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 March 31, 2005
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 incorporation or organization) |
(IRS Employer Identification No.) |
1800 Washington Road,
Pittsburgh, Pennsylvania 15241
(Address of principal executive offices, including 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 ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨
Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.
| Class |
Shares outstanding as of April 25, 2005 | |
| Common stock, $0.01 par value |
91,310,648 |
| Page | ||||
| PART I FINANCIAL INFORMATION |
||||
| ITEM 1. |
CONDENSED FINANCIAL STATEMENTS |
|||
| Consolidated Statements of Income for the three months ended March 31, 2005 and March 31, 2004 | 1 | |||
| Consolidated Balance Sheets at March 31, 2005 and December 31, 2004 | 2 | |||
| Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2005 | 3 | |||
|
Consolidated Statements of Cash Flows for the three months ended March 31, 2005 and March 31, 2004 |
4 | |||
| Notes to Consolidated Financial Statements | 5 | |||
| ITEM 2. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 25 | ||
| ITEM 3. |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 43 | ||
| ITEM 4. |
CONTROLS AND PROCEDURES | 44 | ||
| PART II OTHER INFORMATION |
||||
| ITEM 6. |
EXHIBITS | 45 | ||
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 March 31, | ||||||
| 2005 |
2004 | |||||
| Sales—Outside |
$ | 762,599 | $ | 590,488 | ||
| Freight—Outside |
30,124 | 31,439 | ||||
| Other Income |
24,265 | 28,928 | ||||
| Total Revenue and Other Income |
816,988 | 650,855 | ||||
| Cost of Goods Sold and Other Operating Charges (exclusive of depreciation, depletion and amortization shown below) |
550,908 | 446,541 | ||||
| Freight Expense |
30,124 | 31,439 | ||||
| Selling, General and Administrative Expense |
16,389 | 18,594 | ||||
| Depreciation, Depletion and Amortization |
63,379 | 59,470 | ||||
| Interest Expense |
6,924 | 9,061 | ||||
| Taxes Other Than Income |
59,577 | 48,033 | ||||
| Total Costs |
727,301 | 613,138 | ||||
| Earnings Before Income Taxes and Cumulative Effect of Change in Accounting |
89,687 | 37,717 | ||||
| Income Tax Expense |
14,475 | 4,807 | ||||
| Earnings Before Cumulative Effect of Change in Accounting |
75,212 | 32,910 | ||||
| Cumulative Effect of Changes in Accounting for Workers’ Compensation, net of Income Taxes of $53,080 |
— | 83,373 | ||||
| Net Income |
$ | 75,212 | $ | 116,283 | ||
| Basic Earnings Per Share |
$ | 0.83 | $ | 1.29 | ||
| Dilutive Earnings Per Share |
$ | 0.82 | $ | 1.28 | ||
| Weighted Average Number of Common Shares Outstanding: |
||||||
| Basic |
90,943,236 | 89,927,306 | ||||
| Dilutive |
92,059,791 | 90,548,329 | ||||
| Dividends Paid Per Share |
$ | 0.14 | $ | 0.14 | ||
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) MARCH 31, 2005 |
DECEMBER 31, 2004 |
|||||||
| ASSETS | ||||||||
| Current Assets: |
||||||||
| Cash and Cash Equivalents |
$ | 21,259 | $ | 6,422 | ||||
| Accounts and Notes Receivable: |
||||||||
| Trade |
167,700 | 111,580 | ||||||
| Other Receivables |
41,609 | 30,251 | ||||||
| Inventories |
144,477 | 121,902 | ||||||
| Deferred Income Taxes |
152,623 | 145,890 | ||||||
| Recoverable Income Taxes |
1,253 | 14,614 | ||||||
| Prepaid Expenses |
43,196 | 39,510 | ||||||
| Total Current Assets |
572,117 | 470,169 | ||||||
| Property, Plant and Equipment: |
||||||||
| Property, Plant and Equipment |
6,570,917 | 6,514,016 | ||||||
| Less—Accumulated Depreciation, Depletion and Amortization |
3,393,285 | 3,331,436 | ||||||
| Total Property, Plant and Equipment—Net |
3,177,632 | 3,182,580 | ||||||
| Other Assets: |
||||||||
| Deferred Income Taxes |
352,277 | 355,008 | ||||||
| Investment in Affiliates |
69,778 | 47,684 | ||||||
| Restricted Cash |
15,000 | — | ||||||
| Other |
128,411 | 140,170 | ||||||
| Total Other Assets |
565,466 | 542,862 | ||||||
| TOTAL ASSETS |
$ | 4,315,215 | $ | 4,195,611 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current Liabilities: |
||||||||
| Accounts Payable |
$ | 161,375 | $ | 166,068 | ||||
| Short-Term Notes Payable |
— | 5,060 | ||||||
| Current Portion of Long-Term Debt |
3,919 | 3,885 | ||||||
