James River Coal Company Earnings Cheat Sheet: Increased Costs Strains Margins as Profit Drops

Rising costs hurt James River Coal Company (NASDAQ:JRCC) in the second quarter as profit dropped from a year earlier. James River Coal Company mines, processes and sells bituminous, steam- and industrial-grade coal through six operating subsidiaries located throughout eastern Kentucky and one in southern Indiana.

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James River Coal Company Earnings Cheat Sheet for the Second Quarter

Results: Net income for the industrial metals and minerals company fell to $789,000 (2 cents per share) vs. $19.9 million (71 cents per share) a year earlier. This is a decline of 96% from the year earlier quarter.

Revenue: Rose 92.3% to $352 million from the year earlier quarter.

Actual vs. Wall St. Expectations: JRCC reported adjusted net income of 31 cents per share, which fell short of the mean analyst estimate of 48 cents per share. It beat the average revenue estimate of $295.3 million.

Quoting Management: Peter T. Socha, Chairman and Chief Executive Officer commented: “We are very pleased with our progress this quarter. We completed the acquisition of International Resource Partners LP and its subsidiary Logan & Kanawha in mid-April. The integration of these acquisitions has gone very well. We also successfullymanaged several positive changes to our balance sheet. The mines had a better quarter and are continuing to adjust to several regulatory changes. Lastly, we are beginning to see much more sales and contracting activity in both Central Appalachia and the Midwest.”

Key Stats:

From the first quarter, the company’s current liabilities rose to $181.8 million from $91.3 million.

Gross margin shrank 10.6 percentage points to 10.2%. The contraction appeared to be driven by increased costs, which rose more than twofold from the year earlier quarter while revenue rose 92.3%.

The company has now fallen short of estimates in the last two quarters. In the first quarter, it missed expectations by 38 cents with a loss of 11 cents versus a mean estimate of net income of 27 cents per share.

Revenue rose last quarter after seeing a drop the quarter before. Revenue fell 10.8% to $164.6 million in the first quarter from the year earlier.

Competitors to Watch: Alliance Holdings GP, L.P. (NASDAQ:AHGP), Intl. Coal Group, Inc. (NYSE:ICO), Peabody Energy Corporation (NYSE:BTU), Natural Resource Partners LP (NYSE:NRP), Arch Coal, Inc. (NYSE:ACI), Alliance Resource Partners, L.P. (NASDAQ:ARLP), Patriot Coal Corporation (NYSE:PCX), CONSOL Energy Inc. (NYSE:CNX), and Walter Energy, Inc. (NYSE:WLT).

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(Source: Xignite Financials)