Back to GetFilings.com
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2002
-------------
or
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ______________
Commission File Number: 001-14901
----------
CONSOL Energy Inc.
----------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 51-0337383
- ---------------------------------- -----------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1800 Washington Road, Pittsburgh, Pennsylvania 15241
----------------------------------------------------
(Address or principal executive offices)
(Zip Code)
(412) 831-4000
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------- ------
As of August 8, 2002, there were 78,731,344 shares of Common Stock, $.01 par
value, outstanding.
TABLE OF CONTENTS
PART I
FINANCIAL INFORMATION
Page
----
ITEM 1. CONDENSED FINANCIAL STATEMENTS
Consolidated Statements of Income for the three months and six months
ended June 30, 2002 and 2001 ................................................. 1
Consolidated Balance Sheets at June 30, 2002
and December 31, 2001 ........................................................ 2
Consolidated Statements of Stockholders' Equity for the six
months ended June 30, 2002 ................................................... 4
Consolidated Statements of Cash Flows for the six months
ended June 30, 2002 and 2001 ................................................. 5
Notes to Consolidated Financial Statements ................................... 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION ................................ 22
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK ............................................................ 38
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS ............................................................ 39
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS .................................... 39
ITEM 3. DEFAULTS UPON SENIOR SECURITIES .............................................. 39
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS .......................... 39
ITEM 5. OTHER INFORMATION ............................................................ 39
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ............................................. 40
PART I
FINANCIAL INFORMATION
ITEM 1. CONDENSED FINANCIAL STATEMENTS
CONSOL ENERGY INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------- ----------------------------
2002 2001 2002 2001
------------- ------------- ------------- -------------
Sales - Outside $ 485,657 $ 556,928 $ 992,851 $ 1,130,341
Sales - Related Parties 815 3,717 819 7,232
Freight - Outside 33,699 53,681 70,131 85,654
Freight - Related Parties 549 2,399 549 3,061
Other Income 15,530 14,930 23,901 33,303
----------- ------------ ----------- -----------
Total Revenue 536,250 631,655 1,088,251 1,259,591
Cost of Goods Sold and Other
Operating Charges 366,095 409,695 730,997 831,110
Freight Expense 34,248 56,080 70,680 88,715
Selling, General and Administrative
Expense 17,195 15,375 33,852 29,662
Depreciation, Depletion and
Amortization 65,801 62,918 132,258 123,549
Interest Expense 11,848 12,130 21,985 26,792
Taxes Other Than Income 42,867 43,060 93,592 80,295
Export Sales Excise Tax Resolution (1,037) (28,230) (1,037) (123,522)
----------- ------------ ----------- -----------
Total Costs 537,017 571,028 1,082,327 1,056,601
----------- ------------ ----------- -----------
Earnings (Loss) Before Income Taxes (767) 60,627 5,924 202,990
Income Taxes (Benefits) (9,794) 11,280 (8,604) 52,843
----------- ------------ ----------- -----------
Net Income $ 9,027 $ 49,347 $ 14,528 $ 150,147
=========== ============ =========== ===========
Basic Earnings Per Share $ 0.11 $ 0.63 $ 0.18 $ 1.91
=========== ============ =========== ===========
Dilutive Earnings Per Share $ 0.11 $ 0.62 $ 0.18 $ 1.90
=========== ============ =========== ===========
Weighted Average Number of
Common Shares Outstanding:
Basic 78,722,778 78,670,017 78,714,967 78,643,444
=========== ============ =========== ===========
Dilutive 78,935,017 79,071,471 78,921,664 78,994,428
=========== ============ =========== ===========
Dividends Paid Per Share $ 0.28 $ 0.28 $ 0.56 $ 0.56
=========== ============ =========== ===========
The accompanying notes are an integral part of these financial statements.
1
CONSOL ENERGY INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
(Unaudited)
JUNE 30, DECEMBER 31,
2002 2001
--------------- ----------------
ASSETS
Current Assets:
Cash and Cash Equivalents $ 10,214 $ 15,582
Accounts and Notes Receivable:
Trade 205,419 220,442
Related Parties 598 -
Other Receivables 132,968 123,347
Inventories 201,701 113,894
Deferred Income Taxes 55,490 54,708
Recoverable Income Taxes 9,739 -
Prepaid Expenses 44,395 42,274
--------------- ----------------
Total Current Assets 660,524 570,247
Property, Plant and Equipment:
Property, Plant and Equipment 5,598,786 5,413,960
Less - Accumulated Depreciation,
Depletion and Amortization 2,687,701 2,498,650
--------------- ----------------
Total Property, Plant and
Equipment - Net 2,911,085 2,915,310
Other Assets:
Deferred Income Taxes 539,421 520,906
Advance Mining Royalties 90,437 92,644
Investment in Affiliates 118,805 77,667
Other 120,458 120,813
--------------- ----------------
Total Other Assets 869,121 812,030
--------------- ----------------
Total Assets $ 4,440,730 $ 4,297,587
=============== ================
The accompanying notes are an integral part of these financial statements.
2
CONSOL ENERGY INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
(Unaudited)
JUNE 30, DECEMBER 31,
2002 2001
------------- -------------
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $ 139,717 $ 171,923
Short-Term Notes Payable 291,212 77,869
Current Portion of Long-Term Debt 6,954 72,771
Accrued Income Taxes - 4,799
Other Accrued Liabilities 411,991 313,379
------------- -------------
Total Current Liabilities 849,874 640,741
Long-Term Debt:
Long-Term Debt 466,221 464,187
Capital Lease Obligations 6,504 8,482
------------- -------------
Total Long-Term Debt 472,725 472,669
Deferred Credits and Other Liabilities:
Postretirement Benefits Other Than Pensions 1,432,132 1,417,567
Pneumoconiosis Benefits 460,150 459,776
Mine Closing 342,144 333,738
Workers' Compensation 258,637 269,075
Deferred Revenue 206,075 227,595
Reclamation 11,930 13,744
Other 163,859 191,123
------------- -------------
Total Deferred Credits and Other Liabilities 2,874,927 2,912,618
Stockholders' Equity:
Common Stock, $.01 par value;
500,000,000 Shares Authorized; 80,267,558 Issued; and
78,731,344 Outstanding at June 30, 2002, and
78,705,638 Outstanding at December 31, 2001 803 803
Preferred Stock, 15,000,000 Shares Authorized;
None Issued and Outstanding - -
Capital in Excess of Par Value 643,746 643,627
Retained Earnings (Deficit) (347,118) (317,566)
Other Comprehensive Loss (36,872) (37,659)
Common Stock in Treasury, at Cost - 1,536,214 Shares
at June 30, 2002, and 1,561,920 Shares at December 31, 2001 (17,355) (17,646)
------------- -------------
Total Stockholders' Equity 243,204 271,559
------------- -------------
Total Liabilities and Stockholders' Equity $ 4,440,730 $ 4,297,587
============= =============
The accompanying notes are an integral part of these financial statements.
3
CONSOL ENERGY INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollars in thousands, except per share data)
Other Total
Capital in Retained Compre- Stock-
Common Excess of Earnings hensive Treasury holders'
Stock Par Value (Deficit) Loss Stock Equity
----------- ------------ ----------- ----------- ------------ ------------
Balance -
December 31, 2001 $ 803 $ 643,627 $ (317,566) $ (37,659) $ (17,646) $ 271,559
----------- ------------ ---------- ----------- ----------- ------------
(Unaudited)
Net Income - - 14,528 - - 14,528
Treasury Rate Lock (net of $500 tax) - - - 787 - 787
Treasury Stock Issued
(25,706 shares) - 119 - - 291 410
Dividends ($.56 per share) - - (44,080) - - (44,080)
----------- ------------ ---------- ----------- ----------- ------------
Balance -
June 30, 2002 $ 803 $ 643,746 $ (347,118) $ (36,872) $ (17,355) $ 243,204
=========== ============ ========== =========== =========== ============
The accompanying notes are an integral part of these financial statements.
4
CONSOL ENERGY INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Six Months Ended
June 30,
---------------------------
2002 2001
---------- -----------
Operating Activities:
Net Income $ 14,528 $ 150,147
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Depreciation, Depletion and Amortization 132,258 123,549
Gain on the Sale of Assets (2,126) (5,290)
Amortization of Advance Mining Royalties 4,940 11,464
Deferred Income Taxes (19,797) 33,408
Equity in Earnings of Affiliates 2,589 (10,453)
Changes in Operating Assets:
Accounts and Notes Receivable 4,804 (111,923)
Inventories (87,807) 4,424
Prepaid Expenses (2,121) (6,089)
Changes in Other Assets 2,937 (24,398)
Changes in Operating Liabilities:
Accounts Payable (41,206) 17,450
Other Operating Liabilities 84,074 28,898
Changes in Other Liabilities (10,539) 41,810
Other (6,998) 1,119
---------- -----------
61,008 103,969
---------- -----------
Net Cash Provided by Operating Activities 75,536 254,116
---------- -----------
Investing Activities:
Capital Expenditures (149,774) (104,836)
Additions to Advance Mining Royalties (2,733) (2,715)
Acquisition of Line Creek Mine Joint Venture - (1,608)
Investment in Equity Affiliates (34,727) 9,381
Proceeds from Sales of Assets 3,366 (2,628)
---------- -----------
Net Cash Used in Investing Activities (183,868) (102,406)
---------- -----------
Financing Activities:
Payments on Commercial Paper (32,078) (99,877)
Payments on Miscellaneous Borrowings (1,973) (3,264)
Payments on Long Term Notes (66,000) -
Proceeds from Long Term Notes 246,310 -
Dividends Paid (44,054) (44,024)
Proceeds from Treasury Rate Lock 1,332 -
Payments for Bond Issuance Costs (957) -
Issuance of Treasury Stock 384 1,510
---------- -----------
Net Cash Provided by (Used in) Financing Activities 102,964 (145,655)
---------- -----------
Net (Decrease) Increase in Cash and Cash Equivalents (5,368) 6,055
Cash and Cash Equivalents at Beginning of Period 15,582 10,570
---------- -----------
Cash and Cash Equivalents at End of Period $ 10,214 $ 16,625
========== ===========
The accompanying notes are an integral part of these financial statements.
