PITTSBURGH, Oct. 26 /PRNewswire-FirstCall/ -- CONSOL Energy Inc.
(NYSE:CNX), a high-Btu bituminous coal and coalbed methane company,
reported earnings of $50.6 million, or $0.27 per diluted share, for
its third quarter ended September 30, 2006, compared with $377.0
million, or $2.02 per diluted share for the same period a year
earlier. In the third quarter 2005, the company recognized a gain
of $323.0 million, or $1.75 per diluted share, on the sale of 18.5%
of CNX Gas. FINANCIAL RESULTS - Period-To-Period Comparison Quarter
Quarter Nine Months Nine Months Ended Ended Ended Ended Sept 30,
Sept 30, Sept 30, Sept 30, 2006 2005 2006 2005 Total Revenue and
Other Income $843.4 $1,207.3 $2,761.5 $2,841.4 Net Income $50.6
$377.0 $281.0 $493.3 Earnings Per Share (Diluted) $0.27 $2.02 $1.51
$2.67 Net Cash from Operating Activities $90.2 $32.9 $439.3 $190.4
EBITDA $139.1 $452.6 $629.2 $735.7 EBIT $66.3 $388.5 $410.1 $541.4
Capital Expenditures $175.0 $117.7 $469.4 $287.3 Other Investing
Cash Flows ($1.6) ($430.2) ($12.2) ($446.5) 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; Acquisitions and Proceeds
from Sales of Assets; and $420.2 million of Proceeds from the sale
of 18.5% of CNX Gas. "Higher period-to-period prices for both coal
and gas enabled us to post respectable results even though we have
elected to reduce production in both Northern and Central
Appalachia and have faced several operating challenges at our mines
during the quarter just ended," said J. Brett Harvey, president and
chief executive officer. Harvey said revenues from sales of
produced gas increased nearly 29 percent. "Although produced coal
revenues declined period-to-period by approximately two percent,"
he noted, "tons of company-produced coal sold in the same
comparison were down approximately nine percent because of the
production shortfalls. However, our current pricing structure
enabled us to manage through the situation. With our mines now
running at expected production levels, I expect us to return to the
strong performance we have had for most of the year." On October
10, 2006, the company announced that it reduced third quarter
production expectations because of production problems at several
coal mines and a voluntary reduction in production at two other
mines because of soft spot market conditions in Central Appalachia.
Earlier in the year, the company had announced that it was idling
production at the Shoemaker Mine while the company continued to
upgrade the belt haulage system in the mine. However, the company
reiterated its original production guidance for the fourth quarter
ending December 31, 2006, saying that the mines affected by
production problems had returned to expected production levels.
Period-to-Period Analysis of Financial Results for the Quarter
Total revenue and other income declined 30.1 percent, primarily due
to the 2005 period gain on the sale of 18.5% of CNX Gas. In August
2005, CNX Gas, a subsidiary of CONSOL Energy, sold 27.9 million
shares of common stock. CNX Gas received proceeds of $420.2
million, which it used to pay a special dividend to CONSOL Energy.
