- Net income for second quarter of 2008 increases to $74.3 million ($1.04
per diluted share) from $4.7 million ($0.07 per diluted share) in
comparable period last year
- Coal revenues increase 63 percent on record metallurgical shipments
- Per-ton margin increases 130 percent quarter-over-quarter
- Record EBITDA of $141.8 million, compared with $53.7 million in second
quarter of 2007
- More than 21 million tons of Alpha's planned metallurgical coal
production in 2009 and 2010 remains open for pricing
- Alpha enters into agreement to merge with Cleveland-Cliffs
ABINGDON, Va., July 29 /PRNewswire-FirstCall/ -- Alpha Natural
Resources, Inc. (NYSE: ANR), the largest supplier of metallurgical coal in
the U.S., established all-time quarterly records for coal revenues, net
income and cash flow from operating activities in the quarter ended June
30, 2008 as the company achieved its highest-ever shipments and pricing for
metallurgical coal due to continued strong global demand from the steel
industry.
For the three months ended June 30, 2008, Alpha recorded coal revenues
of $631.9 million, compared with $387.2 million in the same period of 2007.
Net income for the most recent quarter was $74.3 million ($1.04 per diluted
share), compared with net income of $4.7 million ($0.07 per diluted share)
in the second quarter of 2007.
Results for the most recent quarter included the following items, equal
to $39.2 million pretax, or $30.2 million after tax ($0.42 per diluted
share):
-- $14.7 million charge for retiring the company's 10% senior notes due
2012;
-- $8.9 million of interest expense from full amortization of debt
issuance costs related to the company's 2.375% convertible senior
notes, which became convertible on July 1, 2008;
-- $9.2 million charge for recognition awards of common stock and other
incentives granted under Alpha's employee appreciation and retention
program, of which approximately $8.7 million is in cost of sales;
-- $6.4 million charge for adjustments to employee incentive plans, of
which approximately $1.7 million is in cost of sales.
Results for the most recent quarter also included an income tax benefit
of $11.2 million ($0.16 per diluted share) from the reversal of a portion
of the company's existing valuation allowance for deferred tax assets. As
of June 30, 2008, Alpha had sufficient earnings expectations going forward
to conclude that it is more likely than not that most of the deferred tax
asset previously reserved through a valuation allowance would be realized.
Of the total amount realized ($37.6 million), $11.2 million was recognized
as a discrete item in the second quarter with the effect of reducing income
tax expense, while the remainder is recognized in the annual effective tax
rate for the second through fourth quarters of 2008.
Earnings before interest, taxes, depreciation, depletion and
amortization (EBITDA) for the three months ended June 30, 2008 reached a
new quarterly record of $141.8 million, representing an improvement of
$88.1 million, or 164 percent, from the same period last year. A
reconciliation of EBITDA to net income, the most closely related GAAP
measure, is provided in a table included with the accompanying financial
schedules.
For the six months ended June 30, 2008, Alpha recorded coal revenues of
$1,077.6 million compared with $767.4 million in the same period of 2007.
Net income for the first half of 2008 was $99.9 million ($1.46 per diluted
share), compared with net income of $13.1 million ($0.20 per diluted share)
in the first half of 2007. EBITDA for the six months ended June 30, 2008
was $228.8 million, an increase of $119.0 million, or 108%, from the first
half of 2007.
"Persistently strong demand for metallurgical coal from steel producers
worldwide is having a profound impact on our financial performance," said
Michael Quillen, Alpha's chairman and CEO. "In the second quarter, Alpha
shipped nearly one million tons more metallurgical coal overseas than we
did in the same period last year. For the first half, our seaborne
metallurgical shipments were up 51 percent. With demand growing markedly
from countries that are addressing their infrastructure needs, we expect
some tightness in the market will continue for a period of time."
"Alpha was already established as the largest U.S. exporter of
high-quality metallurgical coals before this surge in 2008, and having 21
million tons of our planned metallurgical coal production open for
contracting and pricing for the next two years puts us in an extremely good
position looking forward," added Kevin Crutchfield, president.
