Coal Margins Continue to Expand PITTSBURGH, July 27
/PRNewswire-FirstCall/ -- CONSOL Energy Inc. (NYSE:CNX), a high-Btu
bituminous coal and coalbed methane company, reported earnings of
$105.9 million, or $0.57 per diluted share, for its second quarter
ended June 30, 2006, compared with $41.1 million, or $0.22 per
diluted share for the same period a year earlier, an increase of
nearly 160 percent. Net cash from operating activities was $196.6
million for the quarter just ended, compared with $61.8 million for
the June 2005 quarter, an increase of approximately 218 percent.
FINANCIAL RESULTS - Period-To-Period Comparison Quarter Quarter Six
Months Six Months Ended Ended Ended Ended June 30, June 30, June
30, June 30, 2006 2005 2006 2005 Total Revenue and Other Income
$932.3 $817.1 $1,918.2 $1,634.1 Net Income $105.9 $41.1 $230.4
$116.3 Earnings Per Share (Diluted) $0.57 $0.22 $1.24 $0.63 Net
Cash from Operating Activities $196.6 $61.8 $349.1 $157.4 EBITDA
$231.2 $123.8 $490.1 $283.1 EBIT $156.7 $57.0 $343.8 $152.9 Capital
Expenditures $149.3 $112.7 $319.1 $169.6 Other Investing Cash Flows
($1.0) ($38.4) ($35.3) ($16.3) 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; Changes in Restricted Cash and Proceeds from
Sales of Assets. "We are very pleased with the solid second quarter
financial results," said J. Brett Harvey, president and chief
executive officer. Total Revenue and Other Income grew
approximately 14 percent, primarily due to higher realized pricing
for coal and natural gas. Operating margins (average realized price
per ton less operating costs per ton) for CONSOL Energy's coal
operations were nearly $15 per ton during the quarter, an increase
of approximately 15 percent period-to-period, as average coal
prices period-to- period were $2.84 per ton higher. Harvey said he
was particularly pleased with the period-to-period improvement in
realized pricing per ton in conjunction with a reduction in total
cost per ton. "Our stated goal of margin expansion is evident in
this quarter's coal operations results. We were able to realize
nearly $3 per ton more this year versus last year's second quarter
while slightly reducing total cost per ton produced."
Period-To-Period Analysis of Financial Results for the Quarter
Total revenue and other income improved 14.1 percent, primarily
reflecting higher realized pricing for both the coal and gas
segments. During the quarter, the Company recognized $25 million of
business interruption insurance proceeds related to the fire at the
Buchanan Mine in March 2005. Total costs increased 0.5 percent.
Cost of goods sold (including Purchased Gas and Gas Royalty
Interests' Costs) decreased 3.7 percent, primarily reflecting lower
purchased gas costs period-to-period, partially offset by higher
operating costs related to labor, supplies and contract mining fees
and royalties. Depreciation, depletion and amortization increased
11.5 percent, primarily reflecting various coal assets and other
projects placed in service after the 2005 period. Taxes other than
income increased 17.6 percent, primarily due to higher severance
and other taxes attributable to higher sales prices and higher
volumes for the coal and gas segments. As of June 30, 2006, CONSOL
Energy had no short-term debt and had $830 million in total
liquidity, which is comprised of $345 million of cash, an available
accounts receivable securitization facility of $125 million and
$360 million available to be borrowed under its $750 million bank
facility. Coal Operations Quarter Quarter Six Months Six Months
Ended Ended Ended Ended June 30, June 30, June 30, June 30, 2006
2005 2006 2005 Total Coal Sales (millions of tons) 17.5 17.4 35.7
35.1 Sales - Company-Produced (millions of tons) 17.2 17.0 35.0
34.4 Coal Production (millions of tons) 18.0* 16.5 36.2 34.7
Average Realized Price Per Ton - Company-Produced $38.33 $35.49
$39.07 $35.28 Operating Costs Per Ton $23.48 $22.62 $23.82 $22.06
Non-operating Charges Per Ton $4.10 $4.94 $4.17 $4.71 DD&A Per
Ton $2.97 $3.06 $2.90 $2.77 Total Cost Per Ton - Company-Produced
$30.55 $30.62 $30.89 $29.54 Operating Margins Per Ton $14.85 $12.87
$15.25 $13.22 Financial Margins Per Ton $7.78 $4.87 $8.18 $5.74
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. Operating Margins Per Ton are defined as Average
Realized Price Per Ton less Operating Costs Per Ton. Financial
Margins Per Ton are defined as Average Realized Price Per Ton Less
