Form 10-Q
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2009 or

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number: 001-14901

CONSOL Energy Inc.

(Exact name of registrant as specified in its charter)

 

Delaware   51-0337383

(State or Other Jurisdiction of

Incorporation or Organization)

 

(IRS Employer

Identification No.)

1000 CONSOL Drive

Canonsburg, Pennsylvania

  15317-6506
(Address of Principal Executive Offices)   (Zip Code)

(724) 485-4000

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant:(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes    x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer   x    Accelerated filer  ¨    Non-accelerated filer  ¨    Smaller Reporting Company  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  ¨    No  x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.

 

Class

 

Shares outstanding as of July 24, 2009

Common stock, $0.01 par value   180,700,590

 

 

 


Table of Contents

TABLE OF CONTENTS

PART I

FINANCIAL INFORMATION

 

          Page

ITEM 1.

  

CONDENSED FINANCIAL STATEMENTS

  
  

Consolidated Statements of Income for the three and six months ended June 30, 2009 and 2008

   1
  

Consolidated Balance Sheets at June 30, 2009 and December 31, 2008

   2
  

Consolidated Statements of Stockholders’ Equity for the six months ended June 30, 2009

   4
  

Consolidated Statements of Cash Flows for the six months ended June 30, 2009 and 2008

   5
  

Notes to Consolidated Financial Statements

   6

ITEM 2.

  

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

   35

ITEM 3.

  

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

   64

ITEM 4.

  

CONTROLS AND PROCEDURES

   65
  

PART II

OTHER INFORMATION

  

ITEM 1.

  

LEGAL PROCEEDINGS

   66

ITEM 4.

  

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

   66

ITEM 6.

  

EXHIBITS

   68


Table of Contents

PART I

FINANCIAL INFORMATION

 

ITEM 1. CONDENSED FINANCIAL STATEMENTS

CONSOL ENERGY INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(Dollars in thousands, except per share data)

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
     2009     2008     2009     2008  

Sales—Outside

   $ 994,141      $ 1,111,410      $ 2,144,385      $ 1,997,735   

Sales—Gas Royalty Interests

     8,666        22,515        21,298        39,019   

Sales—Purchased Gas

     1,166        1,647        2,631        5,186   

Freight—Outside

     27,087        63,927        58,003        108,671   

Other Income

     39,505        11,397        62,999        86,016   
                                

Total Revenue and Other Income

     1,070,565        1,210,896        2,289,316        2,236,627   

Cost of Goods Sold and Other Operating Charges (exclusive of depreciation, depletion and amortization shown below)

     642,856        740,735        1,310,478        1,377,461   

Gas Royalty Interests’ Costs

     6,458        21,880        17,049        37,954   

Purchased Gas Costs

     390        1,522        1,920        4,943   

Freight Expense

     27,087        63,927        58,003        108,671   

Selling, General and Administrative Expense

     35,627        30,644        66,443        61,114   

Depreciation, Depletion and Amortization

     107,475        95,775        213,694        188,503   

Interest Expense

     6,945        8,526        15,457        18,704   

Taxes Other Than Income

     70,472        73,299        148,311        144,905   
                                

Total Costs

     897,310        1,036,308        1,831,355        1,942,255   
                                

Earnings Before Income Taxes

     173,255        174,588        457,961        294,372   

Income Taxes

     54,416        61,798        134,151        97,351   
                                

Net Income

     118,839        112,790        323,810        197,021   

Less: Net Income Attributable to Noncontrolling Interest

     (5,500     (11,778     (14,652     (20,927
                                

Net Income Attributable to CONSOL Energy Inc. Shareholders

   $ 113,339      $ 101,012      $ 309,158      $ 176,094   
                                

Basic Earnings Per Share

   $ 0.63      $ 0.55      $ 1.71      $ 0.96   
                                

Dilutive Earnings Per Share

   $ 0.62      $ 0.54      $ 1.69      $ 0.95   
                                

Weighted Average Number of Common Shares Outstanding:

        

Basic

     180,644,498        182,977,726        180,610,676        182,775,355   
                                

Dilutive

     183,073,413        185,637,248        182,833,111        185,330,300   
                                

Dividends Paid Per Share

   $ 0.10      $ 0.10      $ 0.20      $ 0.20   
                                

The accompanying notes are an integral part of these financial statements.