Quarterly Financial & Operating Highlights
(in millions, except per-share and per-ton amounts)
Q2 Q2 Q1
2008 2007 2008
Coal revenues $631.9 $387.2* $445.7
Income from operations $111.5 $15.3 $42.6
Net income $74.3 $4.7 $25.5
Earnings per diluted share $1.04 $0.07 $0.39
EBITDA $141.8 $53.7 $87.1
Tons of coal produced and
processed 6.2 6.2 6.1
Tons of coal sold 7.8 6.8 6.9
Coal margin per ton $21.85 $9.49* $12.18*
* Adjusted from amounts reported in prior periods to exclude changes
in the presentation of fair value of derivative instruments, which
are now recorded as a component of costs and expenses, to conform to
current year income statement presentation. The adjustments have no
effect on previously reported income from operations or net income.
A reconciliation of EBITDA to net income is included in the notes
accompanying the financial schedules.
Financial Performance -- Second Quarter
-- Total revenues in the second quarter increased by 68 percent over
last year to $732.2 million. Coal revenues were up 63 percent due to
significantly higher average price realizations and a 13 percent
improvement in shipments, while other revenues rose 119 percent,
mostly because of sales from our Gallatin lime business, higher
third-party coal processing revenue and road construction revenue.
-- Alpha's income from operations was $111.5 million in the latest
quarter, compared with $15.3 million in the same period of 2007.
Results for the most recent quarter included an unrealized after-tax
gain in the fair value of derivative instruments of $5.0 million,
equal to $0.07 per diluted share. This compares with a net
unrealized after-tax gain of $0.3 million in the prior-year quarter.
-- Depreciation, depletion and amortization (DD&A) in the quarter just
ended was $7.1 million higher than the second quarter of 2007. The
increase came mainly from an increase in depletion at one of the
company's surface mines and from depreciation related to the June
2007 Mingo Logan acquisition and recent capital additions.
-- Selling, general and administrative (SG&A) expenses for the most
recent quarter were $6.8 million higher than the second quarter last
year, mostly due to changes to the company's incentive compensation
programs.
-- Interest expense (net) increased by $5.3 million in the most recent
quarter, as the company fully amortized $8.9 million of deferred
loan fees that it had incurred in issuing its 2.375% convertible
senior notes due 2015, which became convertible on July 1, 2008.
This was partly offset by significantly lower interest expense as a
result of repayment of the company's 10% senior notes due 2012. The
company also incurred a $14.7 million pretax charge from the early
extinguishment of the 10% notes. (See Liquidity and Capital
Resources section.)
-- Reversal of a deferred tax asset valuation allowance (see page 1)
reduced Alpha's income tax expense by $11.2 million to $7.7 million
for the second quarter of 2008. This compares with tax expense of
$1.5 million in the prior-year period. Excluding the $11.2 million
benefit, the company's effective tax rate would have been
approximately 23 percent in the second quarter of 2008, compared
with approximately 24 percent in the prior-year period.
Production and Sales -- Second Quarter
-- Coal margin per ton, a key profitability measure for the company,
rose 130 percent in the quarter just ended to a new high of $21.85,
as the company's higher-margin metallurgical products accounted for
44 percent of total shipments versus 37 percent in the corresponding
period last year. The company's average realized price per ton for
the quarter reached $81.48, also a new quarterly high.
-- Produced and processed tons (representing company and contractor-
operated mines and coal purchased at our processing plants) were
6.2 million tons in the quarter just ended, essentially level with
the second quarter of 2007 and 1 percent higher than the first
quarter of this year. To meet customer demand, the company purchased
1.5 million tons of coal in the quarter just ended, higher than both
the comparable period last year and the first quarter of this year.
-- Total coal sales volumes for the quarter just ended were 7.8 million
tons, up 13 percent on both a year-over-year and sequential basis.
The company's average cost of coal sales per ton in the most recent
quarter increased 27 percent from the comparable period in 2007, and
13 percent sequentially. Produced and processed costs were impacted
by increased sales-related costs (primarily royalties and severance
taxes) and sharply higher mine supply costs-particularly diesel fuel
increases and surcharges on steel for mine roof support-and by
$10.4 million worth of stock awards and other employee incentives
including those granted under Alpha's employee appreciation and
retention program launched May 1. The unit cost of outside coal
purchases, which tends to move with coal market prices, rose
42 percent from the comparable three months last year and 10 percent
sequentially.
