Hallador Energy Company Reports Third Quarter 2020 Financial and Operating Results

Rhea-AI Summary

Hallador Energy Company (NASDAQ – HNRG) reported a net income of $1.9 million, equating to $0.06 per share for Q3 2020. The company has successfully reduced its bank debt by $33 million this year, aiming for a total reduction of 20%-25%. Operating cash flow was reported at $34.1 million, with coal shipments expected to improve in Q4. As of September 30, liquidity was $52.7 million and leverage stood at 2.46X, comfortably below the 3.5X covenant. Despite economic uncertainties due to COVID-19, Hallador maintains a strong contracted sales position through 2022.

Positive

• Net income of $1.9 million for Q3 2020.
• Reduced bank debt by $33 million year-to-date.
• Operating cash flow of $34.1 million for the first nine months.
• Improved liquidity to $52.7 million and leverage ratio to 2.46X.

Negative

• Total revenues decreased from $83.1 million in Q3 2019 to $65.1 million in Q3 2020.
• Decrease in tons sold from 2,118 in Q3 2019 to 1,585 in Q3 2020.
• Suspension of sales guidance due to COVID-19 impacts.

TERRE HAUTE, Ind., Nov. 02, 2020 (GLOBE NEWSWIRE) -- Hallador Energy Company (NASDAQ – HNRG) today reported net income of $1.9 million, $.06 Per Share. 

Brent Bilsland, President and Chief Executive Officer, stated, "We are intensely focused on creating positive cash flow to aggressively pay down debt.  Year to date, we have paid down $33 million and are on pace to reduce our total bank debt by 20% - 25% for the year."

• During Q3 2020, shipments improved over Q2 levels and our costs of $29.30 per ton remained within our expectations.
• In the first nine months of 2020, bank debt was reduced by $33 million, and operating cash flow was $34.1 million.  Coal inventories decreased $4.5 million in Q3.  We anticipate shipments increasing in Q4 and inventory levels to continue to decline, further improving operating cash flow.
• As of September 30, 2020, both our liquidity and our leverage ratio improved to $52.7 million and 2.46X, respectively.  Leverage was comfortably within our covenant of 3.5X.

Solid Sales Position Through 2022

• Due to the impacts and economic uncertainty of COVID-19, the Company is continuing to suspend sales guidance, but still carries a strong contracted sales position through 2022.

		Contracted		Estimated
		Tons		Priced
Year		(millions)*		per ton
2020 (Q4)		2.1		$40.00
2021		5.0		$39.30
2022		5.3		$40.20
		12.4

 * Contracted tons are subject to adjustment due to the exercise of customer options to either take additional tons or reduce tonnage if such options exist in the customer contract.  Our actual shipments for the remainder of 2020 are estimated to be 1.7 million tons as we expect our customers to defer or carryover 400,000 tons from 2020 to 2021 from the contracted tons noted above, resulting in contracted and carryover tons of 5.4 million for 2021. 

The table below represents some of our critical metrics (in thousands except for per ton data):

		Three Months Ended							Nine Months Ended
		September 30,							September 30,
			2020			2019				2020				2019
Net Income (loss)		$1,923			$(3,723)				$(1,483)				$(67)
Total Revenues		$65,128			$83,096				$179,747				$244,719
Tons Sold			1,585			2,118				4,355				6,055
Average Price per Ton		$40.85			$39.13				$40.68				$39.51
Bank Debt		$146,925			$172,000				$146,925				$172,000
Operating Cash Flow		$15,810			$12,612				$34,109				$36,323
Adjusted EBITDA*		$17,077			$10,451				$44,151				$52,109
Adjusted Free Cash Flow **		$11,557			$1,100				$24,651				$21,695

 EBITDA, adjusted EBITDA, and adjusted free cash flow should not be considered alternatives to net income, income from operations, cash flows from operating activities or any other measure of financial performance presented in accordance with GAAP.  Our method of computing EBITDA, adjusted EBITDA, and adjusted free cash flow may not be the same method used to compute similar measures reported by other companies.

