EX-99.1 4 d641822dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

On December 6, 2013, CONSOL Energy Inc. completed the sale of its Consolidation Coal Company subsidiary, which contains five of its longwall coal mines in West Virginia, and river operations to a subsidiary of Murray Energy Corporation for $3.5 billion in value.

The following unaudited pro forma consolidated balance sheet as of September 30, 2013 and unaudited pro forma consolidated statements of operations of CONSOL Energy Inc. for the nine-month period ended September 30, 2013 and the year ended December 31, 2012, give effect to this sale. The pro forma consolidated financial statements have been prepared by management of CONSOL based upon the historical financial statements of CONSOL and the adjustments and assumptions in the accompanying notes to the pro forma consolidated financial statements.

The pro forma consolidated balance sheet reflects the closing transaction as if such a transaction had been consummated on September 30, 2013.

The pro forma consolidated statements of operations set forth the effect of the disposition as if it had occurred on January 1, 2012.

The pro forma consolidated financial statements may not be indicative of the results that actually would have occurred if the sale had occurred on the dates indicated or which may be obtained in the future. The pro forma consolidated financial statements should be read in conjunction with the consolidated financial statements and notes of CONSOL included in its annual report on Form 10-K for the year ended December 31, 2012.


CONSOL ENERGY INC. AND SUBSIDIARIES

PRO FORMA CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, 2013

(000 OMITTED)

(UNAUDITED)

 

     As Reported      Proforma
Adjustments
         Proforma  

ASSETS

          

Current Assets:

          

Cash and Cash Equivalents

   $ 21,086       $ 849,978      (a),(b)    $ 871,064   

Accounts and Notes Receivable:

          

Trade

     436,388         (45,000   (b)      391,388   

Accounts Receivable - Securitized

     44,364         —             44,364   

Notes Receivable

     25,813         —             25,813   

Other Receivables

     160,931         7,500      (d)      168,431   

Inventories

     238,348         (78,540   (b)      159,808   

Income taxes receivable

        65,321      (e)      65,321   

Deferred Income Taxes

     81,825         (57,535   (b)      24,290   

Restricted Cash

     12,263         —             12,263   

Prepaid Expenses

     162,418         (9,060   (b)      153,358   
  

 

 

    

 

 

      

 

 

 

Total Current Assets

     1,183,436         732,664           1,916,100   

Property, Plant and Equipment:

          

Property, Plant and Equipment

     16,571,104         (3,448,318   (b)      13,122,786   

Less - Accumulated Depreciation, Depletion and Amortization

     5,940,247         (1,895,103   (b)      4,045,144   
  

 

 

    

 

 

      

 

 

 

Total Property, Plant and Equipment - Net

     10,630,857         (1,553,215        9,077,642   

Other Assets:

          

Deferred Income Taxes

     457,105         (457,105   (b)      —     

Investment in Affiliates

     261,218         —             261,218   

Notes Receivable

     155         —             155   

Other

     204,301         30,049      (b),(d)      234,350   
  

 

 

    

 

 

      

 

 

 

Total Other Assets

     922,779         (427,056        495,723   
  

 

 

    

 

 

      

 

 

 

TOTAL ASSETS

   $ 12,737,072       $ (1,247,607      $ 11,489,465   
  

 

 

    

 

 

      

 

 

 

 

a) To recognize proceeds from Murray Energy Inc., which has been adjusted for working capital levels as of September 30, 2013.
b) To record the removal of net assets held for sale allocated to this business.
c) To record a receivable for $50 million in minimum guaranteed royalties on leased coal reserves.
d) Record $153 million estimated income tax receivable associated with the transaction.
e) Record an accrual of $30 million for transactions costs associated with the sale.
f) As part of the agreement CONSOL Energy Inc. guaranteed certain coal sales agreements and obligations with a fair value of $3 million. This adjustment is to record the estimated fair value of those guarantees.
g) To record the estimated gain on disposition.
h) To record the accumulated other comprehensive income associated with the employee benefit obligations associated with this business.


CONSOL ENERGY INC. AND SUBSIDIARIES

PRO FORMA CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, 2013

(000 OMITTED)

(UNAUDITED)

 

     As Reported     Proforma
Adjustments
         Proforma  

LIABILITIES AND EQUITY

         

Current Liabilities:

         

Accounts Payable

   $ 512,182      $ (7,401   (b)    $ 504,781   

Current Portion of Long-Term Debt

     13,182        (533   (b)      12,649   

Short-Term Notes Payable

     47,000        —             47,000   

Accrued Income Taxes

     87,965        (87,965   (e)      —     

Borrowings Under Securitization Facility

     44,364        —             44,364   

Other Accrued Liabilities

     868,904        (205,060   (b),(f),(g)      663,844   
  

 

 

   

 

 

      

 

 

 

