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Alpha Natural Resources Announces Results for Fourth Quarter and Full Year 2009

- Consistent operating performance and continued focus on cost control drives strong fourth quarter financial results

- Alpha increases 2010 metallurgical coal shipment guidance to address strengthening market

- Excellent safety performance demonstrated in the fourth quarter and full year 2009

- Alpha begins development of Marcellus shale asset in joint venture with Rice Energy, LP


News provided by

Alpha Natural Resources, Inc.

Feb 09, 2010, 07:00 ET

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ABINGDON, Va., Feb. 9 /PRNewswire-FirstCall/ -- Alpha Natural Resources, Inc. (NYSE: ANR), a leading U.S. coal producer, reported fourth quarter net income of $18.0 million or $0.15 per diluted share compared to net income of $5.6 million or $0.08 per diluted share last year.  The fourth quarter 2009 income from continuing operations was $20.2 million or $0.17 per diluted share compared to income from continuing operations of $33.9 million or $0.49 per diluted share in the fourth quarter of 2008.  Excluding amortization of coal supply agreements, merger-related expenses and other revenue from the modification of a coal supply agreement, plus related tax effects, fourth quarter 2009 adjusted income from continuing operations was $62.1 million, or $0.51 per diluted share.

Earnings before interest, taxes, depreciation, depletion and amortization (EBITDA) from continuing operations for the quarter just ended totaled $199.1 million, compared to $93.6 million in the year ago period.  Excluding merger-related expenses and other revenue from the modification of a coal supply agreement, fourth quarter 2009 Adjusted EBITDA from continuing operations was $193.4 million.  

    
    
    
                    Quarterly Financial & Operating Highlights
                 (millions, except per-share and per-ton amounts)
    
                                                               Q4       Q4
                                                              2009     2008
    
    Coal revenues                                           $787.5    $512.8
    
    Income from continuing operations                        $20.2     $33.9
    
    Income from continuing operations per diluted share      $0.17     $0.49
    
    Net  income                                              $18.0      $5.6
    
    Net income per diluted share                             $0.15     $0.08
    
    Adjusted income (loss) from continuing operations*       $62.1    ($13.5)
    
    Adjusted income (loss) from continuing operations per
     diluted share*                                          $0.51    ($0.19)
    
    EBITDA from continuing operations*                      $199.1     $93.6
    
    Adjusted EBITDA from continuing operations*             $193.4     $35.8
    
    Tons of coal sold                                         21.3       6.2
    
    Coal margin per ton                                      $9.87    $16.01
    
    
    

All quarters have been adjusted for discontinued operations and the fourth quarter 2008 amounts have been adjusted for the adoption of ASC 470-20 on January 1, 2009.  Coal revenues and coal margin per ton have been adjusted to reflect a change in the income statement presentation of gains and losses on derivatives.

*These are non-GAAP financial measures.  A reconciliation of adjusted income (loss) from continuing operations to income from continuing operations, and a reconciliation of both EBITDA from continuing operations and adjusted EBITDA from continuing operations to income from continuing operations are included in tables accompanying the financial schedules.

"Alpha again delivered solid operating results in the fourth quarter of 2009, and our performance would have been even better had we not experienced severe winter weather in December that temporarily interrupted production and shipments at many of our operations," said Kevin Crutchfield, Alpha's chief executive officer.  "More than six months have passed since we completed our merger with Foundation Coal, and the integrated company has consistently delivered strong operating and financial results.  We remain focused on execution and operational excellence, and our consistent performance to date demonstrates the benefit of Alpha's enhanced scale and diversification.  Our safety performance during 2009 was commendable, with a record low total reportable incident rate that was well below the industry average.  Alpha's success directly reflects the dedication, focus and hard work of our entire workforce, and I would like to thank them for their continued efforts.

"Demand for metallurgical coal appears to be increasing; customer discussions are ongoing; and recent indications suggest that the strength is likely to continue throughout 2010.  In response to this increasing demand, we are raising our guidance for metallurgical coal shipments in 2010 to a new range of 11 million tons to 13 million tons.  As the largest U.S. supplier of metallurgical coal, Alpha remains highly leveraged to this market with 38% of our planned 2010 metallurgical coal shipments yet to be priced.  Combined with our expertise in blending and optimization and our ample port capacity including 41% ownership of the DTA terminal, we are well-positioned to benefit from the current momentum in the global metallurgical coal market.  With regard to thermal coal, we will continue to scale our production to respond to anticipated demand, and we have adjusted our Eastern thermal shipment guidance to a range of 23 million tons to 26 million tons.

Mr. Crutchfield continued, "Last week Alpha entered into a 50/50 joint venture with Rice Energy, LP through which we are beginning to develop our valuable Marcellus shale gas resource in southwestern Pennsylvania where we control nearly 20,000 acres of one of the Marcellus' most productive regions.  The initial phase of development is underway, and we are currently drilling the first of four wells planned for 2010.  Rice Energy brings technical and managerial expertise with extensive experience drilling and fracturing wells in the Marcellus, and this partnership enables Alpha to capture value from our Marcellus shale asset without diverting focus away from our coal business.

"We remain on track to achieve the synergies that we laid out at the end of July.  Much of the anticipated synergies were expected to stem from blending and optimization, particularly for metallurgical products and export shipments.  In light of increasing global demand for metallurgical coal, these marketing synergies have the potential to exceed our initial estimates in 2010.  Going forward, we are intensely focused on delivering the consistent execution made possible by Alpha's post-merger base of operations, which is arguably the most diverse of any domestic coal producer," Mr Crutchfield concluded.