Management believes that the presentation of such additional financial measures provides useful information to investors regarding our performance and results of operations because these measures, when used in conjunction with related GAAP financial measures, (i) provide additional information about our core operating performance and ability to generate and distribute cash flow, (ii) provide investors with the financial and analytical framework upon which management bases financial, operation, compensation, and planning decisions, and (iii) present measurements that investors, rating agencies, and debt holders have indicated are useful in assessing our results.

Reconciliation of GAAP “net income” to non-GAAP “adjusted EBITDA” (in thousands).

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
			2020				2019				2020				2019
Net income (loss)		$1,923				$(3,723)				$(1,483)				$(67)
Income tax benefit			(461)				(3,473)				(3,255)				(3,318)
Loss from Hourglass Sands			64				47				205				438
(Income) loss from equity method investments			119				184				(1,167)				350
DD&A			9,313				11,774				30,151				35,598
Asset impairment			1,799				—				1,799				—
ARO accretion			348				320				1,024				943
Loss (gain) on disposal of assets			38				1				38				(99)
Loss (gain) on marketable securities			—				14				(14)				(334)
Interest Expense			2,329				3,558				10,877				13,546
Other amortization			1,452				1,323				4,274				3,614
Change in fair value of fuel hedges			(138)				-				775				—
Stock-based compensation			291				426				927				1,438
Adjusted EBITDA		$17,077				$10,451				$44,151				$52,109

Reconciliation of GAAP "net income" to non-GAAP "adjusted free cash flow" (in thousands).

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
			2020				2019				2020				2019
Net income (loss)		$1,923				$(3,723)				$(1,483)				$(67)
(Income) loss from equity method investments			119				184				(1,167)				350
Deferred income tax benefit			(387)				(3,047)				(2,657)				(2,741)
DD&A			9,315				11,778				30,159				35,612
Asset impairment			1,799				—				1,799				—
ARO accretion			348				320				1,024				943
Deferred financing costs amortization			610				543				1,686				1,628
Change in fair value of interest rate swaps			(995)				162				981				3,018
Change in fair value of fuel hedges			(138)				—				775				—
Loss (gain) on disposal of assets			38				1				38				(99)
Maintenance capex			(1,365)				(5,537)				(7,413)				(18,373)
Stock-based compensation less taxes paid			290				419				909				1,424
Adjusted Free Cash Flow		$11,557				$1,100				$24,651				$21,695

Conference Call

As previously announced our earnings conference call for financial analysts and investors will be held on Tuesday, November 3, 2020, at 2:00 pm eastern time.  Dial-in numbers for the live conference call are as follows:  Toll-free (888) 347-5317; Canadian Callers Toll-free (855) 669-9657; Conference ID #: Hallador Energy Company HNRG Call.

An audio replay of the conference call will be available for one week. To access the audio replay, dial US Toll-Free (877) 344-7529; Canada Toll-Free (855) 669-9658 and request to be connected to replay access code 10148523.

Hallador is headquartered in Terre Haute, Indiana and through its wholly owned subsidiary, Sunrise Coal, LLC, produces coal in the Illinois Basin for the electric power generation industry. To learn more about Hallador or Sunrise, visit our website at www.halladorenergy.com.

Contact:	Investor Relations
Phone:	(303) 839-5504

FAQ

What is Hallador Energy Company's net income for Q3 2020?

Hallador Energy Company reported a net income of $1.9 million for Q3 2020.

How much did Hallador Energy reduce its bank debt in 2020?

Hallador Energy reduced its bank debt by $33 million year-to-date in 2020.

What is Hallador Energy's operating cash flow for the first nine months of 2020?

The operating cash flow for Hallador Energy in the first nine months of 2020 was $34.1 million.

What is the current liquidity of Hallador Energy as of September 30, 2020?

As of September 30, 2020, Hallador Energy's liquidity improved to $52.7 million.

What are Hallador Energy's contracted sales for 2021?

Hallador Energy has contracted estimated tons of 5.0 million priced at $39.30 per ton for 2021.