5
CONSOL ENERGY INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2002
(Dollars in thousands, except per share data)
NOTE 1 - BASIS OF PRESENTATION:
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three-month and six-month periods ended
June 30, 2002 are not necessarily indicative of the results that may be expected
for future periods.
The balance sheet at December 31, 2001 has been derived from the audited
financial statements at that date but does not include all the footnotes
required by generally accepted accounting principles for complete financial
statements.
For further information, refer to the consolidated financial statements and
footnotes for the transitional period ended December 31, 2001 included in CONSOL
Energy Inc.'s (CONSOL Energy) Form 10-K for the transition period ended December
31, 2001, as amended.
CONSOL Energy changed from a fiscal year ending June 30 to a fiscal year ending
December 31. CONSOL Energy had a transitional period ended December 31, 2001.
CONSOL Energy's first full year ending December 31 started January 1, 2002 and
ends December 31, 2002. CONSOL Energy made this change in order to align its
fiscal year with that of RWE A.G., which beneficially owns directly or through
subsidiaries approximately 74% of the common stock of CONSOL Energy.
Certain reclassifications of prior years' data have been made to conform to the
classification of data for the six months ended June 30, 2002.
NOTE 2 - ACQUISITION:
On December 7, 2001, in order to expand its international market share, CONSOL
Energy purchased for $17,950, a 50% interest in the Glennies Creek Mine, which
is currently under development in New South Wales, Australia. Glennies Creek
produces a high fluidity coking coal that will be sold primarily to steel makers
in the Asia-Pacific region. The acquisition has been accounted for as a
purchase, and accordingly, since the date of acquisition the operating results
of Glennies Creek Mine have been included in CONSOL Energy's consolidated
financial statements using the equity method of accounting. Net income and
earnings per share of CONSOL Energy, on a pro forma basis, after giving effect
to certain purchase accounting adjustments, would not materially change from
actual net income and earnings per share for the three months or the six months
ended June 30, 2001.
6
On August 22, 2001, in order to expand existing gas operations, CONSOL Energy
purchased the remaining 50% interest in the coalbed methane reserves and the
remaining 25% interest in the production and gathering assets in southwestern
Virginia of Pocahontas Gas Partnership and Cardinal States Gathering Company for
$155,312. Prior to the acquisition, CONSOL Energy owned 50% and 75%,
respectively, of these two entities. The acquisition has been accounted for as a
purchase and, accordingly, the operating results for the portion of Pocahontas
Gas Partnership and Cardinal States Gathering Company previously reported on the
equity method and the newly acquired portions have been included in CONSOL
Energy's operating results using full consolidation since the date of
acquisition. The pro forma results, assuming the acquisition of the interests in
these entities had occurred January 1, 2001, are estimated to be:
Pro forma
-------------------------------------------
Three Months Ended Six Months Ended
June 30, 2001 June 30, 2001
------------------- --------------------
Revenues $650,244 $1,300,903
Net income $ 51,355 $ 156,150
Net income per common share:
Basic $ 0.65 $ 1.99
Dilutive $ 0.65 $ 1.98
The pro forma results are not necessarily indicative of what actually would have
occurred if the acquisition of the interests in these entities had been
completed as of the beginning of the period presented, nor are they necessarily
indicative of future consolidated results.
On July 2, 2001, CONSOL Energy entered into agreements with American Electric
Power to supply coal to various American Electric Power coal-fired power plants.
CONSOL Energy purchased, for a nominal amount, the stock of Windsor Coal
Company, Southern Ohio Coal Company and Central Ohio Coal Company, subsidiaries
of American Electric Power which own mines in Ohio and West Virginia. Under the
agreements, CONSOL Energy will supply approximately 34 million tons of coal
through 2008. These tons will be supplied by the former American Electric Power
affiliated mines and by other CONSOL Energy mines. The former American Electric
Power affiliated mines all have limited economically mineable reserves. The
Meigs 31 mine of Southern Ohio Coal Company closed on October 24, 2001, the
Muskingum surface mine of Central Ohio Coal Company closed on December 14, 2001
and the Meigs 2 mine of Southern Ohio Coal Company closed on March 6, 2002.
CONSOL Energy will expand its McElroy and Robinson Run Mines to meet the new
supply agreement requirements as the former American Electric Power mines
deplete.
As part of this acquisition, CONSOL Energy assumed approximately $239,000 of
long-term liabilities related to employee and mine closure liabilities in this
acquisition, as well as other current liabilities. American Electric Power paid
CONSOL Energy $336,000 in cash. Subsequent to the acquisition, the cash included
as part of the acquisition was used by CONSOL Energy to reduce a portion of its
short-term debt. For income tax purposes, an election was made to treat the
stock acquisition as a purchase of assets. Therefore, an income tax liability
was recognized as part of the acquisition based upon the excess of the assets
received over the tax liabilities assumed. The acquisition has been accounted
for as a purchase and, accordingly, the operating results of
7
Windsor Coal Company, Southern Ohio Coal Company and Central Ohio Coal Company
have been included in CONSOL Energy's operating results since the date of
acquisition. The pro forma results, assuming the acquisition of the interests in
these entities had occurred January 1, 2001, are estimated to be:
Pro forma
-------------------------------------------
Three Months Ended Six Months Ended
June 30, 2001 June 30, 2001
-------------------------------------------
Revenues $703,856 $1,418,400
Net income $ 51,780 $ 155,788
Net income per common share:
Basic $ 0.66 $ 1.98
Dilutive $ 0.65 $ 1.97
The pro forma results are not necessarily indicative of what actually would have
occurred if the acquisition of the interests in these entities had been
completed as of the beginning of the period presented, nor are they necessarily
indicative of future consolidated results.
NOTE 3 - INCOME TAXES:
CONSOL Energy estimates the effective tax rate expected to be applicable for the
full fiscal year. This rate is used to provide for income taxes on a current
year-to-date basis. The effective tax rate is sensitive to changes in annual
profitability and percentage depletion. The following is the reconciliation
between the income tax expense (benefit) recognized in the Consolidated
Statements of Income and the income tax expense computed by applying the
statutory federal income tax rate to the earnings before income taxes:
For the Three
Months Ended
-------------------------------------------------------------
June 30,
-------------------------------------------------------------
2002 2001
-------------------------- ----------------------------
Amount Percent Amount Percent
----------- ----------- ------------ ------------
Statutory U. S. federal income tax rate $ (269) 35.0 % $ 21,219 35.0 %
Excess tax depletion (5,956) 776.6 (10,442) (17.2)
Nonconventional fuel tax credit - - (2,643) (4.4)
Net effect of state tax 894 (116.6) 5,216 8.6
Net effect of foreign tax 729 (95.0) (42) (0.1)
Prior year tax settlement (1,908) 248.8 - -
Other (3,284) 428.1 (2,028) (3.3)
Income Tax (Benefit)Expense/
---------- ----------- ----------- ------------
Effective Rate $ (9,794) 1,276.9 % $ 11,280 18.6 %
========== =========== =========== ============
8
For the Six
Months Ended
----------------------------------------------------------
June 30,
----------------------------------------------------------
2002 2001
------------------------- --------------------------
Amount Percent Amount Percent
------------ ---------- ------------- -----------
Statutory U. S. federal income tax rate $ 2,073 35.0 % $ 71,047 35.0 %
Excess tax depletion (7,945) (134.1) (20,977) (10.3)
Nonconventional fuel tax credit - - (4,493) (2.2)
Net effect of state tax 1,227 20.7 9,203 4.5
Net effect of foreign tax 1,290 21.8 385 0.2
Prior year tax settlement (1,908) (32.2) - -
Other (3,341) (56.4) (2,322) (1.2)
Income Tax (Benefit)Expense/
----------- ---------- ----------- ---------
Effective Rate $ (8,604) (145.2) % $ 52,843 26.0 %
=========== ========== =========== =========
The provision for income taxes is adjusted at the time the returns are filed.
These adjustments, of which the federal portion is included in the Other line
above, decreased income tax expense by $2,974 for the three months and six
months ended June 30, 2002. These adjustments decreased income tax expense by
$805 for the three months and six months ended June 30, 2001, respectively.