 

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Table of Contents

CONSOL ENERGY INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share data)

 

     (Unaudited)
June 30,

2009
   December 31,
2008

ASSETS

     

Current Assets:

     

Cash and Cash Equivalents

   $ 108,311    $ 138,512

Accounts and Notes Receivable:

     

Trade

     180,752      221,729

Other Receivables

     20,921      79,552

Inventories

     324,655      227,810

Deferred Income Taxes

     63,103      60,599

Recoverable Income Taxes

     —        33,862

Prepaid Expenses

     228,462      221,750
             

Total Current Assets

     926,204      983,814

Property, Plant and Equipment:

     

Property, Plant and Equipment

     10,265,654      9,980,288

Less—Accumulated Depreciation, Depletion and Amortization

     4,362,575      4,214,316
             

Total Property, Plant and Equipment—Net

     5,903,079      5,765,972

Other Assets:

     

Deferred Income Taxes

     301,511      333,543

Investment in Affiliates

     77,706      72,996

Other

     148,800      214,133
             

Total Other Assets

     528,017      620,672
             

TOTAL ASSETS

   $ 7,357,300    $ 7,370,458
             

The accompanying notes are an integral part of these financial statements.

 

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CONSOL ENERGY INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share data)

 

      (Unaudited)
June 30,
2009
    December 31,
2008
 

LIABILITIES AND STOCKHOLDERS’ EQUITY

    

Current Liabilities:

    

Accounts Payable

   $ 232,136      $ 385,197   

Short-Term Notes Payable

     452,000        557,700   

Current Portion of Long-Term Debt

     22,231        22,401   

Accrued Income Taxes

     4,891        —     

Other Accrued Liabilities

     554,190        546,442   
                

Total Current Liabilities

     1,265,448        1,511,740   

Long-Term Debt:

    

Long-Term Debt

     391,856        393,312   

Capital Lease Obligations

     69,736        75,039   
                

Total Long-Term Debt

     461,592        468,351   

Deferred Credits and Other Liabilities:

    

Postretirement Benefits Other Than Pensions

     2,494,054        2,493,344   

Pneumoconiosis Benefits

     194,984        190,261   

Mine Closing

     393,653        404,629   

Gas Well Plugging

     84,114        80,554   

Workers’ Compensation

     131,959        128,477   

Salary Retirement

     167,587        194,567   

Reclamation

     21,818        38,193   

Other

     155,300        185,996   
                

Total Deferred Credits and Other Liabilities

     3,643,469        3,716,021   
                

Total Liabilities

     5,370,509        5,696,112   

Stockholders’ Equity:

    

Common Stock, $.01 par value; 500,000,000 Shares Authorized, 183,014,426 Issued and 180,665,103 Outstanding at June 30, 2009; 183,014,426 Issued and 180,549,851 Outstanding at December 31, 2008

     1,830        1,830   

Preferred Stock, 15,000,000 Shares Authorized; None Issued and Outstanding

     —          —     

Capital in Excess of Par Value

     1,013,810        993,478   

Retained Earnings

     1,279,979        1,010,902   

Other Comprehensive Loss

     (467,193     (461,900

Common Stock in Treasury, at Cost—2,349,323 Shares at June 30, 2009 and 2,464,575 Shares at December 31, 2008

     (78,150     (82,123
                

Total Consol Energy Inc. Stockholders’ Equity

     1,750,276        1,462,187   

Noncontrolling Interest

     236,515        212,159   
                

Total Equity

     1,986,791        1,674,346   
                

TOTAL LIABILITIES AND EQUITY

   $ 7,357,300      $ 7,370,458   
                

The accompanying notes are an integral part of these financial statements.

 

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CONSOL ENERGY INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Dollars in thousands, except per share data)

 

    Common
Stock
  Capital in
Excess

of Par
Value
    Retained
Earnings
(Deficit)
    Other
Compre-
hensive
Income
(Loss)
    Treasury
Stock
    Total Consol
Energy, Inc.
Stockholders’
Equity
    Noncont-
rolling
Interest
    Total
Equity
 

Balance—December 31, 2008

  $ 1,830   $ 993,478      $ 1,010,902      $ (461,900   $ (82,123   $ 1,462,187      $ 212,159      $ 1,674,346   
                                                             

(Unaudited)

               

Net Income

    —       —          309,158        —          —          309,158        14,652        323,810   

Treasury Rate Lock (Net of ($24) tax)

    —       —          —          (41     —          (41     —          (41

FASB 158 Long-Term Liability Adjustment (Net of $116 tax)