Quarterly Production and Sales Data
(in thousands, except per-ton amounts)
Q2 2008 Q2 2007 % Change Q1 2008 % Change
Production
Produced/
processed 6,177 6,179 0% 6,087 1%
Purchased 1,455 870 67% 1,066 36%
Total 7,632 7,049 8% 7,153 7%
Tons Sold
Steam 4,368 4,326 1% 3,969 10%
Metallurgical 3,387 2,515 35% 2,883 17%
Total 7,755 6,841 13% 6,852 13%
Coal revenue/
ton
Steam $51.12 $48.01* 6% $50.51 1%
Metallurgical $120.63 $71.39 69% $85.05 42%
Total $81.48 $56.60* 44% $65.04 25%
Cost of coal
sales/ton(1)
Alpha Mines $55.56 $46.13* 20% $50.44* 10%
Contract
Mines(2) $70.69 $51.29 38% $57.60 23%
Total
Produced
and
processed $57.73 $47.04* 23% $51.36* 12%
Purchased $67.47 $47.62* 42% $61.30 10%
Total $59.63 $47.11* 27% $52.86* 13%
Coal margin
per ton(3) $21.85 $9.49* 130% $12.18* 79%
YTD-08 YTD-07 % Change
Production
Produced/processed 12,264 12,323 0%
Purchased 2,521 1,584 59%
Total 14,785 13,907 6%
Tons Sold
Steam 8,337 8,586 -3%
Metallurgical 6,270 4,882 28%
Total 14,607 13,468 8%
Coal revenue/ton
Steam $50.83 $48.42* 5%
Metallurgical $104.27 $72.02 45%
Total $73.77 $56.98* 29%
Cost of coal sales/ton(1)
Alpha Mines $53.07 $45.86* 16%
Contract Mines(2) $64.75 $50.76 28%
Total Produced and processed $54.65 $46.69* 17%
Purchased $64.96 $50.84* 28%
Total $56.45 $47.16* 20%
Coal margin per ton(3) $17.32 $9.82* 76%
(1) Excludes changes in fair value of derivative instruments, freight &
handling costs, cost of other revenues, DD&A and SG&A
(2) Includes coal purchased from third parties and processed at our
plants prior to resale
(3) Coal revenue per ton less cost of coal sales per ton
* Adjusted from amounts reported in prior periods to exclude changes
in the presentation of fair value of derivative instruments, which
are now recorded as a component of costs and expenses, to conform to
current year income statement presentation. The adjustments have no
effect on previously reported income from operations or net income.
Year-to-Date Results
-- Total revenues in the first half of 2008 increased by 44 percent
over last year to $1,249.1 million. Coal revenues were up 40 percent
due to higher price realizations on both metallurgical and thermal
coal and an 8 percent rise in sales volumes. Other revenues rose
92 percent in the first half to $26.4 million, mostly because of
sales from our Gallatin lime business, and higher third-party
processing fees and road construction revenue. Income from
operations was $154.1 million in the first six months of 2008,
compared with $35.5 million in the same period of 2007.
-- Coal sales volumes for the first six months of 2008 totaled
14.6 million tons, an increase over the prior-year period of
1.1 million tons, or 8 percent. Metallurgical coal shipments were up
28 percent from the first half of 2007 while thermal coal shipments
were down 3 percent. Coal purchases climbed 59 percent. The
company's unit cost of coal sales rose 20 percent for the first six
months of 2008 compared with last year, while average realization
per ton increased by 29 percent. As a result, Alpha's coal margin
per ton for the first half of 2008 reached $17.32, a 76 percent
increase from $9.82 per ton in the first half of 2007.
-- At June 30, 2008, Alpha had unrealized net gains of $10.9 million on
its balance sheet for certain open forward coal contracts for the
purchase or sale of coal that are considered derivatives. Since
Alpha intends to take delivery or provide delivery of coal under
these contracts, the net unrealized gains will reverse into the
income statement in future periods when ultimate delivery occurs.
