Lipari Energy, Inc.
TSX : LIP

Lipari Energy, Inc.

November 14, 2011 15:31 ET

Lipari Energy, Inc. Announces Third Quarter 2011 Results

TORONTO, ONTARIO--(Marketwire - Nov. 14, 2011) - 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 nine months ended September 30, 2011. All figures are in U.S. dollars unless otherwise stated.

Third quarter 2011 tons sold increased by 66.3% and tons produced increased by 67.4% over third quarter 2010 to 333,256 tons and 297,464 respectively. Third quarter revenues increased by 46.9% as a result of the increase in sales volumes. Lipari generated earnings before interest, taxes, depreciation, depletion and amortization ("EBITDA") of $3.1 million during the third quarter of 2011. Adjusted EBITDA, after accounting for a change in the fair value of warrants, lease expenses and other adjustments, was $4.0 million during the third quarter of 2011.

"We are continuing our efforts to expand the Company with organic growth while maintaining our debt ratio at a low level. Despite achieving substantial production growth, our EBITDA was reduced by a lower realized sales price per ton due to a general economic slowdown in our operating region. We continue to execute on our overall business model and remain on target to grow saleable coal production to approximately 1.3 million tons in 2011 and we have upgraded our 2012 outlook to approximately 1.65 million tons of saleable coal production from our previous estimate of 1.45 million tons. Production growth will come from the Bingham Mine, which is expected to commence mining in Q4 2011, as well as initial production from the Barger Branch Project, which is expected to commence highwall mining in the first quarter of 2012," said John Liperote, CEO of Lipari.

Selected Third Quarter 2011 Operating and Financial Highlights


Q3 2011

Q3 2010
Year-Over-Year
% Change
Tons produced 297,464 177,682 67.4 %
Tons sold 333,256 200,385 66.3 %
Average sales price per ton $ 69.83 $ 79.05 (11.7 %)
Cash cost per ton produced(1) $ 49.46 $ 52.30 (5.4 %)
Lifting cost per ton produced(2) $ 52.02 $ 59.54 (12.6 %)
Total operating cost per ton sold(3) $ 63.58 $ 73.25 (13.2 %)
($ in 000s, except per share amounts)
Revenues $ 23,270 $ 15,840 46.9 %
Gross profit $ 2,081 $ 1,162 79.1 %
EBITDA $ 3,140 $ 2,677 17.3 %
Adjusted EBITDA $ 4,030 $ 2,841 41.9 %
Net income $ 644 $ 768 NMF
Earnings per share – basic $ 0.01 $ 0.03 NMF
Earnings per share – diluted $ 0.01 $ 0.02 NMF
(1) Cash cost per ton produced includes all costs associated with the operation of our mines, preparation plant and rail load out facility plus royalty expenses
(2) Lifting cost per ton produced includes all costs associated with the operation of our mines, preparation plant and rail load out facility plus depreciation, depletion and amortization
(3) Total operating cost per ton sold includes all cost of sales inclusive of depreciation, depletion and amortization

Review of Operating Performance

During the third quarter of 2011, Lipari's operations sold 333,256 tons of high quality thermal coal, a 66.3% increase over the prior year's quarter of 200,385 tons. The average realized sales price per ton of coal sold was $69.83 per ton, an 11.7% decrease over the prior year's average realized price of $79.05 per ton. The economic slowdown lowered the demand for energy and the realized sales price for the quarter. As the majority of coal sales for the remainder of the year are contracted, Lipari expects to realize an annual average sales price of $71 per ton. Total revenues during the third quarter of 2011 increased by 46.9% over the prior year's quarter to $23.3 million.

Lifting costs during the third quarter of 2011 were $52.02 per ton, a 12.6% decrease over the third quarter of 2010 average of $59.54 per ton. Average cash cost per ton decreased by 5.4% during the third quarter of 2011 over the third quarter of 2010 to an average of $49.46 per ton. The decrease in lifting costs and average cash cost was attributable to the increased production. Average cash cost measures a company's control over its cash costs. The primary differences used in calculation lifting costs and average cash cost are lifting cost includes the cost for depreciation, depletion and amortization, and excludes royalty costs.

EBITDA & Adjusted EBITDA

EBITDA for Q3 2011 was approximately $3.1 million, an increase from $2.7 million for Q3 2010. The increase is primarily attributable to an increase in production and sales volume. Adjusted EBITDA for Q3 2011 was approximately $4.0 million, an increase from $2.8 million for Q3 2010. The increase is primarily attributable to an increase in production and sales volume.

