Exhibit 99.1
CONSOL Energy Announces Results for the Fourth Quarter and Full Year 2019
CANONSBURG, PA (February 11, 2020) - Today, CONSOL Energy Inc. (NYSE: CEIX) reported financial and operating results for the period ended December 31, 2019.
Fourth Quarter 2019 and Full Year 2019 Highlights Include:
• | GAAP net income of $17.4 million and $93.6 million for 4Q19 and 2019, respectively; |
• | 2019 total GAAP dilutive earnings per share of $2.81; |
• | Adjusted net income1 of $17.4 million and $112.7 million for 4Q19 and 2019, respectively; |
• | 2019 adjusted dilutive earnings per share1 of $3.52; |
• | Adjusted EBITDA1 of $92.1 million and $405.9 million for 4Q19 and 2019, respectively; |
• | Coal sales volume of 27.3 million tons is the second strongest year ever for the Pennsylvania Mining Complex (PAMC); |
• | Annual revenue record at the CONSOL Marine Terminal (CMT); |
• | Harvey Mine achieved annual production record of 5.02 million tons; |
• | 2019 cash provided by operating activities of $244.6 million; |
• | 2019 organic free cash flow net to CEIX shareholders1 of $52.6 million, including $80.3 million adverse working capital changes; |
• | Net payments on total debt of $25.7 and $183.9 million for 4Q19 and 2019, respectively; and |
• | Total net leverage ratio1 of 1.9x on 12/31/2019 per bank method. |
Management Comments
"2019 was quite a challenging year, as our industry dealt with weakening commodity and capital markets, which led to several bankruptcies in the coal space,” said Jimmy Brock, President and Chief Executive Officer of CONSOL Energy Inc. “Despite such a tough backdrop, I am pleased to announce that we delivered a strong set of results for the fourth quarter and full year of 2019. While U.S. coal production is estimated to have declined by 9% compared to 2018, the PAMC produced and sold 27.3 million tons in 2019, which is largely unchanged from the record production and sales levels set in 2018. These results were driven by our contracting strategy, well-capitalized asset base and consistent operational performance. On the financial front, we continued to reduce the leverage on our balance sheet by making net payments of approximately $184 million towards debt outstanding in 2019, and due to our refinancing efforts in early 2019, we've extended maturities into at least 2023 and increased liquidity."
"We also achieved significant improvements on the safety front. Our total recordable incident rate at the PAMC for 2019 improved by 44.7% and our total number of exceptions improved by 41.4%, compared to 2018. Safety remains our top core value, and we continue to strive towards zero life-altering incidents."
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Pennsylvania Mining Complex (PAMC) Review and Outlook
PAMC Sales and Marketing
Our marketing team sold 6.7 million tons of coal during the fourth quarter of 2019 at an average revenue per ton of $45.14, compared to 7.0 million tons at an average revenue per ton of $49.81 in the year-ago period. Despite a 25% lower average PJM West day-ahead power price, a 36% lower average API 2 prompt month coal price and a 36% lower average Henry Hub natural gas spot price in the fourth quarter of 2019 versus the fourth quarter of 2018, our average revenue per ton declined only 9% across the same time period due to our strong contracted position. On the sales volume front, the 0.4 million ton decline in 2019 compared to the year-ago period was mostly a function of reduced production.
During the quarter, we were successful in securing additional coal sales contracts and are currently approximately 95% contracted for 2020 and 43% contracted for 2021, assuming the midpoint of our coal sales volume guidance range.
According to the U.S. Energy Information Administration, inventories at domestic utilities stood at approximately 124 million tons at the end of November 2019, which is approximately 18% higher compared to year-ago levels. While low natural gas and power prices have been weighing on broader coal demand, we continued to ship all the coal we produced during the fourth quarter of 2019. Despite a warmer-than-normal start to 2020, the National Oceanic and Atmospheric Administration expects below-normal temperatures for most of the northern and northeastern areas of the U.S. in February. This development could help to reduce some of the coal stockpile overhang in the domestic markets we serve.
On the export front, low-priced LNG has weighed on coal demand abroad, as a glut of new projects came online in 2019. Additionally, API 2 spot prices for thermal coal delivered to Europe remained volatile throughout 2019, declining 39%. Our 2019 revenues were largely unaffected by this volatility due to our previously disclosed export contract, which runs through December 2020.
On the supply side, low prices are starting to drive global supply rationalization. We started seeing production cuts in the U.S. and Colombia in late 2019, and we are now starting to see Indonesia do the same. Most recently, Indonesia set its coal production output target to 550 million tons in 2020, down from 610 million tons in 2019. Despite this planned production cut, Indonesia's coal consumption is expected to rise from 138 million tons in 2019 to 155 million tons in 2020, which should help to tighten the international market.
