The effective income tax rate was 29.7 percent in the current quarter compared to 31.2 percent in the third quarter of 2012.
Cash provided by continuing operations was $350 million in the third quarter of fiscal 2013, compared to $157 million in the prior year third quarter. The increase in cash provided by continuing operations during the third quarter was primarily due to the collection of accounts receivables and a reduction in inventories. These decreases were partially offset by a reduction in advance payments resulting from lower original equipment orders.
Capital expenditures were $31 million in the third quarter of fiscal 2013, down from $55 million in the prior year third quarter, and consistent with our sustaining rate.
Market OutlookMost mined commodities are in or near supply surplus for the first time in over a decade. This is primarily the result of the post-recession economic recovery falling short of expectations. The Eurozone is just starting to recover from a multi-year recession, China growth has slowed and growth in the U.S. remains sluggish. This surplus has moved commodity pricing down from incentive levels into the marginal cost curve. Prices for industrial metals and bulk commodities have declined by 20 to 40 percent over the last 18 months. Seaborne coal prices have declined 17 percent since the beginning of the year, and China domestic coal prices have fallen nearly 20 percent. Lower pricing is making higher cost mines uneconomic and will result in closures that will rebalance the market. Until this happens, there is little incentive to invest in new mine capacity. Oversupply in the seaborne thermal coal market has undermined domestic prices and has led to Chinese coal imports reaching 187 million tons by July, an increase of 15 percent from last year despite ample domestic supply. Imports are increasing even as China domestic production is down 4 percent year-to-date, and, as a result, coal stockpiles remain higher than normal in key domestic producing regions. This continues to indicate that a significant portion of China thermal coal production is higher cost and not economic at today’s pricing. This will support continued coal imports and will increase the pressure on domestic producers to consolidate and mechanize as a proven path to reducing unit cost.
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