Third Quarter Highlights - Net Income totaled $16.5 million or
$0.19 per share - EBITDA totaled $112.1 million - Cash and
restricted cash increased by $102.4 million RICHMOND, Va., Oct. 27
/PRNewswire-FirstCall/ -- Massey Energy Company (NYSE:MEE) today
reported net income of $16.5 million or $0.19 per share and EBITDA
of $112.1 million for the quarter ended September 30, 2009. Massey
also reported continuing strong cash generation as cash and
restricted cash increased by $102.4 million. Produced coal revenue
for the quarter was $535.5 million. These results compared to net
income of $51.6 million or $0.61 per share, EBITDA of $158.7
million and produced coal revenue of $666.4 million in the third
quarter of 2008. (Logo:
http://www.newscom.com/cgi-bin/prnh/20071031/MASSEYENERGYLOGO )
Commenting on the Company's third quarter results, Massey's
Chairman and Chief Executive Officer Don Blankenship said, "We are
pleased to have increased our cash balance by over $100 million
during the quarter, even though it was partially offset by the
deposit of a $72 million appeal bond related to the Harman
litigation. We achieved the strong cash generation amid difficult
conditions in the global coal markets and in spite of operating
challenges resulting from a fire that destroyed a key preparation
plant in August." "We also continued to add to our dominant Central
Appalachia reserve base and related competitive advantages during
the quarter," Blankenship added. "We already have approximately 12
million tons of annual met coal production capacity in place and
our recent acquisition of the Alloy assets from Appalachian Fuels
gives us yet another opportunity to expand met coal production in
the near term. In addition, our reserve exchange with Foundation
Coal for the Laurel Creek property will provide longer term
benefits such as expanded mining infrastructure and increased
consolidation of the region's coal reserves." The Bandmill
preparation plant was destroyed by fire on August 27, 2009. This
incident impacted the operations at the Logan County resource group
and, to a lesser extent, the Company as a whole during the quarter.
Total shipments lost during September as a result of the Bandmill
fire are estimated at 0.3 million tons of coal. The Laurel Creek
reserve and asset exchange, which occurred in July 2009, resulted
in a $24.9 million non-cash gain which was recognized in the third
quarter and was included in other income. Massey's third quarter
operating cash margin per ton was $11.98. Though a strong result,
this was down from the near-record high operating cash margin per
ton of $16.10 reported in the third quarter of 2008. The decline
was driven by a 4 percent decrease in average realized prices on
coal shipped and an increase in cash cost per ton of approximately
3 percent as compared to the third quarter of 2008. Average
realized prices were impacted most significantly by product mix as
utility coal shipments comprised 70 percent of the total tons
shipped in the third quarter of 2009 compared to 65 percent in the
third quarter of 2008 while higher priced metallurgical coal tons
comprised 22 percent of total tons in the third quarter of 2009
compared to more than 24 percent in the third quarter of 2008. The
impact of the weaker mix was only partially offset by price
increases of 4 percent and 5 percent for utility coal and
industrial coal, respectively. The average realized price for
metallurgical coal shipped in the third quarter of 2009 declined by
13 percent as compared to the same period in 2008. Average cash
cost per ton (see note 7 below for more information on a change in
the calculation of average cash cost per ton) for the third quarter
of 2009 was $49.81 compared to $48.49 in the third quarter of 2008.
The increase was largely the result of higher fixed cost absorption
on lower volume shipped. 3rd Quarter Comparative Statistics
---------------------------------- 3rd Qtr. 2nd Qtr. 3rd Qtr. 2009
2009 2008 ---- ---- ---- Produced tons sold (millions) 8.7 9.4 10.3
Produced coal revenue ($millions) $535.5 $603.2 $666.4 Produced
coal revenue per ton $61.79 $64.14 $64.59 Average cash cost per ton
(see note 7) $49.81 $51.53 $48.49 EBITDA ($millions) $112.1 $116.3
$158.7 For the first nine months of 2009, Massey generated produced
coal revenue of $1.82 billion and recorded net income of $80.1
million or $0.94 per share. This compared to produced coal revenue
of $1.92 billion and net income of $0.2 million in the first nine
months of 2008. EBITDA was $373.8 million in the first nine months
of 2009 compared to EBITDA of $241.7 million in the first nine
months of 2008. First Nine Months Comparative Statistics
---------------------------------------- 2009 2008 ---- ----
Produced tons sold (millions) 28.9 30.8 Produced coal revenue
($millions) $1,819.8 $1,920.0 Produced coal revenue per ton $63.02
$62.43 Average cash cost per ton (see note 7) $50.64 $46.11 EBITDA
($millions) $373.8 $241.7 Reconciliations for non-GAAP measures are
provided in attached notes to financial statements. Coal Market
Overview The continuing global economic weakness has resulted in
continuing weakness and uncertainty in world coal markets. Coal
contracting and shipment activities remained slow and coal
stockpiles increased during the third quarter of 2009 as total
electric power generation declined and switching to natural gas
fired generation continued. -- Coal burn at utilities in the
Southeastern United States was down 18 percent in the first eight
months of 2009 compared to the same period a year ago according to
industry estimates. It is also estimated that the burn of Central
Appalachia coal was down 22 percent in the first eight months of
the year. These declines are due in part to lower overall electric
power demand and increased use of natural gas for power generation
purposes. -- Receipts of coal at Southeastern utilities were
estimated to be down 7 percent in the first eight months of 2009.