This reversal will result in higher cost and expenses in those
future periods. At June 30, 2008, the company also had unrealized
net gains on diesel fuel swap agreements and put options in the
amount of $22.7 million.
Liquidity and Capital Resources
Cash provided by operations for the quarter ended June 30, 2008 was
$137.7 million, compared with $49.7 million in the second quarter of 2007,
and was $179.4 million through the first six months of 2008, compared with
$102.3 million for the first six months of 2007.
Capital expenditures for the quarter just ended totaled $40.4 million
and $74.2 million for the first six months of 2008, compared with $27.1
million and $71.7 million for the same periods last year.
Total debt outstanding at June 30, 2008 was $545.6 million, compared
with $445.1 million at the end of the second quarter of 2007. The company
had available liquidity of $699.3 million at the end of the second quarter
of 2008, including cash of $406.5 million and $292.8 million available
under the company's credit facility.
On April 7, 2008, the company completed concurrent offerings of
approximately 4.2 million shares of common stock at $41.25 per share and
$287.5 million aggregate principal amount of 2.375% convertible senior
notes due 2015. Net proceeds of $443.3 million were used in part to
repurchase all the outstanding principal amount of the 10% senior notes
previously issued by Alpha subsidiaries, with the remaining proceeds
designated for other general corporate purposes.
The 2.375% convertible senior notes were issued with an initial
conversion price of $54.66 and require net share settlement. Net share
settlement requires the company to pay upon conversion up to the principal
amount of each note in cash, with any value above the applicable conversion
price (currently $54.66 per share) to be repaid in shares of our stock,
cash or a combination thereof at the company's option. The notes become
dilutive for earnings per share calculations when the average price for the
quarter exceeds the applicable conversion price. The average price of Alpha
common shares during the second quarter 2008 was $68.45, and accordingly
the company added 1,059,716 and 529,858 shares to second quarter and
year-to-date dilutive earnings per share calculations, respectively.
On July 1, 2008, the notes became convertible at the option of the
holders and will remain convertible through September 30, 2008, the last
trading day of the current fiscal quarter. The notes became convertible
because the company's common stock exceeded the conversion threshold price
of $71.06 per share (130 percent of the applicable conversion price of
$54.66 per share) for at least 20 trading days within the 30 consecutive
trading days ending June 30, 2008. As of July 28, 2008, no holders had
converted their notes.
Recent Developments
On July 16, Alpha and Cleveland-Cliffs Inc. jointly announced the
signing of a definitive merger agreement under which Cleveland-Cliffs has
agreed to acquire all outstanding common stock of Alpha in a stock and cash
transaction. Under the terms of the agreement, for each share of Alpha
common stock, Alpha stockholders would receive 0.95 Cleveland-Cliffs common
shares and $22.23 in cash.
The combined company, which will be renamed Cliffs Natural Resources,
will become one of the largest U.S. mining companies with a portfolio that
includes nine iron ore facilities and more than 60 coal mines located
across North America, South America and Australia. Upon completion of the
transaction, Alpha stockholders would own approximately 40 percent of the
combined company and Cleveland-Cliffs shareholders would own approximately
60 percent.
The transaction is subject to approval by Cleveland-Cliffs and Alpha
shareholders, as well as the satisfaction of customary closing conditions
and regulatory approvals, including expiration or termination of the
applicable waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976.
Outlook
With steel production, consumption and pricing levels continuing to
show solid strength across the globe, demand for metallurgical coal has
remained persistently strong throughout 2008. Total metallurgical coal
shipments of 6.3 million tons in the first half put the company squarely on
target to meet or exceed its target of 12 million tons of metallurgical
coal sales this year, which would be a new high for the company. By raising
its ownership position in the Dominion Terminal Associates port facility in
Virginia in April, Alpha increased its future export capabilities from the
East Coast.
Importantly, with metallurgical coal remaining in high demand around
the world, during the second quarter, Alpha committed and priced a
considerable amount of planned production from the second quarter of 2008
through the first half of 2009. The weighted average on the 3.1 million
tons that the company priced in the second quarter for delivery during that
time period was in excess of $250 per ton realized at the mine.