Financial Performance – Fourth Quarter

The fourth quarter of 2009 is the first reporting period that includes a full three months of results from the former Foundation operations, compared to the third quarter of 2009 which included just two months of Foundation results.  Fourth quarter results are not comparable to Alpha stand-alone results reported for the year-ago period.

  • Total revenues in the fourth quarter were $893.3 million compared to $583.6 million for Alpha stand-alone in the same period of 2008, and coal revenues were $787.5 million compared to $512.8 million for Alpha stand-alone in the fourth quarter of 2008.  Coal revenues were higher than the year-ago period due to the inclusion of $393.8 million from the former Foundation operations which more than offset reduced shipment levels and coal revenues from Alpha's stand-alone operations as the company continued to match shipments with current customer demand.  Other revenues and freight and handling revenues were $45.0 million and $60.8 million, respectively, versus $11.9 million and $59.0 million for Alpha stand-alone in 2008.

During the fourth quarter of 2009, Alpha shipped 12.1 million tons of Powder River Basin (PRB) coal, 6.6 million tons of Eastern steam coal and 2.6 million tons of metallurgical coal.  Average per ton realization for PRB shipments rose sequentially to $10.52 compared with $10.39 in the previous quarter. The average realization per ton for Eastern steam coal shipments was $62.57, down from $64.43 in the third quarter of 2009, and the average per ton realization for metallurgical coal was $97.18 in the fourth quarter compared with $96.94 in the previous quarter.

  • Total costs and expenses during the fourth quarter of 2009 were $863.6 million compared to $581.4 million for Alpha stand-alone in the fourth quarter of 2008.  Cost of coal sales was $577.4 million compared to $414.0 million for Alpha stand-alone in the fourth quarter of 2008, and includes $276.5 million from the former Foundation operations.  Lower cost of coal sales from the former Alpha operations reflects lower production levels across the operations, effective cost controls and increased operational efficiencies.  Cost of coal sales per ton for Alpha Coal West's PRB mines was $8.48 during the fourth quarter of 2009, and the cost of coal sales per ton in the East was $51.94.  

Selling, general and administrative expense in the fourth quarter 2009 was $52.8 million and included $12.4 million of pre-tax merger-related expenses attributable to consulting and professional services fees, integration-related expenses, and severance and relocation-related costs.  Depreciation, depletion and amortization (DD&A) during the quarter was $97.6 million, and amortization of coal supply agreements resulting from the Foundation merger was $69.6 million during the quarter, up from $58.0 million in the previous quarter, reflecting the inclusion of a full three months of former Foundation Coal results in the fourth quarter.  

  • Alpha recorded net income of $18.0 million, or $0.15 per diluted share during the fourth quarter 2009, compared to $5.6 million, or $0.08 per diluted share during the fourth quarter of 2008.  Fourth quarter 2009 net income included a $2.3 million loss from discontinued operations, $12.4 million of pre-tax merger-related expenses and other revenue of $18.1 million from the modification of a coal supply agreement.  Excluding these items, the $69.6 million amortization of coal supply agreements arising from acquisition accounting related to the Foundation merger, and the tax effects of these various items, adjusted income from continuing operations was $62.1 million, or $0.51 per diluted share, compared to an adjusted loss of $13.5 million or $0.19 per diluted share for Alpha stand-alone in the fourth quarter of 2008, which excludes the gain on termination of the Cliffs' merger, a gain on sale of certain coal reserves, tax effects of these two items, and other tax adjustments.
  • EBITDA from continuing operations was $199.1 million in the fourth quarter 2009 compared to $93.6 million for Alpha stand-alone in the prior-year period.  Excluding merger-related expenses and the coal supply agreement modification, Adjusted EBITDA from continuing operations was $193.4 million in the fourth quarter of 2009.  This compares to $35.8 million for Alpha stand-alone in the fourth quarter of 2008, which excludes the gain resulting from the termination of the Cliffs' merger and a gain on the sale of certain coal reserves.  

Full Year 2009 Results

  • For the full year 2009, Alpha reported total revenues of $2.50 billion, including $2.2 billion of coal revenues.  This compares to total revenues of $2.47 billion and coal revenues of $2.1 billion for Alpha stand-alone for the full year 2008.  The year-over-year increase in revenues reflects the inclusion of five months of results from the former Foundation Coal operations, which more than offset reduced shipments from all business units and product lines, and differences in average per ton realizations, including notably lower volumes and per ton realizations for metallurgical coal in 2009.  
  • Net income for the full year 2009 was $58.0 million or $0.63 per diluted share, compared with $165.7 million or $2.36 per diluted share for Alpha stand-alone in 2008.  Income from continuing operations was $66.8 million in 2009, compared with $198.6 million for Alpha stand-alone in 2008.  Excluding merger-related expenses, amortization of coal supply agreements and other unusual items, plus related tax effects, adjusted income from continuing operations was $181.2 million or $1.98 per diluted share in the year ended December 31, 2009, compared with $142.8 million or $2.03 per diluted share for Alpha stand-alone in 2008.
  • EBITDA from continuing operations for the full year 2009 was $494.8 million versus $448.3 million for Alpha stand-alone in the prior year.  Adjusting for merger-related expenses in 2009, the gain on termination of the Cliffs' merger in 2008 and other unusual items, Adjusted EBITDA from continuing operations was $541.4 million in 2009 versus $393.7 million for Alpha stand-alone in 2008.