    —       —          —          190        —          190        11        201   

Gas Cash Flow Hedge (Net of $4,775 tax)

    —       —          —          (5,442     —          (5,442     (1,085     (6,527
                                                             

Comprehensive Income

    —       —          309,158        (5,293     —          303,865        13,578        317,443   

Issuance of Treasury Stock

    —       —          (3,953     —          3,973        20        —          20   

Issuance of CNX Gas Stock

    —       —          —          —          —          —          121        121   

Tax Benefit from Stock-Based Compensation

    —       (110     —          —          —          (110     (1     (111

Amortization of Stock-Based Compensation Awards

    —       16,942        —          —          —          16,942        15,190        32,132   

Stock-Based Compensation Awards to CNX Gas

    —       3,500        —          —          —          3,500        (2,916     584   

Net Change in Crown Drilling Noncontrolling Interest

    —       —          —          —          —          —          (1,616     (1,616

Dividends ($0.20 per share)

    —       —          (36,128     —          —          (36,128     —          (36,128
                                                             

Balance—June 30, 2009

  $ 1,830   $ 1,013,810      $ 1,279,979      $ (467,193   $ (78,150   $ 1,750,276      $ 236,515      $ 1,986,791   
                                                             

The accompanying notes are an integral part of these financial statements.

 

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CONSOL ENERGY INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in thousands)

 

     Six Months Ended
June 30,
 
     2009     2008  

Operating Activities:

    

Net Income

   $ 323,810      $ 197,021   

Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:

    

Depreciation, Depletion and Amortization

     213,694        188,503   

Stock-based Compensation

     21,783        12,425   

Gain on the Sale of Assets

     (9,788     (8,050

Amortization of Mineral Leases

     2,398        3,240   

Deferred Income Taxes

     34,488        68,996   

Equity in Earnings of Affiliates

     (6,800     (3,645

Changes in Operating Assets:

    

Accounts Receivable Securitization

     —          29,900   

Accounts and Notes Receivable

     100,554        (110,856

Inventories

     (96,845     (11,467

Prepaid Expenses

     18,505        19,289   

Changes in Other Assets

     5,347        13,822   

Changes in Operating Liabilities:

    

Accounts Payable

     (64,959     21,058   

Other Operating Liabilities

     45,117        11,276   

Changes in Other Liabilities

     (30,977     37,739   

Other

     9,919        726   
                

Net Cash Provided by Operating Activities

     566,246        469,977   
                

Investing Activities:

    

Capital Expenditures

     (496,419     (436,277

Net Investment in Equity Affiliates

     2,090        (819

Proceeds from Sales of Assets

     48,184        17,280   
                

Net Cash Used in Investing Activities

     (446,145     (419,816
                

Financing Activities:

    

Proceeds from (Payments on) Miscellaneous Borrowings

     (9,282     6,307   

Payments on Short-Term Borrowings

     (105,700     (40,500

Tax Benefit from Stock-Based Compensation

     397        19,994   

Dividends Paid

     (36,128     (36,549

Issuance of Treasury Stock

     611        14,156   

Purchases of Treasury Stock

     —          (31

Noncontrolling Interest Member Distribution

     (200     —     
                

Net Cash Used in Financing Activities

     (150,302     (36,623
                

Net Increase(Decrease) in Cash and Cash Equivalents

     (30,201     13,538   

Cash and Cash Equivalents at Beginning of Period

     138,512        41,651   
                

Cash and Cash Equivalents at End of Period

   $ 108,311      $ 55,189   
                

The accompanying notes are an integral part of these financial statements.

 

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CONSOL ENERGY INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2009

(Dollars in thousands, except per share data)

NOTE 1—BASIS OF PRESENTATION:

The accompanying unaudited 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 generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2009 are not necessarily indicative of the results that may be expected for future periods.

The balance sheet at December 31, 2008 has been derived from the audited consolidated financial statements at that date but does not include all the notes required by generally accepted accounting principles for complete financial statements.

For further information, refer to the consolidated financial statements and related notes for the year ended December 31, 2008 included in CONSOL Energy’s Form 10-K.

Effective January 1, 2009, CONSOL Energy adopted the provisions of Statement of Financial Accounting Standards No. 160, “Noncontrolling Interests in Consolidated Financial Statements—an Amendment of ARB No. 51 (SFAS 160).” This adoption resulted in modifications to the reporting of noncontrolling interests in the Consolidated Financial Statements. Additionally, certain reclassifications of prior period data have been made to conform to the three and six months ended June 30, 2009 classifications required by SFAS 160.