Coal stockpiles in terms of tons increased by approximately 69
percent in the region since the end of August 2008. Receipts of
Central Appalachia coal were estimated to have declined by 7
percent during the first eight months of the year as compared to
the same period a year ago. -- The Energy Information
Administration (EIA) projects that lower electric power sector coal
consumption will continue for the remainder of 2009 with the total
annual decline projected at more than 9 percent due to lower
overall electric power demand and an increase in generation fueled
by natural gas. -- Steam coal export volumes by U.S. producers
decreased 35 percent in the first eight months of 2009 compared to
the first eight months of 2008. Metallurgical coal exports declined
24 percent in the same period. The EIA forecasts that steam coal
exports will decline by about 38 percent for the full year and met
coal exports will decline by 22 percent as the weak global economy
drives lower demand in international markets. -- According to the
World Steel Association, global crude steel output declined 18
percent in the first eight months of 2009 as compared to the same
period in 2008. US steel production was down 49 percent in the
first eight months of 2009 compared to the first eight months of
2008. -- The EIA expects the coal industry to respond to the weak
market conditions by reducing production by about 8 percent in
2009. According to EIA estimates, total U.S. coal production was
down about 6 percent in the first nine months of 2009. Production
in Central Appalachia was down about 11 percent in the same period.
While market conditions remained weak in the first three quarters
of the year and high stockpile and inventory levels in both thermal
and metallurgical coal point to further weakness, there have been
some positive indicators in the industry recently that may signal
some market improvement: -- Crude steel production in China was up
22 percent in the month of August compared to the same month in
2008. For the first eight months of the year China's crude steel
production was up 5 percent compared to the same period a year ago.
-- Over 40 previously idled blast furnaces world wide representing
over 60 million tons of annual production capacity have been
restarted since June or are planned to be restarted by year end. --
Natural gas prices have rebounded by nearly 60 percent since
September 1, 2009 (September 1 through October 15) which we believe
will increase the competitiveness of coal as the fuel of choice for
electric power generation. Massey continues to believe that the
quality of Central Appalachia coal allows it to enjoy significant
market diversity and its relative proximity to sea ports makes it a
viable source of coal to fill the growing demand for energy
throughout most of the world. Massey believes that as coal demand
strengthens in Asia, more Australian produced coal will be sold
into that region, resulting in increased opportunities for Massey
to export coal to customers throughout the Atlantic basin. Safety
Massey remains on track for another record year in terms of safety.
Through the first nine months of 2009, Massey reported a non-fatal
days lost (NFDL) incident rate of 1.72. The Company's previous best
rate for a full year was 1.93, achieved in 2008. By comparison, the
bituminous coal industry average NFDL rate was 2.95 in 2008.
Liquidity and Capital Resources Massey ended the third quarter of
2009 with $640.0 million in Cash and cash equivalents. This
compared to $607.0 million at December 31, 2008. In addition, the
Company had $15.1 million invested in the Reserve Primary Fund at
the quarter's end, which is classified as a short-term investment
as the availability of these funds remains subject to the
liquidation of the underlying assets of the Fund. The Company had
$74.4 million available under its asset-based revolving credit
facility at September 30, 2009. During the third quarter of 2009
Massey was required to post an appeal bond in the amount of $72
million in cash in relation to the Harman litigation which is being
considered by the West Virginia State Supreme Court. The posted
cash will be returned to the Company should the Court once again
rule in Massey's favor. The Court has not provided a specific
timeframe for rendering a decision on the case. Total debt at
September 30, 2009 was $1,324.3 million compared to $1,312.2
million at December 31, 2008. Massey's total debt-to-book
capitalization ratio was 52.2 percent at September 30, 2009
compared to 53.8 percent at December 31, 2008. After deducting
available cash and short-term investments of $655.1 million and
restricted cash of $118.0 million, net debt totaled $551.2 million.