The pre-tax gain on the transaction was $327.3 million. Net cash
from operating activities was $90.2 million for the quarter just
ended, compared with $32.9 million for the September 2005 quarter,
an increase of approximately 174 percent. The improvement in net
cash from operating activities reflects changes in working capital
and payments to reduce the company's accounts receivable
securitization facility in the 2005 period that did not occur in
the 2006 period. Earnings before interest, taxes, depreciation,
depletion and amortization (EBITDA) was $139.1 million for the
third quarter 2006 versus $452.6 million for the same period a year
ago, which included the $327.3 million pre-tax gain on the sale of
CNX Gas. Third quarter 2006 earnings were impacted negatively by a
pre-tax, non- cash $21.8 million charge for the acceleration of
previously unrecognized actuarial losses related to the company's
salary pension plan. Earnings benefited from $13 million of
insurance proceeds related to the Buchanan Mine fire that occurred
in 2005. Total costs decreased 5.9 percent. Cost of goods sold
(including Purchased Gas and Gas Royalty Interests' Costs)
decreased 10.5 percent, primarily reflecting lower purchased coal
and gas costs period-to-period, partially offset by higher closed
and idle mine costs related to the idling of the Shoemaker and VP
#8 mines. Depreciation, depletion and amortization increased 13.6
percent, primarily reflecting various coal assets and other
projects placed in service after the 2005 period. Taxes other than
income increased 5.1 percent, primarily due to higher severance and
other taxes attributable to higher sales prices for coal. As of
September 30, 2006, CONSOL Energy had no short-term debt and had
$690 million in total liquidity, which is comprised of $216 million
of cash, an available accounts receivable securitization facility
of $112 million and $362 million available to be borrowed under its
$750 million bank facility. Coal Operations Quarter Quarter Nine
Months Nine Months Ended Ended Ended Ended Sept 30, Sept 30, Sept
30, Sept 30, 2006 2005 2006 2005 Total Coal Sales (millions of
tons) 15.6 17.4 51.3 52.5 Sales - Company-Produced (millions of
tons) 15.4 16.9 50.4 51.3 Coal Production (millions of tons) 15.3*
16.8 51.5 51.5 Average Realized Price Per Ton - Company- Produced
$39.11 $35.61 $39.08 $35.39 Operating Costs Per Ton $26.10 $23.13
$24.50 $22.41 Non-operating Charges Per Ton $5.85 $5.18 $4.67 $4.86
DD&A Per Ton $3.48 $2.96 $3.07 $2.84 Total Cost Per Ton -
Company-Produced ** $35.43 $31.27 $32.24 $30.10 Operating Margins
Per Ton $13.01 $12.48 $14.58 $12.98 Financial Margins Per Ton $3.68
$4.34 $6.84 $5.29 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 1.5
million tons of metallurgical grade coal. **Amount may not add due
to rounding. Coal segment performance for the quarter-to-quarter
comparison was driven by higher realized prices and was offset by
lower sales and higher costs per ton of production. Total costs per
ton increased, in part, because of pension settlement charges of
approximately $19.1 million, or $1.25 per ton, allocated to coal
operations. This pension settlement was a non-cash charge that
resulted from the acceleration of previously unrecognized actuarial
losses related to the company's salary pension plan. In the
quarter-to-quarter comparison, company-produced coal production
declined 1.5 million tons primarily as a result of the company's
decision to idle its Shoemaker Mine in West Virginia in April of
this year and to reduce production at its Jones Fork and Mill Creek
mines in Kentucky during the quarter just ended. Also, production
concluded at the VP #8 mine in Virginia in the Spring of 2006. In
addition, geological conditions at several mines resulted in falls
on major beltlines during the high humidity season as well as
sandstone and rock intrusions in the areas being mined. Sales of
company- produced coal declined 1.5 million tons, period-to-period,
partially due to the lower production. Average realized prices
increased $3.50, or 9.8 percent, reflecting higher pricing for
steam and metallurgical coal. "Despite the apparent soft spot
market for coal," Harvey said, "the high percentage of coal we have
already committed and priced under term contracts, coupled with
strong pricing for additional tons we sold for term during the
quarter just ended resulted in a 10 percent gain in
period-to-period pricing and a two percent gain versus the trailing
second quarter." Total costs per ton for company-produced coal were
up $4.16 period-to- period. The increase in costs per ton were
attributable to the salary pension adjustment, lower sales volumes,
higher contract mining fees, increases in production taxes,
increased subsidence costs, higher supply costs, and increased
depreciation, depletion and amortization (DD&A) charges. The
pension adjustment settlement added $0.08 per ton to operating
costs for the period and $1.17 per ton to non-operating charges. In
addition, because a significant portion of mining costs are fixed,
lower than expected production will result in increased unit costs.
