DEFA14A 1 ddefa14a.htm MASSEY ENERGY CO. MASSEY ENERGY CO.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

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The following information was prepared for and presented to Institutional Shareholder Services on May 1, 2006, and may be presented to shareholders, investors and analysts in the future.

Presentation to Institutional
Shareholder Services
May 2006
Massey Energy Company

1
Disclaimer
FORWARD-LOOKING
STATEMENTS:
Certain
statements
in
this
presentation
are
forward-looking
as
defined
by
the
Private
Securities
Litigation
Reform
Act
of
1995.
Due
to
known
and
unknown
risks,
the
Company’s
actual
results
may
differ
materially
from
its
expectations
or
projections.
Factors
potentially
contributing
to
such
differences
are
described
in
further
detail
at
the
conclusion
of
this
presentation
and
in
the
Company’s
Annual
Reports
on
Form
10-K
and
Quarterly
Reports
on
Form
10-Q.

2
SECTION 1
Performance and Business Strategy of the Company
5
SECTION 2
Review of Third Point’s Proposals
19
SECTION 3
Massey’s
Director Nominees and Corporate Governance
Structure
28
Table of Contents

3
Don L. Blankenship
Chairman, Chief Executive
Officer and President
Baxter F. Philips, Jr.
Executive Vice President and
Chief Administrative Officer
Introduction
William R. Grant
Lead Director and Chairman
of the Audit Committee

4
Current Business
Strategy is Focused on
Building Long-Term
Value for Shareholders
Company is
Responsive to
Shareholder Concerns
Experience of
the Boards Nominees
•
Strong performance of the Company
•
Emphasis on creating long-term, lasting shareholder
value
•
Background to the proxy contest
•
Review of shareholder proposals
•
Action taken
•
Qualifications of director nominees
Company has a Strong
Corporate Governance
Structure in Place
•
Active role and independence of the Board
•
Shareholder-friendly defense profile
•
Executive pay/compensation structure that
maximizes accountability and aligns executives’
incentives with shareholder interest
Agenda

5
SECTION 1
Performance and Business
Strategy of the Company

6
Note:
1   Massey operating and financial information as of FYE 2005 unless otherwise noted
2   Excludes refinancing cost
Massey
Snapshot
1
Utility
69%
Metallurgical
22%
Industrial
9%
Mining Type
Tons Sold by Market
Sales Breakdown
42.3 million tons shipped
Domestic
83%
Exports
17%
42.3 million tons shipped
43.1  million tons produced
Surface
43%
Underground
57%
•
Massey is an industry leading coal company
-
largest in Central Appalachia
-
fourth
largest
in
US
ranked
by
produced
coal
revenues
-
sixth largest in US ranked by tons
•
2005
produced
coal
revenues
of
$1.8
billion
and
EBITDA
of
$426
million
2
•
Shipments of 42.3 million tons in 2005 from 22 processing and shipping centers
in Central
Appalachia
•
Massey owns or controls 2.3 billion tons of metallurgical and steam quality coal
reserves
•
Approximately 5,709 employees; 97% union free

7
Coal Fundamentals and Demand
•
Internationally, coal represents approximately 24.4% of primary
energy consumption, according to the World Coal Institute
•
In
the
United
States
in
2005,
Platts
estimates
that
coal
generated
approximately 52% of the electricity produced
•
Most abundant fossil fuel—coal represents approximately 70% of
the United States’
fossil fuel reserves (on a Btu basis), according to
the U.S. Department of Energy
•
Least expensive fossil fuel for electricity generation—less than
one-third the cost per million kilowatt hours than oil and natural
gas
•
Although coal’s primary end use is electricity generation, it is also
used as a resource or raw material in many industries, including
steel, cement and paper
•
Global economic expansion is expected to drive continued strong
demand, especially in fast-growing economies such as China and
India
•
Recognition as energy source of the future—Energy Policy Act of
2005 favors coal as a future energy source