Total Current Liabilities

     1,573,597        (300,959        1,272,638   

Long-Term Debt:

         

Long-Term Debt

     3,123,755        (148   (b)      3,123,607   

Capital Lease Obligations

     48,176        (733   (b)      47,443   
  

 

 

   

 

 

      

 

 

 

Total Long-Term Debt

     3,171,931        (881        3,171,050   

Deferred Credits and Other Liabilities:

         

Postretirement Benefits Other Than Pensions

     2,814,234        (1,953,273   (b)      860,961   

Pneumoconiosis Benefits

     178,508        (65,390   (b)      113,118   

Mine Closing

     460,515        (126,753   (b)      333,762   

Deferred Income Taxes

       271,922           271,922   

Gas Well Closing

     197,093        (7,246   (b)      189,847   

Workers’ Compensation

     156,568        (91,848   (b)      64,720   

Salary Retirement

     74,108        —             74,108   

Reclamation

     49,487        —             49,487   

Other

     103,855        (10,444   (b),(g)      93,411   
  

 

 

   

 

 

      

 

 

 

Total Deferred Credits and Other Liabilities

     4,034,368        (1,983,032        2,051,336   

Equity:

         

Stockholders’ Equity:

         

Common Stock, $.01 par value; 500,000,000 Shares Authorized, 228,936,248 Issued and Outstanding at September 30, 2013; 228,129,467 Issued and 228,094,712 Outstanding at December 31, 2012

     2,292             2,292   

Capital in Excess of Par Value

     2,347,973             2,347,973   

Preferred Stock, 15,000,000 shares authorized, None issued and outstanding

       —             —     

Retained Earnings

     2,257,796        759,411      (h)      3,017,207   

Accumulated Other Comprehensive Loss

     (649,896     277,854      (i)      (372,042

Common Stock in Treasury, at Cost - 0 Shares at August 31, 2013; 34,755 Shares at December 31, 2012, 34,755 Shares at August 31, 2012

     —          —             —     
  

 

 

   

 

 

      

 

 

 

Total CONSOL Energy Stockholders’ Equity

     3,958,165        1,037,265           4,995,430   

Noncontrolling Interest

     (989     —             (989
  

 

 

   

 

 

      

 

 

 

Total Equity

     3,957,176        1,037,265           4,994,441   
  

 

 

   

 

 

      

 

 

 

TOTAL LIABILITIES AND EQUITY

   $ 12,737,072      $ (1,247,607      $ 11,489,465   
  

 

 

   

 

 

      

 

 

 


CONSOL ENERGY INC. AND SUBSIDIARIES

PROFORMA CONSOLIDATED STATEMENTS OF INCOME

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2013

(000 OMITTED, EXCEPT PER SHARE DATA)

(Unaudited)

 

     As
Reported
    Proforma
Adjustments (a)
    Proforma  

Sales - Outside

   $ 3,512,055      $ (1,249,320   $ 2,262,735   

Sales - Gas Royalty Interests

     46,738          46,738   

Sales - Purchased Gas

     4,372          4,372   

Freight - Outside

     35,749          35,749   

Other Income

     138,824        (9,873     128,951   
  

 

 

   

 

 

   

 

 

 

Total Revenue and Other Income

     3,737,738        (1,259,193     2,478,545   

Cost of Goods Sold and Other Operating Charges

     2,639,929        (951,901     1,688,028   

Gas Royalty Interests’ Costs

     38,204          38,204   

Purchased Gas Costs

     2,961          2,961   

Freight Expense

     35,749          35,749   

Selling, General and Administrative Expense

     104,265        (38,648     65,617   

Depreciation, Depletion and Amortization

     489,774        (154,111     335,663   

Interest Expense

     164,197        (2     164,195   

Taxes Other Than Income

     251,575        (128,529     123,046   
  

 

 

   

 

 

   

 

 

 

Total Costs

     3,726,654        (1,273,191     2,453,463   
  

 

 

   

 

 

   

 

 

 

Earnings Before Income Taxes

     11,084        13,998        25,082   

Income Taxes

     89,767        3,681        93,448   
  

 

 

   

 

 

   

 

 

 

Net Income

     (78,683     10,317        (68,366

Less: Net Income Attributable to Noncontrolling Interest

     942          942   
  

 

 

   

 

 

   

 

 

 

Net Income Attributable to CONSOL Energy Inc. Shareholders

   $ (77,741   $ 10,317      $ (67,424
  

 

 

   

 

 

   

 

 

 

Earnings Per Share:

      

Basic

   $ (0.34   $ 0.05      $ (0.29
  

 

 

   

 

 

   

 

 

 

Dilutive

   $ (0.34   $ 0.05      $ (0.29
  

 

 

   

 

 

   

 

 

 

 

a) The adjustment column is to remove the operating results of the business to reflect the consummation of the sale of this business as if it occurred as of January 1, 2012.


