CONSOL Energy Announces Second Quarter Results
PITTSBURGH, July 28 /PRNewswire-FirstCall/ — CONSOL Energy Inc. , a producer of high-Btu bituminous coal and of coalbed methane gas, reported earnings of $41.1 million, or $0.44 per diluted share, for its second quarter ended June 30, 2005, compared with $26.2 million, or $0.29 per diluted share, for the same period a year earlier. Net cash from operating activities was $61.8 million for the June 2005 quarter, compared with $92.1 million in the same quarter a year earlier.
FINANCIAL RESULTS – Period-To-Period Comparison Quarter Quarter Six Months Six Months Ended Ended Ended Ended June 30, June 30, June 30, June 30, 2005 2004 2005 2004 Total Revenue and Other Income $817.1 $674.6 $1,634.1 $1,325.4 Earnings Before Effect of Accounting Change $41.1 $26.2 $116.3 $59.1 Net Income $41.1 $26.2 $116.3 $142.5 Earnings Per Share (Diluted) $0.44 $0.29 $1.26 $1.57 Net Cash from Operating Activities $61.8 $92.1 $157.4 $187.6 EBITDA $123.8 $95.0 $283.1 $199.3 EBIT $57.0 $33.3 $152.9 $78.1 Capital Expenditures ($112.7) ($100.3) ($169.6) ($204.6) Other Investing Cash Flows $38.4 $4.3 $16.3 $14.1 In millions of dollars except per share. Amounts for capital expenditures do not include amounts for equity affiliates. Other investing cash flows represents net cash used in or (provided by) investing activities less capital expenditures and includes: Additions to mineral leases; Investment in Equity Affiliates; Proceeds from Sales of Assets and changes in restricted cash.
“Our top and bottom line improvements this quarter were driven primarily by higher coal prices consistent with the strong energy fundamentals that have persisted for more than a year and the higher production capacity in coal resulting from our recent expansion projects,” said J. Brett Harvey, president and chief executive officer. “We improved second quarter earnings by nearly 57 percent compared with a year earlier despite the loss of coal and gas
production because of the Buchanan Mine fire as well as the costs associated with the fire.”
Harvey said results for the quarter just ended included a charge of $23.3 million in estimated expenses (net of expected insurance recovery) for property damage. “However, we also expect to receive a business interruption insurance recovery at some point, effectively recapturing lost earnings.” Coal and gas production at Buchanan Mine resumed in mid-June, 2005.
He also noted that both the company’s top line and earnings for the first half of the year are running well ahead of last year. “Through the first half of the year, total revenues are up 23.3 percent while earnings before the effect of an accounting change are up nearly 97 percent compared with the first half of last year,” he said. “Higher coal prices and consistent production levels despite the fire at Buchanan are the primary reasons for our strong first half.”
“Energy fundamentals remained strong throughout the first half of the year,” Harvey noted. “Our average realized coal price was higher than the first quarter of this year, reflecting a positive situation in overall demand for coal as well as a continuation of tight coal supplies.” He said the company’s average realized price for gas was lower than the first quarter of this year, reflecting several first quarter sales contracts at more than $10.00 per thousand cubic feet (mcf) that were not part of second quarter sales. “Forward gas markets continue to be very strong,” he added, noting that the company had hedges in place from 2006 through 2008 at average prices ranging from $6.88 to $7.67 per mcf.
Period-to-Period Analysis of the Quarter
Total revenue and other income increased 21.1 percent, primarily reflecting high prices for coal sales and increased sales of purchased gas.
Total costs increased 18.2 percent.
Cost of Goods Sold increased 21.3 percent primarily due to: higher costs for produced coal, reflecting increased supply, labor and contract mining costs; higher retiree medical costs; higher costs for purchased gas (offset by a commensurate increase in purchased gas revenue); and costs related to the Buchanan Mine fire.
Selling, General and Administrative costs increased 8.9 percent, primarily reflecting costs associated with various corporate initiatives.
Depreciation, Depletion and Amortization increased 8.2 percent reflecting several coal mining assets placed in service after the June 2004 quarter.
Interest expense declined 13.6 percent, reflecting lower long-term debt and a reduction in the weighted average outstanding balance of short-term borrowings.
Taxes other than income increased 16.0 percent reflecting an increase in taxes that are tied to coal prices and an increase in wage taxes, reflecting an increase in labor costs.
Income taxes increased, reflecting higher pretax earnings.
