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James River Coal (JRCC)

Q3 2012 Earnings Call

November 07, 2012 11:00 am ET


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


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

David Feaster

Shneur Z. Gershuni - UBS Investment Bank, Research Division

Lucas Pipes - Brean Murray, Carret & Co., LLC, Research Division

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

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

Brett Levy - Jefferies & Company, Inc., Research Division

Justine Fisher - Goldman Sachs Group Inc., Research Division

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

David S. Martin - Deutsche Bank AG, Research Division



Good day, ladies and gentlemen, and welcome to the James River Coal Company Third Quarter Earnings Conference. [Operator Instructions] I would now like to turn the conference over to your host, Beth Cook, Director, Investor Relations. Please begin.

Elizabeth M. Cook

Thank you, Sean, and good morning. Welcome to James River Coal Company's Third Quarter Earnings Call. We released our earnings this morning and our release and presentation are posted on our website and were furnished to the SEC on an 8-K.

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

Thank you, Beth. I'm sure if most of you are like us, you had a late night last night watching the elections. We haven't really studied it, a whole lot yet. We may talk about it a little bit, but we haven't sort of studied all of the implications of it yet. This is a down ballot races, which surprise me a little bit. I mean, obviously, the top pick is as good as well. But some of the down ballot races, I thought, were very surprising.

So I will go through the slides and then we'll -- like usual, we'll jump into -- right into Q&A and take as many questions as we can. You could see on the summary slide, we are continuing to focus on liquidity, continuing to focus on maintaining a strong balance sheet. This particular quarter, we did dip our toe into the -- into bond repurchases a little bit. We had thought that when the other coal companies had their issues earlier in the summer, we had thought that there might be a vortex that we would get caught in and that our securities might be abnormally priced. And so that's in effect, what happened, and that's why we dipped our toe in the water. At the same time, we did maintain a strong balance sheet and strong liquidity.

Our view is that the thermal market is correcting. as far as the market view, our view is the thermal market is correcting. It's just correcting slowly. We had said just last May that we thought that it would take 2 normal seasons. In this case, it would be a normal summer and a normal winter, both for the natural gas market and for the coal market, and we continue to have that view.

On the met market, it's earlier in the process. The corrective period is earlier in the process. But the innings, I used a baseball metaphor here, but the innings in the met market are shorter, so they may be on the same track or the met market may lag a little bit.

The natural gas market is going exactly as we thought it would when we talked about it back in May. The storage overhang is quickly dissipating, partly that's due to production, partly that's due to coal-to-gas switching at the power generators, probably more so on the power side than on the production side, but it is correcting. And as we head into winter, as you'll see in the graph that we put in here that in fact, storage is normal. Storage is pretty close to normal. C.K. and the guys are continuing to manage production to the markets and doing a great job.

So with that, I'll turn it over to C.K. I will forewarn you though, he does have a cold, so if he sounds a little nasal, that maybe why.

Coy K. Lane

Thanks, Peter. On the safety and environmental fronts, we have received several safety awards through the quarter at Triad, our Freelandville surface and Freelandville underground mine, both received the lowest entry rate in the MSHA District.

In Kentucky, at Bledsoe, our Old House underground mine was the safest mine in the district. Also at McCoy, our Mine 15 mine was the safest mine in the district. And our surface mine grew. Coal services, they had a surface mine, Laurel Fork, that received the Reclamation Award for the district.

We're continuing to focus on safety. A lot of distractions with the election, the coal markets and all the mine closings going on, so a continual effort being made to operate the mine safely.

Read the rest of this transcript for free on seekingalpha.com