Operations Summary
The PAMC produced 6.7 million tons in the fourth quarter of 2019, which compares to 6.8 million tons in the year-ago quarter. This brings total PAMC production to 27.3 million tons in 2019, which is its second highest production year in its history. Despite a challenged commodity market, the complex ran at approximately 96% capacity utilization during 2019, highlighting the sustained desirability of our product. Additionally, our Harvey mine set an individual production record during the year of 5.02 million tons, exceeding its previous record set in 2018. This also marks its third consecutive record-setting year.
CEIX's total costs during the fourth quarter of 2019 were $320.5 million compared to $335.9 million in the year-ago quarter. Average cash cost of coal sold per ton1 for the fourth quarter was $30.38 compared to $30.54 in the year-ago quarter. The decrease was due to reduced maintenance and supply costs and contractor and purchased services costs. For 2019, CEIX's total costs were $1,332.8 million compared to $1,344.4 million in the prior year due mainly to a reduction in interest expense. Our 2019 average cash cost of coal sold per ton1 was $30.97 compared to $29.29 for 2018. The increase was primarily driven by additional equipment rebuilds and longwall overhauls due to the timing of longwall moves and panel development. Also, the Company faced atypical challenges during the current year, including a roof fall and equipment breakdowns, resulting in higher mine maintenance and project expenses. Subsidence expense also increased in the year-to-year comparison, primarily due to the timing and nature of the properties undermined.
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Three Months Ended | ||||
December 31, 2019 | December 31, 2018 | |||
Coal Production | million tons | 6.7 | 6.8 | |
Coal Sales | million tons | 6.7 | 7.0 | |
Average Revenue per Ton | per ton | $45.14 | $49.81 | |
Average Cash Costs of Coal Sold1 | per ton | $30.38 | $30.54 | |
Average Cash Margin per Ton Sold1 | per ton | $14.76 | $19.27 | |
CONSOL Marine Terminal (CMT) Review
For the fourth quarter of 2019, throughput volumes at CMT were 2.5 million tons, compared to 2.7 million tons in the year-ago period. Terminal revenues were largely in line compared to the year-ago quarter. For the fourth quarter, terminal revenues and operating cash costs were $16.5 million and $4.9 million, respectively, compared to $16.9 million and $5.2 million, respectively, during the year-ago period. CMT achieved record terminal revenue of $67.4 million, eclipsing the previous record of $64.9 million set in 2018 and marking the third consecutive year of record-setting terminal revenue. CMT net income and CMT adjusted EBITDA1 came in at $8.6 million and $11.3 million, respectively, in the fourth quarter of 2019 compared to $8.8 million and $11.3 million, respectively, in the year-ago period. CMT finished the year with net income and adjusted EBITDA1 of $33.8 million and $44.5 million, respectively compared to $30.6 million and $40.9 million, respectively, in 2018.
Itmann Project
We continue to work on optimizing our Itmann project and are pleased to announce that, once the project is fully operational, we expect an improved production profile of 900+ thousand tons per annum versus our initial guidance of 600+ thousand tons per annum. Furthermore, in order to account for changing market conditions and our capital allocation needs, we are also adjusting the timing of capital spending on the Itmann project. If market conditions warrant, we always have the option to accelerate the spend and ramp up faster. While we continue to anticipate first coal production to occur in 1Q20, the deferred capex has resulted in an extended production ramp-up. As we have mentioned in our previous press releases, we maintain a lot of flexibility on the timing of spend on our Itmann project and will respond to changing market conditions and evolving corporate-level capital priorities.
As previously announced, all permits needed for development of the mine site have been approved and issued. Mine construction, including excavation and blasting, is nearing completion.
Finally, engineering and environmental work is underway to permit a new preparation plant and refuse facility at the former Itmann plant site. We have finalized the plant layout and rail infrastructure design and are working with the appropriate parties to finalize other related agreements for the plant site.
We presently continue to maintain our previously-stated cost and capital guidance outlook for the overall project. As we progress with development mining and the preparation plant project, we will update our outlook accordingly.
Debt and Equity Repurchase Update
Consistent with our stated strategy, we continue to be very measured in our approach to repurchasing our debt and equity securities. We look to take advantage of declines in the prices of our financial securities and weigh them against one another through our strict capital allocation strategy, while also supporting our primary goal of maintaining a strong balance sheet.
During the fourth quarter of 2019, CEIX focused more heavily on delevering and spent $16.2 million to retire $17.6 million of our Second Lien debt as it traded at a significant discount to its par value. Additionally, CEIX spent $3.8 million and $0.7 million toward the reduction of our Term Loan A and Term Loan B debts, respectively. CEIX also
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made principal payments of $4.8 million toward outstanding finance leases. In aggregate, during the fourth quarter, we reduced our absolute debt level by approximately $22 million.
For the year ended December 31, 2019, we have now repurchased $52.6 million of Second Lien notes, $32.7 million of CEIX common shares and $0.4 million of CCR units. We have also repaid $124.4 million (including the February 2019 sweep payment) and $11.3 million of principal with respect to Term Loan B and Term Loan A, respectively.