Operating margins (average realized price per ton less operating
costs per ton) for CONSOL Energy's coal operations were $13.01 per
ton, an improvement of 4.2 percent period-to-period, as average
coal prices period-to-period were $3.50 per ton higher, more than
offsetting increased operating costs. Financial margins (average
realized price less total costs) were $3.68 per ton, a decrease of
15.2 percent period-to-period, reflecting the effects of the
pension settlement, higher operating costs, and higher DD&A
charges. Gas Operations CNX Gas Corporation (NYSE:CXG), 81.5
percent of which is owned by CONSOL Energy, reported net income to
CONSOL Energy of $30.6 million for the quarter ended September 30,
2006. CNX Gas Corporation issued its earnings release on October
25, 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
July, CONSOL Energy was awarded a contract by the U.S. Department
of Energy (DOE) to demonstrate an innovative, multi-pollutant
control technology at the coal-fired, electricity-generating AES
Greenidge station in Dresden, NY. The purpose of the test project
is to illustrate that the combination of various emissions-control
devices can cost-effectively be added to a multitude of similar
units nationwide. The $33 million project will be partially funded
by a $14.5 million cooperative agreement from the DOE through its
National Energy Technology Laboratory, and includes design and
installation of the multi-pollutant control facility, followed by
more than a year of testing. The remainder of the costs will be
funded by AES. Along with CONSOL Energy, major participants in the
test project include AES Greenidge LLC and Babcock Power
Environmental Inc. In August, CONSOL Energy entered into a new coal
supply agreement with PPL Coal Supply, LLC, a subsidiary of
Allentown, Pennsylvania-based PPL Corporation (NYSE:PPL). Under the
agreement, CONSOL Energy expects to supply 29 million tons of
high-Btu bituminous coal to two PPL generating stations in
Pennsylvania for a period of 11 years beginning in 2008 and running
through 2018. The coal is expected to be shipped from CONSOL
Energy's Blacksville #2 Mine, which operates in Pennsylvania and
from its Loveridge Mine, which operates in West Virginia, to PPL's
Brunner Island Station near York Haven, Pennsylvania, and its
Montour Station near Washingtonville, Pennsylvania. On September
15, 2006, Standard & Poor's raised the company's corporate
credit rating to BB from BB- and also raised the rating on the
company's senior secured notes to BB+ from BB. On September 27,
2006, Moody's raised the rating on the company's senior secured
notes to Ba1 from Ba2. 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) 68.5 - 69.5 67 - 71 68 - 72 74 - 78 Tons Committed (millions
of tons at Oct. 11, 2006) 69.9 59.2 44.0 34.5 Tons Committed and
Priced (millions of tons at Oct. 11, 2006) 69.9 57.3 37.5 21.6 Avg.
Realized Price/ Ton Committed & Priced $38.80 $39.26 $39.76
$42.79 2006 Quarterly Production Guidance 1Q Actual 2Q Actual 3Q
Actual 4Q Estimate Coal (millions of tons) 18.2 18.0 15.3 17.0 -
18.0 The company continues to project favorable long-term
supply-demand fundamentals. New coal-fired power plants are
expected to be required to meet future demands for power in the
United States over the next twenty years. In addition, power
generators are investing substantial capital dollars to retrofit
much of the existing fleet of coal-fired power plants with emission
control technologies. This capital investment is expected to
sustain the current record demand of coal for power generation for
several decades. Current demand for coal, however, has been
impacted by relatively moderate temperatures during the first three
quarters of 2006 in most parts of the country. As a result,
Appalachian Basin spot prices for coal have fallen from 15 to 28
percent depending on coal type from a year earlier. However, the
shift in short-term pricing has not affected the company's 2006
results because the company has nearly all of its expected
production under contracts. Spot and Term Pricing Decouple More
significantly, however, Harvey said he believes that coal markets
are beginning to reflect a decoupling of spot pricing and term
pricing. "Because of the substantial capital investment power
generators are making in their generation assets," Harvey
explained, "they are making, in effect, a commitment to the
long-term operation of these units. Such a commitment requires a
parallel commitment to a long-term fuel supply for those units." He
said he expects short-term and long-term coal prices to continue to
diverge as fuel buyers assign additional value to fuel supply
agreements that provide long-term security, reliability and
flexibility of supply. "These qualities are likely to increase in
value as it becomes apparent that there are few coal producers who
can meet the long-term needs of plant operators. We have seen this
in the long-term contracts we have signed this year." CONSOL Energy
has previously disclosed that it has signed several long- term coal
sales agreements this year for an aggregate total of 230 million
tons and an initial value of more than $9 billion. "In each case,
the buyers assigned value to our ability to provide a long-term
supply of coal, based on proximity to their plants, the diversity
of transportation options and the flexibility we have to make
supply commitments from multiple sources." Harvey said that CONSOL
Energy's ability to capture that value has been based not only on
its large, strategically located reserve base and network of large
eastern mining complexes, but also on the company's disciplined
approach to capacity expansion. Company Will Continue to Exercise
Production and Investment Discipline "As we have been saying for
more than a year, we do not intend to add significant new capacity,
either from existing mines or new projects, unless we have a clear
signal that the market needs this additional coal," Harvey said.
