BASIS OF PRESENTATION

6 Months Ended

Jun. 30, 2019

BASIS OF PRESENTATION:

On November 28, 2017, CONSOL Energy was separated from its former parent to become an independent, publicly-traded coal company. As part of the separation, the following assets of the Company's former parent were transferred to CONSOL Energy (collectively, the “Coal Business”): (i) its interest in the Pennsylvania Mining Complex, and certain related coal assets, (ii) its ownership interest in CNX Coal Resources LP, which owns a 25% undivided interest in the PAMC, (iii) the CONSOL Marine Terminal and, (iv) undeveloped coal reserves (Greenfield Reserves) located in the Northern Appalachian, Central Appalachian and Illinois basins and certain related coal assets and liabilities. Following the separation, shares of the Company's common stock began “regular-way” trading on the New York Stock Exchange on November 29, 2017 under the symbol “CEIX”.

Basis of Presentation

The accompanying Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States (“GAAP”) for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2019 are not necessarily indicative of the results that may be expected for future periods.

The Consolidated Balance Sheet at December 31, 2018 has been derived from the Audited Consolidated Financial Statements at that date but does not include all disclosures required by GAAP. This Form 10-Q report should be read in conjunction with CONSOL Energy Inc.'s Annual Report on Form 10-K for the year ended December 31, 2018.

Basis of Consolidation

The Consolidated Financial Statements include the accounts of CONSOL Energy Inc. and its wholly-owned and majority-owned and/or controlled subsidiaries. The portion of these entities that is not owned by the Company is presented as non-controlling interest. All significant intercompany transactions and accounts have been eliminated in consolidation.

Recent Accounting Pronouncements

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-15 - Intangibles - Goodwill and Other - Internal Use Software (Subtopic 350-40) to help entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement (hosting arrangement) by providing guidance for determining when the arrangement includes a software license. The amendments in Update 2018-15 align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements of capitalizing implementation costs incurred to develop or obtain internal-use software. These changes will be effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Management is currently evaluating the impact this guidance may have on the Company’s financial statements.

In August 2018, the FASB issued ASU 2018-14 - Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20) to improve the effectiveness of disclosures in the notes to the financial statements by facilitating clear communication of the information required by GAAP. The amendments modify the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. These changes will be effective for fiscal years ending after December 15, 2020, including interim periods within those fiscal years. Management is currently evaluating the impact this guidance may have on the Company’s financial statements.

In August 2018, the FASB issued ASU 2018-13 - Fair Value Measurement (Topic 820) to improve the effectiveness of disclosures in the notes to the financial statements by facilitating clear communication of the information required by GAAP. The amendments modify the disclosure requirements on fair value measurements including the consideration of costs and benefits. These changes will be effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Management is currently evaluating the impact this guidance may have on the Company’s financial statements.

In June 2016, the FASB issued ASU 2016-13 - Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which provides financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. To achieve this, the amendments in this Update replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The measurement of expected credit losses will be based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectibility of the reported amount. In May 2019, the FASB updated Topic 326 by issuing ASU 2019-05, Financial Instruments-Credit Losses (Topic 326): Targeted Transition Relief, which provides entities that have certain instruments within the scope of Subtopic 326-20, Financial Instruments-Credit Losses - Measured at Amortized Cost, with an option to irrevocably elect the fair value option in Subtopic 825-10, Financial Instruments-Overall, applied on an instrument-by-instrument basis for eligible instruments, upon adoption of Topic 326. The amendments in these Updates will be applied using a modified-retrospective approach and, for public entities, are effective for fiscal years beginning after December 15, 2019 and interim periods within those annual periods. Management does not expect this update to have a material impact on the Company's financial statements.

Earnings per Share

Basic earnings per share are computed by dividing net income attributable to CONSOL Energy Inc. shareholders by the weighted average shares outstanding during the reporting period. Dilutive earnings per share are computed similarly to basic earnings per share, except that the weighted average shares outstanding are increased to include additional shares from restricted stock units and performance share units, if dilutive. The number of additional shares is calculated by assuming that outstanding restricted stock units and performance share units were released, and that the proceeds from such activities were used to acquire shares of common stock at the average market price during the reporting period.

The table below sets forth the share-based awards that have been excluded from the computation of diluted earnings per share because their effect would be anti-dilutive:



	For the Three Months Ended		For the Six Months Ended
	June 30,		June 30,
	2019	2018	2019	2018
Anti-Dilutive Restricted Stock Units	168,460	21,567	6,860	21,567
Anti-Dilutive Performance Share Units	41,675	—	41,675	—
	210,135	21,567	48,535	21,567

The computations for basic and dilutive earnings per share are as follows:



	For the Three Months Ended				For the Six Months Ended
Dollars in thousands, except per share data	June 30,				June 30,
	2019		2018		2019		2018
Numerator:
Net Income	$	48,830	$	52,709	$	69,133	$	123,667
Less: Net Income Attributable to Noncontrolling Interest	5,550		7,547		11,418		16,097
Net Income Attributable to CONSOL Energy Inc. Shareholders	$	43,280	$	45,162	$	57,715	$	107,570

Denominator:
Weighted-average shares of common stock outstanding	27,498,021		28,032,463		27,514,349		28,027,727
Effect of dilutive shares	284,259		521,573		270,454		467,422
Weighted-average diluted shares of common stock outstanding	27,782,280		28,554,036		27,784,803		28,495,149

Earnings per Share:
Basic	$	1.57	$	1.61	$	2.10	$	3.84
Dilutive	$	1.56	$	1.58	$	2.08	$	3.78

As of June 30, 2019, CONSOL Energy authorized 500,000 shares of preferred stock, none of which were issued or outstanding.

Reclassifications

Certain amounts in prior periods have been reclassified to conform with the report classifications of the current period, including the reclassification of restricted cash, previously included in Prepaid Expenses and Other Assets on the Consolidated Balance Sheets, as well as the reclassification of amortization of debt issuance costs and loss on debt extinguishment within the Operating Activities section of the Consolidated Statements of Cash Flows. These reclassifications had no effect on previously reported total assets, net income or stockholders' equity.