ROYAL GOLD INC - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - August 11, 2016

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EXHIBIT 99.1

 

 

 

Royal Gold Reports a 38% Increase in Fourth Quarter Earnings and Record Annual Revenue

 

DENVER, COLORADO. AUGUST 11, 2016: ROYAL GOLD, INC. (NASDAQ: RGLD) (together with its subsidiaries, “Royal Gold” or the “Company,” “we” or “our”) reports net income attributable to stockholders (“net income”) of $20.4 million, or $0.32 per share, on revenue of $94.1 million in its fiscal fourth quarter ended June 30, 2016 (“fourth quarter”). Earnings increased 38% compared to the prior year quarter net income of $14.8 million, or $0.23 per share, on revenue of $73.6 million. The average gold price was $1,259 per ounce, up 6% from the prior year quarter.

 

Fourth Fiscal Quarter 2016 Highlights Compared to the Prior Year Quarter:

 

·Volume of 74,700 Gold Equivalent Ounces (“GEOs1”), an increase of 21%
·Revenue of $94.1 million, an increase of 28%
·Reported earnings per share of $0.32, an increase of 38%
·Operating cash flow of $49.2 million, an increase of 12%
·Dividends paid of $15 million, an increase of 5%.

 

Fiscal 2016 Highlights Compared to Fiscal 2015:

 

·Record volume of 308,000 GEOs2, an increase of 36%
·Record revenue of $359.8 million, an increase of 29%
·Record dividends paid of $58.7 million, an increase of 5%

 

For the fiscal year ended June 30, 2016 (“fiscal 2016”), Royal Gold reports record revenue of $359.8 million, a 29% increase over $278.0 million in fiscal 2015. Fiscal 2016 earnings were impacted by impairments reported in the March 2016 quarter and discrete tax expenses reported in the September 2015 quarter resulting in a net loss attributable to stockholders of $77.1 million, or ($1.18) per share, compared to fiscal 2015 net income of $52.0 million, or $0.80 per share. Absent the adjustments for impairments and the discrete tax expenses, fiscal 2016 adjusted net income3 would have been $65.0 million, or $1.00 per share. The average gold price was $1,168 in fiscal 2016, down 5% from fiscal 2015.

 

 

1 GEOs are calculated as revenue divided by the average gold price for the same period. GEOs net of stream payments were 59,600 in the fourth quarter compared to 53,300 in the year-ago quarter.

2 GEOs net of stream payments were 247,300 for fiscal 2016, compared to 199,800 net GEOs in fiscal 2015.

3 Non-GAAP measure. See Schedule A for reconciliation.

 

1 

 

 

“We made great progress in fiscal 2016 by enhancing our portfolio with four large transactions resulting in immediate contributions to our operating results from four new mines, including Pueblo Viejo, Andacollo, Wassa and Prestea,” commented Tony Jensen, President and CEO. “And fiscal 2017 is starting off strong with Centerra Gold’s agreement to acquire Thompson Creek Metals. In this new fiscal year, we look forward to a financially stronger Mount Milligan, construction progress at Rainy River and the Wassa and Prestea underground mines, and ongoing development at Cortez Crossroads to further grow and diversify our portfolio.”

 

Recent Developments

 

Mount Milligan Commitment Letter

 

On July 5, 2016, we signed a binding commitment letter with Centerra Gold Inc. (“Centerra”) describing key terms of a future amendment to the Company’s streaming interest at the Mount Milligan mine owned by Terrane Metals Corp. (“Terrane”), a subsidiary of Thompson Creek Metals Company Inc. (“Thompson Creek”). Centerra entered into a definitive arrangement agreement to acquire Thompson Creek and, in connection with closing that acquisition, will redeem all of Thompson Creek’s secured and unsecured notes.

 

Under the commitment letter, our 52.25% gold streaming interest at Mount Milligan will be amended to a 35% gold stream and we will obtain an 18.75% copper stream. We will continue to pay $435 per ounce of gold delivered and will pay 15% of the spot price per metric tonne of copper delivered. The amendment is conditioned upon closing of Centerra’s acquisition of Thompson Creek. Royal Gold estimates this amendment to be value neutral on a discounted cash flow basis, and expects about two-thirds of its future net revenue from Mount Milligan will be gold related and one-third copper related over the next ten years. After transition to the amended stream, Royal Gold expects that approximately 85% of our total net revenue will come from precious metals and 15% from base metals.4

 

Centerra’s proposed acquisition of Thompson Creek is subject to court and applicable regulatory approvals as well as approval of Thompson Creek shareholders, and is expected to close in the fall of calendar 2016.