"Investing substantial dollars in new capacity without a parallel
agreement to purchase the output from the mine amounts to
speculation with the shareholders' capital, and we are not prepared
to do that." He also noted that the company is prepared to idle
additional existing capacity to reflect soft market conditions.
Harvey said he is prepared to delay any previously announced
expansion project if the market will not support the additional
supply. "For example, the Enlow Fork expansion is still in the
permitting process," he said. "While this is a great project that
will ultimately produce great returns for shareholders, I am
prepared to limit our activity just to permitting until this
potential new capacity is matched with market demand." Capital
Spending to be Restrained, Costs Controlled Harvey said he expects
capital spending on coal in 2007 to be restrained. "Although we are
still working through the budget process, I believe that our
maintenance of production capital requirements will be reduced and
we will focus most of our remaining coal capital on targeted
efficiency projects that will help us control our costs." Harvey
said the production problems the company experienced during the
quarter just ended will result in higher unit costs for the year
than were previously forecast. However, he said that he still
expects total costs to increase only about five percent compared
with 2005. Share Repurchase Program Continues 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 approximately 3.5 million shares at an average price of
$33.11. In the first nine months of the buyback, we've repurchased
more than $116 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 Nine
Nine Quarter Quarter Months Months Ended Ended Ended Ended 9/30/06
9/30/05 9/30/06 9/30/05 Net Income $50,586 $376,982 $280,966
$493,268 Add: Interest Expense 5,685 6,791 17,791 20,904 Less:
Interest Income (4,608) (2,436) (12,309) (4,021) Add: Income Taxes
14,597 7,173 123,631 31,261 Earnings Before Interest & Taxes
(EBIT) 66,260 388,510 410,079 541,412 Add: Depreciation, Depletion
& Amortization 72,824 64,100 219,088 194,259 Earnings Before
Interest, Taxes and DD&A (EBITDA) $139,084 $452,610 $629,167
$735,671 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 outcomes of various legal proceedings, which
proceedings are more fully described in our reports filed under the
Securities Exchange Act of 1934; * 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 Nine Months Ended September 30, September 30, 2006 2005 2006
2005 Sales - Outside $748,145 $726,143 $2,441,736 $2,163,082 Sales
- Gas Royalty Interests 13,221 12,317 41,714 31,059 Sales -
Purchased Gas 9,076 88,288 41,206 157,545 Sales - Related Party -
4,135 - 4,749 Freight - Outside 38,239 30,718 113,007 92,507
Freight - Related Party - 468 - 468 Other Income 34,671 17,858
123,840 64,654 Gain on Sale of 18.5% of CNX Gas - 327,326 - 327,326
Total Revenue and Other Income 843,352 1,207,253 2,761,503
2,841,390 Cost of Goods Sold and Other Operating Charges (exclusive
of depreciation, 552,104 539,526 1,645,560 1,591,680 depletion and
amortization shown below) Gas Royalty Interests' Costs 10,808
10,042 34,491 24,505 Purchased Gas Costs 9,340 89,653 42,091
159,739 Freight Expense 38,239 31,186 113,007 92,975 Selling,
General and Administrative Expense 25,062 23,976 67,053 59,162