Diversification Efforts
Over the past year, CEIX has been very active in pursuing alternative and lower-emission uses of coal and has made several key investments geared toward that goal. We recently announced that we acquired a 25% ownership stake in CFOAM Corp., a newly-formed US-based holding company whose wholly-owned subsidiary, CFOAM LLC, manufactures high-performance carbon foam products from coal and focuses on meeting demand for high-grade materials in the industrial, aerospace, military and commercial product markets. We estimate the total addressable market for such products is over $15 billion annually. We are also partnering on a DOE-funded project with Ohio University and other industry partners to develop coal plastic composites that are geared toward the engineered composite decking and other building products markets with an expected $8 billion plus global addressable market by 2023. Finally, CEIX has partnered with OMNIS Bailey LLC to develop a refinery that will convert waste coal slurry into two products: a high-quality carbon product that can be used as fuel or as a feedstock for other higher-value applications, and a mineral matter product that has the potential to be used as a soil amendment in agricultural applications.
2020 Guidance and Outlook
Based on our current contracted position, estimated prices and production plans, we are providing the following financial and operating performance guidance for 2020:
• | Coal sales volumes (100% PAMC) - 24.5-26.5 million tons |
• | Coal average revenue per ton sold - $43.00-$45.00 |
• | Average cash cost of coal sold per ton2 - $30.00-$31.50 |
• | CMT Adjusted EBITDA2 - $40-$45 million |
• | Adjusted EBITDA2 (incl. 100% PAMC) - $295-$335 million |
• | Capital expenditures (incl. 100% PAMC) - $125-$145 million |
Fourth Quarter Earnings Conference Call
A joint conference call and webcast with CONSOL Coal Resources LP, during which management will discuss the fourth quarter and annual 2019 financial and operational results, is scheduled for February 11, 2020 at 11:00 AM ET. Prepared remarks by members of management will be followed by a question and answer session. Interested parties may listen via webcast on the "Events and Presentations" page of our website, www.consolenergy.com. An archive of the webcast will be available for 30 days after the event.
Participant dial in (toll free) 1-888-348-6419
Participant international dial in 1-412-902-4235
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Availability of Additional Information
Please refer to our website, www.consolenergy.com, for additional information regarding the company. Prior to the earnings conference call, we will make available additional information in a presentation slide deck to provide investors with further insights into our financial and operating performance. This material can be accessed through the "Events and Presentations" page of our website. In addition, we may provide other information about the company from time to time on our website.
We will also file our Form 10-K with the Securities and Exchange Commission (SEC) reporting our results for the quarter ended December 31, 2019. Investors seeking our detailed financial statements can refer to the Form 10-K once it has been filed with the SEC.
Footnotes:
1"Adjusted Net Income", "Adjusted Dilutive Earnings per Share", "Adjusted EBITDA", "Organic Free Cash Flow Net to CEIX Shareholders", "CMT Adjusted EBITDA" and "Net Leverage Ratio" are non-GAAP financial measures and "Average Cash Cost of Coal Sold per Ton" and "Average Cash Margin per Ton Sold" are operating ratios derived from non-GAAP financial measures, each of which are reconciled to the most directly comparable GAAP financial measures below, under the caption “Reconciliation of Non-GAAP Financial Measures".
2CEIX is unable to provide a reconciliation of Adjusted EBITDA guidance and CMT Adjusted EBITDA guidance to net income, the most comparable financial measure calculated in accordance with GAAP, nor a reconciliation of Average Cash Cost of Coal Sold per Ton guidance, an operating ratio derived from non-GAAP financial measures, due to the unknown effect, timing and potential significance of certain income statement items.
About CONSOL Energy Inc.
CONSOL Energy Inc. (NYSE: CEIX) is a Canonsburg, Pennsylvania-based producer and exporter of high-Btu bituminous thermal and crossover metallurgical coal. It owns and operates some of the most productive longwall mining operations in the Northern Appalachian Basin. Our flagship operation is the Pennsylvania Mining Complex, which has the capacity to produce approximately 28.5 million tons of coal per year and is comprised of 3 large-scale underground mines: Bailey, Enlow Fork, and Harvey. The company also owns and operates the CONSOL Marine Terminal, which is located in the port of Baltimore and has a throughput capacity of approximately 15 million tons per year. In addition to the ~669 million reserve tons associated with the Pennsylvania Mining Complex and the ~21 million reserve tons associated with the Itmann project, the company also controls approximately 1.5 billion tons of greenfield thermal and metallurgical coal reserves located in the major coal-producing basins of the eastern United States. Additional information regarding CONSOL Energy may be found at www.consolenergy.com.