In the three months ended June 30, 2002, CONSOL Energy received a $1,908 federal
income tax benefit from a final agreement resolving disputed federal income tax
items for the years 1995 to 1997.
NOTE 4 - INVENTORIES:
The components of inventories consist of the following:
June 30, December 31,
2002 2001
-------------- --------------
Coal $ 131,107 $ 33,897
Merchandise for resale 21,461 21,816
Supplies 49,133 58,181
-------------- --------------
Total Inventories $ 201,701 $ 113,894
============== ==============
NOTE 5 - COMMITMENTS AND CONTINGENCIES:
CONSOL Energy has various purchase commitments for materials, supplies and items
of permanent investment incidental to the ordinary conduct of business. Such
commitments are not at prices in excess of current market values.
9
CONSOL Energy is subject to various lawsuits and claims with respect to such
matters as personal injury, wrongful death, damage to property, exposure to
hazardous substances, governmental regulations including environmental
remediation, employment and contract disputes, and other claims and actions
arising out of the normal course of business. CONSOL Energy provides for such
claims when available information indicates that it is probable that an asset
has been impaired or a liability has been incurred and the amount of the loss
can be reasonably estimated.
One of CONSOL Energy's subsidiaries, Fairmont Supply Company, which distributes
industrial supplies, currently is defending against approximately 23 thousand
asbestos claims in state courts in Pennsylvania, Ohio, West Virginia and
Mississippi. Because a very small percentage of products manufactured by third
parties and supplied by Fairmont in the past may have contained asbestos and
many of the pending claims are part of mass complaints filed by hundreds of
plaintiffs against a hundred or more defendants, it has been difficult for
Fairmont to determine how many of the cases actually involve valid claims or
plaintiffs who were actually exposed to asbestos-containing products supplied by
Fairmont. In addition, while Fairmont may be entitled to indemnity or
contribution in certain jurisdictions from manufacturers of identified products,
the availability of such indemnity or contribution is unclear at this time and,
in recent years, some of the manufacturers named as defendants in these actions
have sought protection from these claims under bankruptcy laws. Fairmont has no
insurance coverage with respect to these asbestos cases. To date, payments by
Fairmont with respect to asbestos cases have not been material. However, there
cannot be any assurance that payments in the future with respect to pending or
future asbestos cases will not be material to the financial position, results of
operations or cash flows of CONSOL Energy.
CONSOL Energy has recognized a liability related to a waste disposal site and
accrued $3,275 in Other Liabilities. CONSOL Energy cumulatively has paid $1,909
(no payments were made in the three months ended June 30, 2002 and $358 of
payments were made in the six months ended June 30, 2002) related to the
remediation of this waste disposal site and, accordingly, reduced the liability
to $1,366. In the opinion of management, the ultimate liabilities resulting from
such pending lawsuits and claims will not materially affect the financial
position, results of operations or cash flows of CONSOL Energy.
NOTE 6 - SEGMENT INFORMATION:
CONSOL Energy has two reportable business segments: Coal and Gas. In the three
months ended June 30, 2002, CONSOL Energy implemented a new internal reporting
system. As a result, the measure of segment profit or loss has changed from
Pre-tax Operating Income (Loss) to Earnings (Loss) Before Income Taxes. Also,
some corporate charges that were previously reflected in the All Other segment
are now reported as Corporate items and reflected in the reconciliation between
Segment Earnings (Loss) Before Income Tax to total Earnings (Loss) Before Income
Tax.
CONSOL Energy has also changed its disclosure from reporting additions to
property, plant and equipment to reporting capital expenditures for property,
plant and equipment as shown on the cash flow statement. Previously, additions
to property, plant and equipment included certain non-cash increases.
10
Historical segment data has been reclassified to conform with these internal
reporting changes.
Industry segment results for the three months ended June 30, 2002:
Reportable Business Segments
---------------------------------------------
Corporate,
All Adjustments
Coal Gas Total Other & Eliminations Consolidated
------------- ------------- ------------- -------------- -------------- ------------
Sales - outside $ 430,243 $ 35,020 $ 465,263 $ 20,394 $ - $ 485,657
Sales - related parties 815 - 815 - - 815
Freight - outside 33,663 - 33,663 36 - 33,699
Freight - related parties 549 - 549 - - 549
Intersegment transfers - 543 543 22,815 (23,358) -
------------- ------------- ------------- -------------- -------------- ------------
Total Sales and Freight $ 465,270 $ 35,563 $ 500,833 $ 43,245 $ (23,358) $ 520,720
============= ============= ============= ============== ============== ============
Earnings (Loss) Before
Income Taxes (A) $ 11,338 $ 8,323 $ 19,661 $ (6,975) $ (13,453) $ (767)
============= ============= ============= ============== ============== ============
Segment assets (B) $ 3,043,109 $ 548,084 $ 3,591,193 $ 210,223 $ 639,314 $ 4,440,730
============= ============= ============= ============== ============== ============
Depreciation, depletion and
amortization $ 54,773 $ 8,597 $ 63,370 $ 2,431 $ - $ 65,801
============= ============= ============= ============== ============== ============
Capital expenditures $ 64,925 $ 11,401 $ 76,326 $ 3,088 $ - $ 79,414
============= ============= ============= ============== ============== ============
(A) Includes equity in earnings (loss) of unconsolidated equity affiliates
of ($1,256), ($556) and ($217) for Coal, Gas and All Other,
respectively.
(B) Includes investments in unconsolidated equity affiliates of $78,067,
$11,259 and $29,479 for Coal, Gas and All Other, respectively. Also
included in the Coal segment is $71,581 of receivables related to the
Export Sales Excise Tax Resolution that was primarily recognized in the
twelve months ended June 30, 2001.
11
Industry segment results for the three months ended June 30, 2001:
Reportable Business Segments
---------------------------------------------
Corporate,
All Adjustments
Coal Gas Total Other & Eliminations Consolidated
-------------- ------------ -------------- -------------- -------------- --------------
Sales - outside $ 501,003 $ 30,857 $ 531,860 $ 25,068 $ - $ 556,928
Sales - related parties 3,717 - 3,717 - - 3,717
Freight - outside 53,653 - 53,653 28 - 53,681
Freight - related parties 2,399 - 2,399 - - 2,399
Intersegment transfers - 713 713 24,679 (25,392) -
-------------- ------------ -------------- -------------- -------------- --------------
Total Sales and Freight $ 560,772 $ 31,570 $ 592,342 $ 49,775 $ (25,392) $ 616,725
============== ============ ============== ============== ============== ==============
Earnings (Loss) Before
Income Taxes (C) $ 73,521 $ 13,565 $ 87,086 $ (5,848) $ (20,611) 60,627
============== ============ ============== ============== ============== ==============
Segment assets (D) $ 3,001,398 $ 329,834 $ 3,331,232 $ 158,694 $ 404,988 $ 3,894,914
============== ============ ============== ============== ============== ==============
Depreciation, depletion and
amortization $ 55,773 $ 4,865 $ 60,638 $ 2,280 $ - $ 62,918
============== ============ ============== ============== ============== ==============
Capital expenditures $ 42,906 $ 9,693 $ 52,599 $ 2,142 $ - $ 54,741
============== ============ ============== =============== ============== ==============
(C) Includes equity in earnings (loss) of unconsolidated affiliates of
$521, $4,132 and ($344) for Coal, Gas and All Other, respectively.
(D) Includes investments in unconsolidated equity affiliates of $40,559,
$182,269 and $683 for Coal, Gas and All Other, respectively. Also
included in the Coal segment is $102,241 of receivables related to the
Export Sales Excise Tax Resolution.
12
Industry segment results for the six months ended June 30, 2002:
Reportable Business Segments
-------------------------------------------
Corporate,
All Adjustments
Coal Gas Total Other & Eliminations Consolidated
------------- --------- ------------- ------------- -------------- --------------
Sales - outside $ 888,109 $ 62,712 $ 950,821 $ 42,030 $ - $ 992,851
Sales - related parties 819 - 819 - - 819
Freight - outside 70,001 - 70,001 130 - 70,131
Freight - related parties 549 - 549 - - 549
Intersegment transfers - 988 988 48,141 (49,129) -
------------- --------- ------------- ------------- ------------- --------------
Total Sales and Freight $ 959,478 $ 63,700 $ 1,023,178 $ 90,301 $ (49,129) $ 1,064,350
============= ========= ============= ============= ============= ==============
Earnings (Loss) Before
Income Taxes (E) $ 25,770 $ 11,832 $ 37,602 $ (8,114) $ (23,564) $ 5,924
============= ========= ============= ============= ============= ==============
Segment assets (F) $ 3,043,109 $ 548,084 $ 3,591,193 $ 210,223 $ 639,314 $ 4,440,730
============= ========= ============= ============= ============= ==============
Depreciation, depletion and
amortization $ 110,709 $ 16,759 $ 127,468 $ 4,790 $ - $ 132,258
============= ========= ============= ============= ============= ==============
Capital expenditures $ 116,152 $ 30,063 $ 146,215 $ 3,559 $ - $ 149,774
============= ========= ============== ============== ============== ===============
(E) Includes equity in earnings (loss) of unconsolidated equity affiliates
of ($1,258), ($930) and ($401) for Coal, Gas and All Other,
respectively.
