Lipari Energy, Inc.
TSX : LIP

Lipari Energy, Inc.

March 30, 2012 22:38 ET

Lipari Energy, Inc. Announces Fourth Quarter and Full Year 2011 Results

TORONTO, ONTARIO--(Marketwire - March 30, 2012) - Lipari Energy, Inc. (TSX:LIP) ("Lipari" or the "Company"), a thermal coal producer with current operations and additional development properties in the Central Appalachian region of the United States, is pleased to announce its operating results for the three and twelve months ended December 31, 2011. All figures are in U.S. dollars unless otherwise stated.

Fourth quarter 2011 tons sold decreased by 1.4% however tons produced increased by 15.6% over fourth quarter 2010 from 270,272 tons to 312,544. Fourth quarter revenues decreased by 13.2%, as a result of a decrease in sales price per ton. Lipari generated earnings before interest, taxes, depreciation, depletion and amortization ("EBITDA") of $2.7 million during the fourth quarter of 2011. Adjusted EBITDA, after accounting for a change in the fair value of warrants, lease expenses and other adjustments, was $3.2 million during the fourth quarter of 2011.

"We are pleased with the addition of our Barger Branch Project, with our first production in March 2012. We expect this to be a major contributor to our production model as both highwall mining and surface production will occur during the year. Due to the current outlook in the coal market, we have decided to decrease our planned production to only produce committed tonnage for the year. We are continuing our efforts to be one of the lowest cost producers in Central Appalachia as our cash cost per ton decreased by 6.3% from 2010 to $41.86," said John Liperote, CEO of Lipari.

Selected Fourth Quarter 2011 Operating and Financial Highlights
Q4 2011 Q4 2010 Year-Over-Year
% Change
Tons produced 312,544 270,272 15.6 %
Tons sold 282,990 287,118 (1.4 %)
Average sales price per ton $ 67.75 $ 76.94 (11.9 %)
($ in 000s, except per share amounts)
Revenues $ 19,174 $ 22,090 (13.2 %)
Net income (loss) $ (1,930 ) $ 1,865 NMF
Earnings (loss) per share - basic $ (0.04 ) $ 0.07 NMF
Earnings (loss) per share - diluted $ (0.04 ) $ 0.05 NMF

Review of Operating Performance

During the fourth quarter of 2011, Lipari's operations sold 282,990 tons of high quality thermal coal, a 1.4% decrease over the prior year's quarter of 287,118 tons. The average realized sales price per ton of coal sold was $67.75 per ton, an 11.9% decrease over the prior year's average realized price of $76.94 per ton. The economic slowdown, milder weather, and lower natural gas prices decreased the demand for energy and the realized sales price for the quarter. Total revenues during the fourth quarter of 2011 decreased by 13.2% over the prior year's quarter to $19.2 million.

Balance Sheet Highlights
($ in 000s,) Dec 31, 2011 Dec 31, 2010
Cash, equivalents, and restricted cash $ 7,541 $ 9,759
Accounts receivable $ 8,229 $ 5,459
Net working capital* $ 11,359 $ (9,807 )
Total assets $ 66,927 $ 65,798
Total debt $ 7,147 $ 32,334
Total liabilities $ 20,038 $ 45,229
Shareholders' equity $ 46,889 $ 20,569
Total liabilities and shareholders' equity $ 66,927 $ 65,798
*Current assets less current liabilities
Selected Operating and Financial Highlights for the Twelve Months ended December 31
2011 2010 Year-Over-Year
% Change
Tons produced 1,202,796 880,618 36.6 %
Tons sold 1,201,105 1,006,595 19.3 %
Average sales price per ton $ 70.44 $ 78.08 (9.8 %)
Cash cost per ton produced1 $ 41.86 $ 44.66 (6.3 %)
Total operating cost per ton sold2 $ 64.14 $ 62.54 2.6 %
($ in 000s, except per share amounts)
Revenues $ 84,610 $ 78,599 7.6 %
Gross margin $ 7,569 $ 15,569 (51.4 %)
EBITDA $ 6,964 $ 22,230 (68.7 %)
Adjusted EBITDA $ 18,672 $ 23,253 (19.7 %)
Net income (loss) $ (5,426 ) $ 7,330 NMF
Earnings (loss) per share - basic $ (0.13 ) $ 0.27 NMF
Earnings (loss) per share - diluted $ (0.13 ) $ 0.22 NMF
1. Cash cost per ton produced includes all costs associated with the operation of our mines, preparation plant and rail load out facility inclusive of royalty expenses
2. Total operating cost per ton sold includes all cost of sales inclusive of depreciation, depletion and amortization

Production and Sales Contract Portfolio

Lipari has sales commitments in place for 100% of its planned 2012 production and approximately 75% of its planned 2013 production at prices averaging approximately $72 per ton for 2012 and $78 per ton for 2013. The Company has determined it will constrain production to match contracted sales for 2012, in response to the decline in market prices.