Contacts:
Investor:
Mitesh Thakkar, (724) 416-8335
miteshthakkar@consolenergy.com
Media:
Zach Smith, (724) 416-8291
zacherysmith@consolenergy.com
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Condensed Consolidated Statements of Income
The following table presents a condensed consolidated statement of income for the three months ended December 31, 2019 and 2018 (in thousands):
Three Months Ended December 31, | |||||||
2019 | 2018 | ||||||
(Unaudited) | (Unaudited) | ||||||
Revenues and Other Income: | |||||||
Coal Revenue | $ | 303,865 | $ | 347,789 | |||
Terminal Revenue | 16,534 | 16,931 | |||||
Freight Revenue | 5,552 | 5,798 | |||||
Other Income | 16,684 | 11,718 | |||||
Total Revenue and Other Income | 342,635 | 382,236 | |||||
Costs and Expenses: | |||||||
Operating and Other Costs | 229,603 | 245,672 | |||||
Depreciation, Depletion and Amortization | 55,852 | 45,590 | |||||
Freight Expense | 5,552 | 5,798 | |||||
Selling, General and Administrative Costs | 14,210 | 17,631 | |||||
(Gain) Loss on Extinguishment of Debt | (989 | ) | 773 | ||||
Interest Expense, net | 16,224 | 20,437 | |||||
Total Costs and Expenses | 320,452 | 335,901 | |||||
Earnings Before Income Tax | 22,183 | 46,335 | |||||
Income Tax Expense | 4,782 | 301 | |||||
Net Income | 17,401 | 46,034 | |||||
Less: Net Income Attributable to Noncontrolling Interest | 3,455 | 6,362 | |||||
Net Income Attributable to CONSOL Energy Inc. Shareholders | $ | 13,946 | $ | 39,672 | |||
Earnings Per Share: | |||||||
Basic | $ | 0.54 | $ | 1.43 | |||
Dilutive | $ | 0.54 | $ | 1.41 | |||
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Condensed Consolidated Balance Sheets
The following table presents a condensed consolidated balance sheet as of December 31, 2019 and 2018 (in thousands):
December 31, | |||||||
2019 | 2018 | ||||||
(Unaudited) | (Unaudited) | ||||||
ASSETS | |||||||
Cash and Cash Equivalents | $ | 80,293 | $ | 235,677 | |||
Trade Receivables, net of Allowance | 131,688 | 87,589 | |||||
Other Current Assets | 126,048 | 150,689 | |||||
Total Current Assets | 338,029 | 473,955 | |||||
Total Property, Plant and Equipment - Net | 2,092,165 | 2,106,528 | |||||
Total Other Assets | 263,608 | 180,244 | |||||
TOTAL ASSETS | $ | 2,693,802 | $ | 2,760,727 | |||
LIABILITIES AND EQUITY | |||||||
Total Current Liabilities | $ | 392,264 | $ | 492,176 | |||
Total Long-Term Debt | 662,838 | 734,226 | |||||
Total Other Liabilities | 1,066,305 | 982,714 | |||||
Total Equity | 572,395 | 551,611 | |||||
TOTAL LIABILITIES AND EQUITY | $ | 2,693,802 | $ | 2,760,727 | |||
Condensed Consolidated Statements of Cash Flows
The following table presents a condensed consolidated statement of cash flows for the three months ended December 31, 2019 and 2018 (in thousands):
Three Months Ended December 31, | For the Year Ended December 31, | |||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||
Cash Flows from Operating Activities: | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||
Net Income | $ | 17,401 | $ | 46,034 | $ | 93,558 | $ | 178,785 | ||||||
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: | ||||||||||||||
Depreciation, Depletion and Amortization | 55,852 | 45,590 | 207,097 | 201,264 | ||||||||||
Other Non-Cash Adjustments to Net Income | (1,141 | ) | (14,204 | ) | 24,217 | 5,968 | ||||||||
Changes in Working Capital | (50,729 | ) | 5,853 | (80,306 | ) | 27,508 | ||||||||
Net Cash Provided by Operating Activities | 21,383 | 83,273 | 244,566 | 413,525 | ||||||||||
Cash Flows from Investing Activities: | ||||||||||||||
Capital Expenditures | (38,264 | ) | (48,894 | ) | (169,739 | ) | (145,749 | ) | ||||||
Proceeds from Sales of Assets | 186 | 735 | 2,201 | 2,103 | ||||||||||
Other Investing Activity | (5,003 | ) | (10,000 | ) | (5,003 | ) | (10,000 | ) | ||||||
Net Cash Used in Investing Activities | (43,081 | ) | (58,159 | ) | (172,541 | ) | (153,646 | ) | ||||||
Cash Flows from Financing Activities: | ||||||||||||||
Net Payments on Long-Term Debt | (25,679 | ) | (12,438 | ) | (183,890 | ) | (73,916 | ) | ||||||
Distributions to Noncontrolling Interest | (5,546 | ) | (5,502 | ) | (22,220 | ) | (22,265 | ) | ||||||
Other Financing Activities | (1,633 | ) | (18,553 | ) | (50,557 | ) | (52,742 | ) | ||||||
Net Cash Used in Financing Activities | (32,858 | ) | (36,493 | ) | (256,667 | ) | (148,923 | ) | ||||||
Net Decrease in Cash & Cash Equivalents & Restricted Cash | $ | (54,556 | ) | $ | (11,379 | ) | $ | (184,642 | ) | $ | 110,956 | |||
Cash & Cash Equivalents & Restricted Cash at Beginning of Period | 134,849 | 276,314 | 264,935 | 153,979 | ||||||||||
Cash and Cash Equivalents and Restricted Cash at End of Period | $ | 80,293 | $ | 264,935 | $ | 80,293 | $ | 264,935 | ||||||
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Reconciliation of Non-GAAP Financial Measures
We evaluate our cost of coal sold and cash cost of coal sold on an aggregate basis. We define cost of coal sold as operating and other production costs related to produced tons sold, along with changes in coal inventory, both in volumes and carrying values. The cost of coal sold includes items such as direct operating costs, royalty and production taxes, direct administration costs, and depreciation, depletion and amortization costs on production assets. Our costs exclude any indirect costs, such as selling, general and administrative costs, freight expenses, interest expenses, depreciation, depletion and amortization costs on non-production assets and other costs not directly attributable to the production of coal. The GAAP measure most directly comparable to cost of coal sold is total costs and expenses. The cash cost of coal sold includes cost of coal sold less depreciation, depletion and amortization costs on production assets. The GAAP measure most directly comparable to cash cost of coal sold is total costs and expenses.