Total net debt-to-book capitalization was 31.3 percent at September
30, 2009 compared to 35.5 percent at December 31, 2008. (December
31, 2008 amounts have been adjusted to conform with accounting
guidance related to the Company's 3.25% convertible notes,
effective January 1, 2009. See Note 8 to the attached financial
statements.) Capital expenditures for the third quarter 2009
totaled $43.8 million compared to $230.3 million in the third
quarter 2008. For the full year 2009 Massey currently expects CAPEX
of approximately $275 million. Depreciation, depletion and
amortization (DD&A) was $66.3 million in the third quarter 2009
compared to $65.2 million in the third quarter of 2008. Massey
expects DD&A to be in the range of $275 million to $280 million
for the full year 2009. Guidance Update The Company now expects
full year 2009 produced coal shipments to be between 37.5 and 38.5
million tons, with average produced coal realization between $63.00
and $63.50 per ton. Average cash cost per ton for the full year
2009 is expected to be between $50.50 and $51.00. Other income is
expected to be between $80 and $100 million. For 2010, Massey
continues to project produced coal shipments in the range of 37.0
to 41.0 million tons; however, the Company has increased expected
average sales price range to $64.00 to $67.00 per ton due to its
current contracted position. Massey has approximately 39 million
tons committed for 2010. Of the committed tons, 33 million tons
have been priced (average price of approximately $63 per ton). Of
the committed tons that remain unpriced, approximately two thirds
are metallurgical coal. Massey expects cash costs for 2010 to be in
the range of $48.00 to $51.00 per ton. Expectations for capital
expenditures in 2010 remain in the range of $100 to $200 million,
excluding the cost of rebuilding the Bandmill plant, which Massey
expects to be funded primarily by insurance proceeds. With results
in these ranges, the Company believes it would be significantly
cash positive for the year. Continuing economic volatility and
uncertainty make long-term forecasting difficult. Considering this
challenge, the Company has developed initial broad ranges of
guidance for 2011. Massey presently expects produced coal shipments
for 2011 in the range of 37.0 to 44.0 million tons, with average
produced coal realization between $64.00 and $71.50 per ton.
Average cash cost in 2011 is expected in the range of $46.00 to
$52.00 per ton. The Company expects capital expenditures in 2011 to
be approximately $150 to $225 million. Company issued guidance is
summarized below: (In millions except per ton amounts) 2009 2010
2011 Produced Coal Shipped Tons 37.5 to 38.5 37.0 to 41.0 37.0 to
44.0 Average Price/Ton $63.00 to $63.50 $64.00 to $67.00 $64.00 to
$71.50 Average Cash Cost/Ton $50.50 to $51.00 $48.00 to $51.00
$46.00 to $52.00 CAPEX (approx) $275 $100 to $200 $150 to $225
Other Income $80 to $100 $50 to $100 $20 to $100 Conference Call,
Webcast and Replay Members of the Company's senior management will
hold a conference call to discuss the second quarter results and
operations on Wednesday, October 28 at 11:00 a.m. EDT. The call can
be accessed via the Massey Energy Company website at
http://www.masseyenergyco.com/. A replay of the call will be
available at the same site through November 28, 2009. Company
Description Massey Energy Company, headquartered in Richmond,
Virginia, with operations in West Virginia, Kentucky and Virginia,
is the largest coal company in Central Appalachia and is included
the S&P 500 index. FORWARD-LOOKING STATEMENTS: Certain
statements in this press release constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended, and are intended to come within the safe
harbor protection provided by those sections. Any forward-looking
statements are also subject to a number of assumptions regarding,
among other things, future economic, competitive and market
conditions. These assumptions are based on facts and conditions as
they exist at the time such statements are made as well as
predictions as to future facts and conditions, the accurate
prediction of which may be difficult and involve the assessment of
circumstances or events beyond the Company's control. The Company
disclaims any intent or obligation to update these forward-looking
statements unless required by securities law, and the Company
cautions the reader to not rely on them unduly. Caution must be
exercised in relying on forward-looking statements including
disclosures that use words such as "believe," "anticipate,"
"expect," "estimate," "intend," "may," "plan," "project," "will,"
and similar words or statements that are subject to risks, trends
and uncertainties that could cause the Company's actual results to
differ materially from the expectations expressed or implied in
such forward-looking statements. Factors potentially contributing