Liquidity and Capital Resources

Cash provided by operations (including discontinued operations) for the quarter ended December 31, 2009 was $194.1 million, compared with $122.3 million for Alpha stand-alone in the fourth quarter of 2008. Cash provided by operations (including discontinued operations) for the full year 2009 was $356.2 million, compared with $458.0 million in 2008.

Capital expenditures (including discontinued operations) for the fourth quarter and full year 2009 were $84.3 million and $187.1 million, respectively, versus $24.1 million and $137.8 million in the comparable periods of 2008.

The company had available liquidity of approximately $1.1 billion as of year-end 2009, including cash, cash equivalents and marketable securities of $584.0 million and $536.0 million available under the company's revolving credit and accounts receivable securitization facilities. Total long-term debt and note payable outstanding at December 31, 2009 was $790.3 million, compared with $451.3 million at December 31, 2008.  

Market Overview

Coal-fired generation of electricity declined by greater than 10% in 2009, an unprecedented drop driven by a host of variables, including a severe economic recession and fuel switching resulting from low-cost natural gas.  Despite reduced coal production, which fell an estimated 100 million tons in 2009, utility inventories were persistently high and were estimated to exceed 200 million tons nationwide at the end of November.  In that environment, demand for thermal coal waned and pricing was under considerable downward pressure.

As 2010 begins, prospects for the thermal coal market have begun to improve.  A prolonged period of severe winter weather throughout much of the United States increased electricity generation while at the same time interrupting coal production and transportation logistics.  According to Genscape, the result was an approximately 30 million ton decline in nationwide utility inventories in December and January.  This would suggest that utility inventories are now roughly 170-175 million tons.  Relative to conditions in 2009, economic recovery is widely anticipated in 2010 which should lead to increased electricity generation, particularly in heavily industrialized regions of the country that rely on low-cost, coal-fired electricity.  The increased price of natural gas also suggests that much of the fuel switching observed last year is likely to reverse.  In addition, further coal production cutbacks appear probable in 2010 driven by the roll-off of higher priced legacy contracts.  In light of these trends, utility inventories are anticipated to return to more normal levels by the second half of 2010.  This market improvement is reflected in thermal coal spot prices which have increased recently and in coal futures prices which point to rising prices for the foreseeable future.

Demand for metallurgical coal has strengthened worldwide.  Faced with a global recession in 2009, the primary source of demand growth for metallurgical coal throughout much of the year was China, which became a net importer of coal for the first time and imported more than 30 million tons of metallurgical coal, or approximately 15% of the world's seaborne supply.  By year-end, demand for metallurgical coal elsewhere in the world had begun to recover as U.S. steel-making capacity utilization rose above 60% from a low in the 30s, and Europe exhibited a similar trend.  Currently worldwide steel production is estimated to be on an annual pace of approximately 1.3 billion tons, with over 600 million tons expected from China alone in 2010.  

Because the Asian market requires increasing volumes of seaborne metallurgical coal, less supply will be available to satisfy demand as steel production and coking coal consumption increases in the United States, Europe, Brazil and elsewhere.  This shift of seaborne coking coal supply towards Asia should provide a significant opportunity for Appalachian producers, including Alpha, to benefit from a strengthening market in the Atlantic basin, in addition to allowing domestic producers to opportunistically ship directly into Asian markets.  As the largest supplier of metallurgical coal in the United States, and with substantial export terminal capacity, Alpha is uniquely positioned to benefit directly from the increasingly favorable conditions in the metallurgical coal market.

Outlook

Alpha remains committed to managing production to match customer demand.  Accordingly, Alpha has increased its 2010 shipment guidance range for metallurgical coal by one million tons to a range of 11-13 million tons, up from the previous range of 10-12 million tons.  Likewise, Alpha is adjusting its Eastern steam coal shipment guidance to a range of 23-26 million tons in order to match production with expected demand.  In the West, 2010 shipment guidance remains unchanged as Alpha has committed and priced approximately 100% of anticipated shipments.  

Cost of coal sales per ton in 2010 are currently anticipated to range from $8.30 to $8.90 in the West and from $54.00 to $57.00 in the East.  Selling, general and administrative expenses are expected to range between $150 million and $165 million, reflecting modest inflation and the gradual ramp up in synergistic savings which should be most evident in the second half of 2010.  Depreciation, depletion and amortization expense is estimated to range from $370 million to $390 million in 2010, and financial reporting interest expense is estimated to range from $70 million to $80 million.  Capital expenditures for the full year 2010 are anticipated to range from $340 million to $390 million, and include the annual bonus bid payment of the Eagle Butte LBA, provisions for growth capital associated with the Marcellus shale gas development joint venture, development of Deep Mine 41 which is anticipated to achieve full production in 2011, and sustaining capital for Alpha's existing coal mining and coalbed methane operations.

Alpha is also establishing volume guidance for 2011.  PRB shipments in 2011 are expected to range from 48 million tons to 52 million tons, with 77% committed and priced at prices $1.00 greater than the average realizations embedded in the 2010 committed and priced volumes.  Eastern steam coal shipments in 2011 are expected to range from 23 million tons to 28 million tons, with 44% committed and priced and 26% committed and un-priced.  Eastern metallurgical coal shipments in 2011 are expected to range from 11 million tons to 14 million tons, with 15% committed and priced and 47% committed and un-priced.