8
•
Leading coal producer in Central Appalachia
•
Poised to benefit from improved industry fundamentals
–
Large, high quality, diverse reserve base
–
Modern equipment fleet
–
Extensive infrastructure and transportation system
–
Low level of long-term liabilities compared to peers
–
Strong, experienced management team
•
Diverse customer base and long-standing customer relationships
•
Demonstrated ability to grow through strategic reserve acquisitions         
Investment Highlights

9
Notes:
1   Starting
in
2001,
the
SEC
required
Massey
to
show
reserves
on
an
“as
received”
basis,
which
includes
the
moisture
in
the
coal
on
a
delivered
basis
This
change
increased
the
reported
reserves
by
approximately
6.5%.
2   CAGR
represents
the
compounded
annual
growth
rate
which
measures
the
smoothed
year-over-year
growth
rate
of
coal
reserves
from
1987
to
2005
Coal
Reserves
Tripled
(1987–2005)
1
720
710
736
784
760
971
1,088
1,411
1,499
1,549
1,763
1,820
2,100
1,920
2,273
2,206
2,218
2,293
2,260
0
500
1,000
1,500
2,000
2,500
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
19992000
2001
2002200320042005
Demonstrated Ability to Grow Through
Strategic Reserve Acquisitions

10
Production Has Tracked Reserve Growth
Produced Tons Sold
Massey is able to adjust production in response to market conditions
13.7
16.0
16.7
15.8
17.5
19.3
19.4
23.0
26.2
30.7
31.2
31.4
30.0
32.9
3.8
5.2
7.1
11.6
13.6
16.3
18.2
14.9
14.0
13.0
10.9
9.6
10.4
9.4
17.5
21.2
23.8
27.4
31.1
35.6
37.6
37.9
40.2
43.7
42.1
41.0
40.4
42.3
0
5
10
15
20
25
30
35
40
45
92
93
94
95
96
97
98
99
00
01
02
03
04
05
Utility/Industrial Coal
Metallurgical Coal

11
Massey
has
a
very
strong
reserve
base
relative
to
its
peer
group
and
is
well
positioned for continued growth and sustainability
Source:  Company reports
Note:
1 Reserve life defined as 12/31/05 reserve base divided by 2005 production
2005 comparable reserve life
1
Reserve Life Supporting Future Growth
65
61
52
26
24
26
24
41
46
-
10
20
30
40
50
60
70

12
Underground mining poses its own challenges
Coal Sector Challenges

13
Massey has consistently expanded margins
Source:  Company reports
Proven Ability to Maintain Margin
30.14
30.85
31.44
33.74
36.52
36.33
37.57
42.07
41.88
41.75
42.39
26.97
28.56
28.66
29.14
30.20
30.99
31.76
34.73
33.95
37.20
36.90
30.74
28.66
25.00
30.00
35.00
40.00
45.00
Q1 2003
Q2 2003
Q3 2003
Q4 2003
Q1 2004
Q2 2004
Q3 2004
Q4 2004
Q1 2005
Q2 2005
Q3 2005
Q4 2005
Produced Coal Revenue / Ton
Average Cash Cost / Ton

14
Despite all of these challenges, Massey has proven its ability to grow EBITDA at
a faster pace than its peers
2003-2005
EBITDA
growth
(CAGR)
1,2,3,4
Source:  Company reports
Note:
1 EBITDA
as
disclosed
in
10k
2 Massey
EBITDA
excluding
charges
related
to
the
Company’s
debt
repurchase
and
exchange
offers
of
$212.4
million
in
2005
3 CNX
adjusted
for
$327
million
gain
on
sale
of
CNX
Gas
4 Includes
only
comparables
that
were
public
since
2003
Proven Ability to Grow EBITDA
59
54
46
21
45
-
10
20
30
40
50
60
70