(F) Includes investments in unconsolidated equity affiliates of $78,067,
$11,259 and $29,479 for Coal, Gas and All Other, respectively. Also
included in the Coal segment is $71,581 of receivables related to the
Export Sales Excise Tax Resolution.
13
Industry segment results for the six months ended June 30, 2001:
Reportable Business Segments
----------------------------------------------
Corporate,
All Adjustments
Coal Gas Total Other & Eliminations Consolidated
------------- ------------ ------------- ------------- -------------- -------------
Sales - outside $ 995,815 $ 74,231 $ 1,070,046 $ 60,295 $ - $ 1,130,341
Sales - related parties 7,232 - 7,232 - - 7,232
Freight - outside 85,547 - 85,547 107 - 85,654
Freight - related parties 3,061 - 3,061 - - 3,061
Intersegment transfers - 1,835 1,835 50,669 (52,504) -
------------- ------------ ------------- ------------- -------------- -------------
Total Sales and Freight $ 1,091,655 $ 76,066 $ 1,167,721 $ 111,071 $ (52,504) $ 1,226,288
============= ============ ============= ============= ============== =============
Earnings (Loss) Before
Income Taxes (G) $ 174,470 $ 48,174 $ 222,644 $ (7,029) $ (12,625) $ 202,990
============= ============ ============= ============= ============== =============
Segment assets (H) $ 3,001,398 $ 329,834 $ 3,331,232 $ 158,694 $ 404,988 $ 3,894,914
============= ============ ============= ============= ============== =============
Depreciation, depletion and
amortization $ 111,813 $ 6,873 $ 118,686 $ 4,863 $ - $ 123,549
============= ============ ============= ============= ============== =============
Capital expenditures $ 80,008 $ 20,748 $ 100,756 $ 4,080 $ - $ 104,836
============= ============ ============= ============= ============== =============
(G) Includes equity in earnings (loss) of unconsolidated affiliates of
($256), $12,244 and ($1,535) for Coal, Gas and All Other, respectively.
(H) Includes investments in unconsolidated equity affiliates of $40,559,
$182,269 and $683 for Coal, Gas and All Other, respectively. Also
included in the Coal segment is $102,241 of receivables related to the
Export Sales Excise Tax resolution.
14
Reconciliation of Segment Information to Consolidated Amounts
Earnings (Loss) Before Income Taxes:
For the Three Months Ended For the Six Months Ended
June 30, June 30,
-------------------------------- ------------------------------
2002 2001 2002 2001
----------------- -------------- --------------- -------------
Segment earnings before income taxes
for total reportable business segments $ 19,661 $ 87,086 $ 37,602 $ 222,644
Segment (loss) before income taxes
for all other businessses (6,975) (5,848) (8,114) (7,029)
Incentive compensation (3,046) (9,661) (3,378) (16,906)
Interest income (expense), net
and other non-operating activity (10,407) (10,950) (20,186) 4,281
------------ ----------- ---------- -----------
Earnings (Loss) Before Income Taxes $ (767) $ 60,627 $ 5,924 $ 202,990
============ =========== ========== ===========
Total Assets:
June 30,
-------------------------------
2002 2001
----------------- -------------
Segment assets for total reportable
business segments $ 3,591,193 $ 3,331,232
Segment assets for all other businesses 210,223 158,694
Items excluded from segment assets:
Cash and other investments 10,611 17,104
Export sales excise tax resolution
interest receivable 21,655 32,351
Deferred tax assets 594,911 355,533
Recoverable income taxes 9,739
Bond issuance costs 2,398
------------ -------------
Total Consolidated Assets $ 4,440,730 $ 3,894,914
============ =============
NOTE 7 - GUARANTOR SUBSIDIARIES FINANCIAL INFORMATION
The payment obligations under the $250,000 7.875 percent Notes due 2012 issued
by CONSOL Energy are fully and unconditionally guaranteed by several
subsidiaries of CONSOL Energy. In accordance with positions established by the
Securities and Exchange Commission, the following financial information sets
forth separate financial information with respect to the parent, the guarantor
subsidiaries and the non-guarantor subsidiaries. The principal elimination
entries eliminate investments in subsidiaries and certain intercompany balances
and transactions. CONSOL Energy, the parent, and a guarantor subsidiary manage
several assets and liabilities of their subsidiaries. For example, these include
deferred tax assets, cash and other post-employment liabilities. These assets
and liabilities are reflected as parent company or guarantor company amounts for
purposes of this presentation.
15
Income Statement for Three Months Ended June 30, 2002;
Non-
Parent Guarantor Guarantor Elimination Consolidated
----------- ------------ -------------------------- -------------
Sales - Outside $ - $ 408,817 $ 76,840 $ - $ 485,657
Sales - Related Parties - 817 (2) - 815
Freight - Outside - 27,375 6,324 - 33,699
Freight - Related Parties - 549 - - 549
Other Income (including equity earnings) 18,039 (8,920) 27,143 (20,732) 15,530
--------- ------------ ---------- ----------- -------------
Total Revenue 18,039 428,638 110,305 20,732) 536,250
Cost of Goods Sold and Other
Operating Charges 5,882 334,978 65,549 (40,314) 366,095
Intercompany Activity 298 (27,725) (14,585) 42,012 -
Freight Expense - 27,924 6,324 - 34,248
Selling, General and
Administrative Expense - 13,871 3,324 - 17,195
Depreciation, Depletion and
Amortization 133 56,390 9,278 - 65,801
Interest Expense 6,527 4,564 757 - 11,848
Taxes Other Than Income 907 35,410 6,550 - 42,867
Export Sales Excise Tax Resolution - (1,037) - - (1,037)
--------- ------------ ---------- ----------- -------------
Total Costs 13,747 444,375 77,197 1,698 537,017
--------- ------------ ---------- ----------- -------------
Earnings (Loss) Before Income Taxes 4,292 (15,737) 33,108 (22,430) (767)
Income Taxes (Benefit) (4,735) (12,640) 7,581 - (9,794)
--------- ------------ ---------- ----------- -------------
Net Income (Loss) $ 9,027 $ (3,097) $ 25,527 $ (22,430) $ 9,027
========= ============ ========== ----------- =============
16
Balance Sheet for June 30, 2002;
Non-
Parent Guarantor Guarantor Elimination Total
------------ ------------ ------------ -------------- ------------
Assets:
Current Assets:
Cash and Cash Equivalents $ 3,560 $ 115 $ 6,539 $ - $ 10,214
Accounts and Notes Receivable:
Trade 72,829 105,772 26,818 - 205,419
Related Parties 598 - - - 598
Other 2,775 113,895 16,298 - 132,968
Inventories 174 188,007 13,520 - 201,701
Deferred Income Taxes 55,490 - - - 55,490
Recoverable Income Taxes 9,739 - - - 9,739
Prepaid Expenses 14,221 28,191 1,983 - 44,395
------------ ------------ ------------- ------------- ------------
Total Current Assets 159,386 435,980 65,158 - 660,524
Property, Plant and Equipment:
Property, Plant and Equipment 80,832 4,536,520 981,434 - 5,598,786
Less-Accumulated Depreciation,
Depletion and Amortization 39,813 2,592,422 55,466 - 2,687,701
------------ ------------ ------------ ------------- ------------
Property, Plant and Equipment - Net 41,019 1,944,098 925,968 - 2,911,085
Other Assets:
Deferred Income Taxes 539,421 - - - 539,421
Advanced Mining Royalties - 51,189 39,248 - 90,437
Investment in Affiliates 1,251,735 854,677 63,835 (2,051,442) 118,805
Other 3,118 27,178 90,162 - 120,458
------------ ------------ ------------ ------------- ------------
Total Other Assets 1,794,274 933,044 193,245 (2,051,442) 869,121
------------ ------------ ------------ ------------- ------------
Total Assets $ 1,994,679 $ 3,313,122 $ 1,184,371 $ (2,051,442) $ 4,440,730
============ ============ ============ ============= ============
Liabilities and Stockholders' Equity:
Current Liabilities:
Accounts Payable $ 65,878 $ 59,840 $ 13,999 $ - $ 139,717
Accounts Payable (Recoverable)-
Related Parties 935,532 (674,409) (261,350) 227 -
Short-Term Notes Payable 291,212 - - - 291,212
Current Portion of Long-Term Debt 100 6,219 635 - 6,954
Other Accrued Liabilities 62,872 282,659 66,460 - 411,991
------------ ------------ ------------- ------------- ------------
Total Current Liabilities 1,355,594 (325,691) (180,256) 227 849,874
Long-Term Debt:
Long-Term Debt 247,993 211,621 6,607 - 466,221
Capital Lease Obligations - 6,504 - - 6,504
------------ ------------ ------------ ------------- ------------
Total Long-Term Debt 247,993 218,125 6,607 - 472,725
Deferred Credits and Other Liabilities:
Postretirement Benefits Other