Depreciation, Depletion and Amortization 72,824 64,100 219,088
194,259 Interest Expense 5,685 6,791 17,791 20,904 Taxes Other Than
Income 57,145 54,365 195,301 170,178 Total Costs 771,207 819,639
2,334,382 2,313,402 Earnings Before Income Taxes and Minority
Interest 72,145 387,614 427,121 527,988 Income Taxes 14,597 7,173
123,631 31,261 Earnings Before Minority Interest 57,548 380,441
303,490 496,727 Minority Interest (6,962) (3,459) (22,524) (3,459)
Net Income $50,586 $376,982 $280,966 $493,268 Basic Earnings Per
Share $0.28 $2.05 $1.53 $2.70 Diluted Earnings Per Share $0.27
$2.02 $1.51 $2.67 Weighted Average Number of Common Shares
Outstanding: Basic 183,246,777 184,225,540 183,597,117 183,003,898
Dilutive 185,555,687 186,784,578 185,850,322 184,966,356 Dividends
Paid Per Share $0.07 $0.07 $0.21 $0.21 CONSOL ENERGY INC. AND
SUBSIDIARIES (Unaudited) CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands) Three Months Ended Nine Months Ended
September 30 September 30, 2006 2005 2006 2005 Operating
Activities: Net Income $50,586 $376,982 $280,966 $493,268
Adjustments to Reconcile Net Income to Net Cash Provided by
Operating Activities: Depreciation, Depletion and Amortization
72,824 64,100 219,088 194,259 Stock-based Compensation 4,066 857
10,325 2,654 Gain on the Sale of Assets (2,364) (2,201) (5,476)
(12,854) Gain on Sale of 18.5% Interest in Gas Segment - (327,326)
- (327,326) Change in Minority Interest 6,962 3,459 22,524 3,459
Amortization of Mineral Leases 672 313 4,069 3,974 Deferred Income
Taxes (6,036) (9,803) 8,641 (10,575) Equity in Earnings of
Affiliates 50 (134) (669) (1,952) Changes in Operating Assets:
Accounts Receivable Securitization - (15,000) - (125,000) Accounts
and Notes Receivable 2,623 (27,731) (5,533) (47,808) Inventories
2,202 3,437 (40,895) (10,320) Prepaid Expenses (20,990) (9,377)
(25,051) (17,405) Changes in Other Assets 2,327 5,019 308 5,785
Changes in Operating Liabilities: Accounts Payable 27,137 21,732
(23,960) 5,307 Other Operating Liabilities (34,099) (12,184)
(27,602) 37,711 Changes in Other Liabilities (15,868) (42,587)
16,213 (4,957) Other 121 3,365 6,349 2,149 Net Cash Provided by
Operating Activities 90,213 32,921 439,297 190,369 Investing
Activities: Capital Expenditures (175,033) (117,700) (469,417)
(287,262) Acquisition of Mon River Towing and J.A.R. Barge Lines -
- (24,750) - Additions to Mineral Leases (1,480) (1,474) (5,670)
(7,826) Net Investment in Equity Affiliates (1,505) 8,739 (1,402)
1,901 Proceeds from Sale of 18.5% Interest in Gas Segment - 420,167
- 420,167 Proceeds from Sales of Assets 4,654 2,765 44,028 32,236
Net Cash (Used in) Provided by Investing Activities (173,364)
312,497 (457,211) 159,216 Financing Activities: Payments on
Miscellaneous Borrowings (4,010) (118) (4,093) (284) Proceeds from
Short Term Borrowings - 2,200 - 2,200 Payments on Revolver - - -
(1,700) Tax Benefit from Stock-Based Compensation 2,082 - 37,878 -
Dividends Paid (12,847) (12,909) (38,631) (38,377) Issuance of
Treasury Stock 1,047 (21,437) 12,777 - Purchases of Treasury Stock
(32,819) - (116,450) - Stock Options Exercised - 35,369 1,362
35,369 Net Cash (Used in) Provided by Financing Activities (46,547)
3,105 (107,157) (2,792) Net (Decrease) Increase in Cash and Cash
Equivalents (129,698) 348,523 (125,071) 346,793 Cash and Cash