 

Fiscal 2016 Overview

 

Fiscal year 2016 revenue of $359.8 million included stream revenue of $238.0 million and royalty revenue of $121.8 million. Stream segment gold purchases totaled approximately 216,600 ounces of gold and sales were approximately 202,000 ounces of gold. Stream segment silver purchases were 532,600 ounces and sales were 208,900 ounces of silver. The Company had approximately 19,800 ounces of gold and 323,700 ounces of silver in inventory at June 30, 2016, as previously announced, compared to 5,300 ounces of gold at June 30, 2015.

 

 

4 Based on current projections for the next five years from operators where the Company has interests.

 

2 

 

 

The increase in fiscal 2016 revenue, compared to the fiscal year ended June 30, 2015, resulted primarily from higher production at Mount Milligan and new production from our recently acquired streams at the Wassa, Prestea, Pueblo Viejo and Andacollo mines.

 

Fiscal 2016 cost of sales was $71.0 million, compared to $33.5 million in fiscal 2015. The increase is primarily attributable to higher volume from our streaming segment. Cost of sales is specific to our stream agreements and results from the Company’s purchase of gold and silver for cash payments at a set contractual price, or a percentage of the prevailing market price of gold or silver when purchased.

 

General and administrative expenses increased to $31.7 million in fiscal 2016 compared to $24.9 million in fiscal 2015. The increase was primarily due to non-cash, stock-based compensation of approximately $4.9 million, resulting from management’s change in estimate for the number of performance shares that are expected to vest.

 

Depreciation, depletion and amortization expense increased to $141.1 million in fiscal 2016, compared to $93.5 million in fiscal 2015. The increase was primarily attributable to the ramp-up in production at Mount Milligan ($11.4 million) and new production from the recently acquired streams at Pueblo Viejo ($21.9 million), Wassa and Prestea ($7.8 million), and Andacollo
($9.0 million).

 

Exploration costs, which are specific to our Peak Gold joint venture in Alaska, increased to $8.6 million in fiscal 2016, compared to $2.2 million in fiscal 2015.

 

We recognized a fiscal 2016 income tax expense of $60.7 million compared to $9.6 million in fiscal 2015.  The increase is primarily related to the gain attributable to the Company’s Andacollo transactions, the liquidation of our Chilean subsidiary, and impairment charges.

 

At June 30, 2016, we had current assets of $164.8 million compared to current liabilities of $22.7 million. This compares to current assets of $797.0 million and current liabilities of $25.0 million at June 30, 2015. The decrease in our current assets was primarily attributable to a decrease in our cash and equivalents resulting from the stream acquisitions completed early in the fiscal year.

 

The Company repaid $25 million on its revolving credit facility during the fourth quarter and as of June 30, 2016, had $375 million available and $275 million outstanding under the facility. Working capital, combined with the Company’s undrawn revolving credit facility, totaled $517.1 million in liquidity at June 30, 2016.

 

PROPERTY HIGHLIGHTS

 

A summary of fiscal 2016 fourth quarter and historical production can be found on Tables 1 and 2. Calendar year production estimates versus actual production at certain producing properties can be found on Table 3. Results of our streaming business for the three months and fiscal year ended June 30, 2016 compared to the three months and fiscal year ended June 30, 2015, can be found on Table 4. Highlights at certain of the Company’s principal producing and development properties during fiscal 2016, compared to fiscal 2015, are detailed in our Form 10-K.

 

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CORPORATE PROFILE

 

Royal Gold is a precious metals stream and royalty company engaged in the acquisition and management of precious metal streams, royalties and similar production based interests. The Company owns interests on 193 properties on six continents, including interests on 38 producing mines and 24 development stage projects.  Royal Gold is publicly traded on the NASDAQ Global Select Market under the symbol “RGLD.” The Company’s website is located at www.royalgold.com.