Total debt declined 1.2 percent since the beginning of the year. As of June 30, 2005, CONSOL Energy had $418.5 million in total liquidity, which is comprised of $4.7 million of cash and $413.8 million available to be borrowed under it $750 million bank facility.
Coal Operations Quarter Quarter Six Months Six Months Ended Ended Ended Ended June 30, June 30, June 30, June 30, 2005 2004 2005 2004 Total Coal Sales (millions of tons) 17.4 17.3 35.1 34.7 Sales – Company-Produced (millions of tons) 17.0 16.7 34.4 33.6 Coal Production (millions of tons) 16.5 16.5 34.7 33.4 Average Realized Price Per Ton – Company- Produced $35.49 $29.77 $35.28 $29.30 Operating Costs Per Ton $22.62 $20.68 $22.06 $20.07 Non-operating Charges Per Ton $4.94 $4.62 $4.71 $4.59 DD&A Per Ton $3.06 $2.56 $2.77 $2.46 Total Cost Per Ton – Company-Produced $30.62 $27.86 $29.54 $27.11* Sales and production includes CONSOL Energy’s portion from equity affiliates. Operating costs include items such as labor, supplies, power, preparation costs, project accruals, subsidence costs, gas well plugging costs, charges for employee benefits (including Combined Fund premium), royalties, production and property taxes. Non-operating charges include items such as charges for long-term liabilities, direct administration, selling and general administration. *Amounts may not add due to rounding.
Coal segment performance in the quarter-to-quarter comparison reflected significantly higher realizations for company-produced coal, offset in part by an increase in unit costs of production.
“Our mines generally ran well during the quarter,” Harvey said. “Other than the obvious problem at Buchanan, the only notable situations were at Enlow Fork, which was in an area with poor roof conditions, and some of our Central Appalachia properties, where thinner seams are a fact of life.”
Production of coal by the company was unchanged in the quarter-to-quarter comparison, with higher production from McElroy, Bailey, Miller Creek and Emery mines offsetting lower production at Buchanan, Enlow Fork mines and the Mill Creek contract mining operations in Kentucky. The expansion of the McElroy Mine, the opening of the Miller Creek Mine and the reactivation of the Emery mine all occurred in the second half of 2004. In addition, the following mines began a vacation period on June 25, 2005 that ended on July 8, 2005: Shoemaker; Blacksville #2; Loveridge; Robinson Run; Amonate; and VP 8.
Sales of company-produced coal improved 0.3 million tons to 17.0 million from 16.7 million tons. “We have worked closely with our various transportation providers all year,” Harvey said. “Thus far, we have been very close to our shipping targets.”
Average realized prices for company-produced coal increased period-to- period by $5.72 per ton, or 19.2 percent, reflecting improved contract pricing and higher spot prices for coal compared with the same period a year earlier. The company produced approximately 0.7 million tons of metallurgical grade coal during the period.
Total costs for company-produced coal increased $2.76 per ton, or 9.9 percent period-to-period. The increase primarily was due to higher costs for supplies related to adverse mining conditions, labor, contract mining, retiree medical care and production taxes. Operating margins (average realized price less operating costs) were $12.87 per ton, an improvement of 41.6 percent period-to-period, while financial margins (average realized price less total costs) were $4.87 per ton, an improvement of 155.0 percent.
Gas Operations Quarter Quarter Six Months Six Months Ended Ended Ended Ended June 30, June 30, June 30, June 30, 2005 2004 2005 2004 Volumes Gas Sales Volumes (Bcf) – Produced net 11.3 12.1 23.6 23.7 3rd Party Gas Gathered Volumes (Bcf) 0.9 0.6 1.8 1.1 Price Received/Mcf $4.96 $4.94 $5.34 $5.12 Costs/ Mcf – Production Lifting $0.41 $0.26 $0.35 $0.28 Other Production Costs $0.16 $0.18 $0.20 $0.16 Administration $0.35 $0.29 $0.34 $0.30 DD&A $0.57 $0.56 $0.59 $0.54 Production Taxes $0.18 $0.18 $0.18 $0.18 Costs/ Mcf – Gathering Operating Costs $0.86 $0.68 $0.76 $0.65 DD&A $0.18 $0.15 $0.17 $0.15 Total Costs/Mcf* $2.71 $2.30 $2.59 $2.26 Volumes, including CONSOL Energy’s portion from equity affiliates expressed as net revenue interest, in billions of cubic feet (Bcf). Royalty payments, which are included in Cost of Goods Sold for gas in our income statement, were: $0.55/Mcf in the 2005 quarter, compared with $0.57/Mcf in the 2004 quarter; and $0.54/Mcf for the first six months of 2005, compared with $0.60/Mcf for the first six months of 2004. *Amounts may not add due to rounding.