The following table presents a reconciliation of cost of coal sold and cash cost of coal sold to total costs and expenses, the most directly comparable GAAP financial measure, on a historical basis, for each of the periods indicated (in thousands).
Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Total Costs and Expenses | $ | 320,451 | $ | 335,901 | $ | 1,332,806 | $ | 1,344,402 | ||||||||
Freight Expense | (5,552 | ) | (5,798 | ) | (19,667 | ) | (43,572 | ) | ||||||||
Selling, General and Administrative Costs | (14,210 | ) | (17,631 | ) | (67,111 | ) | (65,346 | ) | ||||||||
Gain (Loss) on Debt Extinguishment | 989 | (773 | ) | (24,455 | ) | (3,922 | ) | |||||||||
Interest Expense, net | (16,224 | ) | (20,437 | ) | (66,464 | ) | (83,848 | ) | ||||||||
Other Costs (Non-Production) | (25,044 | ) | (31,568 | ) | (101,900 | ) | (135,081 | ) | ||||||||
Depreciation, Depletion & Amortization (Non-Production) | (9,277 | ) | (3,863 | ) | (32,388 | ) | (30,961 | ) | ||||||||
Cost of Coal Sold | $ | 251,133 | $ | 255,831 | $ | 1,020,821 | $ | 981,672 | ||||||||
Depreciation, Depletion and Amortization (Production) | (46,575 | ) | (41,727 | ) | (174,709 | ) | (170,303 | ) | ||||||||
Cash Cost of Coal Sold | $ | 204,558 | $ | 214,104 | $ | 846,112 | $ | 811,369 | ||||||||
We define average cash margin per ton sold as average coal revenue per ton, net of average cash cost of coal sold per ton. The GAAP measure most directly comparable to average cash margin per ton sold is total coal revenue.
The following table presents a reconciliation of average cash margin per ton sold to total coal revenue, the most directly comparable GAAP financial measure, on a historical basis, for each of the periods indicated (in thousands, except per ton information).
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Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Total Coal Revenue | $ | 303,864 | $ | 347,789 | $ | 1,288,529 | $ | 1,364,292 | ||||||||
Operating and Other Costs | 229,602 | 245,672 | 948,012 | 946,450 | ||||||||||||
Less: Other Costs (Non-Production) | (25,044 | ) | (31,568 | ) | (101,900 | ) | (135,081 | ) | ||||||||
Total Cash Cost of Coal Sold | 204,558 | 214,104 | 846,112 | 811,369 | ||||||||||||
Add: Depreciation, Depletion and Amortization | 55,852 | 45,590 | 207,097 | 201,264 | ||||||||||||
Less: Depreciation, Depletion and Amortization (Non-Production) | (9,277 | ) | (3,863 | ) | (32,388 | ) | (30,961 | ) | ||||||||
Total Cost of Coal Sold | $ | 251,133 | $ | 255,831 | $ | 1,020,821 | $ | 981,672 | ||||||||
Total Tons Sold (in millions) | 6.7 | 7.0 | 27.3 | 27.7 | ||||||||||||
Average Revenue per Ton Sold | $ | 45.14 | $ | 49.81 | $ | 47.17 | $ | 49.28 | ||||||||
Average Cash Cost of Coal Sold per Ton | 30.38 | 30.54 | 30.97 | 29.29 | ||||||||||||
Depreciation, Depletion and Amortization Costs per Ton Sold | 6.93 | 6.10 | 6.40 | 6.17 | ||||||||||||
Average Cost of Coal Sold per Ton | 37.31 | 36.64 | 37.37 | 35.46 | ||||||||||||
Average Margin per Ton Sold | 7.83 | 13.17 | 9.80 | 13.82 | ||||||||||||
Add: Depreciation, Depletion and Amortization Costs per Ton Sold | 6.93 | 6.10 | 6.40 | 6.17 | ||||||||||||
Average Cash Margin per Ton Sold | $ | 14.76 | $ | 19.27 | $ | 16.20 | $ | 19.99 | ||||||||
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We define adjusted EBITDA as (i) net income (loss) plus income taxes, net interest expense and depreciation, depletion and amortization, as adjusted for (ii) certain non-cash items, such as long-term incentive awards. The GAAP measure most directly comparable to adjusted EBITDA is net income (loss).