 

For further information, please contact:

 

Karli Anderson

Vice President Investor Relations

(303) 575-6517

 

Note: Management’s conference call reviewing the fourth fiscal quarter results will be held Thursday, August 11, 2016 at 10:00 a.m. Mountain Daylight Time (noon Eastern Daylight Time) and will be available by calling (855) 209-8260 (U.S.), (855) 669-9657 (Canada) or (412) 542-4106 (international), conference title “Royal Gold.” The call will be simultaneously broadcast on the Company’s website at www.royalgold.com under the “Presentations” section. A replay of this webcast will be available on the Company’s website approximately two hours after the call ends.

 

Cautionary “Safe Harbor” Statement Under the Private Securities Litigation Reform Act of 1995: With the exception of historical matters, the matters discussed in this press release are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from projections or estimates contained herein. Such forward-looking statements include statements about operators’ expectations about development; anticipated production and returns from our stream and royalty properties, including without limitation Centerra’s proposed acquisition of Thompson Creek Metals Company, Centerra’s financial strength as proposed owner of Mount Milligan, estimated percentages of precious and base metals expected from Mount Milligan and from the Company’s stream and royalty portfolio in the aggregate after the proposed Mount Milligan stream agreement becomes effective; construction progress at Rainy River and at Wassa and Prestea and development at Cortez Crossroads; operators’ production estimates for calendar year 2016 and statements about the opportunities for portfolio and investment growth and diversification and the Company’s ability to pursue such opportunities. Factors that could cause actual results to differ materially from the projections include, among others, precious metals, copper and nickel prices; performance of and production at the Company's stream and royalty properties, including gold and copper production at Mount Milligan; the ability of operators of development properties to finance project construction to completion and bring projects into production as expected; operators’ delays in securing or inability to secure necessary governmental permits; decisions and activities of the operators of the Company's stream and royalty properties; unanticipated grade, environmental, geological, seismic, metallurgical, processing, liquidity or other problems the operators of the mining properties may encounter; changes in operators’ project parameters as plans continue to be refined; changes in estimates of reserves and mineralization by the operators of the Company’s stream and royalty properties; the failure of Centerra’s acquisition of Thompson Creek to occur; contests to the Company’s stream and royalty interests and title and other defects to the Company’s stream and royalty properties; errors or disputes in calculating stream and royalty payments, or payments not made in accordance with stream and royalty agreements; economic and market conditions; risks associated with conducting business in foreign countries; changes in laws governing the Company and its stream and royalty properties or the operators of such properties, and other subsequent events; as well as other factors described in the Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and other filings with the Securities and Exchange Commission. Most of these factors are beyond the Company’s ability to predict or control. The Company disclaims any obligation to update any forward-looking statement made herein. Readers are cautioned not to put undue reliance on forward-looking statements.

 

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Statement Regarding Third Party Information:  Royal Gold does not own, develop or mine the properties on which it holds stream or royalty interests.  Certain information provided in this press release, including production estimates for calendar 2016, has been provided to us by the operators of those properties or is publicly available information filed by these operators with applicable securities regulatory bodies, including the Securities and Exchange Commission. Royal Gold has not verified, and is not in a position to verify, and expressly disclaims any responsibility for, the accuracy, completeness or fairness of such third-party information and refers the reader to the public reports filed by the operators for information regarding those properties.

 

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TABLE 1

Fourth Quarter Fiscal 2016

Revenue and Reported Production for Principal Royalty and Stream Interests

(In thousands, except reported production in oz. and lbs.)

 

       Three Months Ended   Three Months Ended 
       June 30, 2016   June 30, 2015 
           Reported       Reported 
Stream/Royalty  Metal(s)   Revenue   Production11   Revenue   Production1 
Stream:                         
Mount Milligan   Gold   $29,874    23,800oz.  $27,411    23,000oz.
Andacollo   Gold   $17,080    13,500oz.   N/A    N/A 
Pueblo Viejo   Gold   $16,676    10,600oz.   N/A    N/A 
    Silver         208,900oz.   N/A    N/A 
Wassa and Prestea   Gold   $5,791    4,600oz.   N/A    N/A 
Other   Gold   $-    300oz.   N/A    N/A 
Total stream revenue       $69,421        $27,411      
                          
Royalty:                         
Peñasquito       $2,552        $10,369      
    Gold         41,900oz.        296,900oz.
    Silver         2.6Moz.        7.0Moz.
    Lead         13.3Mlbs.        48.2Mlbs.
    Zinc         43.2Mlbs.        88.9Mlbs.
Voisey's Bay       $-        $3,021      
    Nickel         N/A         9.0Mlbs.
    Copper         N/A         20.8Mlbs.
Holt   Gold   $2,775    13,500oz.  $2,911    15,800oz.
Cortez   Gold   $1,267    16,100oz.  $3,283    43,900oz.
Andacollo2   Gold    -    N/Aoz.  $9,433    10,500oz.
Other   Various    18,114    N/A   $17,151    N/A 
Total royalty revenue        24,708        $46,168      
Total Revenue        94,129        $73,579      

 

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TABLE 1

Fiscal Year 2016

Revenue and Reported Production for Principal Royalty and Stream Interests

(In thousands, except reported production in oz. and lbs.)