Than Pensions - 1,432,132 - - 1,432,132
Pneumoconiosis Benefits - 460,150 - - 460,150
Mine Closing - 195,704 146,440 - 342,144
Workers' Compensation 1,653 226,438 30,546 - 258,637
Deferred Revenue - 180,656 25,419 - 206,075
Reclamation - 7,010 4,920 - 11,930
Other 146,235 13,216 4,408 - 163,859
------------ ------------ ------------ ------------- ------------
Total Deferred Credits and Other
Liabilities 147,888 2,515,306 211,733 - 2,874,927
Stockholders' Equity 243,204 905,382 1,146,287 (2,051,669) 243,204
------------ ------------ ------------ ------------- ------------
Total Liabilities and Stockholders' Equity $ 1,994,679 $ 3,313,122 $ 1,184,371 $ (2,051,442) $ 4,440,730
============ ============ ============ ============= ============
17
Condensed Statement of Cash Flows
For the Three Months Ended June 30, 2002;
Non-
Parent Guarantor Guarantor Elimination Consolidated
---------- ---------- ----------- ------------- --------------
Net Cash (Used in) Provided
by Operating Activities $ (79,002) $ 100,884 $ 24,238 $ - $ 46,120
---------- ---------- ----------- ------------- --------------
Cash Flows from Investing Activities:
Capital Expenditures $ (4,019) $ (58,015) $ (17,380) $ - $ (79,414)
Investment in Equity Affiliates (19,678) - (9,641) - (29,319)
Other Investing Activities - 1,155 811 - 1,966
---------- ---------- ----------- ------------- --------------
Net Cash Used in Investing activities $ (23,697) $ (56,860) $ (26,210) $ - $ (106,767)
---------- ---------- ----------- ------------- --------------
Cash Flows from Financing Activities:
Proceeds from Short-Term
Borrowings $ 112,672 $ - $ - $ - $ 112,672
Payments on Long-Term Notes - (43,000) - - (43,000)
Dividends Paid (22,029) - - - (22,029)
Other Financing Activities (94) (986) - - (1,080)
---------- ----------- ----------- ------------- --------------
Net Cash Provided by (Used in)
Financing Activities $ 90,549 $ (43,986) $ - $ - $ 46,563
---------- ---------- ----------- ------------- --------------
Income Statement for Three Months Ended June 30, 2001;
Non-
Parent Guarantor Guarantor Elimination Consolidated
---------- ---------- ----------- ------------- --------------
Sales - Outside $ - $ 414,189 $ 142,739 $ - $ 556,928
Sales - Related Parties - 1,690 2,027 - 3,717
Freight - Outside - 8,852 44,829 - 53,681
Freight - Related Parties - 308 2,738 (647) 2,399
Other Income (including equity earnings) 47,524 42,753 (21,467) (53,880) 14,930
---------- ---------- ----------- ------------- --------------
Total Revenue 47,524 467,792 170,866 (54,527) 631,655
Cost of Goods Sold and Other
Operating Charges 17,763 353,907 72,527 (34,502) 409,695
Intercompany Activity (28,008) (10,423) 5,893 32,538 -
Freight Expense - 9,160 47,567 (647) 56,080
Selling, General and
Administrative Expense - 11,765 3,610 - 15,375
Depreciation, Depletion and
Amortization 472 45,034 17,412 - 62,918
Interest Expense 4,822 6,306 1,002 - 12,130
Taxes Other Than Income 1,186 55,849 (13,975) - 43,060
Export Sales Excise Tax Resolution - (28,274) 44 - (28,230)
---------- ---------- ----------- ------------- --------------
Total Costs (3,765) 443,324 134,080 (2,611) 571,028
---------- ---------- ----------- ------------- --------------
Earnings (Loss) Before Income Taxes 51,289 24,468 36,786 (51,916) 60,627
Income Taxes (Benefit) 1,942 (648) 9,986 - 11,280
---------- ---------- ----------- ------------- --------------
Net Income (Loss) $ 49,437 $ 25,116 $ 26,800 $ (51,916) $ 49,347
========== ========== =========== ============= ==============
18
Balance Sheet for December 31, 2001;
Non-
Parent Guarantor Guarantor Elimination Total
----------- ----------- ----------- ------------ -----------
Assets:
Current Assets:
Cash and Cash Equivalents $ 3,723 $ 158 $ 11,701 $ - $ 15,582
Accounts and Notes Receivable:
Trade - 204,520 59,331 (43,409) 220,442
Other 1,577 108,784 12,986 - 123,347
Inventories 240 83,668 29,986 - 113,894
Deferred Income Taxes 54,708 - - - 54,708
Prepaid Expenses 3,142 30,667 8,465 - 42,274
----------- ----------- ----------- ------------ -----------
Total Current Assets 63,390 427,797 122,469 (43,409) 570,247
Property, Plant and Equipment:
Property, Plant and Equipment 51,581 4,055,229 1,307,150 - 5,413,960
Less-Accumulated Depreciation,
Depletion and Amortization 20,737 2,074,162 403,751 - 2,498,650
----------- ----------- ----------- ------------ -----------
Property, Plant and Equipment - Net 30,844 1,981,067 903,399 - 2,915,310
Other Assets:
Deferred Income Taxes 520,906 - - - 520,906
Advanced Mining Royalties 9 52,966 39,669 - 92,644
Investment in Affiliates 1,113,721 951,651 51,236 (2,038,941) 77,667
Other 754 74,451 45,608 - 120,813
----------- ----------- ----------- ------------ -----------
Total Other Assets 1,635,390 1,079,068 136,513 (2,038,941) 812,030
----------- ----------- ----------- ------------ -----------
Total Assets $ 1,729,624 $ 3,487,932 $ 1,162,381 $ (2,082,350) $ 4,297,587
=========== =========== =========== ============ ===========
Liabilities and Stockholders' Equity:
Current Liabilities:
Accounts Payable $ 117,281 $ 6,139 $ 91,912 $ (43,409) $ 171,923
Accounts Payable (Recoverable)-
Related Parties 811,479 (374,435) (517,919) 80,875 -
Short-Term Notes Payable 77,869 - - - 77,869
Current Portion of Long-Term Debt 100 72,036 635 - 72,771
Accrued Income Taxes 4,799 - - - 4,799
Other Accrued Liabilities 31,753 208,637 72,989 - 313,379
----------- ----------- ----------- ------------ -----------
Total Current Liabilities 1,043,281 (87,623) (352,383) 37,466 640,741
Long-Term Debt:
Long-Term Debt 245,892 211,688 6,607 - 464,187
Capital Lease Obligations - 8,482 - - 8,482
----------- ----------- ----------- ------------ -----------
Total Long-Term Debt 245,892 220,170 6,607 - 472,669
Deferred Credits and Other Liabilities:
Postretirement Benefits Other
Than Pensions - 1,417,567 - - 1,417,567
Pneumoconiosis Benefits - 459,776 - - 459,776
Mine Closing - 198,700 135,038 - 333,738
Workers' Compensation 1,738 234,814 32,523 - 269,075
Deferred Revenue - 195,370 32,225 - 227,595
Reclamation - 7,715 6,029 - 13,744
Other 167,154 21,649 2,320 - 191,123
----------- ----------- ----------- ------------ -----------
Total Deferred Credits and
Other Liabilities 168,892 2,535,591 208,135 - 2,912,618
Stockholders' Equity 271,559 819,794 1,300,022 (2,119,816) 271,559
----------- ----------- ----------- ------------ -----------
Total Liabilities and Stockholders' Equity $ 1,729,624 $ 3,487,932 $ 1,162,381 $ (2,082,350) $ 4,297,587
=========== =========== =========== ============ ===========
19
Condensed Statement of Cash Flows
For the Three Months Ended June 30, 2001;
Non-
Parent Guarantor Guarantor Elimination Consolidated
----------- ----------- ----------- ----------- ------------
Net Cash Provided
by Operating Activities $ 70,996 $ 37,886 $ 15,666 $ - $ 124,548
----------- ----------- ----------- ----------- ------------
Cash Flows from Investing Activities:
Capital Expenditures $ (951) $ (43,573) $ (10,217) $ - $ (54,741)
Acquisition of Line Creek Mine
Joint Venture - - (740) - (740)
Investment in Equity Affiliates 26 5,985 (2,597) - 3,414
Other Investing Activities 1,372 1,769 (59) - 3,082
----------- ----------- ----------- ----------- ------------
Net Cash Provided By (Used in)
Investing Activities $ 447 $ (35,819) $ (13,613) $ - $ (48,985)
----------- ----------- ----------- ----------- ------------
Cash Flows from Financing Activities:
Payments on Short-Term Borrowings $ (51,184) $ - $ - $ - $ (51,184)
Dividends Paid (22,019) - - - (22,019)
Other Financing Activities 1,088 (2,118) - - (1,030)
----------- ----------- ----------- ----------- ------------
Net Cash Used in Investing Activities $ (72,115) $ (2,118) $ - $ - $ (74,233)
----------- ----------- ----------- ----------- ------------
Income Statement for the Six Months Ended June 30, 2002;
Non-
Parent Guarantor Guarantor Elimination Consolidated
----------- ----------- ----------- ----------- ------------
Sales - Outside $ - $ 837,050 $ 155,801 $ - $ 992,851
Sales - Related Parties - 819 - - 819
Freight - Outside - 55,370 14,761 - 70,131
Freight - Related Parties - 549 1,265 (1,265) 549
Other Income (including equity earnings) 26,317 (804) 21,647 (23,259) 23,901
----------- ----------- ----------- ----------- ------------
Total Revenue 26,317 892,984 193,474 (24,524) 1,088,251