    
    
                                     Guidance
               (in millions, except per-ton and percentage amounts)
    
    
                                                   2010          2011
                                                   ----          ----
    Average per Ton Sales Realization
     on Committed and Priced Coal
     Shipments(1)
    -------------------------------------
        West                                      $10.93        $11.93
        ----                                      ------        ------
        Eastern Steam                             $65.54        $67.03
        -------------                             ------        ------
        Eastern Met                              $104.63         $123.97
        -----------                              -------         -------
    Coal Shipments(2)                          81.0 – 89.0     82.0 – 94.0
    ----------------                           -----------     -----------
        West                                   47.0 – 50.0     48.0 – 52.0
        ----                                   -----------     -----------
        Eastern Steam                          23.0 – 26.0     23.0 – 28.0
        -------------                          -----------     -----------
        Eastern Met                            11.0 – 13.0     11.0 – 14.0
        -----------                            -----------     -----------
    Committed and Priced (%)(3)                     92%             59%
    --------------------------                     ---             ---
        West                                       100%             77%
        ----                                       ---             ---
        Eastern Steam                               93%             44%
        -------------                              ---             ---
        Eastern Met                                 62%             15%
        -----------                                ---             ---
    Committed and Un-priced (%)(4)                   3%             14%
    -----------------------------                  ---             ---
        West                                         0%              0%
        ----                                       ---             ---
        Eastern Steam                                3%             26%
        -------------                              ---             ---
        Eastern Met                                 15%             47%
        -----------                                ---             ---
    West – Cost of Coal Sales per Ton         $8.30 – $8.90
    ---------------------------------         -------------
    East – Cost of Coal Sales per Ton        $54.00 – $57.00
    ---------------------------------        ---------------
    Selling, General & Administrative
     Expense                                   $150 – $165
    ---------------------------------          -----------
    Depletion, Depreciation &
     Amortization                              $370 – $390
    -------------------------                  -----------
    Interest Expense                            $70 – $80
    ----------------                            ---------
    Capital Expenditures                       $340 – $390
    
    
    

Notes:

  1. Based on committed and priced coal shipments as of February 8, 2010.
  2. Eastern shipments in 2010 and 2011 include an estimated 2.0 to 3.0 million tons of brokered coal per year.
  3. As of February 8, 2010, compared to the midpoint of shipment guidance range.
  4. In 2010, committed and un-priced Eastern tons include approximately 1.8 million tons of met coal subject to market pricing, approximately 0.2 million tons of steam coal subject to market pricing, and 0.5 million tons of steam coal subject to collared pricing with an average pricing range of $65.00 to $76.00 per ton.  In 2011, committed and unpriced Eastern tons include approximately 5.9 million tons of met coal subject to market pricing, approximately 3.3 million of steam coal subject to market pricing, approximately 2.9 million tons of steam coal subject to collared pricing with an average pricing range of $50.00 to $62.00 per ton, and legacy contracts covering approximately 0.4 million tons of steam coal subject to average indexed pricing estimated at $69.21 per ton.

About Alpha Natural Resources

Alpha Natural Resources is one of America's premier coal suppliers with coal production capacity of greater than 90 million tons a year.  Alpha is the nation's leading supplier and exporter of metallurgical coal used in the steel-making process and is a major supplier of thermal coal to electric utilities and manufacturing industries across the country.  The Company, through its affiliates, employs approximately 6,400 people and operates more than 60 mines and 14 coal preparation facilities in the regions of Northern and Central Appalachia and the Powder River Basin.  More information about Alpha can be found on the Company's Web site at www.alphanr.com.  

Forward Looking Statements

This news release includes forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on Alpha's expectations and beliefs concerning future events and involve risks and uncertainties that may cause actual results to differ materially from current expectations. These factors are difficult to predict accurately and may be beyond Alpha's control. The following factors are among those that may cause actual results to differ materially from our forward-looking statements:

  • worldwide market demand for coal, electricity and steel;
  • global economic, capital market or political conditions, including a prolonged economic recession in the markets in which we operate;
  • decline in coal prices;
  • our liquidity, results of operations and financial condition; 
  • regulatory and court decisions;
  • competition in coal markets;
  • changes in environmental laws and regulations, including those directly affecting our coal mining and production, and those affecting our customers' coal usage, including potential carbon or greenhouse gas related legislation;
  • changes in safety and health laws and regulations and the ability to comply with such changes;
  • availability of skilled employees and other employee workforce factors, such as labor relations;
  • the inability of our third-party coal suppliers to make timely deliveries and our customers refusing to receive coal under agreed contract terms;
  • ongoing instability and volatility in worldwide financial markets;
  • future legislation and changes in regulations, governmental policies or taxes or changes in interpretation thereof;
  • inherent risks of coal mining beyond our control;
  • disruption in coal supplies;
  • the geological characteristics of the Powder River Basin, Central and Northern Appalachian coal reserves;
  • our production capabilities and costs;
  • our ability to integrate the operations we have acquired or developed with our existing operations successfully, as well as those operations that we may acquire or develop in the future;
  • the risk that the businesses of old Alpha and Foundation will not be integrated successfully or such integration may be more difficult, time-consuming or costly than expected;
  • our actual results of operations following the merger, which may differ significantly from the pro forma financial data contained in this quarterly report;
  • the calculations of, and factors that may impact the calculations of, the acquisition price in accordance with the methodologies of ASC 805, formerly SFAS 141(R), the allocation of this acquisition price to the net assets acquired, and the effect of this allocation on future results, including our earnings per share, when calculated on a GAAP basis;
  • our plans and objectives for future operations and expansion or consolidation;
  • the consummation of financing transactions, acquisitions or dispositions and the related effects on our business;
  • our relationships with, and other conditions affecting, our customers;
  • reductions or increases in customer coal inventories and the timing of those changes;
  • changes in and renewal or acquisition of new long-term coal supply arrangements;
  • railroad, barge, truck and other transportation availability, performance and costs;
  • availability of mining and processing equipment and parts;
  • disruptions in delivery or changes in pricing from third party vendors of goods and services which are  necessary for our operations, such as fuel, steel products, explosives and tires;
  • our assumptions concerning economically recoverable coal reserve estimates;
  • our ability to obtain, maintain or renew any necessary permits or rights, and our ability to mine properties due to defects in title on leasehold interest;
  • changes in postretirement benefit obligations and pension obligations;
  • fair value of derivative instruments not accounted for as hedges that are being marked to market;
  • indemnification of certain obligations not being met;
  • continued funding of the road construction business, related costs, and profitability estimates;
  • restrictive covenants in our credit facility and the indenture governing our convertible notes;
  • certain terms of our convertible notes, including any conversions, that may adversely impact our liquidity;
  • weather conditions or catastrophic weather-related damage; and
  • other factors, including the other factors discussed in "Overview - Coal Pricing Trends, Uncertainties and Outlook" below, and Part I, Item 1A, "Risk Factors," of our annual report on Form 10-K for the year ended December 31, 2008. 