Sales volumes of company-produced gas net of the royalty owners’ interest declined 6.6 percent in the quarter-to-quarter comparison. The decline primarily was due to reduction in gas produced in association with the Buchanan Mine fire and because of transportation restrictions on the interstate pipeline through which the company’s gas is transported. Net gas price received was essentially unchanged in the period-to-period comparison.
The reduction in expected gas production associated with the Buchanan Mine fire during the quarter was 2.2 Bcf (gross) and was 3.6 Bcf (gross) for the entire period during which the mine was idle. Gas curtailments related to transportation constraints in the quarter were 0.9 Bcf (gross).
Unit costs of production (net of production taxes) were $1.49 per Mcf, an increase of 15.5 percent compared with the same period a year earlier. Unit cost increases reflected higher lifting, administrative, and gathering costs. Per unit lifting costs increased because of loss of gob well production, which has lower than average unit lifting costs, during the Buchanan Mine fire and because of costs related to steps taken to enhance frac well production during the Buchanan fire. Gathering costs per unit of production were higher because of the purchase of additional firm transportation in Virginia, additional gas processing costs in Northern Appalachia and the effect of lower volumes on per unit fixed costs.
Developments During the Quarter
In April, the company completed a $750 million Senior Secured Loan Agreement to replace an existing facility of $600 million. The new agreement is a five-year revolving credit facility.
In May, the company announced that it planned to expand the Enlow Fork Mine in southwestern Pennsylvania. The expansion project, which is subject to final approval by the CONSOL Energy Board of Directors, is expected to add approximately seven million tons of additional capacity and be running by 2010.
In June, the Buchanan Mine resumed coal production following repairs of damage from a mine fire that had idled the mine since February 14, 2005. Gas production associated with mining activity also resumed.
Subsequent Events
On July 7, 2005, the company announced that it had created CNX Gas Corporation, a wholly owned subsidiary of CONSOL Energy Inc., to conduct its gas exploration and production activities. CONSOL Energy will contribute substantially all of the assets of its gas business, including all of CONSOL Energy’s rights to coalbed methane associated with 4.5 billion tons of coal reserves owned or controlled by CONSOL Energy as well as all of CONSOL Energy’s rights to conventional gas. CONSOL Energy will enter into various agreements with CNX Gas that will define various operating and service relationships between the two companies.
In conjunction with the creation of the new company, several CONSOL Energy executives will resign their positions with CONSOL Energy to become employees of the new company. They include: Ronald Smith, Executive Vice-President; Nicholas DeIuliis, Senior Vice President; and Gary Bench, Vice President. In addition, a separate Board of Directors will be created to govern CNX Gas. CONSOL Energy Director Phillip Baxter will resign from the Board to become Chairman of the Board of CNX Gas. In addition, CONSOL Energy Board of Director members J. Brett Harvey, James Altmeyer, Sr., and Raj Gupta will serve on both boards.
On the same day, CNX Gas announced that it planned to sell approximately 18.5 percent of its outstanding stock in a private transaction. Upon completion of the private transaction, CONSOL Energy expects to receive a dividend equal to the net proceeds, which could range from approximately $340 million to $390 million.
Outlook
The company provides the following update to its guidance previously provided on April 28, 2005:
GUIDANCE 2005 2006 2007 2008 Estimate Estimate Estimate Estimate FINANCIAL FORECAST DD&A $265 $291 $321 N.A. CAPEX Required to Meet Production Forecasts $449 $449 $273 N.A. Assumed Effective Tax Rate* 17% 24% 26% N.A. COAL Tons Produced (millions of tons) 69.2 – 71.2 68 – 72 69 – 73 N.A. Tons Committed (millions of tons at July 11, 2005) 70.2 61.1 44.5 30.9 Tons Committed and Priced (millions of tons at July 11, 2005) 69.6 57.1 37.9 22.4 Av. Realized Price/Ton Committed & Priced $35.25 $35.60 $36.52 $39.14 GAS Volumes produced (Bcf) (net) 50 56 66 76 Produced Volumes Hedged (Bcf at July 7, 2005) 38.2 14.8 7.4 7.4 Weighted Average Hedge Price/Mcf $4.77 $6.88 $7.67 $7.20 Financial data in millions except unit prices. Gas volumes expressed in net revenue interest. Capital for 2006 and 2007 are estimates. Actual amounts are approved annually by the company’s Board of Directors. *Based on current tax code. 2005 Quarterly Production Guidance 1Q 2Q 3Q 4Q Actual Actual Estimate Estimate Coal (millions of tons) 18.2 16.5 17 – 18 17.5 – 18.5 Gas (billions of cubic feet) 12.3 11.3 12 – 13 12.5 – 13.5 Gas volumes expressed in net revenue interest.