Total Costs Per Ton - Company Produced. *Includes 1.3 million tons
of metallurgical grade coal. Coal segment performance improved in
the quarter-to-quarter comparison, driven by higher realized prices
and higher sales, and was partially offset by higher operating
costs per ton of production. Sales of Company-produced coal
increased 0.2 million tons, period-to- period. Average realized
prices increased $2.84, or 8.0 percent, reflecting higher pricing
for steam and metallurgical coal. Total costs per ton for
Company-produced coal were nearly flat period-to- period and down
2.1 percent from the previous quarter. The Company's total cost per
ton continues to track internal plans. "Cost control is a key
component in our plan to expand margins," Harvey said. "In
addition, we have targeted efficiency projects underway at several
operations that should further mitigate cost pressures." He said he
expected unit cost increases at the Company's large underground
mines in Northern Appalachia to be less than two percent
year-over-year. "Our Central Appalachian average unit costs
increases will be somewhat higher because we have brought on some
high margin, but higher cost production," he said. "In addition, we
have similar labor and geologic challenges to other producers in
the region. However, I still expect our overall unit cost increases
to be modest compared with current industry experience in the
Appalachian Basin." Operating margins (average realized price per
ton less operating costs per ton) were $14.85 per ton, an
improvement of 15.4 percent period-to-period, while financial
margins (average realized price less total costs) were $7.78 per
ton, an increase of 59.8 percent period-to-period. During the
second quarter, the following mines began a vacation period on June
24, 2006 that ended on July 8, 2006: Shoemaker; McElroy;
Blacksville; Loveridge; and Amonate. Gas Operations CNX Gas
Corporation (NYSE:CXG), 81.5 percent of which is owned by CONSOL
Energy, reported net income to CONSOL Energy of $31.1 million for
the quarter ended June 30, 2006. CNX Gas Corporation issued its
earnings release on July 26, 2006. Additional information regarding
CNX Gas Corporation financial and operating results for the quarter
are available in their release and can be found in the investor
section of their website: http://www.cnxgas.com/ Developments
During the Quarter In April, CONSOL Energy idled production at the
Shoemaker Mine near Moundsville, WV. Approximately 170 workers were
part of the workforce reduction out of a total of 319 employees.
The remaining employees will continue to work on the installation
of the new belt haulage system, which is expected to be completed
in early 2009. Also in April, the VP8 mine was placed on long-term
idle as a result of mining all of its currently economical
reserves. The VP8 mine is located near Rowe, VA and is a
metallurgical mine. In May, CONSOL Energy's Board of Directors
approved a two-for-one stock split of the Company's common stock
effected in the form of a stock dividend and distributed on May 31,
2006. In June, CONSOL Energy announced it had signed a new
long-term sales agreement with FirstEnergy Corp. under which CONSOL
Energy will supply a total of more than 128 million tons of
high-Btu coal to FirstEnergy for a twenty- year period beginning in
2009 and running through 2028. The new agreement will replace an
existing coal supply agreement that took effect in January 2003 and
was scheduled to run through 2020. Under the new agreement, CONSOL
Energy will increase its coal shipments by approximately two
million tons per year to provide coal for FirstEnergy's 2410
megawatt Bruce Mansfield Plant in Shippingport, Pennsylvania, and
other power plants. The coal will be shipped from three CONSOL
Energy mines in West Virginia: the McElroy Mine near Moundsville;
the Blacksville #2 Mine near Wana; and the Robinson Run Mine near
Shinnston. On June 27, 2006, Standard & Poor's added CONSOL
Energy to the S&P 500 equity index. Outlook In the tables
below, the Company provides certain financial and production
guidance measures. These measures are based on the Company's
current estimates and are subject to change based on changing
circumstances and on risks associated with the business that are
described at the end of this news release. Production guidance for
2007, 2008, and 2009 has not been revised. The Company revises
production guidance for out-year production annually in January.