In this environment, Alpha has continued to pursue opportunities that
will augment the company's metallurgical supply capabilities. As of July
23, 2008, the company had approximately 10 million tons of planned
metallurgical coal production uncommitted and unpriced for calendar year
2009, and in excess of 11 million tons for 2010. Combined, this represents
83 percent of Alpha's planned metallurgical coal production for the
two-year period, and excludes any third-party purchases that are blended
and/or resold.
Of Alpha's planned thermal coal production in 2009 and 2010,
approximately 39 percent was uncommitted and unpriced as of July 23, or a
total of more than 11 million tons. Approximately 2.7 million tons was
committed during the second quarter for delivery in 2008 and 2009 at a
weighted average price of more than $102.
Based upon its current outlook and assessment of market conditions and
contractual commitments, Alpha is issuing the following targets for the
year 2008 and including targets for 2009, although the company may not
continue to provide such targets in the future:
TARGET 2008 2009
Production
(produced &
processed) 24.5 - 25.0 million tons 27.0 - 28.0 million tons
Purchased coal 5.0 - 5.5 million tons 3.0 - 5.0 million tons
Coal revenues $2.2 billion - $2.4 billion $3.7 billion - $4.4 billion
DD&A $175 million - $185 million $200 million - $210 million
Income tax rate 21% - 23%* 29% - 31%
Net income $230 million - $270 million $1.0 billion - $1.3 billion
EBITDA** $490 million - $540 million $1.7 billion - $2.1 billion
Capital
expenditures $145 million - $155 million $175 million - $200 million
* 2008 tax rate excludes the $11.2 million benefit from the tax
valuation allowance reversal in the second quarter.
** A reconciliation of EBITDA targets to net income targets is included
in the notes accompanying the financial schedules.
Second Quarter Earnings Conference Call
Alpha management will hold a conference call at 11:00 a.m. Eastern Time
on July 29, 2008, to discuss the company's second quarter results and the
business outlook. The call will be accessible through the Investor
Relations section of Alpha's web site and will be archived on the site for
a period of two weeks. Also, a podcast of the call will be available for
downloading on the company's web site following the call. Please go to
http://www.alphanr.com.
A telephone replay of the call will be available through August 12,
2008, by calling 800-642-1687 (toll-free) or 706-645-9291 and entering pass
code 56219600.
About Alpha Natural Resources
Alpha Natural Resources is a leading supplier of high-quality
Appalachian coal to electric utilities, steel producers and heavy industry.
Approximately 89 percent of the company's reserve base is high Btu coal and
82 percent is low sulfur, qualities that are in high demand among electric
utilities which use steam coal. Alpha is also the nation's largest supplier
and exporter of metallurgical coal, a key ingredient in steel
manufacturing. Alpha and its subsidiaries currently operate mining
complexes in four states, consisting of 58 mines feeding 11 coal
preparation and blending plants. The company and its subsidiaries employ
more than 3,600 people.
ANRG
Forward Looking Statements
This news release includes forward-looking statements as defined in the
Private Securities Litigation Reform Act of 1995. These forward-looking
statements are based on Alpha's expectations and beliefs concerning future
events and involve risks and uncertainties that may cause actual results to
differ materially from current expectations. These factors are difficult to
predict accurately and may be beyond Alpha's control. The following factors
are among those that may cause actual results to differ materially from our
forward-looking statements: market demand for coal, electricity and steel;
future global economic, capital market or political conditions; weather
conditions or catastrophic weather-related damage; our production
capabilities; the consummation of financing, acquisition or disposition
transactions and the effect thereof on our business; our ability to
successfully integrate acquired or developed operations with our existing
operations and implement our business plans for these new operations; our
plans and objectives for future operations and expansion or consolidation;
our relationships with, and other conditions affecting, our customers;
timing of changes in customer coal inventories; changes in, renewal of and
acquiring new long-term coal supply arrangements; inherent risks of coal
mining beyond our control; environmental laws, including those directly
affecting our coal mining and production, and those affecting our
customers' coal usage; competition in coal markets; railroad, barge, truck
and other transportation availability, performance and costs; the
geological characteristics of Central and Northern Appalachian coal
reserves; availability of mining and processing equipment and parts; our
assumptions concerning economically recoverable coal reserve estimates; our