Production forecast represent a range of expected outcomes and are provided to assist investors with the development of quarterly or annual earnings estimates.
The following mines will take a one-week vacation period during the third quarter ending September 30, 2005: Bailey and Enlow Fork. The following mines will take a two-week vacation period during the third quarter: Mahoning Valley; Mine 84 and Emery. The following mines began a two-week vacation period that began June 25, 2005 and ended July 8, 2005: Shoemaker; Blacksville #2; Loveridge; Robinson Run; Amonate; and VP 8.
“We remain on track to meet our production targets for coal in 2005,” said Harvey. “We expect steady performance from our mining complexes for the second half of the year and look for the fourth quarter to be strong.” Harvey said that the VP 8 metallurgical mine in Virginia that had been scheduled to deplete at the end of the quarter just ended is developing a small longwall panel on remaining reserves that will extend the life of the mine through the end of 2005. VP 8 Mine is expected to produce about 1.6 million tons for calendar year 2005.
Harvey said he expects average prices received for the remaining uncommitted coal sold this year to be higher than the average realization per ton of coal sold in the first half of the year. He also noted that costs per ton of coal produced should be stable through the second half of the year.
“Because we have done a good job with controllable costs, our gas segment will be a strong contributor in 2005 despite the impacts on production from the Buchanan Mine fire and the shipping curtailments on the Columbia KA-20 line,” Harvey noted. He said production guidance for the gas segment reflects previously disclosed transportation restrictions. “However, the Jewell Ridge lateral line being constructed by a subsidiary of Duke Energy is on schedule to be completed next summer. We expect this to alleviate the transportation problems and give us access to new markets for our gas.”
Harvey assessed energy fundamentals as remaining strong. “Solid economic growth in the United States and hot summer temperatures across most of the nation have resulted in near record electricity generation,” he said. “As a result, demand for coal has remained strong. And despite higher gas injection volumes that we might have expected given the hot weather, both NYMEX and cash prices at Henry Hub remain well above $7.00 per mcf.”
Harvey said he expects eastern coal contract prices for 2006 and 2007 to continue to show improvement. “The high Btu coals are clearly in demand, particularly with the continuing transportation problems in the west,” he said. “With a number of power producers planning to accelerate the retrofitting of scrubbers on their plants, we expect that our strategically located, high-Btu coals will be a product customers will want.”
Harvey said he expects the company to continue to generate both top and bottom line growth through the forecast period.
CONSOL Energy Inc. is the largest producer of high-Btu bituminous coal in the United States. CONSOL Energy has 17 bituminous coal mining complexes in seven states. In addition, the company is one of the largest U.S. producers of coalbed methane with daily gas production of approximately 139.6 million cubic feet (at 12/31/04) from wells in Pennsylvania, Virginia and West Virginia. The company also has a joint-venture company to produce natural gas in Virginia and Tennessee, and the company produces electricity from coalbed methane at a joint-venture generating facility in Virginia.
CONSOL Energy Inc. has annual revenues of $2.8 billion. The company was named one of America’s most admired companies in 2005 by Fortune magazine. It received the U.S. Department of the Interior’s Office of Surface Mining National Award for Excellence in Surface Mining for the company’s innovative reclamation practices in 2002 and 2003. Also in 2003, the company was listed in Information Week magazine’s “Information Week 500″ list for its information technology operations. In 2002, the company received a U.S. Environmental Protection Agency Climate Protection Award. Additional information about the company can be found at its web site: http://www.consolenergy.com/.