to such differences include, among others: the Company's cash
flows, results of operation or financial condition; worldwide
market demand for coal, electricity and steel; the successful
completion of acquisition, disposition or financing transactions;
future economic or capital market conditions; foreign currency
fluctuations; governmental policies, laws, regulatory actions and
court decisions affecting the coal industry or our customers' coal
usage; competition among coal producers in the United States and
internationally; inherent risks of coal mining beyond the Company's
control, including weather and geologic conditions or catastrophic
weather-related damage; the Company's ability to expand mining
capacity; the Company's production capabilities to meet market
expectations and customer requirements; the Company's ability to
obtain coal from brokerage sources or contract miners in accordance
with their contracts; the successful implementation of the
Company's strategic plans and objectives for future operations and
expansion or consolidation; the Company's assumptions and
projections concerning economically recoverable coal reserve
estimates; the Company's assumptions and projections regarding
pension and other post-retirement benefit liabilities; the
Company's interpretation and application of accounting literature
related to mining specific issues; failure to receive anticipated
new contracts; the Company's reliance upon and relationships with
our customers and suppliers; the creditworthiness of the Company's
customers and suppliers; adjustments made in price, volume or terms
to existing coal supply agreements; the Company's ability to manage
production costs, including labor costs; the Company's ability to
timely obtain necessary supplies and equipment; the Company's
ability to obtain and renew permits necessary for existing and
planned operations; the availability and cost of credit, surety
bonds, and letters of credit that the Company requires; the
Company's ability to attract, train and retain a skilled workforce
to meet replacement or expansion needs; the cost and availability
of transportation for the Company's produced coal; legal and
administrative proceedings, settlements, investigations and claims
and the availability of insurance coverage related thereto; the
lack of insurance coverage against all potential operating risk;
and environmental concerns related to coal mining and combustion
and the cost and perceived benefits of alternative sources of
energy such as natural gas and nuclear energy. Additional
information concerning these and other factors can be found in
press releases and Massey's public filings with the Securities and
Exchange Commission, including Massey's Annual Report on Form 10-K
for the year ended December 31, 2008, which was filed on March 2,
2009, and subsequently filed interim reports. Massey's filings are
available either publicly, on the Investor Relations page of
Massey's website, http://www.masseyenergyco.com/, or upon request
from Massey's Investor Relations Department: (866) 814-6512 (toll
free). For further information, please visit Massey's website at
http://www.masseyenergyco.com/. MASSEY ENERGY COMPANY CONSOLIDATED
FINANCIAL RESULTS - UNAUDITED (in Millions, except # of employees,
per share & per ton information) Three Months Ended Nine Months
Ended September 30, September 30, ----------------------
------------------ 2009 2008 2009 2008 ------- ---------- -----
---------- As As Adjusted(2) Adjusted(2) ------- ---------- -----
---------- Revenues Produced coal revenue $535.5 $666.4 $1,819.8
$1,920.0 Freight and handling revenue 52.5 81.1 171.3 229.6
Purchased coal revenue 14.6 4.5 43.7 22.0 Other revenue 39.0 11.3
72.5 63.2 ---- ---- ---- ---- Total revenues 641.6 763.3 2,107.3
2,234.8 Costs and expenses Cost of produced coal revenue 431.7
500.4 1,462.2 1,418.3 Freight and handling costs 52.5 81.1 171.3
229.6 Cost of purchased coal revenue 18.4 4.3 39.1 19.8
Depreciation, depletion and amortization applicable to: Cost of
produced coal revenue 66.1 64.4 204.5 185.2 Selling, general and
administrative 0.2 0.8 2.1 2.6 Selling, general and administrative
21.5 2.8 63.4 62.8 Other expense 0.6 1.1 2.0 2.4 Litigation charge
- 5.8 - 251.1 Loss on refinancing - 9.1 - 9.1 Loss (gain) on
derivative instruments 4.8 - (4.5) - --- - ---- - Total costs and
expenses 595.8 669.8 1,940.1 2,180.9 ---- ---- ----- ---- Income
before interest and taxes 45.8 93.5 167.2 53.9 Interest income 0.6
4.7 12.3 13.5 Interest expense(1), (2) (25.5) (29.8) (76.2) (71.6)
Loss on short-term investment - (6.5) - (6.5) - ---- --- ----
Income (loss) before taxes 20.9 61.9 103.3 (10.7) Income tax
(expense) benefit(2) (4.4) (10.3) (23.2) 10.9 ---- ----- ----- ----
Net income $16.5 $51.6 $80.1 $0.2 ===== ===== ===== ==== Net income
per share Basic $0.19 $0.62 $0.94 $0.00 ===== ===== ===== =====
Diluted $0.19 $0.61 $0.94 $0.00 ===== ===== ===== ===== Shares used