ability to obtain or maintain any necessary permits or rights; availability
of skilled employees and other employee workforce factors; regulatory and
court decisions; future legislation and changes in regulations,
governmental policies or taxes; unfavorable government interventions in, or
nationalization of, foreign investments; changes in postretirement benefit
obligations; our liquidity, results of operations and financial condition;
decline in coal prices; derivative contracts not accounted for as a hedge
that are marked to market; indemnification of certain obligations not being
met; continued funding of the road construction business and related costs;
disruption in coal supplies; ; restrictive covenants in our credit facility
indenture governing our convertible notes; sales of additional shares of
our common stock; future conversions of any of the convertible notes;
provisions in our certificate of incorporation and bylaws and the indenture
for our convertible notes may discourage a takeover attempt even if doing
so might be beneficial to our stockholders; certain terms of our
convertible notes may adversely impact our liquidity; and our reported
interest expense may increase due to a proposed accounting change for cash
settled convertible debt instruments like our convertible notes; the risk
that the businesses of Alpha and Cleveland-Cliffs will not be integrated
successfully pursuant to the previously announced proposed merger; the risk
that the cost savings and any other synergies from the proposed transaction
with Cleveland-Cliffs may not be fully realized or may take longer to
realize than expected; disruption from the proposed transaction with
Cleveland-Cliffs making it more difficult to maintain relationships with
customers, employees or suppliers; the failure to obtain government
approvals of the proposed transaction with Cleveland-Cliffs on the proposed
terms and schedule, and any conditions imposed on the combined company in
connection with consummation of the merger; the failure to obtain approval
of the merger by the stockholders of Cleveland-Cliffs and Alpha; and the
failure to satisfy various other conditions to the closing of the merger
contemplated by the merger agreement between Cleveland-Cliffs and Alpha.
These and other risks and uncertainties are discussed in greater detail in
Alpha's Annual Report on Form 10-K and other documents filed with the
Securities and Exchange Commission. Forward-looking statements in this news
release or elsewhere speak only as of the date made. New uncertainties and
risks come up from time to time, and it is impossible for Alpha to predict
these events or how they may affect the company. Alpha has no duty to, and
does not intend to, update or revise the forward-looking statements in this
news release after the date it is issued. In light of these risks and
uncertainties, investors should keep in mind that the results, events or
developments disclosed in any forward-looking statement made in this news
release may not occur.
Additional Information on the Proposed Transaction with
Cleveland-Cliffs and Where to Find It
In connection with the proposed transaction, a registration statement
on Form S-4 will be filed with the SEC. ALPHA AND CLEVELAND-CLIFFS
SHAREHOLDERS ARE ENCOURAGED TO READ THE REGISTRATION STATEMENT AND ANY
OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, INCLUDING THE JOINT PROXY
STATEMENT/PROSPECTUS THAT WILL BE PART OF THE REGISTRATION STATEMENT, WHEN
THEY BECOME AVAILABLE, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION
ABOUT THE PROPOSED MERGER. The final joint proxy statement/prospectus will
be mailed to shareholders of Alpha and shareholders of Cleveland-Cliffs.
Investors and security holders will be able to obtain the documents free of
charge at the SEC's web site, http://www.sec.gov, from Alpha Natural
Resources, Inc., One Alpha Place, P.O. Box 2345, Abingdon, Virginia 24212,
attention: Investor Relations, or call (276) 619-4410; or from
Cleveland-Cliffs Inc, Investor Relations, 1100 Superior Avenue, Cleveland,
Ohio 44114-2544, or call (216) 694-5700,
Participants In Solicitation
Alpha and Cleveland-Cliffs and their respective directors and executive
officers and other members of management and employees may be deemed to be
participants in the solicitation of proxies in respect of the proposed
merger. Information concerning Alpha' participants is set forth in the
proxy statement, dated April 2, 2008, for Alpha's 2008 annual meeting of
stockholders as filed with the SEC on Schedule 14A. Information concerning
Cleveland-Cliffs' participants is set forth in the proxy statement dated
March 26, 2008, for Cleveland-Cliffs' 2008 annual meeting of shareholders
as filed with the SEC on Schedule 14A. Additional information regarding the
interests of participants of Alpha and Cleveland-Cliffs in the solicitation
of proxies in respect of the proposed merger will be included in the
registration statement and joint proxy statement/prospectus and other
relevant materials to be filed with the SEC when they become available.
