Net financing expense was $11.8 million for second quarter 2012 as compared with net financing income of $4.5 million in second quarter 2011. This change is primarily due to $12 million of interest expense associated with the issuance of debt in connection with becoming a standalone company and a net decrease of $4.0 million in interest income received from affiliates.
COMBINED CASH FLOWS AND FINANCIAL POSITION
Cash FlowsNet cash provided by operating activities rose $70.3 million to $86.7 million in first half 2012, driven by the contribution to earnings of our Middletown operations and decreases in working capital and favorable comparisons to first half 2011, which included costs associated with the purchase of third-party coke to meet projected production shortfalls. Capital expenditures were $20.7 million for first half 2012, a decrease of $107.3 million as compared with first half 2011. In first half 2011, capital expenditures of $128.0 million included $103.9 million related to the construction of our Middletown facility. Capital expenditures and investments in 2012 are now expected to be about $85 million, instead of the $100 million previously indicated. This lower capital expenditure outlook has positive implications for expected free cash flow in 2012 (defined as cash provided by operations less cash used in investing activities less cash distributions to noncontrolling interests), which is now expected to be in excess of $100 million. 2012 OUTLOOK The following summarizes the Company’s 2012 guidance:
- Earnings per share (assuming a 22 percent tax rate) is expected to be between $1.30 and $1.65
- Full year 2012 Adjusted EBITDA is projected to be between $250 million and $280 million
- Capital expenditures and investments are anticipated to be approximately $85 million
- Domestic coke production is expected to be in excess of 4.3 million tons
- Coal production is projected to be approximately 1.6 million tons
- Free cash flow is expected to be in excess of $100 million
- The effective tax rate for the full year 2012 is expected to be between 20 percent and 24 percent, and the cash tax rate is expected to be between 10 percent and 15 percent
- Adjusted EBITDA represents earnings before interest, taxes, depreciation, depletion and amortization (“EBITDA”) adjusted for sales discounts and the deduction of income attributable to noncontrolling interests in our Indiana Harbor cokemaking operations. EBITDA reflects sales discounts included as a reduction in sales and other operating revenue. The sales discounts represent the sharing with customers of a portion of nonconventional fuels tax credits, which reduce our income tax expense. However, we believe our Adjusted EBITDA would be inappropriately penalized if these discounts were treated as a reduction of EBITDA since they represent sharing of a tax benefit which is not included in EBITDA. Accordingly, in computing Adjusted EBITDA, we have added back these sales discounts. Our Adjusted EBITDA also reflects the deduction of income attributable to noncontrolling interests in our Indiana Harbor cokemaking operations. EBITDA and Adjusted EBITDA do not represent and should not be considered alternatives to net income or operating income under United States generally accepted accounting principles (GAAP) and may not be comparable to other similarly titled measures in other businesses. Management believes Adjusted EBITDA is an important measure of the operating performance of the Company’s net assets and is indicative of the Company’s ability to generate cash from operations. See the tables (unaudited) at the end of this release for reconciliations of net income to Adjusted EBITDA.
- Adjusted EBITDA per Ton represents Adjusted EBITDA divided by tons sold.
- Free Cash Flow equals cash from operations less cash used in investing activities less cash distributions to noncontrolling interests. Management believes Free Cash Flow information enhances an investor’s understanding of a business’ ability to generate cash. Free Cash Flow does not represent and should not be considered an alternative to net income or cash flows from operating activities as determined under GAAP and may not be comparable to other similarly titled measures of other businesses.
- Goldman Sachs Chicago Small Cap One-on-One Summit on August 1, 2012 in Chicago, IL
- Barclays 2012 CEO Energy/Power Conference on September 5, 2012 in New York, NY
- KeyBanc Basic Materials Conference on September 11, 2012 in Boston, MA
- Credit Suisse Global Credit Products Conference on October 4-5, 2012 in Miami Beach, FL
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