to calculate net income per share Basic 84.9 82.6 84.9 80.9 ====
==== ==== ==== Diluted 85.7 84.0 85.4 82.1 ==== ==== ==== ==== EBIT
$45.8 $93.5 $167.2 $53.9 EBITDA $112.1 $158.7 $373.8 $241.7 (1)
Interest expense for the three and nine months ended September 30,
2009 includes non-cash interest expense in accordance with new
accounting guidance related to our 3.25% convertible senior notes
due 2015 ("3.25% Notes"), effective January 1, 2009. See Note 8
below. (2) Amounts for the three and nine months ended September
30, 2008 have been adjusted in accordance with new accounting
guidance related to our 3.25% Notes, effective January 1, 2009. See
Note 8 below. Three Months Nine Months Ended Ended September
September 30, 30, ------------- ------------ 2009 2008 2009 2008
---- ---- ---- ---- Produced tons sold: ------------------- Utility
6.1 6.7 21.4 19.9 Metallurgical 1.9 2.5 5.5 7.8 Industrial 0.7 1.1
2.0 3.1 --- --- --- --- Total produced tons sold 8.7 10.3 28.9 30.8
=== ==== ==== ==== Total tons produced 8.8 10.4 29.6 30.9 Produced
coal revenue per ton sold ------------------------- Utility $53.84
$51.90 $53.74 $49.07 Metallurgical $84.58 $97.47 $97.60 $97.25
Industrial $69.26 $65.89 $68.25 $60.41 Produced coal revenue per
ton sold $61.79 $64.59 $63.02 $62.43 Average cash cost per ton
$49.81 $48.49 $50.64 $46.11 Capital expenditures $43.8 $230.3
$223.0 $532.0 Number of employees (at period end) 5,675 6,196 5,675
6,196 September 30, December 31, 2009 2008 ---- ---- As Adjusted(1)
----------- ASSETS Cash and cash equivalents $640.0 $607.0
Short-term investment 15.1 39.4 Trade and other accounts receivable
197.4 233.2 Inventories 229.8 233.2 Income tax receivable - 6.6
Other current assets 193.8 116.1 Net property, plant and equipment
2,339.6 2,297.7 Other noncurrent assets(1) 135.4 139.2 ----- -----
Total assets $3,751.1 $3,672.4 ======== ======== LIABILITIES AND
STOCKHOLDERS' EQUITY Short-term debt $1.6 $2.0 Accounts payable,
principally trade and bank overdrafts 168.7 244.2 Payroll and
employee benefits 63.8 57.0 Income taxes payable 1.5 - Other
current liabilities 192.8 201.0 Long-term debt(1) 1,322.7 1,310.2
Deferred taxes(1) 189.3 177.3 Pension obligations 66.2 63.3 Other
noncurrent liabilities 533.2 490.8 ----- ----- Total liabilities
2,539.8 2,545.8 Total stockholders' equity(1) 1,211.3 1,126.6
------- ------- Total liabilities and stockholders' equity $3,751.1
$3,672.4 ======== ======== (1) Amounts at December 31, 2008 have
been adjusted in accordance with new accounting guidance related to
our 3.25% Notes, effective January 1, 2009. See Note 8 below. Note
1: The number of shares used to calculate basic net income per
share is based on the weighted average outstanding shares of Massey
during the respective periods. The number of shares used to
calculate diluted net income per share is based on the number of
shares used to calculate basic net income per share plus the
dilutive effect of stock options and other stock-based instruments
held by our employees and directors each period and debt securities
convertible into common stock. In accordance with accounting
principles generally accepted in the United States, the effect of
certain dilutive securities was excluded from the calculation of
the diluted net income per share in the three and nine months ended
September 30, 2009 and 2008, as such inclusion would result in
antidilution. Note 2: Litigation charge shown in Costs and expenses
for the three and nine months ended September 30, 2008, relates to
an accrual initially recorded in the second quarter of 2008 in the
amount of $245.3 million (pretax) for a specific legal action. An
additional charge of $5.8 million (pretax) for interest was
recorded in the third quarter of 2008. On May 22, 2008, the West
Virginia Supreme Court of Appeals ("WV Supreme Court") decided not
to hear an appeal of the verdicts against us or our subsidiary
Central West Virginia Energy Company that awarded damages in favor
of Wheeling-Pittsburgh Steel Corporation ("Wheeling-Pittsburgh")
and Mountain State Carbon, LLC in the amount of $219.9 million,
comprised of $119.9 million compensatory and $100 million punitive
damages (plus an additional $24 million of pre-judgment interest).
On December 2, 2008, a payment of $267.4 million was made to
Wheeling-Pittsburgh for final settlement of the judgment, which
included $50 million of cash previously used to support an appeal
bond for this matter. Note 3: Loss on refinancing shown in Costs
and expenses for the three and nine months ended September 30,
2008, relates to the fees incurred for the consent solicitation and
tender offer for any and all of our 6.625% senior notes due 2010
("6.625% Notes"). In the third quarter of 2008, we purchased $313.1
million of the $335 million outstanding of 6.625% Notes, which were
tendered pursuant to our consent solicitation and tender offer.