NOTES TO ACCOMPANYING CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
Reconciliation of EBITDA
EBITDA is a non-GAAP financial measure used by management to gauge
operating performance. Alpha defines EBITDA as net income plus interest
expense, income tax expense, and depreciation, depletion and amortization,
less tax benefit and interest income. Management presents EBITDA as a
supplemental measure of the company's performance and debt-service capacity
that may be useful to securities analysts, investors and others. EBITDA is
not, however, a measure of financial performance under U.S. GAAP and should
not be considered as an alternative to net income, operating income or cash
flow as determined in accordance with U.S. GAAP. Moreover, EBITDA is not
calculated identically by all companies. A reconciliation of EBITDA to net
income, the most directly comparable U.S. GAAP measure, is provided in the
accompanying tables.
FINANCIAL TABLES FOLLOW
ALPHA NATURAL RESOURCES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income (Unaudited)
(In thousands, except share and per share amounts)
Three months ended Six months ended
June 30, June 30,
2008 2007 2008 2007
Revenues:
Coal revenues $631,876 $387,212 $1,077,555 $767,362
Freight and handling
revenues 86,015 41,588 145,187 84,799
Other revenues 14,330 6,548 26,385 13,778
Total revenues 732,221 435,348 1,249,127 865,939
Costs and expenses:
Cost of coal sales
(exclusive of items
shown separately
below) 462,424 322,279 824,635 635,204
Increase in fair value
of derivative
instruments, net (6,516) (390) (23,200) (840)
Freight and handling
costs 86,015 41,588 145,187 84,799
Cost of other revenues 13,110 4,768 23,125 10,396
Depreciation, depletion
and amortization 44,910 37,855 89,170 73,644
Selling, general and
administrative
expenses (exclusive
of depreciation and
amortization shown
separately above) 20,732 13,982 36,086 27,221
Total costs and
expenses 620,675 420,082 1,095,003 830,424
Income from
operations 111,546 15,266 154,124 35,515
Other income (expense):
Interest expense (17,097) (10,030) (27,184) (20,023)
Interest income 2,234 457 3,023 1,094
Loss on early
extinguishment of debt (14,669) - (14,669) -
Miscellaneous income, net (127) 512 2 554
Total other income
(expense), net (29,659) (9,061) (38,828) (18,375)
Income before income
taxes and minority
interest 81,887 6,205 115,296 17,140
Income tax expense 7,662 1,502 15,630 4,131
Minority interest (112) (44) (201) (87)
Net income $74,337 $4,747 $99,867 $13,096
Net income per basic share $1.07 $0.07 $1.48 $0.20
Net income per diluted
share $1.04 $0.07 $1.46 $0.20
Weighted average
shares-basic 69,455,450 64,588,324 67,273,460 64,583,769
Weighted average
shares-diluted 71,421,253 64,841,698 68,625,866 64,817,676
ALPHA NATURAL RESOURCES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
(In thousands, except share and per share amounts)
June 30, December 31,
2008 2007
Assets
Current assets:
Cash and cash equivalents $406,494 $54,365
Trade accounts receivable, net 257,285 183,969
Notes and other receivables 11,345 11,141
Inventories 85,418 70,780
Deferred income taxes 10,788 -
Prepaid expenses and other current assets 111,052 59,954
Total current assets 882,382 380,209
Property, plant, and equipment, net 619,237 640,258
Goodwill 20,547 20,547
Other intangibles, net 7,826 9,376
Deferred income taxes 81,522 97,130
Other assets 67,422 63,394
Total assets $1,678,936 $1,210,914
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt $289,956 $2,579
Note payable 6,398 18,883
Trade accounts payable 119,753 95,749
Deferred income taxes - 9,753
Accrued expenses and other current
liabilities 154,418 96,098
Total current liabilities 570,525 223,062
Long-term debt, net of current portion 249,242 425,451
Workers' compensation benefit obligations 8,846 9,055
Postretirement medical benefit obligations 57,078 53,811
Asset retirement obligation 84,348 83,020
Deferred gains on sale of property interests 2,758 3,176