GUIDANCE 2006 2007 2008 2009 Estimate Estimate Estimate Estimate
COAL Tons Produced (millions of tons) 69.3 - 71.3 67 - 71 68 - 72
74 - 78 Tons Committed (millions of tons at July 11, 2006) 69.0
53.4 41.5 31.8 Tons Committed and Priced (millions of tons at July
11, 2006) 68.9 51.2 34.8 20.3 Avg. Realized Price/Ton Committed
& Priced $38.68 $38.70 $39.60 $42.30 2006 Quarterly Production
Guidance 1Q Actual 2Q Actual 3Q Estimate 4Q Estimate Coal (millions
of tons) 18.2 18.0 16.1 - 17.1 17.0 - 18.0 The following mines will
take a one-week vacation period during the third quarter ending
September 30, 2006: Bailey and Enlow Fork. The following mines will
take a two-week vacation period during the third quarter: Mine 84;
Robinson Run; and Emery. The long-term supply and demand situation
for coal in the United States is favorable for CONSOL Energy as new
coal-fueled power generation projects continue to be announced and
existing power plants are retrofitted with emission control
technologies. However, because of the mild winter and a slow start
to the summer cooling season in the eastern United States, power
generators have been able to increase their coal inventories closer
to historical levels. This has led to short-term pressure on spot
pricing. However, with recent hot and humid weather in the U.S.,
particularly in the Northeast, there is some evidence to suggest
that inventories at coal-fired power plants are in the early stages
of a reduction. There is only a limited relationship between spot
pricing and CONSOL Energy's long-term contract pricing. Spot prices
in CONSOL Energy's key markets, while volatile, represent a small
portion of total coal sales. Moreover, CONSOL Energy does not
publicly report its contract prices, including production from the
Pittsburgh Seam that accounts for more than 80 percent of the
Company's annual coal production. "Short-term fluctuations in the
coal markets are not expected to affect our long-term strategic
direction," Harvey said. "We have more than 95% of our 2006
production priced and committed." He also noted the Company's
recent announcement of a twenty-year contract with FirstEnergy for
128 million tons of high-Btu coal is the third large-scale
agreement that the Company has signed since the beginning of the
year. "This contract highlights our strategy of providing our power
generation customers with a secure, long-term source of coal as
they complete their scrubber retrofits." Harvey noted that CONSOL
Energy's strong balance sheet, low cost structure, near-term sales
commitment position in coal and strong cash flow enable the Company
to be extremely disciplined in pricing its coal. "We are in a
strong position to manage short-term fluctuations in coal markets
to control the long-term value of our coal," he said. "In the next
few years, we expect to focus on targeted capital efficiency
projects rather than large capacity expansion projects while our
power generation customers complete the installation of scrubbers."
CONSOL Energy continues to monitor scrubber retrofit announcements
by power generators east of the Mississippi River. "Many of the
scrubber retrofits are being accelerated, particularly in CONSOL's
key markets," Harvey said. "There are now more than 82 gigawatts
located east of the Mississippi River of planned capacity scheduled
to be scrubbed by 2012. When all of the retrofits are completed, it
will bring the total scrubbed gigawatts to over 130 gigawatts,
which equates to over 300 million tons of market for high-Btu
coal." CONSOL Energy also has a strategic focus on non-conventional
opportunities for coal. There are currently more than a dozen
coal-to-liquids (CTL) and coal-to-gas (CTG) projects in various
stages of planning. Analysts estimate that it would take 475
million tons of coal per year to replace 10 percent of the liquid
fuel in the U.S. "With the ongoing geopolitical events and the risk
to the energy supply to the United States, interest in CTL and CTG
facilities from the federal government, for both civilian and
military purposes, continues to gain momentum as a way to reduce