15
Massey generates the highest EBITDA per ton shipped relative to its peers
…
with superior EBITDA margin
Relative
2005
EBITDA
1,2
per
tons
shipped
Relative
2005
EBITDA
1,2
margin
(%)
Source:  Company reports
Note:
1
Massey
EBITDA
excluding
charges
related
to
the
Company’s
debt
repurchase
and
exchange
offers
of
$212.4
million
in
2005
2
Consol
EBITDA
adjusted
for
$327
million
gain
on
sale
of
CNX
Gas
Superior Performance
10.1
8.5
7.2
3.6
3.5
4.6
2.1
5.4
5.6
-
3.0
6.0
9.0
12.0
24.3
19.3
18.7
11.6
8.9
15.6
8.7
16.4
17.2
-
5
10
15
20
25
30

16
On a relative basis, Massey compares favorably to the majority of its peer
group and would expect to be significantly advantaged in the future by low
levels of legacy liabilities
2005 legacy liabilities as a percentage of
net worth
1,2
Source: Company reports
Note:
1 Net worth defined as shareholders equity less intangibles
2 Arch,
Foundation
&
Peabody
shareholders
equity
and
intangibles
as
of
March
31,
2006
Low Legacy Liabilities
2005 labor structure
347
265
144
49
38
60
27
106
129
-
50
100
150
200
250
300
350
400
100
100
97
92
87
61
60
56
8
13
39
40
44
3
0
20
40
60
80
100
Union Free
Union

17
130%
310%
0
100
200
300
400
500
600
Dec-00
Apr-02
Aug-03
Dec-04
Apr-06
S&P Materials Index
MEE
310%
108%
0
100
200
300
400
500
600
Dec-00
Apr-02
Aug-03
Dec-04
Apr-06
MEE
S&P Smallcap 600
Total Returns to Shareholders
Since the spinoff, Massey has outperformed the broader industry indices
Source:
FactSet
as of April 21, 2006
Note:
1   The
S&P
Materials
Index
consists
of
companies
with
GICS
code
1510
which
are
in
the
S&P
small
cap
600
index.
This
data
is
only
available
from
12/29/00
Compared
to
S&P
Materials
Index
1
Compared
to
S&P
Smallcap
600

18
After an extended period of out-performance compared to its eastern peers,
Massey is still performing in-line despite the recent difficulties
Source: FactSet, Bloomberg as of April 21, 2006
Notes:
1   Western producers index includes Peabody, Arch Coal, Foundation Coal (December 04)
2   Eastern producers index includes Alpha Natural Resources (February 05), James River (July 04), Consol and ICG (November 04)
3   US Big Sandy spot coal price used as benchmark for eastern coal and US PRB 8800 spot price used as benchmark for western coal
Total Return Over the Past 3 Years
Total Returns to Shareholders
Indexed Coal price performance –
Over Past 3 Years
3
0
50
100
150
200
250
300
350
400
Apr-03
Jan-04
Oct-04
Jul-05
Apr-06
Eastern Coal
Western
Coal
244
181
0
100
200
300
400
500
600
700
800
Apr-03
Oct-03
Apr-04
Oct-04
Apr-05
Oct-05
Apr-06
MEE
Western
Coal
Index
¹
Eastern Coal Index
²
724
416
412

19
SECTION 2
Review of Third Point Proposals

20
September
2005
November
2005
January 2006
•
Third Point supported JANA’s proposal that the Company increase its
leverage by $1.5 billion to repurchase its shares in a Dutch auction tender
offer
•
Massey hired financial and other advisors to undertake a review of the
recapitalization alternatives, including those raised by JANA and
Third Point
•
The Company announced a capital restructuring plan that removed
approximately 6.8 million shares or 7.5% of the diluted shares
outstanding,
more
than
twice
the
average
3.2%
repurchased
by
S&P
500
companies. The Company also announced a $500 million share
repurchase program when free cash flows became available
•
Third Point filed a preliminary proxy statement soliciting proxies for the
election of two Third Point nominees to the Company’s Board
•
Third Point’s proposal is for Massey to accelerate and possibly expand
the Company’s $500 million share repurchase program
•
Senior management met with Third Point at the Howard Weil
Energy Conference
Background to the Proxy Contest
•
On
January
19,
2006,
a
fire
broke
out
at
the
Aracoma
mine,
resulting
in
two fatalities and disrupting production
•
Company
lowered
its
2006
guidance
to
shipments
of
between
44
and
47
million tons
March 2006
October 2005
•
Management spoke with JANA and Third Point to discuss their proposal