During the three months ended June 30, 2009, CONSOL Energy recognized the effect of an exchange offer that allows participants in the CNX Gas Long-Term Incentive Program to exchange their unvested performance share units for CONSOL Energy restricted stock units. The excess fair value of the replacement restricted stock units over the original performance stock units resulted in $2,738 of incremental expense being immediately recognized. Additionally, a liability of $10,347 for the cash settlement of CNX Gas performance share units was removed from the balance sheet.

Basic earnings per share are computed by dividing net income 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 the effect of dilutive potential common shares outstanding during the period as calculated in accordance with Statement of Financial Accounting Standard No. 123R (SFAS 123R). The number of additional shares is calculated by assuming that restricted stock units and performance share units were converted and outstanding stock options were exercised and that the proceeds from such activity were used to acquire shares of common stock at the average market price during the reporting period. Options to purchase 1,659,105 and 1,659,695 shares of common stock were outstanding for the three and six months ended June 30, 2009, respectively, but were not included in the computation of dilutive earnings per share because the effect would be antidilutive. Options to purchase 383,161 shares of common stock were outstanding for both the three and six-months ended June 30, 2008, respectively, but were not included in the computation of dilutive earnings per share because the effect would be antidilutive. Unvested restricted stock units of 4,716 and 5,096, respectively, were outstanding for the three and six months ended June 30, 2009, but were not included in the computation of dilutive earnings per share because the effect would be antidilutive. No unvested restricted stock units were outstanding for the three and six months ended June 30, 2008 that were not included in the computation of dilutive earnings per share. Unvested performance share units of 33,364 and 120,645, respectively, were outstanding for the three and six months ended June 30,

 

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2009, but were not included in the computation of dilutive earnings per share because the effect would be antidilutive. There were no unvested performance share units outstanding for the three and six months ended June 30, 2008 that were not included in the computation of dilutive earnings per share.

Options exercised during the three months ended June 30, 2009 and 2008 were 38,413 shares and 423,977 shares, respectively. The weighted average exercise price per share of the options exercised during the three months ended June 30, 2009 and 2008 was $13.42 and $20.98, respectively. There were 57,087 and 816,614 options exercised during the six months ended June 30, 2009 and 2008, respectively. The weighted average exercise price per share of the options exercised during the six months ended June 30, 2009 and 2008 was $11.69 and $17.90, respectively. There were 25,668 and 81,672 fully vested restricted stock awards released during the three and six months ended June 30, 2009. Additionally, during the three and six months ended June 30, 2008, there were 391 and 48,929 fully vested restricted stock awards released, respectively.

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

 

     Three Months Ended
June 30,
   Six Months Ended
June 30,
     2009    2008    2009    2008

Net Income Attributable to CONSOL Energy Shareholders

   $ 113,339    $ 101,012    $ 309,158    $ 176,094
                           

Average shares of common stock outstanding:

           

Basic

     180,644,498      182,977,726      180,610,676      182,775,355

Effect of share based payments

     2,428,915      2,659,522      2,222,435      2,554,945
                           

Dilutive

     183,073,413      185,637,248      182,833,111      185,330,300
                           

Earnings per share:

           

Basic

   $ 0.63    $ 0.55    $ 1.71    $ 0.96
                           

Dilutive

   $ 0.62    $ 0.54    $ 1.69    $ 0.95
                           

We have evaluated all subsequent events through August 3, 2009, the date the financial statements were issued. No material recognized or non-recognizable subsequent events were identified.

NOTE 2—ACQUISITIONS AND DISPOSITIONS:

In June 2009, CONSOL Energy recognized the fair value of the remaining lease payments in the amount of $11,848 in accordance with Statement of Financial Accounting Standards No. 146 (SFAS 146), “Accounting for Costs Associated with Exit or Disposal Activities,” related to the Company’s previous headquarters. This liability has been recorded in Other Liabilities on the consolidated balance sheet at June 30, 2009. Total expense related to this transaction was $13,374 which was recognized in Cost of Goods Sold and Other Operating Charges. This amount includes the fair value of the remaining lease payments of $11,848 as well as the removal of a related asset of $1,526. Additionally, $5,832 was recognized in Other Income for the acceleration of a deferred gain associated with the initial sale-leaseback of the premises that occurred in 2005.