The following tables present a reconciliation of net income (loss) to adjusted EBITDA, the most directly comparable GAAP financial measure, on a historical basis, for each of the periods indicated.
Three Months Ended December 31, 2019 | ||||||||||||||||
PAMC Division | Other Division | |||||||||||||||
Dollars in thousands | PA Mining Complex | Baltimore Terminal (CMT) | Other | Total Company | ||||||||||||
Net Income (Loss) | $ | 41,082 | $ | 8,614 | $ | (32,295 | ) | $ | 17,401 | |||||||
Add: Income Tax Expense | — | — | 4,782 | 4,782 | ||||||||||||
Add: Interest Expense, net | — | 1,549 | 14,675 | 16,224 | ||||||||||||
Less: Interest Income | — | — | (538 | ) | (538 | ) | ||||||||||
Earnings (Loss) Before Interest & Taxes (EBIT) | 41,082 | 10,163 | (13,376 | ) | 37,869 | |||||||||||
Add: Depreciation, Depletion & Amortization | 49,492 | 1,170 | 5,190 | 55,852 | ||||||||||||
Earnings (Loss) Before Interest, Taxes and DD&A (EBITDA) | $ | 90,574 | $ | 11,333 | $ | (8,186 | ) | $ | 93,721 | |||||||
Adjustments: | ||||||||||||||||
Stock/Unit-Based Compensation | $ | (497 | ) | $ | (46 | ) | $ | (46 | ) | $ | (589 | ) | ||||
Gain on Debt Extinguishment | — | — | (989 | ) | (989 | ) | ||||||||||
Total Pre-tax Adjustments | (497 | ) | (46 | ) | (1,035 | ) | (1,578 | ) | ||||||||
Adjusted EBITDA | $ | 90,077 | $ | 11,287 | $ | (9,221 | ) | $ | 92,143 | |||||||
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Three Months Ended December 31, 2018 | ||||||||||||||||
PAMC Division | Other Division | |||||||||||||||
Dollars in thousands | PA Mining Complex | Baltimore Terminal (CMT) | Other | Total Company | ||||||||||||
Net Income (Loss) | $ | 70,501 | $ | 8,808 | $ | (33,275 | ) | $ | 46,034 | |||||||
Add: Income Tax Expense | — | — | 301 | 301 | ||||||||||||
Add: Interest Expense, net | — | 1,513 | 18,924 | 20,437 | ||||||||||||
Less: Interest Income | — | — | (555 | ) | (555 | ) | ||||||||||
Earnings (Loss) Before Interest & Taxes (EBIT) | 70,501 | 10,321 | (14,605 | ) | 66,217 | |||||||||||
Add: Depreciation, Depletion & Amortization | 44,082 | 908 | 600 | 45,590 | ||||||||||||
Earnings (Loss) Before Interest, Taxes and DD&A (EBITDA) | $ | 114,583 | $ | 11,229 | $ | (14,005 | ) | $ | 111,807 | |||||||
Adjustments: | ||||||||||||||||
Stock/Unit-Based Compensation | $ | 2,380 | $ | 108 | $ | 109 | $ | 2,597 | ||||||||
Loss on Debt Extinguishment | — | — | 773 | 773 | ||||||||||||
Total Pre-tax Adjustments | 2,380 | 108 | 882 | 3,370 | ||||||||||||
Adjusted EBITDA | $ | 116,963 | $ | 11,337 | $ | (13,123 | ) | $ | 115,177 | |||||||
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For the Year Ended December 31, 2019 | ||||||||||||||||
PAMC Division | Other Division | |||||||||||||||
Dollars in thousands | PA Mining Complex | Baltimore Terminal (CMT) | Other | Total Company | ||||||||||||
Net Income (Loss) | $ | 197,112 | $ | 33,758 | $ | (137,312 | ) | $ | 93,558 | |||||||
Add: Income Tax Expense | — | — | 4,539 | 4,539 | ||||||||||||
Add: Interest Expense, net | — | 6,088 | 60,376 | 66,464 | ||||||||||||
Less: Interest Income | — | — | (2,937 | ) | (2,937 | ) | ||||||||||
Earnings (Loss) Before Interest & Taxes (EBIT) | 197,112 | 39,846 | (75,334 | ) | 161,624 | |||||||||||
Add: Depreciation, Depletion & Amortization | 185,616 | 4,078 | 17,403 | 207,097 | ||||||||||||
Earnings (Loss) Before Interest, Taxes and DD&A (EBITDA) | $ | 382,728 | $ | 43,924 | $ | (57,931 | ) | $ | 368,721 | |||||||
Adjustments: | ||||||||||||||||
Stock/Unit-Based Compensation | $ | 11,626 | $ | 567 | $ | 567 | $ | 12,760 | ||||||||
Loss on Debt Extinguishment | — | — | 24,455 | 24,455 | ||||||||||||
Total Pre-tax Adjustments | 11,626 | 567 | 25,022 | 37,215 | ||||||||||||