21
Debt/LTM
EBITDA
(x)
1
Debt/2006E
EBITDA
(x)
1
Debt/Cap.
(%)
1
Massey would have been the highest levered company among its peers
Note:
1
Balance sheet data as of September 30, 2005 and LTM EBITDA adjusted for non-recurring items
Source: Company reports, I/B/E/S as of November 15, 2005
Proposal for $1.5 Billion Accelerated
Buyback—Credit Impact
3.4
1.8
1.5
1.3
1.2
1.1
0.7
0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
3.1
2.7
2.3
2.3
2.1
2.1
0.5
5.7
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
CAPP
Producers
68
66
55
50
47
41
30
139
0
20
40
60
80
100
120
140

22
"
"
•
The capital restructuring program consists of:
–
Cash Tender Offer for $132mm 4.75% Convertible due 2023 to
effectively repurchase shares
–
Induced conversion for all of the $175mm 2.25% Convertible due 2024
–
Completed $760mm Private Notes Offering with a $300 million
restricted payment basket
•
The Board authorized $500 million share repurchase program in line with the
amount that is anticipated to become available under the restricted payment
basket over the next 3-5 years
•
As expected, Massey’s credit rating was downgraded by Moody’s and S&P
Massey Transaction Summary
On November 15, 2005, Massey announced a capital restructuring program to
reduce outstanding shares by 7.5% and authorized a share repurchase
program
We view the potential size of the share repurchase as reasonable and
are relieved that MEE did not overextend itself by significantly
levering
the
balance
sheet
today
in
order
to
repurchase
shares
CSFB
11/16/05
The ratings on Richmond, VA –
based coal producer Massey Energy
reflects its limited geographic diversity…
and aggressive financial
leverage.
The
ratings
also
reflect
favorable
industry
conditions
and
a
high
percentage
of
metallurgical
coal
sales.
S&P
12/01/05
"
"

23
While the Board remains committed to maximizing shareholder value under
the authorized $500 million share repurchase program, the current capital
structure limits Massey’s ability to do the entire repurchase at this time
Share Repurchase Considerations
•
Massey’s existing $335 million 6.625% Senior Unsecured Notes
due 2010
–
share repurchases are restricted to the amount of availability in the
restricted
payments
basket
(approximately
$60mm
at
this
time)
•
To undertake a larger share repurchase, Massey would need to
tender for the existing $335 million senior notes at a significant
premium
–
estimated tender cost of $16 million and incremental interest
expense of approximately $4 million/year
•
Even if Massey tenders for the existing $335 million senior notes,
given the restricted payment basket of the $760 million 6.875%
Senior Unsecured Notes, Massey can only undertake a share
repurchase of up to $300 million plus 50% of cumulative net
income
•
For illustrative purposes, the following pages assume a $500
million share repurchase and tendering for the $335 million senior
notes without the refinancing of the $760mm 6.875% Senior
Unsecured Notes
•
Additional considerations for a debt financed share repurchase
include:
–
possible two-notch credit downgrade
–
deteriorated credit metrics and weaker capital structure
–
refinance existing 6.625% notes at approximately 7.5%