These and other risks and uncertainties are discussed in greater detail in old Alpha's and Foundation's Annual Reports on Form 10-K and other documents filed with the Securities and Exchange Commission. Forward-looking statements in this news release or elsewhere speak only as of the date made. New uncertainties and risks come up from time to time, and it is impossible for Alpha to predict these events or how they may affect the Company. Alpha has no duty to, and does not intend to, update or revise the forward-looking statements in this news release after the date it is issued.  In light of these risks and uncertainties, investors should keep in mind that the results, events or developments disclosed in any forward-looking statement made in this news release may not occur.

FINANCIAL TABLES FOLLOW

    
    
                  Alpha Natural Resources, Inc. and Subsidiaries              
                  Condensed Consolidated Statements of Operations             
                  (In Thousands Except Shares and Per Share Data)             
                                    (Unaudited)                               
                                                                              
                                 Three Months Ended           Year Ended      
                                    December 31,             December 31,     
                                 -------------------         -------------    
                                   2009        2008        2009        2008   
                                   ----        ----        ----        ----   
                                                                              
    Revenues:                                                                 
       Coal sales                $787,460    $512,750  $2,210,629  $2,140,367 
       Freight and                                                            
        handling                   60,783      58,957     189,874     279,853 
       Other                       45,044      11,893      95,004      48,533 
                                   ------      ------      ------      ------ 
          Total                   893,287     583,600   2,495,507   2,468,753 
                                  -------     -------   ---------   --------- 
                                                                              
    Costs and expenses:                                                       
       Coal sales                                                             
        (exclusive of                                                         
        items shown                                                           
        separately                                                            
        below)                    577,415     413,961   1,616,905   1,627,960 
       Gain on sale of                                                        
        coal reserves                   -      (1,490)          -     (12,936)
       Freight and                                                            
        handling                   60,783      58,957     189,874     279,853 
       Other expense                5,366      55,602      21,016      91,461 
       Depreciation,                                                          
        depletion and                                                         
        amortization               97,592      39,421     252,395     164,969 
       Amortization of                                                        
        acquired coal                                                         
        supply agreements,                                                    
        net                        69,625           -     127,608           - 
       Selling, general                                                       
        and                                                                   
        administrative                                                        
        expenses                                                              
        (exclusive of                                                         
        depreciation,                                                         
          depletion and                                                       
           amortization                                                       
           shown above)            52,783      14,961     170,414      71,923 
                                   ------      ------     -------      ------ 
          Total                   863,564     581,412   2,378,212   2,223,230 
                                  -------     -------   ---------   --------- 
                                                                              
    Income from operations         29,723       2,188     117,295     245,523 
                                   ------       -----     -------     ------- 
                                                                              
    Other income (expense):                                                   
       Interest expense           (19,971)     (9,587)    (82,825)    (39,812)
       Interest income                494       1,649       1,769       7,351 
       Loss on early                                                          
        extinguishment of                                                     
        debt                            -           -      (5,641)    (14,702)
       Gain on                                                                
        termination of                                                        
        Cliff's merger                  -      56,315           -      56,315 
       Miscellaneous income                                                   
        (expense)                   2,149      (4,312)      3,186      (3,834)
                                    -----      ------       -----      ------ 
          Total other                                                         
           income                                                             
           (expense),                                                         
           net                    (17,328)     44,065     (83,511)      5,318 
                                  -------      ------     -------       ----- 
                                                                              
    Income from continuing                                                    
     operations before                                                        
     income taxes                  12,395      46,253      33,784     250,841 
    Income tax benefit                                                        
     (expense)                      7,853     (12,356)     33,023     (52,242)
                                    -----     -------      ------     ------- 
    Income from continuing                                                    
     operations                    20,248      33,897      66,807     198,599 
                                   ------      ------      ------     ------- 
                                                                              
