHA National Mining Association's Sentinels of Safety award for a large prep plant. Tan Trough also won for the safest large underground mine in MSHA District 7. We have added a second continuous miner with the proximity detection at our McCoy operation, and we're pleased with the way that miners operate. We completed 90 seals at 2 different mines, trying to reduce the size of the mines and just the regulatory footprint. We will continue to try to make the mines smaller in size just to reduce the cost it takes to maintain large outby areas, and we'll continue this project into the fourth quarter.

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