During the third quarter of 2011, Lipari reported net income of approximately $0.6 million, compared to approximately $0.8 million in net income for Q3 2010. The decrease in net income is attributable to an increase in diesel fuel and labor costs. Basic earnings per share for Q3 2011 were $0.01 compared to earnings per share of $0.03 for Q3 2010.

Balance Sheet Highlights
($ in 000s,) Sep 30, 2011 Dec 31, 2010
Cash, equivalents, and restricted cash $ 10,757 $ 9,759
Accounts receivable $ 8,886 $ 5,459
Net working capital $ 11,091 $ (9,807 )
Total assets $ 69,492 $ 65,798
Total debt $ 6,931 $ 32,334
Total liabilities $ 21,041 $ 45,229
Shareholder's equity $ 48,451 $ 20,569
Total liabilities and shareholders' equity $ 69,492 $ 65,798
Selected Operating and Financial Highlights for the Nine Months ended September 30
2011 2010 Year-Over-Year % Change
Tons produced 890,253 610,345 45.9 %
Tons sold 913,537 719,477 27.1 %
Average sales price per ton $ 71.63 $ 78.54 (8.8 %)
Cash cost per ton produced(1) $ 43.00 $ 43.71 (1.6 %)
Lifting cost per ton produced(2) $ 46.58 $ 49.28 (5.5 %)
Total operating cost per ton sold(3) $ 62.19 $ 60.59 2.6 %
($ in 000s, except per share amounts)
Revenues $ 65,437 $ 56,509 15.8 %
Gross profit $ 8,620 $ 12,918 (33.3 %)
EBITDA $ 4,229 $ 17,306 (75.6 %)
Adjusted EBITDA $ 15,409 $ 17,596 (12.4 %)
Net income (loss) $ (3,496 ) $ 5,465 NMF
Earnings per share – basic $ (0.08 ) $ 0.20 NMF
Earnings per share – diluted $ (0.08 ) $ 0.16 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) Lifting cost per ton produced includes all costs associated with the operation of our mines, preparation plant and rail load out facility plus depreciation, depletion and amortization
(3) 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 2011 production and approximately 80% of its planned 2012 production at prices averaging approximately $71 per ton for 2011 and 2012. The Company expects that the balance of its production will be sold on the open market at prevailing market rates. The Company believes they are in a desirable position to take advantage of advancing market trends during 2012. The Company has revised its current and future outlook for 2011 and 2012 as listed in the following tables:

Revised Planned Saleable
Production
Tons
(000s)
Average Price
($/ton)
% of Planned
Total Production

2011 1,300 $ 71 100 %
2012 1,650 $ 71 80 %
Previous Planned Saleable
Production
Tons
(000s)
Average Price
($/ton)
% of Planned
Total Production
2011 1,300 $ 73 90 %
2012 1,450 $ 75 65 %

Interim Consolidated Financial Statements and Management's Discussion and Analysis for the three and nine months ending September 30, 2011 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 third quarter of 2011 was Lipari's third 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 income statement as noted throughout the Management's Discussion and Analysis for the three and nine months ending September 30, 2011.

Core Values

Lipari values its presence within the community; "our community includes our employees and maintaining a safe work environment, keeping a clean and healthy environment, and supporting our local businesses and organizations," 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):

(unaudited, $ in 000s)
Quarter Ended
September 30
Nine Months Ended
September 30
2011 2010 2011 2010
Net income (loss) $ 644 $ 768 $ (3,496 ) $ 5,465
Depreciation, depletion and amortization $ 3,057 $ 2,454 $ 9,355 $ 7,352
Interest expense $ 62 $ 1,078 $ 1,164 $ 4,354
Financing cost amortization change in estimate - $ (2,400 ) - $ (2,400 )
Income tax provision (benefit) $ (623 ) $ 777 $ (2,793 ) $ 2,535
EBITDA $ 3,140 $ 2,677 $ 4,229 $ 17,306
Loss on debt extinguishment - - $ 8,869 -
IPO costs - - $ 4,151 -
Warrant expense - - $ 719 -
Stock compensation expense $ 86 - $ 977 -
Equipment lease expense $ 1,074 $ 164 $ 2,234 $ 290
Change in fair value of warrants $ (270 ) - $ (6,020 ) -
Non-compliance charge - - $ 250 -
Adjusted EBITDA $ 4,030 $ 2,841 $ 15,409 $ 17,596

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, 2010, 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.

Contact Information

  • Lipari Energy, Inc.
    Richard Liperote
    President
    606.877.1800