In June 2009, CONSOL Energy recognized the fair value of the remaining lease payments partially offset by projected sublease income in the amount of $831 in accordance with SFAS 146 related to a subsidiary’s previous headquarters. This liability has been recorded in Other Liabilities on the consolidated balance sheet at June 30, 2009. Total expense related to this transaction was $824 which was recognized in Cost of Goods Sold and Other Operating Charges. This amount includes the fair value of the remaining lease payments offset by projected sublease income of $831 and the removal of the tenant improvement asset and related liability of $7.

 

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In February 2009, CONSOL Energy completed a sale/lease-back of longwall shields for Bailey Mine. Cash proceeds from the sale were $42,282, which was the same as our basis in the equipment. Accordingly, no gain or loss was recognized on the transaction. The lease has been accounted for as an operating lease. The lease term is five years.

In December 2008, CONSOL Energy, through a subsidiary, completed the acquisition of the outstanding 51% interest in Southern West Virginia Energy, LLC (“SWVE”) for a cash payment of $11,521. This amount is included in capital expenditures in cash used in investing activities on the Consolidated Statement of Cash Flows. The purchase price was principally allocated to property, plant and equipment. SWVE wholly-owns Southern West Virginia Resources, LLC and Minway Contracting, LLC, and had previously been a 49% subsidiary of CONSOL Energy. Prior to the acquisition of the outstanding interest, SWVE had been fully consolidated in accordance with Financial Accounting Standards Board Interpretation No. 46, “Consolidation of Variable Interest Entities” by CONSOL Energy. The proforma results for this acquisition are not material to CONSOL Energy’s financial results.

In November 2008, CONSOL Energy, through a subsidiary, completed the acquisition of the assets of North Penn Pipe & Supply, Inc. for a cash payment, net of cash acquired, of $22,550. This amount is included in capital expenditures in cash used in investing activities on the Consolidated Statements of Cash Flows. North Penn Pipe & Supply, Inc. is a distributor of oil and gas field equipment, primarily tubular goods, to the northern Appalachian Basin, a region stretching from the state of New York to southwestern Pennsylvania and northern West Virginia. The fair value of merchandise for resale acquired in this acquisition is $10,623 and is included in inventory on the Consolidated Balance Sheets as of the acquisition date. The proforma results for this acquisition are not significant to CONSOL Energy’s financial results.

In October 2008, CONSOL Energy’s Board of Directors authorized a purchase program for shares of CNX Gas Corporation common stock for an aggregate purchase price of up to $150 million. The authorization, which is not intended to take CNX Gas private, was effective as of October 21, 2008 for a twenty-four month period. During the year ended December 31, 2008, CONSOL Energy completed the purchase of $67,259 of CNX Gas stock on the open market at an average price of $26.53 per share. The purchase price was allocated to property, plant and equipment. The purchase of these 2,531,400 shares changed CONSOL Energy’s ownership percentage in CNX Gas from 81.7% to 83.3% at December 31, 2008. CONSOL Energy did not purchase any additional shares of CNX Gas stock during the six months ended June 30, 2009.

In July 2008, our 83.3% subsidiary, CNX Gas, completed the acquisition of several leases and gas wells from KIS Oil & Gas Inc. for a cash payment of $19,324. The purchase price was principally allocated to property, plant and equipment. The sales agreement called for the transfer of approximately 5,600 leased acres and 30 oil and gas wells. This acquisition enhanced our acreage position in Northern Appalachia. The pro forma results for this acquisition were not significant to CONSOL Energy’s financial results.

In June 2008, CNX Gas completed the acquisition of the remaining 50% interest in Knox Energy, LLC and Coalfield Pipeline Company not already owned by CNX Gas for a cash payment of $36,000, which was principally allocated to property, plant and equipment. Prior to the acquisition of the remaining interest, Knox Energy, LLC had been proportionately consolidated into CONSOL Energy’s financial statements during 2008. During 2006 and 2007, the equity method was used to account for these entities. Knox Energy, LLC is a natural gas production company and Coalfield Pipeline Company is a natural gas transportation company with operations in Tennessee. The pro forma results for this acquisition were not significant to CONSOL Energy’s financial results.

In February 2008, CONSOL Energy, through a subsidiary, completed a sale of the Mill Creek Mining Complex located in Kentucky. The sales agreement called for the transfer of all of the assets comprising the complex. Cash proceeds from the sale were $14,649, with our basis in the assets being $9,934. Accordingly, a gain of $4,715 was recorded on the transaction.