exposure to foreign energy sources," Harvey noted. "We can
participate in a meaningful way in future projects because our
large reserve base in several basins positions us well to serve
these new plants." Harvey said that over the longer term, demand
from conventional and non- conventional coal customers is expected
to be robust as scrubbers come online in CONSOL Energy's key
markets, new coal-fired power plants are constructed and CTL and
CTG projects are developed in the U.S. "Beginning in 2008, we can
re-price a substantial portion of our existing capacity to
capitalize on those future opportunities. Moreover, our financial
flexibility and substantial reserve base allows us to expand
capacity as these new markets grow." However, he said the Company
will continue to manage its business to reflect the ebbs and flows
of the market. "While we have the ability to expand production to
meet the needs of a growing market, we have the discipline to
scale-back production plans if short-term market conditions
warrant." Finally, Harvey reported that the Company has repurchased
shares of the Company's common stock under the previously announced
two-year stock repurchase program that commenced in January 2006
and is authorized through December 31, 2007. "Year to date, the
Company has repurchased nearly 2.6 million shares at an average
price of $32.78. We are one-fourth of the way through the
authorized buyback period and we've repurchased more than $83.6
million of the $300 million authorization." CONSOL Energy Inc., a
member of the Standard & Poor's 500 equity index, has annual
revenues of $3.8 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 Inc. EBIT & EBITDA (000) Omitted Quarter Quarter Six
Months Six Months Ended Ended Ended Ended 6/30/06 6/30/05 6/30/06
6/30/05 Net Income $105,934 $41,074 $230,380 $116,286 Add: Interest
Expense 6,253 7,189 12,106 14,113 Less: Interest Income (4,105)
(838) (7,701) (1,585) Add: Income Taxes 48,647 9,613 109,034 24,088
Earnings Before Interest & Taxes(EBIT) 156,729 57,038 343,819
152,902 Add: Depreciation, Depletion & Amortization 74,448
66,780 146,264 130,159 Earnings Before Interest, Taxes and DD&A
(EBITDA) $231,177 $123,818 $490,083 $283,061 For purposes of this
press release, references to "CONSOL Energy," the "Company," "we,"
"our," or "us" or similar words (other than the legal names of
companies) shall include CONSOL Energy Inc. and its respective
subsidiaries. Forward-Looking Statements Various statements in this
release, including those that express a belief, expectation, or
intention, as well as those that are not statements of historical
fact, are forward-looking statements (as defined in Section 21E of
the Securities Exchange Act of 1934). The forward-looking
statements may include projections and estimates concerning the
timing and success of specific projects and our future production,
revenues, income and capital spending. When we use the words
"believe," "intend," "expect," "may," "should," "anticipate,"
"could," "estimate," "plan," "predict," "project," or their
negatives, or other similar expressions, the statements which
include those words are usually forward-looking statements. When we
describe strategy that involves risks or uncertainties, we are
making forward-looking statements. The forward-looking statements
in this release speak only as of the date of this release; we
disclaim any obligation to update these statements unless required
by securities law, and we caution you not to rely on them unduly.
We have based these forward-looking statements on our current
expectations and assumptions about future events. These risks,
uncertainties and contingencies include, but are not limited to,
the following: - the disruption of rail, barge and other systems
that 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, timing of completion of significant construction
or repair of equipment, 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; - an extended decline in prices we receive for our
coal and gas affecting our operating results and cash flows; - a
decrease in the production of our metallurgical coal or a decrease