24
Source: Company reports, I/B/E/S as of April 26, 2005
Notes:
1
Arch, Foundation & Peabody balance sheet data as of March 31, 2006. All others as of December 31, 2005
2
Massey
pro
forma
assumes
$750
million
of
new
debt
is
raised
to
pursue
a
$500
million
share
buyback
and
tender
for
existing
6.625%
notes at
104.75,
resulting
in
incremental
debt
of
$415
million
and
$515
million
of
net
debt
(portion
of
proceeds
of
share
buyback
assumed
to
come
from
cash
on
hand)
3     Massey EBITDA excluding charges related to the Company's debt repurchase and exchange offers of $212.4 million in 2005
4     Consol EBITDA adjusted for $327 million gain on sale of CNX Gas
Massey would be the highest levered company among its peers
Debt/2005
EBITDA
(x)
1,2,3,4
Debt/2006E
EBITDA
(x)
1,2
Debt/Cap.
(%)
1,2
Proposal for $500 million Accelerated
Buyback—Credit Impact
CAPP Producers
CAPP Producers
3.6
3.6
3.5
2.6
2.3
2.0
1.6
0.7
0.5
3.8
-
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
1.9
1.7
1.7
1.5
1.3
1.3
1.3
0.5
0.3
2.7
-
0.5
1.0
1.5
2.0
2.5
3.0
70
65
57
57
46
39
28
7
46
83
-
10
20
30
40
50
60
70
80
90

25
Proposed accelerated equity repurchase though debt issuance is likely to
cause a further 2-notch downgrade
Proposal for $500 million Accelerated
Buyback—Credit Impact
% CAPP
20%
5%
12%
100%
12%
80%
72%
100%
Outlook
Stable/Positive
Stable/Positive
Stable/Stable
Stable/Negative
na/na
Stable/Stable
Under Review/Developing
na/na
Source: Bloomberg, S&P, Moody’s
CNX
BTU
ACI
MEE
FCL
ANR
JRCC
MEE
Current
Proposal
Moody's
S&P
B2
B1
Caa
B3
Ba3
Ba2
Ba1
CCC
B-
B
B+
BB-
BB
BB+
`

26
•
Permitting for mines in Central Appalachia is a lengthy and time-
consuming process, due to regulations, particularly regarding
environmental issues
•
Thinning
coal
seams,
transportation
disruptions,
and
the
lack
of
skilled
underground miners heighten the challenge of operating in this area
•
Central Appalachian coal will lose market share to the Illinois Basin
and Northern Appalachian coal-producing regions over the next five
years
as
more
utilities
install
emission
equipment
to
remove
the
high
sulfur content in the coal from these regions
•
Central Appalachia coal production costs will continue to increase as
coal companies move into thinner coal seams
•
Difficulty in obtaining surety bonds, environmental lawsuits and
increased regulation have contributed to higher cost and declining
production
Source:
Moody’s report dated November 15, 2004 and S&P report dated August 9, 2005
Credit Rating Agencies’
Views
Operating challenges of Central Appalachia

27
•
Given Massey’s current share price, the Company has announced
the commencement of a share repurchase program
–
Proposal: undertake up to a $50 million share repurchase in
the open market immediately
–
Monitor opportunities to buy back more shares as operating
cash flows improve
Company’s Proposal

28
SECTION 3
Massey’s Director Nominees and
Corporate Governance Structure

29
Active Role
of the Board
The Board has four committees (number of members) to facilitate
active oversight on the following areas:
–
Audit Committee (6)
–
Compensation Committee (4)
–
Governance and Nominating Committee (8)
–
Safety, Environmental and Public Policy Committee (4)
All of the foregoing committees are chaired and staffed by
independent directors 
Independence
of the Board
In 2005, there were 23 committee meetings and 8 Board meetings
8 out of 9 directors on the current Board are independent
The Governance and Nominating Committee reviews the
independence of its directors every year
The Company has an independent Lead Director who presides over
the meetings of the independent directors that occur prior to each
regularly scheduled meeting of the Board of Directors
Defense 
Profile
The Company does not have a poison pill
Cumulative voting is allowed in the election of directors, which
benefits minority stockholders
At the upcoming 2006 annual shareholders’ meeting, the Board is
proposing to lower the requirement for amendment of the
Company’s restated Bylaws by shareholders from 80% to 67% of
the total outstanding shares
The Company has a strong corporate governance and culture in place
that prioritizes shareholder interest
Corporate Governance Structure