Cost of Goods Sold and Other Operating Charges 8,533 665,614 136,085 (79,235) 730,997
Intercompany Activity (3,725) (54,588) (33,342) 91,655 -
Freight Expense - 55,919 16,026 (1,265) 70,680
Selling, General and Administrative Expense - 25,271 8,581 - 33,852
Depreciation, Depletion and Amortization 841 114,323 18,949 (1,855) 132,258
Interest Expense 10,079 10,492 1,414 - 21,985
Taxes Other Than Income 2,023 78,355 13,214 - 93,592
Export Sales Excise Tax Resolution - (1,037) - - (1,037)
----------- ----------- ----------- ----------- ------------
Total Costs 17,751 894,349 160,927 9,300 1,082,327
----------- ----------- ----------- ----------- ------------
Earnings (Loss) Before Income Taxes 8,566 (1,365) 32,547 (33,824) 5,924
Income Taxes (Benefit) (5,962) (10,123) 7,481 - (8,604)
----------- ----------- ----------- ----------- ------------
Net Income (Loss) $ 14,528 $ 8,758 $ 25,066 $ (33,824) $ 14,528
=========== =========== =========== =========== ============
20
Condensed Statement of Cash Flows
For the Six Months Ended June 30, 2002;
Non-
Parent Guarantor Guarantor Elimination Consolidated
----------- ----------- ----------- ----------- ------------
Net Cash (Used in) Provided
by Operating Activities $ (144,490) $ 174,289 $ 45,737 $ - $ 75,536
----------- ----------- ----------- ----------- ------------
Cash Flows from Investing Activities:
Capital Expenditures $ (6,526) $ (106,965) $ (36,283) $ - $ (149,774)
Investment in Equity Affiliates (19,984) (50) (14,693) - (34,727)
Other Investing Activities - 556 77 - 633
----------- ----------- ----------- ----------- ------------
Net Cash Used in Investing Activities $ (26,510) $ (106,459) $ (50,899) $ - $ (183,868)
----------- ----------- ----------- ----------- ------------
Cash Flows from Financing Activities:
Payments on Short-Term Borrowings $ (32,078) $ - $ - $ - $ (32,078)
Payments on Long-Term Notes - (66,000) - - (66,000)
Proceeds from Long-Term Notes 246,310 - - - 246,310
Dividends Paid (44,054) - - - (44,054)
Other Financing Activities 659 (1,873) - - (1,214)
----------- ----------- ----------- ----------- ------------
Net Cash Provided by (Used in)
Financing Activities $ 170,837 $ (67,873) $ - $ - $ 102,964
----------- ----------- ----------- ----------- ------------
Income Statement for the Six Months Ended June 30, 2001;
Non-
Parent Guarantor Guarantor Elimination Consolidated
----------- ----------- ----------- ----------- ------------
Sales - Outside $ - $ 830,438 $ 299,903 $ - $ 1,130,341
Sales - Related Parties - 3,100 4,132 - 7,232
Freight - Outside - 35,762 49,892 - 85,654
Freight - Related Parties - 970 2,738 (647) 3,061
Other Income (including equity earnings) 164,797 101,300 (56,738) (176,056) 33,303
----------- ----------- ----------- ----------- ------------
Total Revenue 164,797 971,570 299,927 (176,703) 1,259,591
Cost of Goods Sold and Other Operating Charges 26,877 730,856 141,577 (68,200) 831,110
Intercompany Activity (23,829) (60,084) 11,177 72,736 -
Freight Expense - 36,732 52,630 (647) 88,715
Selling, General and Administrative Expense - 23,968 5,694 - 29,662
Depreciation, Depletion and Amortization 951 96,759 27,694 (1,855) 123,549
Interest Expense 17,065 7,648 2,079 - 26,792
Taxes Other Than Income 2,536 86,681 (8,922) - 80,295
Export Sales Excise Tax Resolution - (115,886) (7,636) - (123,522)
----------- ----------- ----------- ----------- ------------
Total Costs 23,600 806,674 224,293 2,034 1,056,601
----------- ----------- ----------- ----------- ------------
Earnings (Loss) Before Income Taxes 141,197 164,896 75,634 (178,737) 202,990
Income Taxes (Benefit) (8,950) 40,463 21,330 - 52,843
----------- ----------- ----------- ----------- ------------
Net Income (Loss) $ 150,147 $ 124,433 $ 54,304 $ (178,737) $ 150,147
=========== =========== =========== =========== ============
21
Condensed Statement of Cash Flows
For the Six Months Ended June 30, 2001;
Non-
Parent Guarantor Guarantor Elimination Consolidated
----------- ----------- ----------- ----------- ------------
Net Cash (Used in) Provided
by Operating Activities $ (315,744) $ 525,829 $ 44,031 $ - $ 254,116
----------- ----------- ----------- ----------- ------------
Cash Flows from Investing Activities:
Capital Expenditures $ (3,163) $ (74,291) $ (27,382) $ - $ (104,836)
Acquisition of Line Creek Mine
Joint Venture - - (1,608) - (1,608)
Investment in Equity Affiliates - 11,186 (1,805) - 9,381
Other Investing Activities 1,425 2,876 (9,644) - (5,343)
----------- ----------- ----------- ----------- ------------
Net Cash Used in Investing
Activities $ (1,738) $ (60,229) $ (40,439) $ - $ (102,406)
----------- ----------- ----------- ----------- ------------
Cash Flows from Financing Activities:
Proceeds from (Payments on) Short-Term
Borrownings $ 362,812 $ (462,689) $ - $ - $ (99,877)
Dividends Paid (44,024) - - - (44,024)
Other Financing Activities 1,409 (3,163) - - (1,754)
----------- ----------- ----------- ----------- ------------
Net Cash Provided by (Used in)
Financing Activities $ 320,197 $ (465,852) $ - $ - $ (145,655)
----------- ----------- ----------- ----------- ------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
General
Total coal sales for the three months ended June 30, 2002 were 16.4 million
tons, including a portion of sales by equity affiliates, of which 15.8 million
tons were produced by CONSOL Energy operations, by our equity affiliates or sold
from inventory of company produced coal. This compares with total coal sales of
20.4 million tons for the three months ended June 30, 2001, of which 19.7
million tons were produced by CONSOL Energy operations, by our equity affiliates
or sold from inventory of company produced coal. Demand for coal in the three
months ended June 30, 2002 was weak primarily due to the mild weather in the
Northeast and Southeast United States, delays in finalizing volumes and prices
for export metallurgical coal and the sluggish U.S. economy. Inventory of
company produced coal, including the portion of inventory at equity affiliates,
was 5.8 million tons at June 30, 2002, compared with 1.6 million tons at
December 31, 2001. Average sales prices for company produced coal have increased
6.7% to $26.60 per ton in the three months ended June 30, 2002 period from
$24.92 per ton in the three months ended June 30, 2001 period reflecting the
higher prices negotiated in a more favorable coal market in the last six months
of 2001.
Lower production levels during the quarter were the result of the previously
announced plan to reduce production by five to six million tons from planned
output during 2002 in order to match anticipated demand. McElroy Mine was idled
May 1, 2002. It resumed production on August 5,
22
2002. Blacksville #2, Robinson Run, Mine 84, Mahoning Valley, Humphrey and VP#8
mines were idled June 17, 2002. Blacksville #2 resumed production on July 17,
2002. Robinson Run resumed production July 8, 2002. Mine 84 resumed production
July 22, 2002. Mahoning Valley and Humphrey are being evaluated on a
week-to-week basis. The Humphrey and Dilworth mines will close permanently later
this year. Shoemaker and Rend Lake mines were idled in early July 2002 and we
currently anticipate that these mines will remain idle for several months.
Loveridge Mine remains idle and will continue to be evaluated to determine when
market conditions will support reopening.
Sales volumes of coalbed methane gas, including a percentage of the sales of
equity affiliates equal to our interest in these affiliates, increased 28.3% to
12.0 billion cubic feet in the three months ended June 30, 2002 compared with
9.3 billion cubic feet in the three months ended June 30, 2001. The increased
sales volumes are primarily due to increased volumes as a result of the
acquisition of the remaining 50% interest in Pocahontas Gas Partnership on
August 22, 2001, that we previously did not own. Our average sales price for
coalbed methane gas, including sales of equity affiliates, decreased 35.0% to
$3.05 per million British thermal units in the 2002 period compared with $4.69
per million British thermal units in the 2001 period. Gas prices through the
second quarter of 2002 were lower than levels during the second quarter of 2001
due to lower demand in the industrial sector and lower demand for gas during the
winter heating season which resulted in high levels of gas in storage during the
2002 period.