in the price of metallurgical coal could impact our profitability;
- the inability to produce a sufficient amount of coal to fulfill
our customers' requirements which could result in our customers
initiating claims against us; - replacing our natural gas reserves
which if not replaced will cause our gas reserves and gas
production to decline; - costs associated with perfecting title for
gas rights in some of our properties; - we need to use unproven
technologies to extract coalbed methane on some of our properties;
- location of a vast majority of our gas producing properties in
two counties in southwestern Virginia, making us vulnerable to
risks associated with having our gas production concentrated in one
area; - we do not insure against all potential operating risks; -
other persons could have ownership rights in our advanced gas
extraction techniques which could force us to cease using those
techniques or pay royalties; - 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; - the effects of mine closing,
reclamation and certain other liabilities; - the coalbeds from
which we produce methane gas frequently contain water that may
hamper production; - increased exposure to employee related
long-term liabilities; - our participation in multi-employer
pension plans may expose us to obligations beyond the obligation to
our employees; - 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; -
the anti-takeover effects of our rights plan could prevent a change
of control; and - other factors discussed in our 2005 Form 10-K
under "Risk Factors," which is on file at the Securities and
Exchange Commission. We are including this cautionary statement in
this release 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 us. 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, 2006 2005
2006 2005 Sales - Outside $824,390 $708,591 $1,693,591 $1,436,939
Sales - Gas Royalty Interests 12,686 9,066 28,493 18,742 Sales -
Purchased Gas 9,778 44,975 32,130 69,257 Sales - Related Party -
614 - 614 Freight - Outside 37,689 31,665 74,768 61,789 Other
Income 47,720 22,238 89,169 46,796 Total Revenue and Other Income
932,263 817,149 1,918,151 1,634,137 Cost of Goods Sold and Other
Operating Charges (exclusive of depreciation, depletion and
amortization shown below) 543,906 533,177 1,093,456 1,052,154
Purchased Gas Costs 9,986 45,592 32,751 70,086 Gas Royalty
Interests' Costs 10,267 7,026 23,683 14,463 Freight Expense 37,689
31,665 74,768 61,789 Selling, General and Administrative Expense
21,911 18,797 41,991 35,186 Depreciation, Depletion and
Amortization 74,448 66,780 146,264 130,159 Interest Expense 6,253
7,189 12,106 14,113 Taxes Other Than Income 66,156 56,236 138,156
115,813 Total Costs 770,616 766,462 1,563,175 1,493,763 Earnings
Before Income Taxes and Minority Interest 161,647 50,687 354,976
140,374 Income Taxes 48,647 9,613 109,034 24,088 Earnings Before
Minority Interest 113,000 41,074 245,942 116,286 Minority Interest
(7,066) - (15,562) - Net Income $105,934 $41,074 $230,380 $116,286
Basic Earnings Per Share $0.58 $0.22 $1.25 $0.64 Dilutive Earnings
Per Share $0.57 $0.22 $1.24 $0.63 Weighted Average Number of Common
Share Outstanding: Basic 183,286,425 182,873,976 183,775,190
182,382,952 Dilutive 185,820,234 185,168,622 186,156,863
184,535,874 Dividends Paid Per Share $0.07 $0.07 $0.14 $0.14 CONSOL
ENERGY INC. AND SUBSIDIARIES (Unaudited) CONSOLIDATED STATEMENTS OF
CASH FLOWS (Dollars in thousands) Six Months Ended June 30, 2006
2005 Operating Activities: Net Income $230,380 $116,286 Adjustments
to Reconcile Net Income to Net Cash Provided by Operating
Activities: Depreciation, Depletion and Amortization 146,264
130,159 Stock-based Compensation 6,259 1,797 Gain on the Sale of
Assets (3,112) (10,653) Change in Minority Interest 15,562 -
Amortization of Mineral Leases 3,397 3,661 Deferred Income Taxes
14,677 (772) Equity in Earnings of Affiliates (719) (1,818) Changes
in Operating Assets: Accounts Receivable Securitization - (110,000)
Accounts and Notes Receivable (8,156) (20,077) Inventories (43,097)
