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Walter Industries Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: May 9, 2011 06:20PM
Walter Industries Inc. (WLT) filed Quarterly Report for the period ended 2011-03-31. Walter Energy Inc. has a market cap of $6.97 billion; its shares were traded at around $131.08 with a P/E ratio of 15.66 and P/S ratio of 4.39. The dividend yield of Walter Energy Inc. stocks is 0.38%. Walter Energy Inc. had an annual average earning growth of 1.9% over the past 10 years.
Highlight of Business Operations:
Our income from continuing operations for the three months ended March 31, 2011 was $81.8 million, or $1.53 per diluted share, which compares to $42.7 million, or $0.79 per diluted share, for the three months ended March 31, 2010. In the three months ended March 31, 2011, revenues increased $96.7 million and operating income increased $48.5 million versus the same period in 2010. Revenues and operating income improvements in the first quarter were primarily due to higher coking coal pricing in the Underground Mining segment. Operating income improvements resulting from the higher revenue were partially offset by higher costs and lower sales volumes from the Underground Mining segment. EBITDA for the first quarter of 2011 was $148.1 million, compared to $93.5 million in the first quarter of 2010. A reconciliation of net income to EBITDA is presented in Liquidity and Capital Resources below.
Coking coal sales totaled 1.7 million short tons in the first quarter, down 6.4% compared to the same period last year due to lower production volumes despite strong customer demand. The average selling price in the first quarter of 2011 was $193.51 per short ton, a 52.3% increase over the average selling price of $127.05 per short ton for the same period in 2010. Our sales volume expectation for 2011 ranges from 7.5 million to 8.0 million short tons including up to 500,000 short tons of purchased coal. Coking coal production totaled 1.6 million short tons in the first quarter of 2011, as compared to 1.7 million short tons during the same period in 2010. Lower production was primarily the result of challenging mining conditions, which persisted longer than expected. Production costs for the first quarter of 2011 averaged $69.20 per short ton, an $11.01 per ton increase from the same period in 2010. Cost per short ton increased due to the effect of lower production volumes as well as planned continuous miner development associated with the preparation of future longwall panels. The coal bed methane business sold 3.4 billion cubic feet of natural gas at an average price of $4.09 per thousand cubic feet in the first quarter of 2011 versus 1.4 billion cubic feet at an average hedged price of $5.49 per thousand cubic feet in the first quarter of 2010. Increased production and sales for the quarter resulted from the May 2010 acquisition of the Walter Black Warrior Basin natural gas business. On May 6, 2011 we leased mineral rights for approximately 75 million short tons of recoverable Blue Creek coking coal reserves to the northwest of our existing mines from a subsidiary of Chevron Corporation. In addition we acquired Chevron Corporation's existing North River steam coal mine in Fayette County and Tuscaloosa County, Alabama. The acquisition of the North River mine is expected to be neutral to slightly accretive to earnings in the first year. We will continue to evaluate future expansion opportunities, potential acquisitions and further investment opportunities in coal and natural gas. Surface Mining
Revenues for the three months ended March 31, 2011 were $408.7 million, an increase of $96.7 million from $312.0 million in the same period in 2010. The increase in revenues was primarily due to significantly higher average selling prices for coking coal from our Underground Mining segment.
Cost of sales, exclusive of depreciation, increased $28.9 million to $218.5 million, a 15.3% increase from $189.5 million in the first quarter of 2010, primarily as the result of higher production costs, royalties and freight costs at our Underground Mining segment. Production costs increased primarily due to costs associated with continuous miner development. Cost of sales represented 53.4% of revenues for the three months ended March 31, 2011 versus 60.7% of revenues for the same period in 2010. This reduction of cost of sales as a percentage of revenues is primarily the result of increased selling prices.
Cash and cash equivalents decreased by $200.2 million from $293.4 million at December 31, 2010 to $93.2 million at March 31, 2011, resulting primarily from the use of $293.7 million in cash in January 2011 to acquire approximately 25.3 million common shares of Western Coal and capital expenditures during the 2011 first quarter of $44.3 million. Offsetting these uses of cash was $148.5 million in cash flows provided by operating activities during the first quarter of 2011. See additional discussion in the Statement of Cash Flows section that follows.
Net property, plant and equipment was $805.0 million at March 31, 2011, an increase of $15.0 million from December 31, 2010, primarily due to capital expenditures during the 2011 first quarter of $44.3 million partially offset by quarterly depreciation and depletion expense.
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