CONSOL Energy's Board of Directors announced that the dividend for the second
quarter, which will be paid in September 2002, will be reduced to $0.14 per
share from the dividend of $0.28 per share that had been paid in each quarter
since CONSOL Energy became a public company. The reduction was due to the
condition of the coal markets and the company's capital requirements. CONSOL
Energy also expects to reduce anticipated capital spending in the year ending
December 31, 2002 by more than $110 million from anticipated expenditures for
the year ending December 31, 2002. Expected capital expenditures will be reduced
mainly through project delays and utilization of leasing arrangements.
CONSOL Energy Board of Directors appointed PricewaterhouseCoopers LLP to serve
as the company's independent accountant, effective June 5, 2002.
PricewaterhouseCoopers LLP serves as independent accountant for RWE A.G., a
multi-utility holding group headquartered in Essen, Germany, which owns
approximately 74 percent of CONSOL Energy's common stock. PricewaterhouseCoopers
LLP replaced Ernst & Young LLP as the company's independent accountant.
In March 2002, our joint-venture with Allegheny Energy Supply Company, LLC, an
affiliate of one of our largest coal customers, to build an 88-megawatt,
gas-fired electric generating facility was completed and the facility was placed
into commercial service on June 25, 2002.
On July 15, 2002, Standard & Poor's revised its outlook on CONSOL Energy to
negative from stable based on poor coal industry conditions. Standard & Poor's
said that it has affirmed its triple-B plus and A-2 corporate credit ratings.
On August 2, 2002, Moody's Investor Service downgraded the senior unsecured debt
ratings of CONSOL Energy to Baa2. The rating outlook is negative. These rating
actions resulted from the adverse effect that the decline in coal tons sold and
the reduction in spot prices for uncommitted tons has had on earnings, cash flow
generation and debt protection measures in the year to date. The ratings actions
also reflect Moody's expectation that CONSOL's performance will remain
challenged for the balance of 2002 and into 2003. Moreover, Moody's expects that
despite recent actions taken to reduce capital expenditures and dividends, there
is likely to be a modest cash outflow in 2002 and into 2003.
23
Results of Operations
Three Months Ended June 30, 2002 Compared with Three Months
Ended June 30, 2001
Net Income
CONSOL Energy's net income for the three months ended June 30, 2002 was $9
million compared with $49 million for the three months ended June 30, 2001. The
decrease of $40 million, or 81.7%, primarily was due to reduced revenues from
sales of coal, offset, in part, by reduced cost of goods sold and other charges.
Sales revenue from coal was lower in the 2002 period compared to the 2001 period
primarily due to a 19.5% reduction in sales volumes of company produced coal.
The reductions in the cost of goods sold and other charges were also due
primarily to the reduced volume of coal sold. Net income for the three months
ended June 30, 2001 was also impacted by the $28 million income recognized in
the three months ended June 30, 2001, related to the export sales excise tax
resolution compared to the $1 million recognized in the three months ended June
30, 2002. The decrease in earnings was offset, in part, by income tax benefits
recognized in the three months ended June 30, 2002, compared to tax expense
recognized in the three months ended June 30, 2001. The decrease in tax expense
was due mainly to a pre-tax loss of $1 million for the 2002 period compared to
pre-tax earnings of $61 million in the 2001 period without a comparable
reduction in percentage depletion tax benefits. CONSOL Energy estimates the
effective tax rate expected to be applicable for the full fiscal year. The
effective tax rate is sensitive to changes in annual profitability and
percentage depletion. Income taxes were also reduced due to adjusting the
provision for income taxes at the time the returns are filed. These adjustments
decreased income tax expense by $3 million in the 2002 period and $1 million in
the 2001 period. In the 2002 period, CONSOL Energy received a $2 million federal
income tax benefit from a final agreement resolving disputed federal income tax
items for the years 1995 to 1997.
Revenue
Sales decreased $75 million, or 13.2% to $486 million for the 2002 period from
$561 million for the 2001 period.
Revenues from the sale of company produced coal decreased $68 million, or 14.1%,
to $412 million in the 2002 period from $480 million in the 2001 period. The
decrease in company produced coal revenue was due mainly to a decrease in the
tons sold. Company produced tons sold were 15.5 million tons in the 2002 period,
a 3.8 million ton, or 19.5%, decreased from the 2001 period. The decrease in
tons sold was due primarily to the deferral of shipments by our customers from
the second quarter of 2002 to later in the year and reduced volumes for
requirement contracts, both attributed to decreased demand as a result of the
mild weather and unscheduled power plant outages. Although sales volumes have
declined from the 2001 period, the average sales price per ton of company
produced coal sold increased. Average sales price per ton of company produced
coal increased 6.7% to $26.60 per ton for the 2002 period from $24.92 per ton
24
for the 2001 period. The increase in average sales price reflects the higher
prices negotiated in a more favorable coal market during the last six months of
2001.
Revenues from the sale of purchased coal decreased $5 million, or 23.7%, to $19
million in the 2002 period from $24 million in the 2001 period. The decrease was
primarily due to a 28.9% decrease in sales volumes. Sales volumes of purchased
coal were 0.5 million tons in the 2002 period compared to 0.8 million tons in
the 2001 period. The average sales price per ton of purchased coal increased
$2.29, or 7.2%, to $34.02 per ton for the 2002 period compared to $31.72 per ton
for the 2001 period. The increase in sales price per ton of purchased coal in
the 2002 period reflects higher prices negotiated in a more favorable coal
market during the last six months of 2001.
Industrial supply sales decreased $5 million, or 23.5%, to $16 million in the
2002 period from $21 million in the 2001 period primarily due to reduced sales
volumes. During the year ended June 30, 2001, the physical assets, inventory and
operations associated with 18 industrial and store management sites of Fairmont
Supply Company were sold. Fairmont Supply continues to operate 14 service
centers at June 30, 2002.
These decreases in coal and industrial supply revenues were partially offset by
the increase in sales of gas. Revenues from gas sales increased $4 million, or
13.5%, to $35 million in the 2002 period from $31 million in the 2001 period.
Sales volumes were 11.9 billion cubic feet in the 2002 period, an increase of
5.0 billion cubic feet from the 2001 period. The increase was due to higher
sales volumes as a result of the August 22, 2001 acquisition of the remaining
50% interest in the Pocahontas Gas Partnership. The increase in volumes sold was
offset, in part, by a reduction in demand and a reduction in the average sales
price per million British thermal units sold. The average sales price was $3.04
per million British thermal units in the 2002 period, a $1.63, or 34.9%,
decrease compared to $4.67 per million British thermal units in the 2001 period.
The decrease in demand and average sales price was primarily due to lower demand
for gas in the industrial sector and lower demand for gas during the winter
heating season as a result of milder weather that resulted in high levels of gas
in storage during the quarter.
Freight revenue, both outside and related party, decreased $22 million, or
38.9%, to $34 million in the 2002 period compared to $56 million in the 2001
period. Freight revenue is based on weight of coal shipped, negotiated freight
rates and method of transportation (e.g., rail, barge or truck) used for the
customers that CONSOL Energy contractually provides transportation. Freight
expense is billed to customers and the revenue from such billings equals the
transportation expense.
Other income, which consists of interest income, gain on the disposition of
assets, equity in earnings of affiliates, service income, royalty income, rental
income and miscellaneous income, increased $1 million, or 4.0%, to $16 million
in the 2002 period from $15 million in the 2001 period. The increase was
primarily due to $7 million of income related to a contract settlement which
occurred in the 2002 period. This income was offset, in part, by a reduction of
$6 million in equity in earnings of affiliates primarily due to the August 22,
2001 purchase of the remaining 50% interest in Pocahontas Gas Partnership and
the remaining 25% interest in Cardinal States Gathering Company. As a result of
the acquisition, CONSOL Energy owns 100% of these entities and began to account
for them as fully consolidated subsidiaries. Before the acquisition, CONSOL
Energy accounted for these companies using the equity method.
25
Costs
Cost of Goods Sold and Other Operating Charges decreased $44 million, or 10.6%,
to $366 million in the 2002 period compared to $410 million in the 2001 period.
Cost of goods sold and other charges for company produced coal was $286 million
in the 2002 period, a decrease of $22 million, or 7.4%, from $308 million in the
2001 period. This is due primarily to a 19.5% decrease in the volume of company
produced coal sold. The decrease in volume was offset, in part, by a 15.2%
increase in the cost per ton produced. The increase in cost per ton produced is
primarily due to increased labor and benefits costs. Increased labor costs are
primarily due to the decline in productivity at the mines in the 2002 period
compared to the 2001 period. The decline in productivity is a result of the
reduction in planned production to match anticipated demand for coal. Increased
benefit costs are primarily due to increased medical costs.
Industrial supplies cost of goods sold and other charges decreased $6 million,
or 26.7%, to $19 million in the 2002 period compared to $25 million in the 2001
period. The decrease was due to reduced sales.