 

       Fiscal Year Ended   Fiscal Year Ended 
       June 30, 2016   June 30, 2015 
           Reported       Reported 
Stream/Royalty  Metal(s)   Revenue   Production1   Revenue   Production1 
Stream:                         
Mount Milligan   Gold   $125,438    108,800oz.  $94,104    76,900oz.
Andacollo   Gold   $49,243    41,600oz.   N/A    N/A 
Pueblo Viejo   Gold   $39,683    31,200oz.   N/A    N/A 
    Silver         208,900oz.   N/A    N/A 
Wassa and Prestea   Gold   $23,346    20,100oz.   N/A    N/A 
Other   Gold   $318    300oz.   N/A    N/A 
Total stream revenue       $238,028        $94,104      
                          
Royalty:                         
Peñasquito       $22,760        $30,306      
    Gold         584,000oz.        742,100oz.
    Silver         21.4Moz.        24.6Moz.
    Lead         134.2Mlbs.        158.4Mlbs.
    Zinc         333.0Mlbs.        340.8Mlbs.
Voisey's Bay       $11,044        $16,665      
    Nickel         78.6Mlbs.        62.8Mlbs.
    Copper         56.2Mlbs.        64.8Mlbs.
Holt   Gold   $10,295    58,300oz.  $11,954    61,500oz.
Cortez   Gold   $6,107    74,000oz.  $18,044    229,000oz.
Andacollo2   Gold   $-    -oz.  $38,033    41,500oz.
Other   Various   $71,556    N/A   $68,913    N/A 
Total royalty revenue       $121,762        $183,915      
Total Revenue       $359,790        $278,019      

 

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TABLE 2

Historical Production

 

                Reported Production For The Quarter Ended1  
Property   Stream/Royalty   Operator   Metal(s)   Jun. 30, 2016     Mar. 31, 2016     Dec. 31, 2015     Sep. 30, 2015     Jun. 30, 2015  
Stream:                                                    
Mount Milligan   52.25% of payable gold   Thompson Creek   Gold     23,800 oz.     25,400 oz.     38,700 oz.     21,000 oz.     23,000 oz.
Andacollo   100% of gold produced   Teck   Gold     13,500 oz.     13,500 oz.     5,200 oz.     9,500 oz.     N/A  
Pueblo Viejo   7.5% of gold produced up to 990,000 ounces; 3.75% therafter   Barrick (60%)   Gold     10,600 oz.     11,800 oz.     8,800 oz.     N/A       N/A  
    75% of payable silver up to 50 million ounces; 37.5% therafter       Silver     208,900 oz.     N/A       N/A       N/A       N/A  
Wassa and Prestea   9.25% of gold produced up to 12/31/17; 10.5% of gold produced up to 240,000 ounces; 5.5% thereafter   Golden Star   Gold     4,600 oz.     3,500 oz.     8,800 oz.      3,200 oz.     N/A  
Royalty:                                                    
Peñasquito   2.0% NSR   Goldcorp                                            
            Gold     41,900 oz.     120,300 oz.     195,400 oz.     226,500 oz.     296,900 oz.
            Silver     2.6 Moz.     4.8 Moz.     6.8 Moz.     7.3 Moz.     7.0 Moz.
            Lead     13.3 Mlbs.     30.2 Mlbs.     41.7 Mlbs.     49.1 Mlbs.     48.2 Mlbs.
            Zinc     43.2 Mlbs.     73.1 Mlbs.     98.0 Mlbs.     118.7 Mlbs.     88.9 Mlbs.
Cortez   GSR1 and GSR2, GSR3, NVR1   Barrick   Gold     16,100 oz.     18,400 oz.     17,000 oz.     22,600 oz.     43,900 oz.
Holt   0.00013 x quarterly average gold price   Kirkland Lake Gold   Gold     13,500 oz.     13,500 oz.     15,000 oz.     16,300 oz.     15,800 oz.
Voisey's Bay   2.7% NSR   Vale                                            
            Nickel     N/A       17.2 Mlbs.     23.6 Mlbs.     37.8 Mlbs.     9.0 Mlbs.
            Copper     N/A       39.2 Mlbs.     15.2 Mlbs.     1.7 Mlbs.     20.8 Mlbs.
Andacollo2   75%   Teck   Gold     N/A       N/A       N/A       N/A       10,500 oz.