    Discontinued                                                              
     operations:                                                              
       Loss from discontinued                                                 
        operations before                                                     
        income taxes               (2,678)     (7,793)    (14,278)    (27,383)
       Mine closure/asset                                                     
        impairment charges              -     (30,172)          -     (30,172)
       Gain (loss) on                                                         
        sale of                                                               
        discontinued                                                          
        items                           -         (13)          -      13,622 
       Income tax benefit             377       9,689       5,476      11,035 
                                      ---       -----       -----      ------ 
          Loss from                                                           
           discontinued                                                       
           operations              (2,301)    (28,289)     (8,802)    (32,898)
                                   ------     -------      ------     ------- 
                                                                              
    Net income                    $17,947      $5,608     $58,005    $165,701 
                                  =======      ======     =======    ======== 
                                                                              
    (Loss) earnings per                                                       
     common share:                                                            
       Basic (loss)                                                           
        earnings per                                                          
        common share:                                                         
          Income from                                                         
           continuing                                                         
           operations               $0.17       $0.49       $0.74       $2.90 
          Loss from                                                           
           discontinued                                                       
           operations               (0.02)      (0.41)      (0.10)      (0.48)
                                    -----       -----       -----       ----- 
          Net income                $0.15       $0.08       $0.64       $2.42 
                                    =====       =====       =====       ===== 
                                                                              
       Diluted (loss)                                                         
        earnings per                                                          
        common share:                                                         
          Income from                                                         
           continuing                                                         
           operations               $0.17       $0.49       $0.73       $2.83 
          Loss from                                                           
           discontinued                                                       
           operations               (0.02)      (0.41)      (0.10)      (0.47)
                                    -----       -----       -----       ----- 
          Net income                $0.15       $0.08       $0.63       $2.36 
                                    =====       =====       =====       ===== 
                                                                              
    Weighted average                                                          
     shares outstanding:                                                      
       Weighted average                                                       
        shares--basic         119,175,485  69,591,733  90,662,718  68,453,724 
       Weighted average                                                       
         shares--diluted      121,550,204  70,597,715  91,702,628  70,259,735 
                                                                              
    This information is intended to be reviewed in conjunction with the
    company's filings with the U.S. Securities and Exchange Commission. 
    
    
    
                  Alpha Natural Resources, Inc. and Subsidiaries              
                 Supplemental Sales, Operations and Financial Data            
                (In Thousands, Except Per Ton and Percentage Data)            
                                    (Unaudited)                               
                                                                              
                                   Three Months Ended         Year Ended      
                                       December 31,          December 31,     
                                    ------------------       -------------    
                                      2009      2008        2009        2008  
                                      ----      ----        ----        ----  
                                                                              
    Tons sold from                                                            
     continuing                                                               
     operations(1):                                                           
       Powder River Basin            12,134         -      20,752           - 
       Eastern steam                  6,591     3,758      18,318      15,525 
       Eastern metallurgical          2,546     2,414       8,130      11,372 
                                      -----     -----       -----      ------ 
           Total                     21,271     6,172      47,200      26,897 
                                     ======     =====      ======      ====== 
                                                                              
                                                                              
    Average realized price per                                                
     ton sold from continuing                                                 
     operations (2):                                                          
       Powder River Basin            $10.52        $-      $10.47          $- 
       Eastern steam                  62.57     53.83       65.30       51.80 
       Eastern metallurgical          97.18    128.60       98.08      117.50 
          Weighted average total     $37.02    $83.08      $46.84      $79.58 
                                                                              
    Coal sales from continuing                                                
     operations revenue summary                                               
       Powder River Basin          $127,618        $-    $217,187          $- 
       Eastern steam                412,424   202,309   1,196,121     804,188 
       Eastern metallurgical        247,418   310,441     797,321   1,336,179 
                                    -------   -------     -------   --------- 
          Total coal sales revenue $787,460  $512,750  $2,210,629  $2,140,367 
                                   ========  ========  ==========  ========== 
                                                                              
                                                                              
    Cost of coal sales from                                                   
     continuing operations per ton                                            
     (3):                                                                     
       Powder River Basin             $8.48        $-       $8.30          $- 
       East (4)                       51.94     67.07       54.63       60.53 
          Weighted average total     $27.15    $67.07      $34.26      $60.53 
                                                                              
    Weighted average coal                                                     
     margin per ton (5)               $9.87    $16.01      $12.58      $19.05 
    Weighted average coal                                                     
     margin percentage (6)             26.7%     19.3%       26.9%       23.9%
                                                                              
    Cash flows provided by                                                    
     operating activities                                                     
     including discontinued                                                   
     operations                    $194,103  $122,240    $356,220    $458,043 
    Capital expenditures including                                            
     discontinued operations        $84,277   $24,119    $187,093    $137,751 
    
    
    
                                                               As of          
                                                               -----          
                                                     December 31, December 31,
                                                         2009         2008   
                                                     ------------ ------------
    Liquidity ($ in 000's):                                  
       Cash and cash equivalents                       $465,869     $676,190
       Marketable securities                               
        with maturities of less                            
        than one year (7)                                29,463            -
       Marketable securities with                          
        maturities of greater                              
        than one year (8)                                88,877            -
       Unused revolving                                    
        credit facility                                 536,367      292,425
                                                        -------      -------
          Total available liquidity                  $1,120,576     $968,615
                                                     ==========     ========
                                                             
    (1) Stated in thousands of short tons. 
    (2) Coal sales revenue divided by tons sold.  This statistic is stated as 
        free on board (FOB) at the processing plant. 
    (3) Cost of coal sales divided by tons sold.  The cost of coal sales per 
        ton for the Powder River Basin and the East includes only costs 
        associated with active mines.  The weighted average total includes 
        cost of coal sales for active mines plus cost of coal sales assigned 
        to closed or idle mines that are not presented as discontinued 
        operations. 
    (4) East includes the Company's operations in Central Appalachia (CAPP) 
        and Northern Appalachia (NAPP) and excludes amounts for closed or 
        idled mines. 
    (5) Weighted average total sales realization per ton less weighted 
        average total cost of coal sales per ton. 
    (6) Weighted average coal margin per ton divided by weighted average 
        total sales realization per ton. 
    (7) Classified as a current asset on the balance sheet. 
    (8) Classified as a non-current asset on the balance sheet. 
    