(13,757) Prepaid Expenses (4,061) (8,028) Changes in Other Assets
(2,019) 766 Changes in Operating Liabilities: Accounts Payable
(51,097) (16,425) Other Operating Liabilities (12,503) 49,895
Changes in Other Liabilities 51,081 37,630 Other 6,228 (1,216) Net
Cash Provided by Operating Activities 349,084 157,448 Investing
Activities: Capital Expenditures (294,384) (169,562) Acquisition of
Mon River Towing and J.A.R. Barge Lines (24,750) - Additions to
Mineral Leases (4,190) (6,352) Net Investment in Equity Affiliates
103 (6,838) Proceeds from Sales of Assets 39,374 29,471 Net Cash
Used in Investing Activities (283,847) (153,281) Financing
Activities: Payments on Miscellaneous Borrowings (83) (166)
Payments on Revolver - (1,700) Tax Benefit from Stock-Based
Compensation 35,796 - Dividends Paid (25,784) (25,468) Issuance of
Treasury Stock 11,730 21,437 Purchases of Treasury Stock (83,631) -
Stock Options Exercised 1,362 - Issuance of Treasury Stock Net Cash
Used in Financing Activities (60,610) (5,897) Net Increase
(Decrease) in Cash and Cash Equivalents 4,627 (1,730) Cash and Cash
Equivalents at Beginning of Period 340,640 6,422 Cash and Cash
Equivalents at End of Period $345,267 $4,692 CONSOL ENERGY INC. AND
SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in thousands -
except per share data) (Unaudited) JUNE 30, DECEMBER 31, 2006 2005
ASSETS Current Assets: Cash and Cash Equivalents $345,267 $340,640
Accounts and Notes Receivable: Trade 278,066 276,277 Other
Receivables 32,257 23,340 Inventories 184,977 140,976 Deferred
Income Taxes 144,914 152,730 Prepaid Expenses 68,676 64,537 Total
Current Assets 1,054,157 998,500 Property, Plant and Equipment:
Property, Plant and Equipment 7,417,798 7,096,660 Less -
Accumulated Depreciation, Depletion and Amortization 3,691,411
3,561,897 Total Property, Plant and Equipment - Net 3,726,387
3,534,763 Other Assets: Deferred Income Taxes 336,144 367,228
Investment in Affiliates 52,877 52,261 Other 137,373 134,900 Total
Other Assets 526,394 554,389 TOTAL ASSETS $5,306,938 $5,087,652
CONSOL ENERGY INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
(Dollars in thousands - except per share data) (Unaudited) JUNE 30,
DECEMBER 31, 2006 2005 LIABILITIES AND STOCKHOLDERS' EQUITY Current
Liabilities: Accounts Payable $147,596 $197,375 Current Portion of
Long-Term Debt 56,844 4,629 Accrued Income Taxes 24,206 17,557
Other Accrued Liabilities 566,845 584,361 Total Current Liabilities
795,491 803,922 Long-Term Debt: Long-Term Debt 393,652 438,367
Capital Lease Obligations 30,534 - Total Long-Term Debt 424,186
438,367 Deferred Credits and Other Liabilities: Postretirement
Benefits Other Than Pensions 1,597,997 1,592,907 Pneumoconiosis
Benefits 403,908 411,022 Mine Closing 381,674 356,776 Workers'
Compensation 139,171 134,759 Deferred Revenue 19,436 27,343 Salary
Retirement 49,883 33,703 Reclamation 29,376 32,183 Other 129,815
137,870 Total Deferred Credits and Other Liabilities 2,751,260
2,726,563 Minority Interest 116,939 93,444 Total Liabilities and
Minority Interest 4,087,876 4,062,296 Stockholders' Equity: Common
Stock, $.01 par value; 1,000,000,000 Shares Authorized, 185,125,990
Issued and 183,336,487 Outstanding at June 30, 2006; 185,050,824
Issued and Outstanding at December 31, 2005 1,851 1,850 Preferred
Stock, 15,000,000 Shares Authorized; None Issued and Outstanding -
- Capital in Excess of Par Value 905,135 883,316 Retained Earnings
454,907 252,109 Other Comprehensive Loss (84,371) (105,162)
Unearned Compensation on Restricted Stock Units - (6,757) Common
Stock in Treasury, at Cost - 1,789,503 Shares at June 30, 2006 and
- 0 - Shares at December 31, 2005 (58,460) - Total Stockholders'
Equity 1,219,062 1,025,356 TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $5,306,938 $5,087,652 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, 2005 $1,850 $883,316
$252,109 $(105,162) (Unaudited) Net Income - - 230,380 - Treasury
Rate Lock (Net of $27 tax) - - - (41) Minority Interest in Other
Comprehensive Income and Stock-based Compensation of Gas - (1,996)
- (4,734) Gas Cash Flow Hedge (Net of ($16,428) tax) - - - 25,566