 

FOOTNOTES

Tables 1 and 2

 

1Reported production relates to the amount of metal sales that are subject to our royalty and stream interests for the stated period, as reported to us by operators of the mines.
2This royalty was terminated effective July 1, 2015.

 

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TABLE 3

Calendar 2016 Operators’ Production Estimate vs Actual Production

 

    Calendar 2016 Operator’s Production Estimate1     Calendar 2016 Operator's Production
Actual2,3		  
    Gold     Silver     Base Metals     Gold     Silver     Base Metals  
Stream/Royalty   (oz.)     (oz.)     (lbs.)     (oz.)     (oz.)     (lbs.)  
Stream:                                                
Andacollo4     57,600       -       -       25,300       -       -  
Mount Milligan5     240,000-270,000       -       -       99,700       -       -  
Pueblo Viejo6     600,000-650,000       Not provided               321,900       Not provided       -  
Wassa and Prestea7     180,000-205,000       -               95,700                  
Royalty:                                                
Cortez GSR1     119,200       -       -       31,800       -       -  
Cortez GSR2     1,300       -       -       2,700       -       -  
Cortez GSR3     120,500       -       -       34,400       -       -  
Cortez NVR1     68,900       -       -       23,700       -       -  
Penasquito8     520,000-580,000       22-24 million     -       161,000       7.8 million     -  
Lead                     145-155 million                     46.1 million
Zinc                     375-400 million                     109.4 million

 

1Production estimates received from our operators are for calendar 2016. There can be no assurance that production estimates received from our operators will be achieved. Please refer to our cautionary language regarding forward-looking statements preceding Table 1 above, as well as the Risk Factors identified in Part I, Item 1A, of our Fiscal 2015 10-K for information regarding factors that could affect actual results.
2Actual production figures shown are for the period January 1, 2016 through June 30, 2016, unless otherwise noted.
3Actual production figures for Andacollo and Cortez are based on information provided to us by the operators, and actual production figures for Andacollo, Mount Milligan, Peñasquito (gold), and Wassa and Prestea are the operators’ publicly reported figures.
4The estimated and actual production figures shown for Andacollo are contained gold in concentrate.
5The estimated and actual production figures shown for Mount Milligan are payable gold in concentrate.
6The estimated and actual production figures shown are payable gold in doré and represent Barrick’s 60% interest in Pueblo Viejo.
7The estimated production figure shown is payable gold in doré.
8The estimated gold and silver production figures reflect payable gold and silver in concentrate and doré, while the estimated lead and zinc production figures reflect payable metal in concentrate.

 

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TABLE 4
Stream Summary

 

   Three Months Ended June 30, 2016   Three Months Ended June 30, 2015   As of June 30,
2016		   As of June 30,
2015		 
Gold Stream  Purchases (oz.)   Sales (oz.)   Purchases (oz.)   Sales (oz.)   Ounces in
inventory		   Ounces in
inventory		 
Mount Milligan   31,200    23,700    21,400    23,000    7,500    5,300 
Pueblo Viejo   11,000    11,000    N/A    N/A    11,000    N/A 
Andacollo   13,500    13,500    N/A    N/A    -    N/A 
Wassa and Prestea   4,400    4,600    N/A    N/A    1,300    N/A 
Phoenix Gold   -    -    N/A    N/A    -    N/A 
Total   60,100    52,800    21,400    23,000    19,800    5,300 

 

   Three Months Ended June 30, 2016   Three Months Ended June 30, 2015   As of June 30,
2016		   As of June 30,
2015		 
Silver Stream  Purchases (oz.)   Sales (oz.)   Purchases (oz.)   Sales (oz.)   Ounces in
inventory		   Ounces in
inventory		 
Pueblo Viejo   322,800    208,900    N/A    N/A    323,700    N/A 

 

