Regions Southwest Virginia

Alpha Natural Resources reports $2.2 billion loss for the second quarter

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Bristol-based Alpha Natural Resources Inc., a major U.S. coal producer, reported a second-quarter loss of $2.2 billion or $10.14 per diluted share, compared with a loss of $50 million or 32 cents per diluted share in the second quarter of 2011.

The second-quarter adjusted net loss was $72 million or 33 cents per diluted share, compared to adjusted net income of $152 million or 97 cents per diluted share last year. The adjusted numbers for the second quarter 2012 exclude impairment and restructuring charges, expenses related to the Upper Big Branch (UBB) mine accident in 2010, net amortization of acquired intangibles, changes in fair value and settlement of derivative instruments, merger-related expenses, certain other items, and related tax impacts of these items and other discrete tax items.

Earnings before interest, taxes, depreciation, depletion and amortization (EBITDA) for the second quarter 2012 was a loss of $2.4 billion, compared with EBITDA of $109 million in the year ago period. Excluding impairment and restructuring charges, UBB expenses, changes in fair value and settlement of derivative instruments, merger-related expenses, and loss on early extinguishment of debt, adjusted EBITDA was $186 million, compared with Adjusted EBITDA of $369 million in the second quarter of 2011.

In the second quarter, Alpha recorded restructuring and long-lived asset impairment charges totaling $1 billion, primarily associated with current market conditions and the continued optimization of Eastern operations which included reductions in operating levels and idling of several operations, as well as actions to streamline the company’s organizational structure.

The $991 million reduction to long-lived asset carrying values is anticipated to reduce non-cash depletion, depreciation and amortization expense by approximately $80 million on an annualized basis. In addition, Alpha recorded a non-cash goodwill impairment charge of $1.5 billion, reflecting the current coal market conditions, and lower expected production and shipment levels. None of these charges are anticipated to materially impact the company’s liquidity position or the future operation of its business.

“These are extremely challenging times in the U.S. coal industry, with softness in both the thermal and now the metallurgical coal markets and the pace at which the fundamentals changed,” Kevin Crutchfield, Alpha’s Chairman and CEO, said in a statement. ”Alpha has taken decisive actions to ensure that our business is both well-suited to today’s demand environment and efficient enough to provide us with the flexibility to ramp-up our world-class asset base once market conditions improve. We have continued to optimize our Central Appalachia operations by adjusting our footprint, idling high cost thermal coal and lower-quality metallurgical coal production while focusing on our higher-margin metallurgical products. Additionally, we have reduced our overhead expenses.”

Apha’s total revenue for the second quarter was $1.8 billion, up from $1.6 billion during the same period last year, which included one month of operations of mines formerly owned by Richmond-based Massey Energy. Massey merged with Alpha last year.

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