Oct. 27, 2009 (PR Newswire) --

ST. LOUIS, Oct. 27 /PRNewswire-FirstCall/ -- Patriot Coal Corporation (NYSE: PCX) today reported its financial results for the quarter ended September 30, 2009. The Company reported revenues of $506.2 million, EBITDA of $25.4 million, net income of $52.8 million and diluted earnings per share of $0.58 for the 2009 third quarter. For the first nine months of 2009, Patriot reported revenues of $1.5 billion, EBITDA of $78.2 million, net income of $116.4 million, and diluted earnings per share of $1.40.

Accretion related to shipments on below-market sales and purchase contracts obtained in the Magnum Coal acquisition in July 2008 totaled $94.0 million and $232.5 million, respectively, in the third quarter and first nine months of 2009.

"We achieved solid EBITDA of more than $25 million this quarter, validating the steps we have taken in our Management Action Plan in 2009. We are seeing positive results from our ongoing emphasis on cash and cost control, as well as rationalization of higher-cost production. We are also benefiting from our commercial initiatives, as we work closely with our customers to restructure certain contracts," said Patriot Chief Executive Officer Richard M. Whiting. "Productivity this quarter improved at a number of our operations, including mines in our Wells and Corridor G complexes. Additionally, as we further managed our production base by closing the Samples mine, we stepped up our brokerage activity and were opportunistic in purchasing third-party coal."

Commenting on segment adjusted EBITDA for the quarter, Patriot Senior Vice President and Chief Financial Officer Mark N. Schroeder noted, "Our EBITDA this quarter improved $2.00 per ton, or 32 percent, compared to the second quarter. This improvement occurred despite costs related to the Panther longwall move, challenging geology at the Federal mine and miner vacations typical in the third quarter. Revenues per ton were $4.29 higher, primarily as a result of the rebound in metallurgical volumes. As with revenues, operating costs per ton in the third quarter were also influenced by higher metallurgical tons in our total mix. With the new Panther longwall equipment in place and expected performance at Federal, we anticipate improvement in cost per ton in the fourth quarter."

Financial Overview

Tons sold in the third quarter included 6.3 million tons of thermal and 1.5 million tons of metallurgical coal, compared to 7.3 million and 1.0 million tons of thermal and metallurgical coal, respectively, in the 2009 second quarter. Metallurgical volumes were higher in the third quarter as customers took more consistent delivery of contracted tons.

"Met coal volumes were up 50 percent compared to second quarter, and, significantly, met costs were down by more than $5.00 per ton. With a more normal mix of met and thermal shipments, coupled with improved longwall performance, we expect to see a reduction in overall cost per ton in the fourth quarter," added Schroeder.

Sales volume in the 2009 third quarter declined 300,000 tons from the prior year, largely a result of rationalized production related to lower demand for thermal coal. For the first nine months of 2009, shipments of 24.6 million tons represented an increase of 5.4 million from the prior year, primarily driven by the Magnum acquisition.

Revenues in the 2009 third quarter were $506.2 million, comparable with revenues of $507.0 million in the 2009 second quarter. Slightly higher revenues in the Appalachia Mining Operations segment were offset by slightly lower revenues in the Illinois Basin segment.

Revenues in the 2009 third quarter increased $16.6 million over the prior year amount, as a result of higher average selling prices, partially offset by lower tons sold. Revenues for the first nine months of 2009 compared to 2008 increased $428.5 million, primarily due to the addition of the Magnum results, as well as higher average selling prices.

EBITDA in the 2009 third quarter was $25.4 million, following EBITDA in the 2009 first and second quarters of $21.9 and $30.9 million, respectively. EBITDA was negative $2.2 million in the year-ago quarter. EBITDA for the first nine months of 2009 increased 40 percent compared to $56.0 million for the first nine months of 2008.

During the quarter, the Company successfully restructured three thermal coal contracts, resulting in compensation for shortfalls in contracted shipments. These restructurings increased sales contract accretion by $25.0 million in the 2009 third quarter, as shipments in future periods were reduced.

Both the Federal and Panther longwalls operated at less than their normalized levels during the quarter. As anticipated, in the current panel the Federal longwall experienced a rock parting in the coal seam. In addition, adverse roof conditions were encountered which had not been experienced in the parting area of previous panels. By quarter-end the longwall was operating in more favorable geology and running near its normalized level. And, based on production at this point in October, Federal is on pace for its best month of production in 2009. In the next panel, which will be the final panel of the current mining area, the Company has further refined the mine plan to avoid this adverse geology. In mid-2010, the Federal longwall will move to the South area of the mine, where overall geology is expected to be more favorable.