 

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NOTE 3—COMPONENTS OF PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS NET PERIODIC BENEFIT COSTS:

Components of net periodic costs for the three and six months ended June 30 are as follows:

 

    Pension Benefits     Other Benefits  
      Three Months Ended
June 30,
    Six Months Ended
June 30,
    Three Months Ended
June 30,
    Six Months Ended
June 30,
 
        2009             2008             2009             2008         2009     2008     2009     2008  

Service cost

  $ 3,302      $ 2,438      $ 6,169      $ 4,876      $ 2,949      $ 2,639      $ 6,327      $ 5,277   

Interest cost

    9,082        8,257        17,741        16,515        35,991        39,959        75,726        79,919   

Expected return on plan assets

    (9,245     (8,418     (18,315     (16,835     —          —          —          —     

Amortization of prior service costs (credit)

    (277     (279     (554     (557     (11,604     (12,157     (23,207     (24,313

Recognized net actuarial loss

    5,692        4,182        11,131        8,363        10,209        15,376        25,178        30,752   
                                                               

Net periodic benefit cost

  $ 8,554      $ 6,180      $ 16,172      $ 12,362      $ 37,545      $ 45,817      $ 84,024      $ 91,635   
                                                               

For the six months ended June 30, 2009, $33,208 of contributions to pension trusts and pension benefits have been paid from operating cash flows. CONSOL Energy presently anticipates contributing a total of $65,600 to the pension trust in 2009.

We do not expect to contribute to the other post employment benefit plan in 2009. We intend to pay benefit claims as they become due. For the six months ended June 30, 2009, $77,611 of other post employment benefits have been paid.

NOTE 4—COMPONENTS OF COAL WORKERS’ PNEUMOCONIOSIS (CWP) AND WORKERS’ COMPENSATION NET PERIODIC BENEFIT COSTS:

Components of net periodic costs (benefits) for the three and six months ended June 30 are as follows:

 

     CWP     Workers’ Compensation  
     Three Months Ended
June 30,
    Six Months Ended
June 30,
    Three Months Ended
June 30,
    Six Months Ended
June 30,
 
         2009             2008             2009             2008         2009     2008     2009     2008  

Service cost

   $ 1,769      $ 1,259      $ 3,537      $ 2,518      $ 7,099      $ 7,258      $ 14,197      $ 14,515   

Interest cost

     3,013        2,937        6,027        5,874        2,191        2,082        4,382        4,164   

Amortization of actuarial gain

     (5,079     (6,027     (10,159     (12,056     (1,050     (1,235     (2,100     (2,468

State administrative fees and insurance bond premiums

     —          —          —          —          1,793        1,750        3,552        3,041   

Legal and administrative costs

     675        675        1,350        1,350        850        806        1,701        1,612   
                                                                

Net periodic (benefit) cost

   $ 378      $ (1,156   $ 755      $ (2,314   $ 10,883      $ 10,661      $ 21,732      $ 20,864   
                                                                

CONSOL Energy does not expect to contribute to the CWP plan in 2009. We intend to pay benefit claims as they become due. For the six months ended June 30, 2009, $5,948 of CWP benefit claims have been paid.

 

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CONSOL Energy does not expect to contribute to the workers’ compensation plan in 2009. We intend to pay benefit claims as they become due. For the six months ended June 30, 2009, $18,604 of workers’ compensation benefits, state administrative fees and surety bond premiums have been paid.

NOTE 5—INCOME TAXES:

The following is reconciliation, stated in dollars as a percentage of pretax income, of the U.S. statutory federal income tax rate to CONSOL Energy’s effective tax rate:

 

     For the Six Months Ended
June 30,
 
     2009     2008  
     Amount     Percent     Amount     Percent  

Statutory U.S. federal income tax rate

   $ 160,286      35.0   $ 103,030      35.0

Excess tax depletion

     (38,927   (8.5     (18,163   (6.2

Effect of Domestic Production Activities Deduction

     (7,327   (1.6     (1,472   (0.5

Effect of Medicare Prescription Drug, Improvement and Modernization Act of 2003

     1,374      0.3        589      0.2   

Net Effect of state tax

     18,318      4.0        11,304      3.8   

Other

     427      0.1        2,063      0.7   
                            

Income Tax Expense / Effective Rate

   $ 134,151      29.3   $ 97,351      33.0
                            

The effective tax rate for the six months ended June 30, 2009 and 2008 was calculated using the annual effective rate projection on recurring earnings and includes tax liabilities related to certain discrete transactions.