Definition: EBIT is defined as earnings (excluding cumulative effect of accounting change) before deducting net interest expense (interest expense less interest income) and income taxes. EBITDA is defined as earnings (excluding cumulative effect of accounting change) before deducting net interest expense (interest expense less interest income), income taxes and depreciation, depletion and amortization. Although EBIT and EBITDA are not measures of performance calculated in accordance with generally accepted accounting principles, management believes that it is useful to an investor in evaluating CONSOL Energy because it is widely used to evaluate a company’s operating performance before debt expense and its cash flow. EBIT and EBITDA do not purport to represent cash generated by operating activities and should not be considered in isolation or as a substitute for measures of performance in accordance with generally accepted accounting principles. In addition, because all companies do not calculate EBIT or EBITDA identically, the presentation here may not be comparable to similarly titled measures of other companies. Reconciliation of EBITDA and EBIT to the income statement is as follows:
CONSOL Energy EBIT & EBITDA (000) Omitted Quarter Quarter Six Months Six Months Ended Ended Ended Ended 06/30/05 06/30/04 06/30/05 06/30/04 Net Income/(Loss) $41,074 $26,205 $116,286 $142,488 Less: Cumulative Effect of Accounting Change ($83,373) Adjusted Net Income 41,074 26,205 116,286 59,115 Add: Interest Expense 7,189 8,321 14,113 17,382 Less: Interest Income (838) (1,245) (1,585) (3,192) Add: Income Taxes 9,613 21 24,088 4,828 Earnings Before Interest & Taxes (EBIT) 57,038 33,302 152,902 78,133 Add: Depreciation, Depletion & Amortization 66,780 61,725 130,159 121,195 Earnings Before Interest, Taxes and DD&A(EBITDA) $123,818 $95,027 $283,061 $199,328 Forward-Looking Statements
CONSOL Energy is including the following cautionary statement to make applicable and take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 for any forward-looking statements made by, or on behalf of, CONSOL Energy. With the exception of historical matters, any matters discussed are forward-looking statements (as defined in Section 21E of the Exchange Act) that involve risks and uncertainties that could cause actual results to differ materially from projected results. You can identify these statements by forward-looking words such as “may,”"will,”"expect,”"anticipate,”"believe,”"guidance,”"forecast, “”estimate, “”intend, “”predict, ” and “continue” or similar words. These risks, uncertainties and contingencies include, but are not limited to, the following:
* the disruption of rail, barge and other systems which deliver our coal, or pipeline systems which deliver our gas; * our inability to hire qualified people to meet replacement or expansion needs; * the risks inherent in coal mining being subject to unexpected disruptions, including geological conditions, equipment failure, fires, accidents and weather conditions which could cause our results to deteriorate; * uncertainties in estimating our economically recoverable coal and gas reserves; * risks in exploring for and producing gas; * obtaining governmental permits and approvals for our operations; * a loss of our competitive position because of the competitive nature of the coal industry and the gas industry, or a loss of our competitive position because of overcapacity in these industries impairing our profitability; * a decline in prices we receive for our coal and gas affecting our operating results and cash flows; * the inability to produce a sufficient amount of coal to fulfill our customers’ requirements which could result in our customers initiating claims against us; * reliance on customers extending existing contracts or entering into new long-term contracts for coal; * reliance on major customers; * our inability to collect payments from customers if their creditworthiness declines; * coal users switching to other fuels in order to comply with various environmental standards related to coal combustion; * the effects of government regulation; * our inability to obtain additional financing necessary