    This information is intended to be reviewed in conjunction with the 
    company's filings with the U.S. Securities and Exchange Commission. 
    
    
    
                  Alpha Natural Resources, Inc. and Subsidiaries             
                      Condensed Consolidated Balance Sheets                  
                                  (In Thousands)                             
                                   (Unaudited)                               
                                                                             
                                                    December 31, December 31,
                                                        2009         2008    
                                                    ------------ ------------
                                                                             
    Cash and cash equivalents                           $465,869     $676,190
    Trade accounts receivable, net                       232,631      163,674
    Inventories, net                                     176,372       86,594
    Short-term marketable securities                      29,463            -
    Prepaid expenses and other current assets            133,530       65,325
                                                         -------       ------
          Total current assets                         1,037,865      991,783
    Property, equipment and mine development                                 
     costs, net                                        1,082,446      356,758
    Owned and leased mineral rights, net               1,985,855      180,458
    Owned lands                                           91,262       12,882
    Goodwill                                             357,868       20,547
    Acquired coal supply agreements, net                 396,491            -
    Deferred income taxes                                      -       83,689
    Long-term marketable securities                       88,877            -
    Other non-current assets                              68,147       63,721
                                                          ------       ------
          Total assets                                $5,108,811   $1,709,838
                                                      ==========   ==========
                                                                             
    Current portion of long-term debt                    $33,500         $232
    Note payable                                               -       18,288
    Trade accounts payable                               143,400      102,975
    Accrued expenses and other current liabilities       258,180      140,459
                                                         -------      -------
          Total current liabilities                      435,080      261,954
    Long-term debt                                       756,753      432,795
    Pension and postretirement medical benefit                               
     obligations                                         682,991       60,211
    Asset retirement obligation                          190,724       90,565
    Deferred income taxes                                316,577            -
    Other non-current liabilities                        135,397       68,621
                                                         -------       ------
          Total liabilities                            2,517,522      914,146
    Stockholders' equity                               2,591,289      795,692
                                                       ---------      -------
          Total liabilities and stockholders'                                
           equity                                     $5,108,811   $1,709,838
                                                      ==========   ==========
                                                                             
                                                                             
    This information is intended to be reviewed in conjunction with the 
    company's filings with the U.S. Securities and Exchange Commission. 
    
    
    
                Alpha Natural Resources, Inc. and Subsidiaries           
       Reconciliation of Adjusted EBITDA from Continuing Operations to   
                       Income from Continuing Operations                 
                                (In Thousands)                           
                                 (Unaudited)                             
                                                                         
    EBITDA from continuing operations and adjusted EBITDA from continuing
    operations are non-GAAP measures used by management to gauge operating 
    performance and normalized levels of earnings.  Alpha defines EBITDA from 
    continuing operations as income from continuing operations plus interest 
    expense, income tax expense, depreciation, depletion and amortization, 
    and amortization of coal supply agreements less interest income and 
    income tax benefit.  Alpha defines adjusted EBITDA from continuing 
    operations as EBITDA from continuing operations plus expenses 
    attributable to the merger with Foundation Coal Holdings, Inc., losses on 
    early extinguishment of debt, less various gains and losses not expected 
    to recur on a quarterly basis.  The definition of adjusted EBITDA from 
    continuing operations may be changed periodically by management to adjust 
    for significant items important to an understanding of operating trends.  
    Management presents EBITDA from continuing operations and adjusted EBITDA 
    from continuing operations as a supplemental measure of the company's 
    performance and debt service capacity that may be useful to securities 
    analysts, investors and others.  EBITDA from continuing operations and 
    adjusted EBITDA from continuing operations are not, however, a measure of 
    financial performance under U.S. GAAP and should not be considered as an 
    alternative to net income, income from continuing operations or operating 
    income as determined in accordance with U.S. GAAP.  Moreover, EBITDA from 
    continuing operations and adjusted EBITDA from continuing operations are 
    not calculated identically by all companies.  A reconciliation of EBITDA 
    from continuing operations and adjusted EBITDA from continuing operations 
    to income from continuing operations, the most directly comparable U.S. 
    GAAP measure is provided in the table below.
                                                                         
                                   Three Months Ended      Year Ended    
                                      December 31,        December 31,   
                                   ------------------     ------------   
                                      2009     2008      2009      2008 
                                                                         