Adjusted EBITDA | $ | 394,354 | $ | 44,491 | $ | (32,909 | ) | $ | 405,936 | |||||||
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For the Year Ended December 31, 2018 | ||||||||||||||||
PAMC Division | Other Division | |||||||||||||||
Dollars in thousands | PA Mining Complex | Baltimore Terminal (CMT) | Other | Total Company | ||||||||||||
Net Income (Loss) | $ | 291,418 | $ | 30,647 | $ | (143,280 | ) | $ | 178,785 | |||||||
Add: Income Tax Expense | — | — | 8,828 | 8,828 | ||||||||||||
Add: Interest Expense, net | — | 6,052 | 77,796 | 83,848 | ||||||||||||
Less: Interest Income | — | — | (2,146 | ) | (2,146 | ) | ||||||||||
Earnings (Loss) Before Interest & Taxes (EBIT) | 291,418 | 36,699 | (58,802 | ) | 269,315 | |||||||||||
Add: Depreciation, Depletion & Amortization | 179,156 | 3,782 | 18,326 | 201,264 | ||||||||||||
Earnings (Loss) Before Interest, Taxes and DD&A (EBITDA) | $ | 470,574 | $ | 40,481 | $ | (40,476 | ) | $ | 470,579 | |||||||
Adjustments: | ||||||||||||||||
Stock/Unit-Based Compensation | $ | 9,395 | $ | 420 | $ | 420 | $ | 10,235 | ||||||||
Loss on Debt Extinguishment | — | — | 3,922 | 3,922 | ||||||||||||
Total Pre-tax Adjustments | 9,395 | 420 | 4,342 | 14,157 | ||||||||||||
Adjusted EBITDA | $ | 479,969 | $ | 40,901 | $ | (36,134 | ) | $ | 484,736 | |||||||
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We define adjusted net income as net income adjusted for certain unusual and/or infrequent transactions, such as loss on debt extinguishment resulting from the refinancing of the Company's credit facilities. We define adjusted dilutive earnings per share (EPS) as adjusted net income attributable to CONSOL Energy Inc. shareholders divided by the weighted average shares outstanding during the reporting period. The GAAP measure most directly comparable to adjusted net income and adjusted dilutive EPS is net income and dilutive earnings per share, respectively.
The following table presents a reconciliation of adjusted net income and adjusted dilutive EPS to net income and dilutive earnings per share, the most directly comparable GAAP financial measures, on a historical basis, for each of the periods indicated.
Three Months Ended December 31, | For the Year Ended December 31, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Dollars in thousands, except per share data | ||||||||||||||||
Net Income | $ | 17,401 | $ | 46,034 | $ | 93,558 | $ | 178,785 | ||||||||
Plus: Adjustments to Net Income | — | — | 18,702 | — | ||||||||||||
Plus: Tax Benefit of Adjustments to Net Income | — | — | 473 | — | ||||||||||||
Adjusted Net Income | 17,401 | 46,034 | 112,733 | 178,785 | ||||||||||||
Less: Net Income Attributable to Noncontrolling Interest | 3,455 | 6,362 | 17,557 | 25,809 | ||||||||||||
Adjusted Net Income Attributable to CONSOL Energy Inc. Shareholders | $ | 13,946 | $ | 39,672 | $ | 95,176 | $ | 152,976 | ||||||||
Weighted-Average Diluted Shares of Common Stock Outstanding | 26,061,930 | 28,213,975 | 27,071,108 | 28,419,762 | ||||||||||||
Earnings per Share: | ||||||||||||||||
Dilutive Earnings per Share | $ | 0.54 | $ | 1.41 | $ | 2.81 | $ | 5.38 | ||||||||
Plus: Adjustments to Net Income Attributable to CONSOL Energy Inc. Shareholders | — | — | 0.71 | — | ||||||||||||
Adjusted Dilutive Earnings per Share | $ | 0.54 | $ | 1.41 | $ | 3.52 | $ | 5.38 | ||||||||
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We define net leverage ratio as the ratio of net debt to the last twelve months' ("LTM") earnings before interest expense and depreciation, depletion and amortization, adjusted for certain non-cash items, such as long-term incentive awards, amortization of debt issuance costs and capitalized interest.
The following table presents a reconciliation of net leverage ratio (in thousands).