During the three months ended June 30, 2009 and 2008, CONSOL Energy reduced its liability for unrecognized tax benefits by $15,711 and $7,899, respectively. The reduction in unrecognized tax benefits for the three months ended June 30, 2009 was the result of the payment of Federal and state income tax deficiencies related to the Internal Revenue Service’s (IRS) examination of the Company’s 2004 and 2005 tax returns and the use of state operating loss carry forwards to reduce the anticipated state tax deficiencies arising from the IRS’ changes to taxable income for these years. The reduction in unrecognized tax benefits for the three months ended June 30, 2008 was attributable to the successful resolution of certain tax issues raised by the IRS during its examination of the Company’s 2004 and 2005 tax returns.

The total amounts of unrecognized tax benefits at June 30, 2009 and 2008 were $44,980 and $55,622, respectively. If these unrecognized tax benefits were recognized approximately $14,657 and $12,600 would affect CONSOL Energy’s effective tax rate for the six months ended June 30, 2009 and 2008, respectively.

CONSOL Energy Inc. and its subsidiaries file income tax returns in the U.S. federal, various states, and Canadian tax jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2002. The Internal Revenue Service has issued its audit report relating to the examination of CONSOL Energy’s 2004 and 2005 U.S. income tax returns. During the three months ended June 30, 2009, CONSOL Energy paid Federal and state income tax deficiencies of $12,798 and $608, respectively. The Federal and state income tax deficiencies paid as a result of the IRS’ examination of the Company’s 2004 and 2005 tax returns had an insignificant impact on net income since the tax deficiencies are the result of changes in the timing of certain tax deductions. During the six months ended June 30, 2009, CONSOL Energy classified various state unrecognized tax benefits of $4,800 as a current liability. The Company also classified interest expense relating to the various state unrecognized tax benefits of $2,320 as a current liability.

CONSOL Energy recognizes interest accrued related to unrecognized tax benefits in its interest expense. As of June 30, 2009 and 2008, the Company reported an accrued interest liability relating to uncertain tax positions of $6,359 and $9,944, respectively. The accrued interest liability includes $438 and $1,439 of interest expense

 

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that is reflected in the Company’s consolidated income statements for the six months ended June 30, 2009 and 2008, respectively. During the six months ended June 30, 2009, CONSOL Energy paid interest of $4,590 related to income tax deficiencies previously paid to the IRS as a result of its examinations of the Company’s tax returns from 2002 through 2005.

CONSOL Energy recognizes penalties accrued related to unrecognized tax benefits in its income tax expense. At June 30, 2009, CONSOL had no accrued penalties. At June 30, 2008, an accrued liability of approximately $1,200 was recognized.

NOTE 6—INVENTORIES:

Inventory components consist of the following:

 

     June 30,
2009
   December 31,
2008

Coal

   $ 176,193    $ 93,875

Merchandise for resale

     58,347      43,074

Supplies

     90,115      90,861
             

Total Inventories

   $ 324,655    $ 227,810
             

Merchandise for resale is valued using the Last In First Out (LIFO) cost method. The excess of replacement cost of merchandise for resale inventories over carrying LIFO value was $9,934 and $14,716 at June 30, 2009 and December 31, 2008, respectively.

NOTE 7—ACCOUNTS RECEIVABLE SECURITIZATION:

CONSOL Energy and certain of our U.S. subsidiaries are party to a trade accounts receivable facility with financial institutions for the sale on a continuous basis of eligible trade accounts receivable. The facility allows CONSOL Energy to receive on a revolving basis, up to $165,000. The facility also allows for the issuance of letters of credit against the $165,000 capacity. At June 30, 2009, there were no letters of credit outstanding against the facility.

CONSOL Energy formed CNX Funding Corporation, a wholly owned, special purpose, bankruptcy-remote subsidiary for the sole purpose of buying and selling eligible trade receivables generated by certain subsidiaries of CONSOL Energy. Under the receivables facility, CONSOL Energy and certain subsidiaries, irrevocably and without recourse, sell all of their eligible trade accounts receivable to financial institutions and their affiliates, while maintaining a subordinated interest in a portion of the pool of trade receivables. This retained interest, which is included in Accounts and Notes Receivable Trade in the Consolidated Balance Sheets, is recorded at fair value. Due to a short average collection cycle for such receivables, our collection experience history and the composition of the designated pool of trade accounts receivable that are part of this program, the fair value of our retained interest approximates the total amount of the designated pool of accounts receivable reduced by the amount of accounts receivables sold to the third-party financial institutions under the program. CONSOL Energy will continue to service the sold trade receivables for the financial institutions for a fee based upon market rates for similar services.