Note 4: Loss (gain) on derivative instruments shown in Costs and
expenses for the three and nine months ended September 30, 2009,
represents the net loss (gain) for certain coal contracts deemed
derivative instruments. Contracts that qualify as derivatives are
recognized at fair value and changes to their value are recognized
as gains or losses in the current period earnings. Note 5: Loss on
short-term investment reflects an impairment of our investment in
the Reserve Primary Fund money market fund (a money market fund
that suspended redemptions during September 2008 and is being
liquidated). During the third quarter of 2008, we recorded a loss
of $6.5 million, which represented the difference between cost and
estimated fair value. At September 30, 2009, the estimated fair
value of our investment in the Reserve Primary Fund was $15.1
million. Note 6: "EBIT" is defined as Income before interest and
taxes. "EBITDA" is defined as Income before interest and taxes
before deducting Depreciation, depletion, and amortization
("DD&A"). Although neither EBIT nor EBITDA are measures of
performance calculated in conformity with accounting principles
generally accepted in the United States ("GAAP"), we believe that
both measures are useful to an investor in evaluating us because
they are widely used in the coal industry as measures to evaluate a
company's operating performance before debt expense and as a
measure of its cash flow. Neither EBIT nor EBITDA purport to
represent operating income, net income or cash generated by
operating activities and should not be considered in isolation or
as a substitute for measures of performance calculated in
accordance with GAAP. In addition, because neither EBIT nor EBITDA
are calculated identically by all companies, the presentation here
may not be comparable to other similarly titled measures of other
companies. The table below reconciles the GAAP measure of Net
income to EBIT and to EBITDA. Three Months Nine Months Ended Ended
September 30, September 30, ---------------- -------------- 2009
2008 2009 2008 ---- ---- ---- ---- Net income $16.5 $51.6 $80.1
$0.2 Plus: Income tax expense (benefit) 4.4 10.3 23.2 (10.9) Plus:
Net interest expense and loss on short-term investment 24.9 31.6
63.9 64.6 ---- ---- ---- ---- EBIT 45.8 93.5 167.2 53.9 Plus:
Depreciation, depletion and amortization 66.3 65.2 206.6 187.8 ----
---- ----- ----- EBITDA $112.1 $158.7 $373.8 $241.7 ====== ======
====== ====== Three Months Ended June 30, -------------- 2009 ----
Net income $20.2 Plus: Income tax expense 5.9 Plus: Net interest
expense 22.6 ---- EBIT 48.7 Plus: Depreciation, depletion and
amortization 67.6 ---- EBITDA $116.3 ====== Note 7: "Average cash
cost per ton" is calculated as Cost of produced coal revenue
(excluding Selling, general and administrative expense ("SG&A")
and DD&A), divided by the number of produced tons sold. In
order to conform more closely to common industry reporting
practices, we have changed our calculation of cash cost to exclude
SG&A expense. This change has been reflected in the
presentation of data for both the current and comparative past
reporting periods in this release. Although Average cash cost per
ton is not a measure of performance calculated in accordance with
GAAP, we believe that it is useful to investors in evaluating us
because it is widely used in the coal industry as a measure to
evaluate a company's control over its cash costs. Average cash cost
per ton should not be considered in isolation or as a substitute
for measures of performance in accordance with GAAP. In addition,
because Average cash cost per ton is not calculated identically by
all companies, the presentation here may not be comparable to other
similarly titled measures of other companies. The table below
reconciles the GAAP measure of Total costs and expenses to Average
cash cost per ton. Three Months Ended September 30,
-------------------------------- 2009 2008 ---- ---- $ Per Ton $
Per Ton - ------- - ------- Total costs and expenses $595.8 $669.8
Less: Freight and handling costs 52.5 81.1 Less: Cost of purchased
coal revenue 18.4 4.3 Less: Depreciation, depletion and
amortization 66.3 65.2 Less: Selling, general and administrative
21.5 2.8 Less: Other expense 0.6 1.1 Less: Litigation charge - 5.8
Less: Loss on refinancing - 9.1 Less: Loss (gain) on derivative
instruments 4.8 - --- --- Average cash cost $431.7 $49.81 $500.4
$48.49 ====== ====== Nine Months Ended September 30,
------------------------------- 2009 2008 ---- ---- $ Per Ton $ Per