Twelve Months Ended | Twelve Months Ended | |||||||
December 31, 2019 | December 31, 2018 | |||||||
Net Income | $ | 93,558 | $ | 178,785 | ||||
Plus: | ||||||||
Interest Expense, net | 66,464 | 83,848 | ||||||
Depreciation, Depletion and Amortization | 207,097 | 201,264 | ||||||
Income Taxes | 4,539 | 8,828 | ||||||
Stock/Unit-Based Compensation | 12,760 | 10,235 | ||||||
Loss on Debt Extinguishment | 24,455 | 3,922 | ||||||
CCR Adjusted EBITDA per Credit Agreement | (102,189 | ) | (122,844 | ) | ||||
Cash Distributions from CONSOL Coal Resources LP | 35,398 | 35,124 | ||||||
Cash Payments for Legacy Employee Liabilities, Net of Non-Cash Expense | (18,521 | ) | (16,563 | ) | ||||
Other Adjustments to Net Income | 5,225 | 2,932 | ||||||
Consolidated EBITDA per Credit Agreement | $ | 328,786 | $ | 385,531 | ||||
Consolidated First Lien Debt | $ | 390,148 | $ | 497,475 | ||||
Senior Secured Second Lien Notes | 221,628 | 274,276 | ||||||
MEDCO Revenue Bonds | 102,865 | 102,865 | ||||||
Advance Royalty Commitments | 1,895 | 2,261 | ||||||
Consolidated Indebtedness per Credit Agreement | $ | 716,536 | $ | 876,877 | ||||
Less: | ||||||||
Advance Royalty Commitments | $ | 1,895 | $ | 2,261 | ||||
Cash on Hand | 79,750 | 234,674 | ||||||
Consolidated Net Indebtedness per Credit Agreement | $ | 634,891 | $ | 639,942 | ||||
Net Leverage Ratio (Net Indebtedness/EBITDA) | 1.9 | 1.7 | ||||||
Free cash flow, organic free cash flow and organic free cash flow net to CEIX shareholders are non-GAAP financial measures. Management believes that these measures are meaningful to investors because management reviews cash flows generated from operations and non-core asset sales after taking into consideration capital expenditures due to the fact that these expenditures are considered necessary to maintain and expand CONSOL’s asset base and are expected to generate future cash flows from operations. It is important to note that free cash flow, organic free cash flow and organic free cash flow net to CEIX shareholders do not represent the residual cash flow available for discretionary expenditures since other non-discretionary expenditures, such as mandatory debt service requirements, are not deducted from the measure. The following tables present a reconciliation of free cash flow, organic free cash flow and organic free cash flow net to CEIX shareholders to net cash provided by operations, the most directly comparable GAAP financial measure, on a historical basis, for each of the periods indicated.
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Organic Free Cash Flow | Three Months Ended December 31, 2019 | Three Months Ended December 31, 2018 | Year Ended December 31, 2019 | Year Ended December 31, 2018 | |||||||||||
Net Cash Provided by Operations | $ | 21,383 | $ | 83,273 | $ | 244,566 | $ | 413,525 | |||||||
Capital Expenditures | (38,264 | ) | (48,894 | ) | (169,739 | ) | (145,749 | ) | |||||||
Organic Free Cash Flow | $ | (16,881 | ) | $ | 34,379 | $ | 74,827 | $ | 267,776 | ||||||
Distributions to Noncontrolling Interest | (5,546 | ) | (5,502 | ) | (22,220 | ) | (22,265 | ) | |||||||
Organic Free Cash Flow Net to CEIX Shareholders | $ | (22,427 | ) | $ | 28,877 | $ | 52,607 | $ | 245,511 | ||||||
Free Cash Flow | Three Months Ended December 31, 2019 | Three Months Ended December 31, 2018 | |||||
Net Cash Provided by Operating Activities | $ | 21,383 | $ | 83,273 | |||
Capital Expenditures | (38,264 | ) | (48,894 | ) | |||
Proceeds from Sales of Assets | 186 | 735 | |||||
Free Cash Flow | $ | (16,695 | ) | $ | 35,114 | ||
Cautionary Statement Regarding Forward-Looking Statements
Certain statements in this press release are “forward-looking statements” within the meaning of the federal securities laws. With the exception of historical matters, the matters discussed in this press release are forward-looking statements (as defined in Section 21E of the Securities Exchange Act of 1934, as amended) that involve risks and uncertainties that could cause actual results to differ materially from results projected in or implied by such forward-looking statements. Accordingly, investors should not place undue reliance on forward-looking statements as a prediction of actual results. 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 “anticipate,” “believe,” “could,” “continue,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “should,” “will,” 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. We have based these forward-looking statements on our current expectations and assumptions about future events. While our management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. Specific risks, contingencies and uncertainties are discussed in more detail in our filings with the Securities and Exchange Commission. The forward-looking statements in this press release speak only as of the date of this press release and CEIX disclaims any intention or obligation to update publicly any forward-looking statements, whether in response to new information, future events, or otherwise, except as required by applicable law.
Source: CONSOL Energy Inc.
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