Annual Consolidated Financial Statements and Management's Discussion and Analysis for the years ending December 31, 2011 and 2010 have been posted on SEDAR and are available at www.liparienergy.com.

The Company adopted International Financial Reporting Standards ("IFRS") for fiscal year 2011, with restatement of fiscal 2010 comparative periods. The fourth quarter of 2011 was Lipari's fourth period reporting under IFRS. While the conversion did not have a significant impact on profit for the quarter, certain components have been reclassified within the statement of operations.

Core Values

Lipari continues to stress safety in the workplace; "our employees are the one asset in the organization on which we place the highest value, our continued efforts to provide the safest equipment and surroundings is our number one priority," said Richard Liperote, President of Lipari.

Use of Non-IFRS Financial Measures

Our financial results are prepared in accordance with IFRS. This document refers to EBITDA and Adjusted EBITDA, which are not measures recognized under IFRS. EBITDA is earnings attributable to shareholders before interest and financing expenses, income taxes, depreciation, depletion and amortization. Adjusted EBITDA equals EBITDA exclusive of loss on debt extinguishment, IPO costs, warrant expense, stock compensation expense, equipment lease expense, change in fair value of warrants and non-compliance charge. We disclose these measures, which have been derived from our financial statements and applied on a consistent basis, because we believe it is of assistance in understanding the results of our operations and financial position and are meant to provide further information about our financial results to investors. Management believes that Adjusted EBITDA is a valuable indicator of the Company's ability to generate liquidity by producing operating cash flow to fund working capital needs, service debt obligations and fund capital expenditures.

The table below presents EBITDA and Adjusted EBITDA and reconciles these non-IFRS measures from net income (loss):
($ in 000s) Twelve Months
Ended December 31
2011 2010
Net income (loss) $ (5,426 ) $
7,330
Depreciation, depletion and amortization 13,622 10,369
Interest expense $ 1,264 $ 5,647
Financing cost amortization change in estimate - $ (2,400 )
Income tax provision (benefit) $ (2,496 ) $ 1,203
EBITDA $ 6,964 $ 22,149
Loss on debt extinguishment $ 8,869 -
IPO costs $ 4,151 -
Warrant expense $ 719 -
Stock compensation expense $ 1,064 -
Equipment lease expense $ 3,060 $ 1,022
Change in fair value of warrants $ (6,404 ) -
Non-compliance charge $ 250 -
Adjusted EBITDA $ 18,672 $ 23,171

About Lipari Energy:

Lipari is a thermal coal producer with current operations and additional development properties in the Central Appalachian region of the United States. Lipari has been in production since 2008 and has diversified surface and highwall mining operations. Lipari coal sales are predominantly to utilities through a mix of forward contracts and short-term sales. Lipari's growth strategy includes continued growth of its organic reserves through its enhanced drilling program, as well as from its focused and disciplined approach to strategic acquisitions. Lipari's corporate office is located in London, Kentucky.

This news release and the information contained herein does not constitute an offer of securities for sale in the United States and securities may not be offered or sold in the United States absent registration or exemption from registration.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION: This news release contains "forward-looking information" that includes information relating to future events and future financial and operating performance, including management's assessment of Lipari's future outlook. Forward-looking information should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of the times at, or by which, that performance or those results will be achieved. Forward-looking information is based on information available at the time it is made and/or management's good faith belief as of that time with respect to future events, and such information is subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking information. Important factors that could cause these differences include but are not limited to: changes in contracted sales, the business of the Company may suffer as a result of uncertainty surrounding the coal market; the Company may be adversely affected by other economic, business, and/or competitive factors; the worldwide demand for coal; the price of coal; the price of alternative fuel sources; the supply of coal and other competitive factors; the costs to mine and transport coal; the ability to obtain new mining permits; the costs of reclamation of previously mined properties; the risks of expanding coal production; the ability to bring new mines on line on schedule; industry competition; the Company's ability to continue to execute its growth strategies; and general economic conditions. These and other risks are more fully described in the Company's filings with the Canadian Securities Administrators, including its Annual Information Form for the year ended December 31, 2011, available on SEDAR at www.sedar.com. You should not put undue reliance on any forward-looking information. We assume no obligation to update forward-looking information to reflect actual results, changes in assumptions or changes in other factors affecting forward looking information, except to the extent required by applicable securities laws. If we do update one or more forward-looking information, no inference should be drawn that we will make additional updates with respect to those or other forward-looking information.

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