Miscellaneous cost of goods sold and other charges decreased $10 million, or
41.6%, to $13 million in the 2002 period compared to $23 million in the 2001
period. The decrease is due to a reduction of $7 million related to the
incentive compensation program expense recognized in the 2002 period compared to
the 2001 period. The program is designed to increase compensation to eligible
employees when CONSOL Energy reaches predetermined earnings targets and the
employees reach predetermined performance targets. Expense for this plan was
reduced in the 2002 period due to quarterly performance targets for the three
months ended June 30, 2002, not being achieved. The decrease in miscellaneous
cost of goods sold and other charges is also due to a $4 million expense
adjustment in the 2001 period related to a liability for the salaried investment
plan. These decreases were offset, in part, by a $2 million expense adjustment
to recognize an allowance for doubtful accounts related to trade accounts
receivable in the 2002 period.
Purchased coal costs of goods sold and other charges decreased $5 million, or
19.3%, to $18 million in the 2002 period from $23 million in the 2001 period.
The decrease was primarily due to a 28.9% reduction in volume of purchased coal
sold. The cost per ton of purchased coal was $33.31 per ton in the 2002 period
compared to $29.36 per ton in the 2001 period.
Royalty costs decreased $3 million, or 20.5%, to $10 million in the 2002 period
compared to $13 million in the 2001 period. The decrease is due primarily to
reaching the maximum amount payable on a royalty contract which resulted in
decreased amounts being owed in the 2002 period compared to the 2001 period.
These decreases in cost of goods sold and other charges were offset, in part, by
increased costs for closed and idle mine costs. Closed and idle mine costs
increased $4 million, or 25.6%, to $19 million in the 2002 period compared to
$15 million in the 2001 period. The increase is due primarily to increases in
idle mine costs related to McElroy mine being idled in May and June of 2002. The
increase is also due to additional costs for Loveridge mine being idle for all
of the 2002 period compared with one month of idle time during the 2001 period.
Loveridge mine was reopened in March 2001 in order to mine the remaining
longwall panel and then was idled at the end of May 2001. Other changes in the
2001 period include $4 million of adjustments in
26
reclamation liabilities recognized in that period as a result of updated
engineering studies and cost projections for closed locations.
Gas operations cost of goods sold and other charges increased 3.4% to $16
million in the 2002 period from $15 million in the 2001 period. The increase of
$1 million was due mainly to increased sales volumes as a result of the
acquisition of the remaining 50% interest in Pocahontas Gas Partnership and the
remaining 25% interest in Cardinal States Gathering Company on August 22, 2001.
Freight expense decreased $22 million, or 38.9%, to $34 million in the 2002
period compared to $56 million in the 2001 period. Freight expense is based on
weight of coal shipped, negotiated freight rates and method of transportation
(e.g., rail, barge or truck) used for the customers that CONSOL Energy
contractually provides transportation. Freight expense is billed to customers
and the revenue from such billings equals the transportation expense.
Selling, general and administrative expenses increased 11.8% to $17 million in
the 2002 period compared to $15 million in the 2001 period. The increase of $2
million was primarily due to a $1 million increase in professional consulting
and training fees related to the conversion to a new integrated information
technology system provided by SAP AG to support business processes. The system
will be implemented in stages over the next three years at a total estimated
cost, a portion of which is to be capitalized, of $53 million. The increase is
also attributable to $1 million of professional consulting and training fees
related to the review of strategic planning processes.
Depreciation, depletion and amortization expense increased $3 million, or 4.6%,
to $66 million in the 2002 period compared to $63 million in the 2001 period.
The increase was primarily due to additional depreciation expense related to
assets placed in service after the 2001 period and additional depreciation
expense on assets owned by Pocahontas Gas Partnership and Cardinal States
Gathering Company, of which CONSOL Energy acquired the remaining 50% interest
and 25% interest in on August 22, 2001. This increase was offset, in part, by
lower depletion related to the reduced production levels in the 2002 period
compared to the 2001 period.
Interest expense remained stable at $12 million for the 2002 period compared to
the 2001 period. Interest expense remained stable due to a reduction of $124
million in the average debt levels of commercial paper outstanding during the
2002 period compared to the 2001 period, along with a decrease of 2.6% per annum
in average interest rates in the period to period comparison. This resulted in a
reduction of $3 million in interest expense related to commercial paper in the
2002 period compared to the 2001 period. Interest expense was also reduced $1
million due to the reduction of long term debt through scheduled payments. These
reductions were offset by the increased interest expense related to the March 7,
2002, issuance of $250 million of 7.875% Notes due in 2012. The interest on
notes is payable March 1 and September 1 of each year commencing September 1,
2002. Interest expense related to the issuance of these notes was $5 million in
the 2002 period.
Taxes other than income were at $43 million in the 2002 period and the 2001
period. Production taxes decreased $2 million, or 7.3%, to $25 million in the
2002 period compared to $27 million in the 2001 period. The reduction was due
mainly to lower severance tax accruals due to reduced production. This
decrease was offset by a $3 million, or 45.2%, increase in real estate and
personal property taxes. The increase was due mainly to the additional property
taxes related to
27
the properties owned by the Windsor Coal Company, Southern Ohio Coal Company,
and Central Ohio Coal Company which were acquired from American Electric Power
on July 2, 2001. The increased real estate and personal property taxes were also
due to increased property taxes at the Bailey and Enlow Fork mines, as well as
the Pocahontas Gas Partnership and Cardinal States Gathering Company, of which
CONSOL Energy acquired the remaining 50% and 25% interest in on August 22, 2001.
CONSOL Energy is no longer required to pay certain excise taxes on export sales.
We have filed claims with the Internal Revenue Service seeking refunds for these
excise taxes that were determined to be unconstitutional and were paid during
the period 1991 through 1999. During the 2002 period, we recognized $1 million
of interest income related to these claims. During the 2001 period, we
recognized $27 million of pre-tax earnings net of other charges and $1 million
of interest income related to these claims.
Income Taxes
Income tax benefits were $10 million in the 2002 period compared to $11 million
expense in the 2001 period. The decrease in tax expense was due mainly to a
pre-tax loss of $1 million for the 2002 period compared to pre-tax earnings of
$61 million in the 2001 period without a comparable loss in percentage depletion
tax benefits. CONSOL Energy estimates the effective tax rate expected to be
applicable for the full fiscal year. The effective tax rate is sensitive to
changes in annual profitability and percentage depletion. Income taxes were also
reduced due to adjusting the provision for income taxes at the time the returns
are filed. These adjustments decreased income tax expense by $3 million in the
2002 period and $1 million for the 2001 period. CONSOL Energy received a $2
million federal income tax benefit from a final agreement resolving disputed
federal income tax items for the years 1995 to 1997 that reduced income taxes in
the 2002 period.
Six Months Ended June 30, 2002 Compared with Six Months
Ended June 30, 2001
Net Income
CONSOL Energy's net income was $15 million for the six months ended June 30,
2002, compared to $150 million for the six months ended June 30, 2001. Net
income for the six months ended June 30, 2001 includes $124 million of income
recognized in that period related to the export sales excise tax resolution. The
decrease in net income from the six months ended June 30, 2001 was also due to
reduced revenues from sales of coal, offset, in part, by reduced cost of goods
sold and other charges. Sales revenue from coal was lower in the year to date
2002 period compared to the year to date 2001 period primarily due to a 12.2%
reduction in sales volumes of company produced coal. The reductions in the cost
of goods sold and other charges were also due primarily to the reduced volume of
coal sold. These decreases in earnings were offset, in part, by income tax
benefits recognized in the six months ended June 30, 2002, compared to tax
expense recognized in the six months ended June 30, 2001. The income tax benefit
was due mainly to lower pre-tax income for the year to date 2002 period compared
to the year to date 2001 period without a comparable reduction in percentage
depletion tax benefits. Our effective tax rate is sensitive to changes in annual
profitability and percentage depletion. Income taxes were also reduced due to
adjusting the provision for income taxes at the time the returns are filed.
These adjustments decreased income tax expense by $3 million in the year to date
2002 period and $1
28
million for the year to date 2001 period. CONSOL Energy received a $2 million
federal income tax benefit from a final agreement resolving disputed federal
income tax items for the years 1995 to 1997 that also reduced income taxes in
the year to date 2002 period.
Revenue
Sales decreased $144 million, or 12.7%, to $994 million for the year to date
2002 period from $1,138 million for the year to date 2001 period.
Revenues from the sale of company produced coal decreased $118 million, or
12.3%, to $841 million in the year to date 2002 period from $959 million in the
year to date 2001 period. The decrease in company produced coal revenue was due
mainly to a decrease in the tons sold. Company produced tons sold were 31.7
million tons in the year to date 2002 period, a 7.1 million ton, or 18.2%,
decrease from the year to date 2001 period. The decrease in tons sold was due
primarily to the deferral of shipments by our customers from the second quarter
of 2002 to later in the year and reduced volumes from requirement contracts,
both attributed to the mild weather and unscheduled power plant outages.
Although sales volumes have declined from the year to date 2001 period, the
average sales price per ton of company produced coal sold increased 7.3% to
$26.52 per ton for the year to date 2002 period from $24.73 per ton for the year
to date 2001 period. The increase in average sales price reflects the higher
prices negotiated in a more favorable coal market during the last six months of
2001.
Revenues from the sale of industrial supplies decreased $18 million, or 35.1%,
to $34 million in the year to date 2002 period from $52 million in the year to
date 2001 period primarily due to reduced sales volumes. During the year ended
June 30, 2001, the physical assets,