30
Company believes that each of its Director nominees is well-qualified to be a
credible, valuable and independent voice on the Board, and brings a unique set
of skills and experiences needed on the Board at this time
Dr. John C. Baldwin
Mr. James B. Crawford
Chancellor E. Gordon Gee
Relevant
Experience
President & CEO of the CBR Institute
for Biomedical Research, Inc.,
affiliated with Harvard Medical School
Broad experience previously leading
various organizations over many years
Has a medical and healthcare
background
Chairman of InterAmerican Coal
Holding N.V. and a consultant to Evan
Energy Investments, LC, both
international coal companies
Founder of James River Coal Company
and served as its Chairman and CEO
for 15 years
Past President & CEO of Transco
Coal Company and past EVP of A.T.
Massey Coal Company, Inc.
Chancellor of Vanderbilt University
since 2000
Has been Chancellor or President of
several other nationally renowned,
public and private universities over 
25 years
Judicial Fellow and Senior Staff
Assistant to the former Chief Justice of
the United States
Has a legal and educational training
background
Other
Directorships
Board member since 11/15/04
Serves as a director for another
NYSE company
Director for 12 years of a large trust
company with a focus on energy
Serves on the audit committee of three
companies
Board member since 2/7/05
Has served as a Director or trustee of
private companies, banks, and industry,
civic and other organizations
Board member since 11/30/00, when
the Company became a stand-alone
public entity
Director for many years of four other
NYSE companies
Director or trustee for numerous
national and other organizations
Qualifications
Degrees from Harvard College and
Stanford University
Rhodes scholar
Graduate of the Stanford Law School
program for public company directors
and officers
Authored over 400 publications, and
delivered over 350 lectures
Graduate of the New York University
Graduate School of Business
Degree in economics from
Colby College
Law and education degrees from
Columbia University
Attended multiple public company
programs of the National Association
of Corporate Directors
Co-authored six books and over 25
published papers and articles
Qualifications of Massey's
Director Nominees
The current Board of Directors is highly qualified to oversee Massey’s management
team as well as the Company’s long-term strategy to create shareholder value

31
Massey Leadership and Oversight
•
Massey’s senior executive management has an average of 24 years of
experience in the industry and is highly qualified to:
enhance profitability through continued safety improvements, productivity
gains and cost containment
adjust production in response to changes in market conditions
expand use of more productive and lower-cost mining methods
form strategic contractual arrangements with major customers
complete “Tuck in”
acquisitions where attractive
Highly Qualified Leadership Team

32
Base
Salary
Determined by the Compensation Committee by reviewing the guidance pay within the compensation
peer group and taking into consideration any extenuating circumstances
The Compensation Committee considers (i) the term of any employment contract with the executive, if
any, (ii) the recommendation of the CEO, (iii) salary norms, (iv) the person’s experience and (v) an
assessment of each executive’s performance and contribution to the Company 
Annual
Incentive
Program
Approximately 100 of the Company’s employees participate in this program, including all of its top
level executive officers
Compensation for attainment of Company and individual performance objectives 
Determinants of the target amounts include Earnings Before Interest and Taxes, specific performance
goals (such as coal production, coal shipments, cost containment, coal reserve acquisitions, safety
performances, etc.) and discretion of the Compensation Committee
Long-Term
Incentive
Program
Approximately 250 employees participate in this program, which consists of:
–
cash incentives awards that are based upon meeting earnings or other financial targets
–
stock options that have value only if shareholder value is increased
–
restricted stock awards
–
restricted unit awards
LTIP Awards are typically granted once a year to cover a 3-year performance period
Change in Control
Severance
Agreements
Standard change of control severance agreements with all of its Named Executive Officers and
approximately 40 other key employees to retain them in the event of uncertainty surrounding a
potential or actual change in control by providing attractive incentives to continue working for the
Company during such time
Agreements with CEO
and CAO
To retain and incentivize the Company’s top executives
During 2005, the Compensation Committee approved agreements with its top two officers to retain
their services and incentivize their efforts to enhance shareholder value
The Compensation Committee has established executive compensation
programs it believes attract, retain, develop and motivate the Company’s highly
qualified executive team. The Compensation Committee periodically reviews the
competitiveness of its executive compensation programs with the guidance of an
independent consulting firm. The current structure includes:
Executive Compensation Structure