Other liabilities 38,208 30,930
Total liabilities 1,011,005 828,505
Minority Interest 1,187 1,573
Commitments and contingencies
Stockholders' equity:
Preferred stock - par value $0.01, 10,000,000
shares authorized, none issued - -
Common stock - par value $0.01,
100,000,000 shares authorized, 70,482,861
and 65,769,303 shares issued and outstanding
at June 30, 2008 and December 31, 2007,
respectively 705 658
Additional paid-in capital 411,240 227,336
Accumulated other comprehensive loss (20,200) (22,290)
Retained earnings 274,999 175,132
Total stockholders' equity 666,744 380,836
Total liabilities and
stockholders' equity $1,678,936 $1,210,914
ALPHA NATURAL RESOURCES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
Six months ended
June 30,
2008 2007
Operating activities:
Net income $99,867 $13,096
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation, depletion and
amortization 89,170 73,644
Loss on early extinguishment of debt 14,669 -
Amortization of debt issuance costs 9,962 1,140
Accretion of asset retirement
obligation 3,708 3,123
Share-based compensation 14,575 4,064
Amortization of deferred gains on sales
of property interests (418) (493)
Gain on sale of fixed assets and
investments (1,789) (1,650)
Minority interest (201) (87)
Change in fair value of derivative
instruments (23,200) (840)
Deferred income tax benefit (6,256) (854)
Other 50 385
Changes in operating assets and
liabilities (20,700) 10,780
Net cash provided by operating
activities 179,437 102,308
Investing activities:
Capital expenditures $(74,207) $(71,655)
Proceeds from disposition of
property, plant, and equipment 2,775 2,559
Investment in and advances to investee (164) (147)
Proceeds from sale of investment in coal
terminal 1,500 -
Investment in Dominion terminal facility (2,824) -
Purchase of acquired companies - (43,890)
Deferred acquisition cost (931) (630)
Net cash used in investing
activities (73,851) (113,763)
Financing activities:
Repayments of note payable $(12,485) $(13,853)
Proceeds from issuance of convertible
debt 287,500 -
Repayments on long-term debt (176,028) 13,336
Proceeds from issuance of common stock,
net 164,666 -
Debt issuance costs (10,861) -
Premium payment on early extinguishment
of debt (10,703) -
Decrease in bank overdraft (160) (12,749)
Tax benefit from share-based compensation 1,790 -
Proceeds from exercise of stock options 3,128 120
Other (304) -
Net cash provided by (used in)
financing activities 246,543 (13,146)
Net increase (decrease)in cash
and cash equivalents 352,129 (24,601)
Cash and cash equivalents at beginning of
period 54,365 33,256
Cash and cash equivalents at end of
period $406,494 $8,655
The following table reconciles EBITDA to net income, the most directly
comparable GAAP measure:
Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
(In thousands)
Net income $74,337 $4,747 $99,867 $13,096
Interest expense 17,097 10,030 27,184 20,023
Interest income (2,234) (457) (3,023) (1,094)
Income tax expense 7,662 1,502 15,630 4,131
Depreciation, depletion
and amortization 44,910 37,855 89,170 73,644
EBITDA $141,772 $53,677 $228,828 $109,800
The following table reconciles EBITDA to net income, the most directly
comparable GAAP measure, for the guidance provided in the earnings
release:
2008 2009
Low-Range Hi-Range Low-Range Hi-Range
(In thousands) (In thousands)
Net Income $230,000 $270,000 $1,000,000 $1,300,000
Interest Expense 42,000 42,000 45,000 45,000
Interest Income (9,000) (10,000) (36,000) (43,000)
Income tax expense 47,000 58,000 486,000 593,000
Depreciation, depletion
and amortization 180,000 180,000 205,000 205,000
EBITDA $490,000 $540,000 $1,700,000 $2,100,000
SOURCE Alpha Natural Resources, Inc.
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Related links:
http://www.alphanr.com
CONTACT:
Investor | Media, Ted Pile of Alpha Natural
Resources, Inc., +1-276-623-2920
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