    Income from                                                          
     continuing                                                          
     operations                     $20,248  $33,897   $66,807  $198,599 
    Interest expense                 19,971    9,587    82,825    39,812 
    Interest income                    (494)  (1,649)   (1,769)   (7,351)
    Income tax (benefit) expense     (7,853)  12,356   (33,023)   52,242 
    Depreciation,                                                        
     depletion and                                                       
     amortization                    97,592   39,421   252,395   164,969 
    Amortization of acquired                                             
     coal supply agreements          69,625        -   127,608         - 
                                     ------      ---   -------       --- 
       EBITDA from                                                       
        continuing                                                       
        operations                  199,089   93,612   494,843   448,271 
    Merger related expenses          12,437        -    59,034         - 
    Gain on sale of                                                      
     coal reserves                        -   (1,490)        -   (12,936)
    Gain on termination                                                  
     of Cliff's merger                    -  (56,315)        -   (56,315)
    Other revenue from coal                                              
     supply agreement
     modification                   (18,100)       -   (18,100)        - 
    Loss on early                                                        
     extinguishment of                                                   
     debt                                 -        -     5,641    14,702 
                                        ---      ---     -----    ------ 
       Adjusted EBITDA from                                              
        continuing operations      $193,426  $35,807  $541,418  $393,722 
                                   ========  =======  ========  ======== 
                                                                         
    This information is intended to be reviewed in conjunction with the 
    company's filings with the U.S. Securities and Exchange Commission. 
    
    
    
                  Alpha Natural Resources, Inc. and Subsidiaries              
      Reconciliation of Adjusted Income (Loss) from Continuing Operations to  
                         Income from Continuing Operations                    
                                  (In Thousands)                              
                                    (Unaudited)                               
                                                                              
    Adjusted income (loss) from continuing operations and adjusted diluted 
    earnings per common share from continuing operations are non-GAAP 
    measures used by management to gauge performance and normalized earnings 
    levels.  Alpha defines adjusted income from continuing operations as 
    income from continuing operations plus expenses attributable to the 
    merger with Foundation Coal Holdings, Inc., losses on early 
    extinguishment of debt, the portion of interest expense attributable to 
    termination of an interest rate swap, and amortization of coal supply 
    agreements, less various gains and losses that are not expected to recur 
    on a quarterly basis, discrete income tax benefits from reversal of 
    valuation allowances for deferred tax assets and estimated income tax 
    effects of the pre-tax adjustments.  Adjusted diluted earnings per common 
    share from continuing operations is adjusted income from continuing 
    operations divided by weighted average diluted shares.  The definition of 
    adjusted income from continuing operations may be changed periodically by 
    management to adjust for significant items important to an understanding 
    of operating trends.  Management presents adjusted income from continuing 
    operations and adjusted earnings per share from continuing operations as 
    supplemental measures of the company's performance that it believes are 
    useful to securities analysts, investors and others in assessing the 
    company's performance over time.  Adjusted income from continuing 
    operations and adjusted diluted earnings per common share from continuing 
    operations are not, however, measures of financial performance under U.S. 
    GAAP and should not be considered as an alternative to net income, income 
    from continuing operations, operating income or diluted earnings per 
    share from continuing operations as determined in accordance with U.S. 
    GAAP.  Moreover, adjusted income from continuing operations and adjusted 
    diluted earnings per common share from continuing operations are not 
    calculated identically by all companies.  A reconciliation of adjusted 
    income from continuing operations to income from continuing operations, 
    the most directly comparable U.S. GAAP measure, and the weighted average 
    diluted shares used to calculate adjusted earnings per common share from 
    continuing operations are provided in the table below.
    
    
    
                                  Three Months Ended          Year Ended      
                                     December 31,             December 31,    
                                  ------------------         -------------    
                                   2009        2008        2009        2008 
                                                                              
    Income from                                                               
     continuing                                                               
     operations                   $20,248     $33,897     $66,807    $198,599 
    Gain on sale of                                                           
     coal reserves                      -      (1,490)          -     (12,936)
    Gain on termination                                                       
     of Cliff's merger                  -     (56,315)          -     (56,315)
    Merger related expenses        12,437           -      59,034           - 
    Loss on early                                                             
     extinguishment of                                                        
     debt                               -           -       5,641      14,702 
    Charge arising from                                                       
     termination of hedge                                                     
     accounting for                                                           
     interest rate                                                            
       swap                             -           -      23,549           - 
    Other revenue                                                             
     from coal                                                                
     supply                                                                   
     agreement                                                                
     modification                 (18,100)          -     (18,100)          - 
    Amortization of acquired                                                  
     coal supply agreements        69,625           -     127,608           - 
    Estimated income tax                                                      
     effect of above                                                          
     adjustments                  (22,069)     14,359     (61,162)     13,545 
    Reversal of deferred                                                      
     income tax asset                                                         
     valuation allowance/loss                                                 
     disallowance                       -      (3,919)    (22,185)    (14,819)
                                      ---      ------     -------     ------- 
       Adjusted income (loss)                                                 
        from                                                                  
           continuing                                                         
        operations                $62,141    $(13,468)   $181,192    $142,776 
                                  =======    ========    ========    ======== 
                                                                              
       Weighted average                                                       
        shares--diluted       121,550,204  70,597,715  91,702,628  70,259,735 
                              ===========  ==========  ==========  ========== 
                                                                              
       Adjusted diluted                                                       
        earnings                                                              
           (loss) per common                                                  
        share                                                                 
           from continuing                                                    
        operations                  $0.51      $(0.19)      $1.98       $2.03 
                                                                              
    This information is intended to be reviewed in conjunction with the 
    company's filings with the U.S. Securities and Exchange Commission. 
    
    
    

SOURCE Alpha Natural Resources, Inc.

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