in order to fund our operations, capital expenditures, potential acquisitions and to meet our other obligations; * the incurrence of losses in future periods; * the effects of mine closing, reclamation and certain other liabilities; * our ability to comply with restrictions imposed by our senior credit facility; * increased exposure to employee related long-term liabilities; * lump sum payments made to retiring salaried employees pursuant to our defined benefit pension plan; * the outcome of various asbestos litigation cases; * our ability to comply with laws or regulations requiring that we obtain surety bonds for workers’ compensation and other statutory requirements; * results of class action lawsuits against us and certain of our officers alleging that the defendants issued false and misleading statements to the public and seeking damages and costs; * our ability to service debt and pay dividends is dependent upon us receiving distributions from our subsidiaries; and * the anti-takeover effects of our rights plan could prevent a change of control. CONSOL ENERGY INC. AND SUBSIDIARIES (Unaudited) CONSOLIDATED STATEMENTS of INCOME (Dollars in thousands – except per share data) Three Months Ended Six Months Ended June 30, June 30, 2005 2004 2005 2004 Sales – Outside $762,934 $623,975 $1,525,533 $1,214,463 Sales – Related Parties 614 – 614 – Freight – Outside 31,665 29,768 61,789 61,207 Other Income 21,936 20,841 46,201 49,769 Total Revenue and Other Income 817,149 674,584 1,634,137 1,325,439 Cost of Goods Sold and Other Operating Charges 585,795 482,793 1,136,703 929,331 Freight Expense 31,665 29,768 61,789 61,207 Selling, General and Administrative Expense 18,797 17,263 35,186 35,860 Depreciation, Depletion and Amortization 66,780 61,725 130,159 121,195 Interest Expense 7,189 8,321 14,113 17,382 Taxes Other Than Income 56,236 48,488 115,813 96,521 Total Costs 766,462 648,358 1,493,763 1,261,496 Earnings (Loss) Before Income Taxes 50,687 26,226 140,374 63,943 Income Tax Expense (Benefit) 9,613 21 24,088 4,828 Earnings (Loss) Before Cumulative Effect of Change in Accounting Principle 41,074 26,205 116,286 59,115 Cumulative Effect of Changes in Accounting for Workers’ Compensation Liability, net of Income Taxes of $53,080 – – – 83,373 Net Income (Loss) $41,074 $26,205 $116,286 $142,488 Basic Earnings Per Share $0.45 $0.29 $1.28 $1.58 Dilutive Earnings Per Share $0.44 $0.29 $1.26 $1.57 Weighted Average Number of Common Shares Outstanding: Basic 91,436,988 90,077,916 91,191,476 90,002,611 Dilutive 92,584,311 90,964,155 92,267,937 90,763,088 Dividends Paid Per Share $0.14 $0.14 $0.28 $0.28 CONSOL ENERGY INC. AND SUBSIDIARIES (Unaudited) CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) Three Months Ended Six Months Ended June 30, June 30, 2005 2004 2005 2004 Operating Activities: Net Income $41,074 $26,205 $116,286 $142,488 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Cumulative Effect of Change in Accounting Principle, net of tax – – – (83,373) Depreciation, Depletion and Amortization 66,780 61,725 130,159 121,195 Compensation from Restricted Stock Unit Grants 1,357 286 1,797 286 Gain on the Sale of Assets (8,720) (9,215) (10,653) (30,336) Amortization of Mineral Leases 1,143 413 3,661 3,501 Deferred Income Taxes (1,480) 2,584 (772) 6,279 Equity in (Earnings) Losses of Affiliates 168 399 (1,818) 3,395 Changes in Operating Assets: Accounts Receivable Securitization (100,000) 2,900 (110,000) 17,000 Accounts and Notes Receivable 37,401 24,326 (20,077) (6,628) Inventories 8,818 (1,964) (13,757) (8,528) Prepaid Expenses (967) (13,453) (8,028) (33,314) Changes in Other Assets (3,085) (8,123) 766 4,856 Changes in Operating Liabilities: Accounts Payable (11,740) (17,224) (16,425) 10,159 Other Operating Liabilities 7,662 9,764 49,895 6,681 Changes in Other Liabilities 24,062 12,712 37,630 35,433 Other (709) 753 (1,216) (1,457) 20,690 65,883 41,162 45,149 Net Cash Provided by Operating Activities 61,764 92,088 157,448 187,637 Investing Activities: Capital Expenditures (112,693) (100,285) (169,562) (204,597) Additions to Mineral Leases (2,840) (889) (6,352) (3,387) Withdrawal from Restricted Cash 15,000 – – – Investment