CONSOL ENERGY INC. AND SUBSIDIARIES

PROFORMA CONSOLIDATED STATEMENTS OF INCOME

FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2012

(000 OMITTED, EXCEPT PER SHARE DATA)

(Unaudited)

 

     As
Reported
     Proforma
Adjustments (a)
    Proforma  

Sales - Outside

   $ 4,825,946       $ (1,705,945   $ 3,120,001   

Sales - Gas Royalty Interests

     49,405           49,405   

Sales - Purchased Gas

     3,316           3,316   

Freight - Outside

     141,936           141,936   

Other Income

     409,704         (13,838     395,866   
  

 

 

    

 

 

   

 

 

 

Total Revenue and Other Income

     5,430,307         (1,719,783     3,710,524   

Cost of Goods Sold and Other Operating Charges

     3,421,953         (1,199,494     2,222,459   

Gas Royalty Interests’ Costs

     38,867           38,867   

Purchased Gas Costs

     2,711           2,711   

Freight Expense

     141,936           141,936   

Selling, General and Administrative Expense

     148,071         (58,777     89,294   

Depreciation, Depletion and Amortization

     622,780         (195,449     427,331   

Interest Expense

     220,060         (18     220,042   

Taxes Other Than Income

     336,655         (166,491     170,164   
  

 

 

    

 

 

   

 

 

 

Total Costs

     4,933,033         (1,620,229     3,312,804   
  

 

 

    

 

 

   

 

 

 

Earnings Before Income Taxes

     497,274         (99,554     397,720   

Income Taxes

     109,201         (26,183     83,018   
  

 

 

    

 

 

   

 

 

 

Net Income

     388,073         (73,371     314,702   

Less: Net Income Attributable to Noncontrolling Interest

     397           397   
  

 

 

    

 

 

   

 

 

 

Net Income Attributable to CONSOL Energy Inc. Shareholders

   $ 388,470       $ (73,371   $ 315,099   
  

 

 

    

 

 

   

 

 

 

Earnings Per Share:

       

Basic

   $ 1.71       $ (0.32   $ 1.39   
  

 

 

    

 

 

   

 

 

 

Dilutive

   $ 1.70       $ (0.32   $ 1.38   
  

 

 

    

 

 

   

 

 

 

 

a) The adjustment column is to remove the operating results of the business to reflect the consummation of the sale of this business as if it occurred as of January 1, 2012.


In conjunction with the sale of Consolidation Coal Company (CCC) and certain of its subsidiaries, which contain all five of its longwall coal mines in West Virginia, and its river operations, to a subsidiary of Murray Energy Corporation (Murray Energy), CONSOL Energy has guaranteed certain equipment lease obligations and coal sales agreement that are being assumed by Murray Energy. In the event that Murray Energy would default on the obligations defined in the agreements, CONSOL Energy would be required to perform under the guarantees. Murray has agreed to reimburse CONSOL Energy in the event that CONSOL Energy is required to pay on any of the guarantees and the equipment leases are secured by the leased personal property.

The guarantees, as listed below, consist of a coal sales agreement guarantee, pursuant to which CONSOL Energy guarantees performance by Murray Energy, operational surety bonds and workers compensation guarantees in West Virginia and Pennsylvania, a guarantee related to reclamation of an impoundment site and various equipment leases, primarily related to barges.

CONSOL Energy will regularly evaluate the likelihood of default for the respective guarantees based on an expected loss analysis and record the fair value, if any, of its guarantees as an obligation in the consolidated financial statements. The fair value of certain of the guarantees will be determined using CONSOL Energy’s risk adjusted interest rate. Significant increases or decreases in the risk-adjusted interest rates may result in a significantly higher or lower fair value measurement. Coal sales agreement guarantees will be valued based on an evaluation of coal market pricing compared to contracted sales price and includes an adjustment for nonperformance risk. Significant judgment is required in determining the fair value of these guarantees. The guarantees of the leases and sales agreements are classified within Level 3 of the fair value hierarchy.

The following table reflects the various types of guarantees through 2017. Remaining guarantees after 2018, which are made up only of equipment leases, are insignificant.

 

     Balance Sheet      Maximum     

 

 
     at December 5,      Potential      December 31,  

Description of Guarantee

   2013      Guarantee*      2014      2015      2016      2017  

Coal Sales Agreements

   $ 0       $ 200,400       $ 200,400       $ 100,000       $ 35,000       $ —     

Surety Bonds and Workers Compensation

     693         208,000         —           —           —           —     

Operational

     2,040         30,000         30,000         30,000         30,000         30,000   

Equipment Leases

     267         32,000         22,000         19,000         16,000         12,000   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 3,000       $ 470,400       $ 252,400       $ 149,000       $ 81,000       $ 42,000   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

* Represents the maximum potential guarantee at December 5 and 31, 2013.