Ton - ------- - ------- Total costs and expenses $1,940.1 $2,180.9
Less: Freight and handling costs 171.3 229.6 Less: Cost of
purchased coal revenue 39.1 19.8 Less: Depreciation, depletion and
amortization 206.6 187.8 Less: Selling, general and administrative
63.4 62.8 Less: Other expense 2.0 2.4 Less: Litigation charge -
251.1 Less: Loss on refinancing - 9.1 Less: Loss (gain) on
derivative instruments (4.5) - ---- --- Average cash cost $1,462.2
$50.64 $1,418.3 $46.11 ======== ======== Three Months Ended June
30, ------------ 2009 ------------ $ Per Ton - ---- Total costs and
expenses $648.9 Less: Freight and handling costs 60.9 Less: Cost of
purchased coal revenue 15.5 Less: Depreciation, depletion and
amortization 67.6 Less: Selling, general and administrative 20.0
Less: Other expense 0.7 Less: Gain on derivative instruments (0.4)
---- Average cash cost $484.6 $51.53 ====== Note 8: On January 1,
2009, new accounting guidance became effective relating to our
3.25% Notes. The guidance requires that issuers of convertible debt
instruments that may be settled in cash upon conversion, including
partial cash settlement, should separately account for the
liability and equity components in a manner that reflects the
company's nonconvertible debt borrowing rate when interest cost is
recognized in subsequent periods. Upon adoption, the provisions
were retroactively applied, as required. This resulted in $4.8
million and $13.9 million of additional non-cash interest expense
recorded for the three and nine months ended September 30, 2009,
respectively, and $2.9 million of additional non-cash interest
expense recorded for both the three and nine months ended September
30, 2008. The discount associated with our 3.25% Notes will be
amortized via the effective-interest method until the notes are
carried at par value on their maturity date. Our debt is comprised
of the following: September December 30, 31, 2009 2008 ---- ---- As
Adjusted --------- 6.875% senior notes due 2013, net of discount
$756.6 $756.0 3.25% convertible senior notes due 2015, net of
discount 531.5 517.6 6.625% senior notes due 2010 21.9 21.9 2.25%
convertible senior notes due 2024 9.6 9.6 4.75% convertible senior
notes due 2023 - 0.1 Capital lease obligations 4.7 7.0 --- ---
Total debt 1,324.3 1,312.2 Less: Short-term debt 1.6 2.0 --- ---
Total long-term debt $1,322.7 $1,310.2 ======== ======== The
adoption also impacted the historical accounting for our 3.25%
Notes which resulted in the restatement of the Company's Condensed
Consolidated Income Statement for the three and nine months ended
September 30, 2008 and the Condensed Consolidated Balance Sheet as
of December 31, 2008, as follows: Three months ended Nine months
ended September 30, September 30, 2008 2008 2008 2008 As As
Condensed Consolidated Originally As Originally As Income Statement
Presented Adjusted Presented Adjusted Interest expense $26.9 $$29.8
$68.7 $71.6 Income (loss) before taxes 64.8 61.9 (7.8) (10.7)
Income tax (expense) benefit (10.8) (10.3) 10.4 10.9 Net income
54.0 51.6 2.6 0.2 Net income per share Basic $0.65 $0.62 $0.03
$0.00 Diluted $0.64 $0.61 $0.03 $0.00 December 31, December 31,
2008 2008 As Originally Condensed Consolidated Presented As
Adjusted Balance Sheet Other noncurrent assets $142.6 $139.2 Total
assets 3,675.8 3,672.4 Long-term debt 1,463.6 1,310.2 Deferred
taxes 117.3 177.3 Total liabilities 2,639.2 2,545.8 Total
shareholders' equity 1,036.6 1,126.6 Total liabilities and
shareholders' equity 3,675.8 3,672.4 Note 9: "Net debt" is
calculated as the sum of Short-term debt and Long-term debt less
Cash and cash equivalents, Short-term investment and Restricted
cash (included in Other current assets). Although Net debt is not a
measure of performance calculated in accordance with GAAP,
management believes that it is useful to an investor in evaluating
Massey because it provides a clearer comparison of our debt
position from period to period. Net debt should not be considered
in isolation or as a substitute for measures of performance in
accordance with GAAP. The table below reconciles the GAAP measure
of Long-term debt to Net debt. We adjusted the December 31, 2008
amounts in accordance with new accounting guidance related to our
3.25% Notes, effective January 1, 2009 (see Note 8). September 30,
December 31, 2009 2008 ---- ---- As Adjusted -------- -----------
Long-term debt $1,322.7 $1,310.2 Plus: Short-term debt 1.6 2.0
Less: Cash and cash equivalents 640.0 607.0 Less: Short-term
investment 15.1 39.4 Less: Restricted cash 118.0 46.0 ----- ----