   Fiscal Year Ended June 30, 2016   Fiscal Year Ended June 30, 2015   As of June 30,
2016		   As of June 30,
2015		 
Gold Stream  Purchases (oz.)   Sales (oz.)   Purchases (oz.)   Sales (oz.)   Ounces in
inventory		   Ounces in
inventory		 
Mount Milligan   111,000    108,800    74,400    76,900    7,500    5,300 
Pueblo Viejo   42,200    31,200    N/A    N/A    11,000    N/A 
Andacollo   41,700    41,600    N/A    N/A    -    N/A 
Wassa and Prestea   21,400    20,100    N/A    N/A    1,300    N/A 
Phoenix Gold   300    300    N/A    N/A    -    N/A 
Total   216,600    202,000    74,400    76,900    19,800    5,300 

 

   Fiscal Year Ended June 30, 2016   Fiscal Year Ended June 30, 2015   As of June 30,
2016		   As of June 30,
2015		 
Silver Stream  Purchases (oz.)   Sales (oz.)   Purchases (oz.)   Sales (oz.)   Ounces in
inventory		   Ounces in
inventory		 
Pueblo Viejo   532,600    208,900    N/A    N/A    323,700    N/A 

 

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ROYAL GOLD, INC.

Consolidated Balance Sheets

As of June 30,

(In thousands except share data)

 

   2016   2015 
ASSETS          
Cash and equivalents  $116,633   $742,849 
Royalty receivables   17,990    37,681 
Income tax receivable   20,043    6,422 
Stream inventory   9,489    2,287 
Available-for-sale securities   -    6,273 
Prepaid expenses and other   614    1,511 
   Total current assets   164,769    797,023 
           
Stream and royalty interests, net   2,848,087    2,083,608 
Other assets   53,696    36,560 
   Total assets  $3,066,552   $2,917,191 
           
LIABILITIES          
Accounts payable  $4,114   $4,911 
Dividends payable   15,012    14,341 
Other current liabilities   3,554    5,721 
   Total current liabilities   22,680    24,973 
           
Debt   600,685    313,869 
Deferred tax liabilities   133,867    146,603 
Uncertain tax positions   16,996    15,130 
Other long-term liabilities   6,439    689 
   Total liabilities   780,667    501,264 
           
Commitments and contingencies          
           
EQUITY          
Preferred stock, $.01 par value, authorized 10,000,000 shares authorized; and 0 shares issued   -    - 
Common stock, $.01 par value, 100,000,000 shares authorized; and 65,093,950 and 65,033,547 shares outstanding, respectively   651    650 
Additional paid-in capital   2,179,781    2,170,643 
Accumulated other comprehensive loss   -    (3,292)
Accumulated earnings   48,584    185,121 
Total Royal Gold stockholders’ equity   2,229,016    2,353,122 
Non-controlling interests   56,869    62,805 
   Total equity   2,285,885    2,415,927 
   Total liabilities and equity  $3,066,552   $2,917,191 

 

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ROYAL GOLD, INC.

Consolidated Statements of Operations and Comprehensive (Loss) Income

(In thousands except for per share data)

 

   For The Three Months Ended   For The Years Ended 
   June 30,   June 30,   June 30,   June 30, 
   2016   2015   2016   2015 
Revenue  $94,129   $73,579   $359,790   $278,019 
                     
Costs and expenses                    
Cost of sales   19,019    9,998    70,979    33,450 
General and administrative   8,305    6,671    31,720    24,873 
Production taxes   432    1,091    3,978    5,446 
Exploration Costs   2,466    2,038    8,601    2,194 
Depreciation, depletion and amortization   35,391    26,213    141,108    93,486 
Impairment of stream and royalty interests and royalty receivables   -    -    98,588    31,335 
Total costs and expenses   65,613    46,011    354,974    190,784 
                     
Operating income   28,516    27,568    4,816    87,235 
                     
Gain (loss) on available-for-sale securities   1,665    (183)   2,340    (183)
Interest and other income   1,582    178    3,711    883 
Interest and other expense   (8,656)   (6,196)   (32,625)   (25,691)
Income (loss) before income taxes   23,107    21,367    (21,758)   62,244 
                     
Income tax expense   (5,025)   (6,394)   (60,680)   (9,566)
Net income (loss)   18,082    14,973    (82,438)   52,678 
Net loss (income) attributable to non-controlling interests   2,357    (154)   5,289    (713)
Net income (loss) attributable to Royal Gold common stockholders  $20,439   $14,819   $(77,149)  $51,965 
                     