33
•
Massey’s management and Board are committed to a business
strategy that has generated above-average shareholder returns
•
Current business strategy focuses on creating long-term,
sustainable shareholder value in the face of the volatility and
issues inherent in operating in Central Appalachia
•
Board believes that accelerating the $500 million share
repurchase with new debt today is not fiscally prudent nor is
it in the long-term interest of shareholders
-
the Board is committed to a share repurchase program
when cash flows are realized
-
the Company is already executing the program beginning
with the $50 million announced
•
Massey’s director nominees and the remainder of the Board
have played an active and independent role in the stewardship
of the Company
•
The Company has a strong corporate governance structure
and culture that prioritizes shareholder value
•
The Company under its current management and Board is
well positioned to continue its proven track record
Closing Remarks

34
Disclaimer
FORWARD-LOOKING STATEMENTS: Certain statements in this presentation are forward-looking as defined
by the Private Securities Litigation Reform Act of 1995.  Such forward-looking statements are based on facts and
conditions
as
they
exist
at
the
time
such
statements
are
made
as
well
as
predictions
as
to
future
facts
and
conditions
the
accurate
prediction
of
which
may
be
difficult
and
involve
the
assessment
of
events
beyond
the
Company’s control. Caution must be exercised in relying on forward-looking statements. Due to known and
unknown risks, the Company’s actual results may differ materially from its expectations or projections. Factors
potentially contributing to such differences include, among others: market demand for coal, electricity and steel
which could adversely affect the Company’s operating results and cash flows; future economic or capital market
conditions; deregulation of the electric utility industry; competition in coal markets; inherent risks of coal mining
beyond the Company’s control, including weather and geologic conditions; the Company’s ability to expand
mining capacity; the Company’s production capabilities; the Company’s plan and objectives for future operations
and expansion or consolidation; failure to receive anticipated new contracts; customer cancellations of, or
breaches to, existing contracts; customer delays or defaults in making payments; the Company’s ability to
manage production costs; the Company’s ability to timely obtain necessary supplies and equipment; the
Company’s ability to attract, train and retain a skilled workforce; fluctuations in the demand for, price and
availability of, coal due to labor and transportation costs and disruptions, governmental policies and regulatory
actions, legal and administrative proceedings, settlements, investigations and claims, foreign currency changes
and other factors; and greater than expected environmental and safety regulation, costs and liabilities. The
forward-looking statements are also based on various operating assumptions regarding, among other things,
overhead costs and employment levels that may not be realized. While most risks affect only future costs or
revenues anticipated by the Company, some risks might relate to accruals that have already been reflected in
earnings.
The
Company’s
failure
to
receive
payments
of
accrued
amounts
could
result
in
a
charge
against
future
earnings. Information concerning those factors is available in the Company’s Annual Reports on Form 10-K and
Quarterly Reports on Form 10-Q.
NON-GAAP INFORMATION: Included in this presentation are EBITDA results, which is defined as income
before interest and taxes, depreciation, depletion and amortization. Although EBITDA is not a measure of
performance calculated in accordance with generally accepted accounting principles, management believes that
it
is
useful
to
an
investor
in
evaluating
the
Company
because
it
is
widely
used
in
the
coal
industry
as
a
measure
to
evaluate a company’s operating performance before debt expense and as a measure of its cash flow. EBITDA
does not purport to represent operating income, net income or cash generated by operating activities and should
not be considered in isolation or as a substitute for measures of performance in accordance with generally
accepted accounting principles. In addition, because EBITDA is not calculated identically by all companies, the
presentation here may not be comparable to other similarly titled measures of other companies. Reconciliations
of adjusted EBITDA can be found in the Company’s earnings press release for the relevant periods.