in Equity Affiliates (1,031) (1,405) (6,838) (2,611) Proceeds from Sales of Assets 27,221 6,578 29,471 20,102 Net Cash Used in Investing Activities (74,343) (96,001) (153,281) (190,493) Financing Activities: Payments on Miscellaneous Borrowings (119) (126) (166) (4,338) Payments on Revolver – (100,000) (1,700) (65,000) Payments on Long Term Notes – (45,000) – (45,000) Dividends Paid (12,779) (12,598) (25,468) (25,174) Withdrawal from Restricted Cash – 190,000 – 190,000 Stock Options Exercised 8,910 4,139 21,437 5,983 Net Cash (Used in) Provided by Financing Activities (3,988) 36,415 (5,897) 56,471 Net (Decrease) Increase in Cash and Cash Equivalents (16,567) 32,502 (1,730) 53,615 Cash and Cash Equivalents at Beginning of Period 21,259 27,626 6,422 6,513 Cash and Cash Equivalents at End of Period $4,692 $60,128 $4,692 $60,128 CONSOL ENERGY INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in thousands – except per share data) (Unaudited) JUNE 30, DECEMBER 31, 2005 2004 ASSETS Current Assets: Cash and Cash Equivalents $4,692 $6,422 Accounts and Notes Receivable: Trade 232,989 111,580 Other Receivables 38,920 30,251 Inventories 135,601 121,902 Deferred Income Taxes 152,022 145,890 Recoverable Income Taxes – 14,614 Prepaid Expenses 44,163 39,510 Total Current Assets 608,387 470,169 Property, Plant and Equipment: Property, Plant and Equipment 6,713,023 6,514,016 Less – Accumulated Depreciation, Depletion and Amortization 3,438,331 3,331,436 Total Property, Plant and Equipment – Net 3,274,692 3,182,580 Other Assets: Deferred Income Taxes 352,114 355,008 Investment in Affiliates 70,641 47,684 Other 118,033 140,170 Total Other Assets 540,788 542,862 TOTAL ASSETS $4,423,867 $4,195,611 CONSOL ENERGY INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in thousands – except per share data) (Unaudited) JUNE 30, DECEMBER 31, 2005 2004 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities: Accounts Payable $149,635 $166,068 Short-Term Notes Payable – 5,060 Current Portion of Long-Term Debt 3,924 3,885 Accrued Income Taxes 180 – Other Accrued Liabilities 565,341 530,472 Total Current Liabilities 719,080 705,485 Total Long-Term Debt 425,686 425,760 Deferred Credits and Other Liabilities: Postretirement Benefits Other Than Pensions 1,559,488 1,531,250 Pneumoconiosis Benefits 417,058 427,264 Mine Closing 357,440 305,152 Workers’ Compensation 138,140 140,318 Deferred Revenue 38,122 50,208 Salary Retirement 70,715 51,957 Reclamation 8,922 5,745 Other 109,648 83,451 Total Deferred Credits and Other Liabilities 2,699,533 2,595,345 Stockholders’ Equity: Common Stock, $.01 par value; 500,000,000 Shares Authorized, 91,681,615 Issued and 91,681,615 Outstanding at June 30, 2005; 91,267,558 Issued and 90,642,939 Outstanding at December 31, 2004. 916 913 Preferred Stock, 15,000,000 Shares Authorized; None Issued and Outstanding – – Capital in Excess of Par Value 866,336 846,644 Retained Earnings (Deficit) (186,600) (277,406) Other Comprehensive Loss (92,923) (89,193) Unearned Compensation on Restricted Stock Units (8,161) (4,883) Common Stock in Treasury, at Cost – 0 Shares at June 30, 2005, 624,619 Shares at December 31, 2004 – (7,054) Total Stockholders’ Equity 579,568 469,021 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $4,423,867 $4,195,611 CONSOL ENERGY INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Dollars in Thousands – except per share data) Other Compre- Capital in Retained hensive Common Excess of Earnings Income Stock Par Value (Deficit) (Loss) Balance – December 31, 2004 $913 $846,644 $(277,406) $(89,193) (Unaudited) Net Income – – 116,286 – Treasury Rate Lock (Net of $26 tax) – – – (40) Gas Cash Flow Hedge (Net of $2,440 tax) – – – (3,690) Comprehensive Income (Loss) – – 116,286 (3,730) Dividend Equivalents on Restricted Stock Units (3,338 units) – 129 – – Issuance of Restricted Stock Under the Equity Incentive Plan (93,508 shares) – 4,211 – – Stock Options Exercised (1,038,407 shares) 3 14,380 – – Stock-Based Compensation from Accelerated Vesting – 735 – – Common Stock Issued (4,946 shares) – 225 – – Amortization of Restricted Stock Unit Grants – – – – Dividends ($.28 per share) – 12 (25,480) – Balance – June 30, 2005 $916 $866,336 $(186,600) $(92,923) CONSOL ENERGY INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Dollars in Thousands – except per share data) Unearned Compen- sation on Total Restricted Stock- Stock Treasury holders’ Units Stock Equity Balance – December 31, 2004 $(4,883) $(7,054) $469,021 (Unaudited) Net Income – – 116,286 Treasury Rate Lock (Net of $26 tax) – – (40) Gas Cash Flow Hedge (Net of $2,440 tax) – – (3,690) Comprehensive Income (Loss) – – 112,556 Dividend Equivalents on Restricted Stock Units (3,338 units) (129) – – Issuance of Restricted Stock Under the Equity Incentive Plan (93,508 shares) (4,211) – – Stock Options Exercised (1,038,407 shares) – 7,054 21,437 Stock-Based Compensation from Accelerated Vesting – – 735 Common Stock Issued (4,946 shares) – – 225 Amortization of Restricted Stock Unit Grants 1,062 – 1,062 Dividends ($.28 per share) – – (25,468) Balance – June 30, 2005 $(8,161) $ – $579,568 PRODUCTION REPORT COAL 2nd Quarter 2nd Quarter (Millions of Tons) 2005 Actual 2004 Actual Northern Appalachia 13.7 13.0 Central Appalachia 2.5 3.5 Other Areas 0.3 0 Total 16.5 16.5 GAS 2nd Quarter 2nd Quarter (Billion Cubic Feet) 2005 Actual 2004 Actual Total (Net) 11.3 12.1 ELECTRICITY 2nd Quarter 2nd Quarter (Megawatt Hours) 2005 Actual 2004 Actual Total 15,150 1,345 Note: All production figures include CONSOL Energy’s portion of production from equity affiliates. SPECIAL INCOME STATEMENT June QTR In Millions Three Months Ended June 30, 2005 COAL Total Total Produced Other Total Gas Other TOTAL Sales $606 $17 $623 $109 $31 $763 Freight Revenue 32 – 32 – – 32 Other Income – 16 16 5 1 22 Total Revenue and Other Income 638 33 671 114 32 817 Cost of Goods Sold 407 65 472 73 40 585 Freight Expense 32 – 32 – – 32 Selling, General & Admin. 16 (1) 15 2 2 19 DD&A 50 5 55 8 4 67 Interest Expense – – – – 7 7 Taxes Other Than Income 34 18 52 3 1 56 Total Cost 539 87 626 86 54 766 Earnings Before Income Taxes $99 $(54) $45 $28 $(22) 51 Income Tax (10) Net Income $41 SPECIAL INCOME STATEMENT June YTD In Millions Year to Date June 30, 2005 COAL Total Total Produced Other Total Gas Other TOTAL Sales $1,216 $38 $1,254 $212 $60 $1,526 Freight Revenue 62 – 62 – – 62 Other Income – 39 39 7 – 46 Total Revenue and Other Income 1,278 77 1,355 219 60 1,634 Cost of Goods Sold 793 145 938 122 77 1,137 Freight Expense 62 – 62 – – 62 Selling, General & Admin. 27 1 28 3 4 35 DD&A 96 10 106 17 7 130 Interest Expense – – – – 14 14 Taxes Other Than Income 71 35 106 6 4 116 Total Cost 1,049 191 1,240 148 106 1,494 Earnings Before Income Taxes $229 $(114) $115 $71 $(46) 140 Income Tax (24) Net Income $116 CONSOL Energy Inc. Financial and Operating Statistics 27-Jul-05 Quarter Ended Jun 30 2005 2004 AS REPORTED FINANCIALS: Revenue ($ MM) $817.149 $674.584 EBIT ($MM) $57.038 $33.302 EBITDA ($ MM) $123.818 $95.027 Net Income / (Loss) ($ MM) $41.074 $26.205 EPS(diluted) $0.44 $0.29 Average shares outstanding – Dilutive 92,584,311 90,964,155 CAPEX, excl. acquisitions ($ MM) $112.693 $100.285 COAL OPERATIONAL: # Mining Complexes (end of period) 22 19 # Complexes Producing (end of period) 18 14 Sales (MM tons)-Produced only 17.006 16.736 Average sales price * ($/ton) $35.49 $29.77 Production income ($/ton) $4.87 $1.91 Production (MM tons)-Produced only 16.495 16.506 Produced Tons Ending inventory (MM tons)**** 1.745 0.987 *note: average sales price of tons produced GAS OPERATIONAL/FINANCIAL(incl. equity companies): 8/8 BASIS GAS sales volumes (Bcf) gross 12.9 13.8 GAS sales price ($/Mcf) net of hedging $5.02 $4.98 GAS revenue net of hedging ($MM)** $64.692 $68.779 7/8 BASIS GAS sales volumes (Bcf) 11.3 12.1 GAS sales price ($/Mcf) net of hedging $4.96 $4.94 GAS revenue net of hedging ($MM)** $55.962 $59.627 GAS EBIT ($MM)** $28.130 $33.222 GAS EBITDA ($MM)** $36.242 $41.383 GAS CAPEX ($ MM)*** $22.547 $19.723 OTHER INVESTING CASH FLOWS ($ MM) $(0.900) $1.093 **note: gas revenue, EBIT, EBITDA, and CAPEX included in total company financials ***note: excludes equity companies ****note: includes equity companies
CONSOL Energy Inc.
CONTACT: Thomas F. Hoffman of CONSOL Energy Inc., +1-412-831-4060
Web site: http://www.consolenergy.com/