Net income (loss)  $18,082   $14,973   $(82,438)  $52,678 
Adjustments to comprehensive income (loss), net of tax                    
Unrealized change in market value of available-for-sale securities   1,112    689    5,632    (3,292)
Reclassification adjustment for (gains) losses included in net income (loss)   (1,665)   167    (2,340)   160 
Comprehensive income (loss)   17,529    15,829    (79,146)   49,546 
Comprehensive income attributable to non-controlling interests   2,357    154    5,289    (713)
                     
Comprehensive income (loss) attributable to Royal Gold stockholders  $19,886   $15,675   $(73,857)  $48,833 
                     
Net income (loss) per share available to Royal Gold common stockholders:                    
                     
Basic earnings (loss) per share  $0.32   $0.23   $(1.18)  $0.80 
Basic weighted average shares outstanding   65,090,772    65,033,547    65,074,455    65,007,861 
Diluted earnings (loss) per share  $0.32   $0.23   $(1.18)  $0.80 
Diluted weighted average shares outstanding   65,090,772    65,129,362    65,074,455    65,125,173 
Cash dividends declared per common share  $0.23   $0.22   $0.91   $0.87 

 

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ROYAL GOLD, INC.

Consolidated Statements of Cash Flows

(In Thousands)

 

   For The Three Months Ended   For The Years Ended 
   June 30,   June 30,   June 30,   June 30, 
   2016   2016   2016   2015 
Cash flows from operating activities:                    
Net income (loss)  $18,082   $14,973   $(82,438)  $52,678 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:                    
Depreciation, depletion and amortization   35,391    26,213    141,108    93,486 
Impairment of stream and royalty interests   -    -    98,588    31,335 
Amortization of debt discount and issuance costs   4,843    3,088    12,985    12,100 
Non-cash employee stock compensation expense   2,250    1,481    10,039    5,141 
Tax benefit of stock-based compensation exercises   301    (290)   548    (364)
(Gain) loss on available-for-sale securities   (1,665)   183    (2,340)   183 
Deferred tax benefit   12,263    6,548    (4,983)   (27,651)
Other   -    (46)   (390)   (46)
Changes in assets and liabilities:                    
Royalty receivables   2,245    1,805    17,221    5,977 
Stream inventory   (4,088)   675    (7,203)   1,110 
Income taxes receivable   (11,181)   (9,666)   (14,177)   15,525 
Prepaid expenses and other assets   (1,783)   (121)   (153)   2,527 
Accounts payable   684    1,892    (849)   150 
Foreign withholding taxes payable   -    1    (199)   (2,000)
Uncertain tax positions   (83)   (331)   1,867    1,405 
Other liabilities   (8,047)   (2,500)   235    543 
Net cash provided by operating activities  $49,212   $43,905   $169,859   $192,099 
                     
Cash flows from investing activities:                    
Acquisition of royalty and stream interests   (19,853)   (88)   (1,346,109)   (60,429)
Andacollo royalty termination   -    -    345,000    - 
Golden Star term loan   -    -    (20,000)   - 
Proceeds from sale of available-for-sale securities   4,972    -    11,905    - 
Tulsequah stream termination   -    -    -    10,000 
Other   (7)   (702)   (309)   (773)
Net cash used in investing activities  $(14,888)  $(790)  $(1,009,513)  $(51,202)
                     
Cash flows from financing activities:                    
Borrowings from revolving credit facility   -    -    350,000    - 
Repayment of revolving credit facility   (25,000)   -    (75,000)   - 
Net (payments) proceeds from issuance of common stock   (179)   -    (353)   775 
Common stock dividends   (15,011)   (14,342)   (58,720)   (56,054)
Debt issuance costs   (62)   (864)   (1,111)   (864)
Distribution to non-controlling interests   (1)   (578)   (830)   (1,805)
Tax (benefit) expense of stock-based compensation exercises   (301)   290    (548)   364 
Net cash (used in) provided by financing activities  $(40,554)  $(15,494)  $213,438   $(57,584)
Net (decrease) increase  in cash and equivalents   (6,230)   27,621    (626,216)   83,313 
Cash and equivalents at beginning of period   122,863    715,228    742,849    659,536 
Cash and equivalents at end of period  $116,633   $742,849   $116,633   $742,849 

 

13 

 

 

SCHEDULE A

 

Non-GAAP Financial Measures

 

Non-GAAP financial measures are intended to provide additional information only and do not have any standard meaning prescribed by generally accepted accounting principles (GAAP). These measures should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP.