Net debt $551.2 $619.8 ====== ====== Note 10: The "Total
debt-to-book capitalization" ratio is calculated as the sum of
Short-term debt and Long-term debt divided by the sum of Short-term
debt, Long-term debt and Total shareholders' equity. The "Total net
debt-to-book capitalization" ratio is calculated as the sum of Net
debt (calculated in Note 9) divided by the sum of Net debt and
Total shareholders' equity. The tables below calculate the Total
debt-to-book capitalization and Total net debt-to-book
capitalization ratios. We adjusted the December 31, 2008 amounts in
accordance with new accounting guidance related to our 3.25% Notes,
effective January 1, 2009 (see Note 8). September 30, December 31,
2009 2008 ---- ---- As Adjusted -------- ----------- Long-term debt
$1,322.7 $1,310.2 Plus: Short-term debt 1.6 2.0 --- --- Total debt
(numerator) 1,324.3 1,312.2 Plus: Total shareholders' equity
1,211.3 1,126.6 ------- ------- Book capitalization (denominator)
$2,535.6 $2,438.8 ======== ======== Total debt-to-book
capitalization ratio 52.2% 53.8% ==== ==== Net debt (from Note 9)
(numerator) 551.2 619.8 Plus: Total shareholders' equity 1,211.3
1,126.6 ------- ------- Adjusted book capitalization (denominator)
$1,762.5 $1,746.4 ======== ======== Total net debt-to-book
capitalization ratio 31.3% 35.5% ==== ==== Note 11: "Operating cash
margin per ton" is calculated as the difference between Produced
coal revenue per ton sold (Produced coal revenue divided by Total
produced tons sold) and Average cash cost per ton (computed in Note
7). Although Operating cash margin per ton is not a measure of
performance calculated in accordance with GAAP, management believes
that it is useful to an investor in evaluating Massey because it is
widely used in the coal industry as a measure to evaluate a
company's profitability from produced tons sold. Operating cash
margin per ton should not be considered in isolation or as a
substitute for measures of performance in accordance with GAAP. In
addition, because Operating cash margin per ton may not be
calculated identically by all companies, the presentation here may
not be comparable to other similarly titled measures of other
companies. The table below reconciles the GAAP measure of Produced
coal revenue to Operating cash margin per ton. Three Months Ended
September 30, --------------------------------- 2009 2008
-------------- --------------- $ Per Ton $ Per Ton --------------
--------------- Produced coal revenue $535.5 $61.79 $666.4 $64.59
Less: Average cash cost (from Note 7) 431.7 49.81 500.4 48.49 -----
----- ----- ----- Operating cash margin $103.8 $11.98 $166.0 $16.10
====== ====== ====== ====== Nine Months Ended September 30,
-------------------------------- 2009 2008 --------------
--------------- $ Per Ton $ Per Ton -------------- ---------------
Produced coal revenue $1,819.8 $63.02 $1,920.0 $62.43 Less: Average
cash cost (from Note 7) 1,462.2 50.64 1,418.3 46.11 ------- -----
------- ----- Operating cash margin $357.6 $12.38 $501.7 $16.32
====== ====== ====== ====== Note 12: "Other income" is calculated
as the sum of Purchased coal revenue and Other revenue less Cost of
purchased coal revenue and Other expense. Although Other income is
not a measure of performance calculated in accordance with GAAP,
management believes that it is useful to investors in evaluating
Massey because it is a widely used measure of gross income from
non-core sources. Other income should not be considered in
isolation or as a substitute for measures of performance in
accordance with GAAP. In addition, because Other income is not
calculated identically by all companies, the presentation here may
not be comparable to other similarly titled measures of other
companies. The table below reconciles the GAAP measure of Other
revenue to Other income. Three Nine Months Months Ended Ended
September September 30, 30, ---------- ---------- 2009 2008 2009
2008 ---- ---- ---- ---- Other revenue $39.0 $11.3 $72.5 $63.2
Plus: Purchased coal revenue 14.6 4.5 43.7 22.0 Less: Cost of
purchased coal revenue 18.4 4.3 39.1 19.8 Less: Other expense 0.6
1.1 2.0 2.4 Less: Loss (gain) on derivative instruments 4.8 - (4.5)
- --- --- --- --- Other income $29.8 $10.4 $79.6 $63.0 ===== =====
===== =====
http://www.newscom.com/cgi-bin/prnh/20071031/MASSEYENERGYLOGO
http://photoarchive.ap.org/ DATASOURCE: Massey Energy Company
CONTACT: Roger Hendriksen, Director, Investor Relations for Massey
Energy Company, +1-804-788-1824 Web Site:
http://www.masseyenergyco.com/
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