Comprehensive Income (Loss) - (1,996) 230,380 20,791 Issuance of
Treasury Stock - (11,643) (1,798) - Purchases of Treasury Stock - -
- - Stock Options Exercised 1 1,361 - - Tax Benefit from
Stock-Based Compensation - 35,796 - - Amortization of Stock-Based
Compensation Awards - 5,058 - - Elimination of Unearned
Compensation on Restricted Stock Units - (6,757) - - Dividends
($.14 per share) - - (25,784) - Balance - June 30, 2006 $1,851
$905,135 $454,907 $(84,371) CONSOL ENERGY INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Dollars in
Thousands - except per share data) Unearned Compen- Total sation on
Stock- Restricted Treasury holders' Stock Units Stock Equity
Balance - December 31, 2005 $(6,757) $- $1,025,356 (Unaudited) Net
Income - - 230,380 Treasury Rate Lock (Net of $27 tax) - - (41)
Minority Interest in Other Comprehensive Income and Stock-based
Compensation of Gas - - (6,730) Gas Cash Flow Hedge (Net of
($16,428) tax) - - 25,566 Comprehensive Income (Loss) - - 249,175
Issuance of Treasury Stock - 25,171 11,730 Purchases of Treasury
Stock - (83,631) (83,631) Stock Options Exercised - - 1,362 Tax
Benefit from Stock-Based Compensation - - 35,796 Amortization of
Stock-Based Compensation Awards - - 5,058 Elimination of Unearned
Compensation on Restricted Stock Units 6,757 - - Dividends ($.14
per share) - - (25,784) Balance - June 30, 2006 $- $(58,460)
$1,219,062 SPECIAL INCOME STATEMENT 2nd Quarter 2006 In Millions
Quarter Ended June 30, 2006 COAL Total Total Produced Other Total
Gas Other TOTAL Sales $661 $18 $679 $102 $52 $833 Gas Royalty
Interests - - - 13 - 13 Freight Revenue 38 - 38 - - 38 Other Income
- 23 23 15 10 48 Total Revenue and Other Income 699 41 740 130 62
932 Cost of Goods Sold 401 53 454 42 58 554 Gas Royalty Interests'
Costs - - - 10 - 10 Freight Expense 38 - 38 - - 38 Selling, General
& Admin. 15 - 15 4 3 22 DD&A 54 7 61 9 4 74 Interest
Expense - - - - 6 6 Taxes Other Than Income 42 17 59 4 3 66 Total
Cost 550 77 627 69 74 770 Earnings Before Income Taxes $149 $(36)
$113 $61 $(12) 162 Income Tax (49) Earnings Before Minority
Interest 113 Minority Interest (7) Net Income $106 SPECIAL INCOME
STATEMENT June 2006 YTD In Millions Year to Date June 30, 2006 COAL
Total Total Produced Other Total Gas Other TOTAL Sales $1,359 $41
$1,400 $227 $99 $1,726 Gas Royalty Interest - - - 28 - 28 Freight
Revenue 75 - 75 - - 75 Other Income - 57 57 19 13 89 Total Revenue
and Other Income 1,434 98 1,532 274 112 1,918 Cost of Goods Sold
829 112 941 82 103 1,126 Gas Royalty Interests' Costs - - 24 - 24
Freight Expense 75 - 75 - - 75 Selling, General & Admin. 28 1
29 7 6 42 DD&A 108 12 120 18 8 146 Interest Expense - - - - 12
12 Taxes Other Than Income 86 38 124 8 6 138 Total Cost 1,126 163
1,289 139 135 1,563 Earnings Before Income Taxes $308 $(65) $243
$135 $(23) 355 Income Tax (109) Earnings Before Minority Interest
246 Minority Interest (16) Net Income $230 CONSOL Energy Inc.
Financial and Operating Statistics Quarter Ended June 30, 2006 2005
AS REPORTED FINANCIALS: Revenue ($ MM) $932.263 $817.149 EBIT ($MM)
$156.729 $57.038 EBITDA ($ MM) $231.177 $123.818 Net Income /
(Loss) ($ MM) $105.934 $41.074 EPS(diluted) $0.57 $0.22 Average
shares outstanding - Dilutive 185,820,234 185,168,622 CAPEX ($ MM)
$149.282 $112.693 COAL OPERATIONAL: # Complexes Producing (end of
period) 14 18 Sales (MM tons)-Produced only 17.221 17.005 Average
sales price* ($/ton) $38.33 $35.49 Production income ($/ton) $7.78
$4.87 Production (MM tons)-Produced only 17.964 16.495 Produced
Tons Ending inventory (MM tons)** 2.813 1.745 * note: average sales
price of tons produced ** note: includes equity companies
PRODUCTION REPORT COAL 2nd Quarter 2nd Quarter (Millions of Tons)
2006 Actual 2005 Actual Northern Appalachia 14.4 13.7 Central
Appalachia 3.2 2.5 Other Areas 0.3 0.3 Total 18.0 16.5 * Numbers
may not add due to rounding DATASOURCE: CONSOL Energy Inc. CONTACT:
Thomas F. Hoffman, +1-412-831-4060, or Charles E. Mazur, Jr.,
+1-412-831-4340, both of CONSOL Energy Web site:
http://www.consolenergy.com/ http://www.cnxgas.com/
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