Equivalents at Beginning of Period 345,267 4,692 340,640 6,422 Cash
and Cash Equivalents at End of Period $215,569 $353,215 $215,569
$353,215 CONSOL ENERGY INC. AND SUBSIDIARIES CONSOLIDATED BALANCE
SHEETS (Dollars in thousands - except per share data) (Unaudited)
September 30, December 31, 2006 2005 ASSETS Current Assets: Cash
and Cash Equivalents $215,569 $340,640 Accounts and Notes
Receivable: Trade 284,986 276,277 Other Receivables 22,714 23,340
Inventories 182,775 140,976 Deferred Income Taxes 142,343 152,730
Prepaid Expenses 90,357 64,537 Total Current Assets 938,744 998,500
Property, Plant and Equipment: Property, Plant and Equipment
7,577,316 7,096,660 Less - Accumulated Depreciation, Depletion and
Amortization 3,749,729 3,561,897 Total Property, Plant and
Equipment - Net 3,827,587 3,534,763 Other Assets: Deferred Income
Taxes 338,722 367,228 Investment in Affiliates 54,332 52,261 Other
135,046 134,900 Total Other Assets 528,100 554,389 TOTAL ASSETS
$5,294,431 $5,087,652 CONSOL ENERGY INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Dollars in thousands - except per
share data) (Unaudited) September 30, December 31, 2006 2005
LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts
Payable $174,733 $197,375 Current Portion of Long-Term Debt 57,017
4,629 Accrued Income Taxes 28,219 17,557 Other Accrued Liabilities
547,427 584,361 Total Current Liabilities 807,396 803,922 Long-Term
Debt: Long-Term Debt 393,240 438,367 Capital Lease Obligations
27,131 - Total Long-Term Debt 420,371 438,367 Deferred Credits and
Other Liabilities: Postretirement Benefits Other Than Pensions
1,596,316 1,592,907 Pneumoconiosis Benefits 401,326 411,022 Mine
Closing 387,188 356,776 Workers' Compensation 151,724 134,759
Deferred Revenue 16,333 27,343 Salary Retirement - 33,703
Reclamation 26,282 32,183 Other 122,988 137,870 Total Deferred
Credits and Other Liabilities 2,702,157 2,726,563 Minority Interest
126,526 93,444 Total Liabilities and Minority Interest 4,056,450
4,062,296 Stockholders' Equity: Common Stock, $.01 par value;
500,000,000 Shares Authorized, 185,126,526 Issued and 182,604,705
Outstanding at September 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 910,347 883,316 Retained Earnings
486,543 252,109 Other Comprehensive Loss (76,691) (105,162)
Unearned Compensation on Restricted Stock Units - (6,757) Common
Stock in Treasury, at Cost - 2,521,821 Shares at September 30, 2006
and 0 Shares at December 31, 2005 (84,069) - Total Stockholders'
Equity 1,237,981 1,025,356 TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $5,294,431 $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 - - 280,966 - Treasury
Rate Lock (Net of $40 tax) - - - (61) Minority Interest in Other
Comprehensive Income and Stock-based Compensation of Gas - (1,996)
- (6,484) Gas Cash Flow Hedge (Net of ($22,470) tax) - - - 35,016
Comprehensive Income (Loss) - (1,996) 280,966 28,471 Issuance of
Treasury Stock - (11,703) (7,901) - Purchases of Treasury Stock - -
- - Stock Options Exercised 1 1,361 - - Tax Benefit from
Stock-Based Compensation - 37,878 - - Amortization of Stock-Based
Compensation Awards - 8,248 - - Elimination of Unearned
Compensation on Restricted Stock Units - (6,757) - - Dividends
($.21 per share) - - (38,631) - Balance - September 30, 2006 $1,851
$910,347 $486,543 $(76,691) 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 - - 280,966 Treasury Rate Lock (Net of $40 tax) - - (61)