| Other Accrued Liabilities |
559,337 | 530,472 | ||||||
| Total Current Liabilities |
724,631 | 705,485 | ||||||
| Total Long-Term Debt |
425,745 | 425,760 | ||||||
| Deferred Credits and Other Liabilities: | ||||||||
| Postretirement Benefits Other Than Pensions |
1,536,300 | 1,531,250 | ||||||
| Pneumoconiosis Benefits |
422,330 | 427,264 | ||||||
| Mine Closing |
321,805 | 305,152 | ||||||
| Workers’ Compensation |
139,498 | 140,318 | ||||||
| Deferred Revenue |
44,124 | 50,208 | ||||||
| Salary Retirement |
66,001 | 51,957 | ||||||
| Reclamation |
5,581 | 5,745 | ||||||
| Other |
92,088 | 83,451 | ||||||
| Total Deferred Credits and Other Liabilities |
2,627,727 | 2,595,345 | ||||||
| Stockholders’ Equity: | ||||||||
| Common Stock, $.01 par value; 500,000,000 Shares Authorized, 91,271,352 Issued and 91,271,352 Outstanding at March 31, 2005 and 90,642,939 Outstanding at December 31, 2004 |
913 | 913 | ||||||
| Preferred Stock, 15,000,000 Shares Authorized; None Issued and Outstanding |
— | — | ||||||
| Capital in Excess of Par Value |
852,232 | 846,644 | ||||||
| Retained Earnings (Deficit) |
(214,895 | ) | (277,406 | ) | ||||
| Other Comprehensive Loss |
(96,592 | ) | (89,193 | ) | ||||
| Unearned Compensation on Restricted Stock Units |
(4,546 | ) | (4,883 | ) | ||||
| Common Stock in Treasury, at Cost—0 Shares at March 31, 2005, 624,619 Shares at December 31, 2004 |
— | (7,054 | ) | |||||
| Total Stockholders’ Equity |
537,112 | 469,021 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
$ | 4,315,215 | $ | 4,195,611 | ||||
The accompanying notes are an integral part of these financial statements.
2
CONSOL ENERGY INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Dollars in thousands, except per share data)
| Common Stock |
Capital in Excess of Par Value |
Retained Earnings (Deficit) |
Other Comprehensive Income (Loss) |
Unearned Compensation on Restricted Stock Units |
Treasury Stock |
Total Stockholders’ Equity |
||||||||||||||||||||
| Balance—December 31, 2004 |
$ | 913 | $ | 846,644 | $ | (277,406 | ) | $ | (89,193 | ) | $ | (4,883 | ) | $ | (7,054 | ) | $ | 469,021 | ||||||||
| (Unaudited) |
||||||||||||||||||||||||||
| Net Income |
— | — | 75,212 | — | — | — | 75,212 | |||||||||||||||||||
| Treasury Rate Lock (Net of $13 tax) |
— | — | — | (21 | ) | — | — | (21 | ) | |||||||||||||||||
| Stock Options Exercised (624,619) |
— | 5,473 | — | — | — | 7,054 | 12,527 | |||||||||||||||||||
| Gas Cash Flow Hedge (Net of $4,697 tax) |
— | — | — | (7,378 | ) | — | — | (7,378 | ) | |||||||||||||||||
| Dividend Equivalents on Restricted Stock Units (2,790 units) |
— | 103 | — | — | (103 | ) | — | — | ||||||||||||||||||
| Amortization of Restricted Stock Unit Grants |
— | — | — | — | 440 | — | 440 | |||||||||||||||||||
| Dividends ($.14 per share) |
— | 12 | (12,701 | ) | — | — | — | (12,689 | ) | |||||||||||||||||
| Balance—March 31, 2005 |
$ | 913 | $ | 852,232 | $ | (214,895 | ) | $ | (96,592 | ) | $ | (4,546 | ) | $ | — | $ | 537,112 | |||||||||
The accompanying notes are an integral part of these financial statements.
3
CONSOL ENERGY INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
| Three Months Ended March 31, |
||||||||
| 2005 |
2004 |
|||||||
| Operating Activities: |
||||||||
| Net Income |
$ | 75,212 | $ | 116,283 | ||||
| Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: |
||||||||
| Cumulative Effect of Change in Accounting, net of tax |
— | (83,373 | ) | |||||
| Depreciation, Depletion and Amortization |
63,379 | 59,470 | ||||||
| Compensation from Restricted Stock Unit Grants |
440 | — | ||||||
| Gain on the Sale of Assets |
(1,933 | ) | (21,121 | ) | ||||
| Amortization of Mineral Leases |
2,518 | 3,088 | ||||||
| Deferred Income Taxes |
708 | 3,695 | ||||||
| Equity in (Earnings)Losses of Affiliates |
(1,986 | ) | 2,996 | |||||
| Changes in Operating Assets: |
||||||||
| Accounts Receivable Securitization |
(10,000 | ) | 14,100 | |||||
| Accounts and Notes Receivable |
(57,478 | ) | (30,954 | ) | ||||
| Inventories |
(22,575 | ) | (6,564 | ) | ||||
| Prepaid Expenses |
(7,061 | ) | (19,861 | ) | ||||
| Changes in Other Assets |
3,851 | 12,979 | ||||||
| Changes in Operating Liabilities: |
||||||||