At Panther, the longwall move during the quarter included significant upgrades to components of the longwall mining equipment. Downtime related to the longwall move, together with time required to fully integrate the new equipment, caused Panther's output to be lower in the quarter. Importantly, by quarter-end, the longwall was operating near its normalized run-rate. During October, the longwall has continued to perform well and has had the most consistent performance of any month in 2009.

Credit and Capital

As of September 30, 2009, Patriot had no borrowings on its revolving credit facility, and a cash balance of $48.6 million. Letters of credit at September 30, 2009 were $349 million, leaving unused borrowing capacity of $174 million on its $522.5 million facility. Including the Company's cash balance, Patriot had available liquidity of $222 million at September 30, 2009.

Capital expenditures totaled $19.3 million in the 2009 third quarter, as the Company continued to tightly control spending. Total debt was $205.4 million as of September 30, 2009, consisting mainly of the 3.25 percent convertible debt due in 2013.

"Patriot was cash-neutral for the quarter, despite the longwall move and the impact of miner vacations. Net cash provided by operating activities was $39.5 million in the first nine months of 2009. We expect our cash from operations to continue to fund our capital expenditure needs," commented Schroeder.

Safety and Environmental Awards

Maintaining safe operations continues to be a top priority at Patriot. During the first nine months of 2009, Patriot achieved a safety incidence rate of 3.63 per 200,000 hours worked. This compares favorably to the national average industry rate for all coal mines of 3.97 per 200,000 hours worked and to the Company's safety incidence rate of 3.79 for the first nine months of 2008.

During the quarter, the Company was recognized with a number of safety and reclamation awards. Patriot's mine rescue teams received first place awards in the first aid and pre-shift categories of the National Mine Rescue Contest, as well as third place in the combination, or overall, category. In the Southern West Virginia Mine Rescue Contest, Patriot teams placed first in the overall mine rescue, first aid, and combination categories. And in the reclamation area, Patriot received the Commissioner's Award of Excellence in Reclamation from the Kentucky Department of Natural Resources for work at the Patriot surface operation.

Market Overview

"Looking forward, we continue to see signs of strength in the metallurgical coal market, as domestic steel mill utilization has improved for 25 consecutive weeks and currently stands at 62 percent. We expect this market to continue to strengthen throughout 2010," continued Patriot Chief Executive Officer Richard M. Whiting. "At Patriot, we have the ability to essentially double our met volume from the current run-rate of approximately 5.0 million tons to around 9.5 million tons, as market conditions warrant. This ramp-up could take place in a relatively short period of time with a fairly modest capital outlay. Our decisions to increase met production will clearly be based on the pricing and duration of new sales commitments with our long-established customer base."

"In international markets, higher fixed asset investments in China have led to higher steel production and increased met coal imports. While U.S. coal producers have not historically shipped large quantities of met coal to China, there have been a number of U.S. exports to China in recent months," added Whiting. "In fact, Patriot recently entered into an agreement that we believe will represent the first meaningful shipments of U.S. high volatile met coal to China."

"We are also seeing an improvement in customer sentiment on the thermal side, even though inventory levels remain high. In just the last month, customers who had previously indicated that they wanted to discuss delivery deferrals are now indicating that these discussions are no longer necessary. We believe this is the result of concerns over coal supply and permitting issues, as well as higher natural gas prices," noted Whiting.

Outlook

"Looking forward to 2010, customer demand has stabilized. We have a solid base of 2010 booked business and are comfortable with our unpriced volumes remaining in each of our operating regions. Further, Patriot has flexibility with our diverse operating platform to selectively increase production as conditions warrant," concluded Schroeder.

Average selling prices of currently priced tons for the remainder of 2009 and 2010 are as follows:

(Tons in millions)              2009                   2010
-------------------    -------------------
Tons  Price per ton    Tons  Price per ton
----  -------------    ----  -------------

Appalachia - thermal      5.3       $56         15.9       $59
Illinois Basin - thermal  1.9       $38          7.0       $39
Appalachia - met          1.5       $97          2.2       $86
---                    ---
Total                8.7                   25.1
===                   ====

Amounts above reflect recent contract restructuring arrangements, including the blending of lower quality metallurgical coal at lower prices to replace higher quality tons previously contracted. Unpriced volumes for 2010 will depend on the finalization of production plans, taking into account demand, pricing, the Company's cost structure and the availability of mining permits.