 

Our management uses Adjusted EBITDA and Adjusted Net Income as measures of operating performance to assist in comparing performance from period to period on a consistent basis; as a measure for planning and forecasting overall expectations and for evaluating actual results against such expectations; in communications with the board of directors, stockholders, analysts and investors concerning our financial performance; as useful comparisons to the performance of our competitors; and as metrics of certain management incentive compensation calculations. We believe that these measures are used by and are useful to investors and other users of our financial statements in evaluating our operating performance because they provide an additional tool to evaluate our performance without regard to special and noncore items, which can vary substantially from company to company depending upon accounting methods and book value of assets and capital structure. We have provided reconciliations of all non-GAAP measures to their nearest U.S. GAAP measures and have consistently applied the adjustments within our reconciliations in arriving at each non-GAAP measure. We consider these items to be necessary adjustments for purposes of evaluating our ongoing business performance and are often considered non-recurring. Such adjustments are subjective and involve significant management judgment.

 

14 

 

 

SCHEDULE A

 

Adjusted EBITDA Reconciliation

 

Adjusted EBITDA is defined by the Company as net income (loss) plus depreciation, depletion and amortization, non-cash charges, income tax expense, interest and other expense, and any impairment of mining assets, less non-controlling interests in operating loss (income) of consolidated subsidiaries, interest and other income, and any royalty portfolio restructuring gains or losses. Other companies may define and calculate this measure differently. Adjusted EBITDA identifies the cash generated in a given period that will be available to fund the Company's future operations, growth opportunities, shareholder dividends and to service the Company's debt obligations. This information differs from measures of performance determined in accordance with U.S. generally accepted accounting principles (“GAAP”) and should not be considered in isolation or as a substitute for measures of performance determined in accordance with U.S. GAAP. See the table below for a reconciliation of net income to Adjusted EBITDA.

 

   For The Three Months Ended   For The Years Ended 
   June 30,   June 30, 
   2016   2015   2016   2015 
                 
Net income (loss)  $18,082   $14,973   $(82,438)  $52,678 
Depreciation, depletion and amortization   35,391    26,213    141,108    93,486 
Non-cash employee stock compensation   2,250    1,481    10,039    5,141 
Impairment of stream and royalty interests and royalty receivables   -    -    98,588    31,335 
Interest and other, net   5,409    6,201    26,574    24,992 
Income tax expense   5,025    6,394    60,680    9,566 
Non-controlling interests in operating loss (income) of consolidated subsidiaries   2,357    (108)   5,289    (666)
                     
Adjusted EBITDA  $68,514   $55,154   $259,840   $216,532 

 

Adjusted Net Income (Loss) Reconciliation

 

Management of the Company uses adjusted net income (loss) to evaluate the Company’s operating performance, and for planning and forecasting future business operations. The Company believes the use of adjusted net income (loss) allows investors and analysts to understand the results relating to receipt of revenue from its royalty interests and purchase and sale of gold from its streaming interests by excluding certain items that have a disproportionate impact on our results for a particular period. The net income (loss) adjustments are presented net of tax generally at the Company’s statutory effective tax rate. Management’s determination of the components of adjusted net income (loss) are evaluated periodically and based, in part, on a review of non-GAAP financial measures used by mining industry analysts. Net income (loss) attributable to Royal Gold stockholders is reconciled to adjusted net income (loss) as follows:

 

   For The Three Months Ended   For The Years Ended 
   June 30,   June 30, 
   2016   2015   2016   2015 
                 
Net income (loss) attributable to Royal Gold common stockholders  $20,439   $14,819   $(77,149)  $51,965 
                     
Impairment of stream and royalty interests and royalty receivables, net of tax   -    -    86,130    24,185 
Tax expense on Andacollo royalty sale and Chilean subsidiary liquidation   -    -    56,000    - 
                     
Adjusted net income attributable to Royal Gold common stockholders  $20,439   $14,819   $64,981   $76,150 
                     
Adjusted earnings per share  $0.32   $0.23   $1.00   $1.17 

 

15 

ROYAL GOLD INC Reports