Minority Interest in Other Comprehensive Income and Stock-based
Compensation of Gas - - (8,480) Gas Cash Flow Hedge (Net of
($22,470) tax) - - 35,016 Comprehensive Income (Loss) - - 307,441
Issuance of Treasury Stock - 32,381 12,777 Purchases of Treasury
Stock - (116,450) (116,450) Stock Options Exercised - - 1,362 Tax
Benefit from Stock-Based Compensation - - 37,878 Amortization of
Stock-Based Compensation Awards - - 8,248 Elimination of Unearned
Compensation on Restricted Stock Units 6,757 - - Dividends ($.21
per share) - - (38,631) Balance - September 30, 2006 $- $(84,069)
$1,237,981 INCOME STATEMENT BY SEGMENT September 2006 QTD In
Millions Quarter Ended September 30, 2006 COAL Total Total Produced
Other Total Gas Other TOTAL Sales $592 $14 $606 $103 $48 $757 Gas
Royalty Interests - - - 13 - 13 Freight Revenue 38 - 38 - - 38
Other Income - 25 25 9 1 35 Total Revenue and Other Income 630 39
669 125 49 843 Cost of Goods Sold 426 60 486 36 38 560 Gas Royalty
Interests' Costs - - - 11 - 11 Freight Expense 38 - 38 - - 38
Selling, General & Admin. 17 - 17 4 4 25 DD&A 52 7 59 9 5
73 Interest Expense - - - - 6 6 Taxes Other Than Income 35 15 50 4
3 57 Total Cost 568 82 650 64 56 770 Earnings Before Income Taxes
$62 $(43) $19 $61 $(7) 73 Income Tax (15) Earnings Before Minority
Interest 58 Minority Interest (7) Net Income $51 INCOME STATEMENT
BY SEGMENT September 2006 YTD In Millions Year to Date September
30, 2006 COAL Total Total Produced Other Total Gas Other TOTAL
Sales $1,951 $55 $2,006 $330 $147 $2,483 Gas Royalty Interest - - -
42 - 42 Freight Revenue 113 - 113 - - 113 Other Income - 85 85 25
14 124 Total Revenue and Other Income 2,064 140 2,204 397 161 2,762
Cost of Goods Sold 1,255 175 1,430 117 141 1,688 Gas Royalty
Interests' Costs - - - 34 - 34 Freight Expense 113 - 113 - - 113
Selling, General & Admin. 45 1 46 11 10 67 DD&A 160 19 179
27 13 219 Interest Expense - - - - 18 18 Taxes Other Than Income
121 53 174 12 9 195 Total Cost 1,694 248 1,942 201 191 2,334
Earnings Before Income Taxes $370 $(108) $262 $196 $(30) 428 Income
Tax (124) Earnings Before Minority Interest 304 Minority Interest
(23) Net Income $281 CONSOL Energy Inc. Financial and Operating
Statistics Quarter Ended Sept. 30, 2006 2005 AS REPORTED
FINANCIALS: Revenue ($ MM) $843.352 $1,207.253 EBIT ($ MM) *
$66.260 $388.510 EBITDA ($ MM) * $139.084 $452.610 Net Income ($
MM) $50.586 $376.982 EPS(diluted) $0.27 $2.02 Average shares
outstanding - Dilutive 185,555,687 186,784,578 CAPEX ($ MM)
$175.033 $117.700 COAL OPERATIONAL: # Complexes Producing (end of
period) 14 18 Sales (MM tons)-Produced only 15.350 16.942 Average
sales price ** ($/ton) $39.11 $35.61 Production income ($/ton)
$3.68 $4.34 Production (MM tons)-Produced only 15.312 16.777
Produced Tons Ending inventory (MM tons)*** 2.754 1.558 * Year to
date total may not add due to rounding ** note: average sales price
of tons produced *** note: includes equity companies CONSOL ENERGY
INC. COAL PRODUCTION 3RD QTR 3RD QTR 2006 2005 REGION ACTUAL ACTUAL
Northern Appalachia 11.9 13.7 Central Appalachia 3.2 2.9 Other
Areas 0.2 0.3 TOTAL PRODUCTION 15.3 16.8 * 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 Inc. Web site:
http://www.consolenergy.com/ http://www.cnxgas.com/
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