Filing summary
Entity and period: The supplied filing is CONSOL Energy Inc.’s Form 10-Q for the quarter ended March 31, 2009—not a filing identified in the text as CNX Resources Corp. The company reported coal, natural gas and other operations. Amounts below are in U.S. dollars; financial statement amounts are converted from thousands to millions where appropriate.
Financial performance
| Metric | Q1 2009 | Q1 2008 | Change |
|---|---|---|---|
| Total revenue and other income | $1,218.8 million | $1,025.7 million | Up 18.8% |
| Earnings before income taxes | $284.7 million | $119.8 million | Up 137.5% |
| Net income attributable to CONSOL shareholders | $195.8 million | $75.1 million | Up 161.3% |
| Diluted EPS | $1.08 | $0.41 | Up $0.67 |
| Operating cash flow | $249.8 million | $146.1 million | Up $103.7 million |
| Capital expenditures | $299.6 million | $176.3 million | Up $123.2 million |
- Attributable net income margin was approximately 16.1%, versus 7.3% in Q1 2008; pretax margin was approximately 23.4%, versus 11.7%.
- Coal revenue benefited from higher realized prices: company-produced coal averaged $59.27 per ton, up 39%, while tons sold declined 2.5% to 15.3 million. Coal cost per ton rose 12.1% to $31.61.
- Produced gas sales volume increased 41.9% to 22.0 Bcf, while average realized price fell 10.2% to $7.38 per Mcf. Gas hedges supported realized prices; approximately 10.7 Bcf of quarterly produced gas volumes were hedged at an average $9.85 per Mcf.
- Net income growth also reflected the absence of $50 million of Buchanan Mine business-interruption insurance income and $16 million of contract-buyout costs recorded in the 2008 quarter. Higher coal unit costs and depreciation partly offset the improvement.
Liquidity, debt and balance sheet
- Cash was $71.6 million at March 31, down from $138.5 million at year-end. Operating cash flow did not cover capital expenditures; investing activities used $255.0 million, and financing activities used $61.7 million.
- Current assets were $999.0 million and current liabilities $1,357.9 million, a current ratio of approximately 0.74. Working capital was negative by about $358.9 million.
- Short-term notes payable were $520.4 million. Long-term debt and capital lease obligations totaled $486.1 million, including current maturities; the filing separately describes approximately $486 million of total long-term debt outstanding.
- The $1.0 billion parent secured credit facility had $440 million drawn and $267.1 million of letters of credit, leaving $292.9 million available. CNX Gas had $80.4 million drawn and $14.9 million of letters of credit under its $200 million facility, with $104.7 million available.
- Parent facility covenants were met: leverage ratio 1.10 against a 3.25 maximum and interest coverage 21.95 against a 4.50 minimum. CNX Gas leverage was 0.32 against a 3.00 maximum and interest coverage 76.68 against a 3.00 minimum.
- Quarterly dividend was $0.10 per share. Management said operating cash and borrowing capacity were expected to fund working capital, planned capital spending, debt service and anticipated dividends, while noting dependence on future performance and market conditions.
Business developments, outlook and risks
- Management described recession-related weakness in industrial demand, elevated coal stockpiles and natural gas storage, and near-term pricing pressure. The company was working with some customers to postpone shipments while managing production to expected schedules. Management believed supply responses could help rebalance markets and said prices could improve as early as 2010; this was an expectation, not formal numerical guidance.
- Management cited long-term coal contracts, higher-sulfur coal demand associated with scrubber installations, continued gas development, and transportation assets as business supports. No specific production, earnings or capital-spending forecast for the remainder of 2009 is provided in the supplied text.
- EPA scrutiny of mountaintop-mining valley-fill permits had effectively delayed issuance of permits. The company warned that future permits could adversely affect surface operations; permitting delays and tighter safety requirements were also cited as operational risks.
- Natural gas cash-flow hedges had a reported fair-value asset of $253.1 million at quarter-end; $120.2 million of gains were expected to be reclassified from other comprehensive income into earnings over the next 12 months. Commodity prices, hedge outcomes and counterparty performance remain relevant risks.
- Material contingencies include a Pennsylvania state claim seeking $58 million related to alleged mining damage to Ryerson Park Dam; asbestos claims against subsidiary Fairmont Supply (approximately 25,000 cases, with no insurance coverage); and litigation and permitting disputes concerning water storage and discharge at Buchanan Mine, with potentially material consequences if adverse outcomes occur. The filing also describes other legal and regulatory matters and says outcomes cannot be predicted.
- The Ward Transformer Superfund matter had an estimated remaining liability of $7.3 million at quarter-end, alongside estimated recoveries of $3.4 million; additional-area remediation estimates remained subject to EPA approval. Management expected a $56 million black-lung excise tax refund, including interest and net of amounts owed to third parties, before year-end 2009.
- Management identified financial-market disruption risks, including tighter or more costly credit, counterparty defaults and customer collection risk. It also expected approximately $65.6 million of pension contributions in 2009.
Most important facts to verify
- Confirm the intended issuer: the filing names CONSOL Energy Inc., whereas the request identifies CNX Resources Corp.
- Assess the durability of earnings growth, separating higher coal prices and gas volumes from the prior-year $50 million insurance recovery and other unusual comparisons.
- Verify current cash, working-capital needs, capital-spending requirements, borrowing availability and covenant headroom against the company’s subsequent filings.
- Track coal and gas prices, customer shipment deferrals, inventory levels, hedge coverage and the timing and realization of hedge gains.
- Monitor EPA permit decisions, the listed litigation and environmental contingencies, and whether the anticipated tax refund and pension contributions occurred as expected.