The cost of funds under this facility is based upon commercial paper rates, plus a charge for administrative services paid to the financial institutions. Costs associated with the receivables facility totaled $833 and $1,768 for the three and six months ended June 30, 2009. Costs associated with the receivables facility totaled $1,285 and $2,862 for the three and six months ended June 30, 2008. These costs have been recorded as financing fees which are included in Cost of Goods Sold and Other Operating Charges in the Consolidated Statements of Income. No servicing asset or liability has been recorded. The receivables facility expires in April 2012 with the underlying liquidity agreement renewing annually each April.

 

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At June 30, 2009 and 2008, eligible accounts receivable totaled approximately $165,000. There was no subordinated retained interest at June 30, 2009. The subordinated retained interest approximated $9,700 at June 30, 2008. Accounts receivable totaling $165,000 and $155,300 were removed from the Consolidated Balance Sheet at June 30, 2009 and 2008, respectively. CONSOL Energy’s $29,900 increase in the accounts receivable securitization program for the six months ended June 30, 2008 is reflected in cash flows from operating activities in the Consolidated Statement of Cash Flows. There was no change in the facility usage in the six months ended June 30, 2009.

NOTE 8—PROPERTY, PLANT AND EQUIPMENT:

The components of property, plant and equipment are as follows:

 

     June 30,
2009
   December 31,
2008

Coal & other plant and equipment

   $ 4,620,840    $ 4,533,793

Coal properties and surface lands

     1,257,956      1,264,920

Gas properties and related development

     1,563,172      1,427,588

Gas gathering equipment

     780,804      740,396

Airshafts

     608,484      615,512

Leased coal lands

     510,858      502,521

Mine development

     549,878      527,991

Coal advance mining royalties

     371,272      365,380

Gas advance royalties

     2,390      2,187
             

Total property, plant and equipment

     10,265,654      9,980,288

Less Accumulated depreciation, depletion and amortization

     4,362,575      4,214,316
             

Total Net Property, Plant and Equipment

   $ 5,903,079    $ 5,765,972
             

NOTE 9—SHORT-TERM NOTES PAYABLE:

CONSOL Energy has a five-year $1,000,000 senior secured credit facility, which extends through June 2012. The facility is secured by substantially all of the assets of CONSOL Energy and certain of its subsidiaries and collateral is shared equally and ratably with the holders of CONSOL Energy Inc. 7.875% bonds maturing in 2012. The Agreement does provide for the release of collateral at the request of CONSOL Energy upon achievement of certain credit ratings. Fees and interest rate spreads are based on a ratio of financial covenant debt to twelve-month trailing earnings before interest, taxes, depreciation, depletion and amortization (EBITDA), measured quarterly. The facility includes a minimum interest coverage ratio covenant of no less than 4.50 to 1.00, measured quarterly. The interest coverage ratio was 24.44 to 1.00 at June 30, 2009. The facility also includes a maximum leverage ratio covenant of not more than 3.25 to 1.00, measured quarterly. The leverage ratio was 0.93 to 1.00 at June 30, 2009. Affirmative and negative covenants in the facility limit our ability to dispose of assets, make investments, purchase or redeem CONSOL Energy common stock, pay dividends and merge with another corporation. At June 30, 2009, the $1,000,000 facility had $371,000 of borrowings outstanding and $268,176 of letters of credit outstanding, leaving $360,824 of capacity available for borrowings and the issuance of letters of credit. The facility bore a weighted average interest rate of 1.21% for the six months ended June 30, 2009.

CNX Gas has a five-year $200,000 unsecured credit agreement which extends through October 2010. The agreement contains a negative pledge provision, whereas CNX Gas assets cannot be used to secure other obligations. Fees and interest rate spreads are based on the percentage of facility utilization, measured quarterly. Covenants in the facility limit CNX Gas’ ability to dispose of assets, make investments, purchase or redeem CNX Gas stock, pay dividends and merge with another corporation. The facility includes a maximum leverage ratio covenant of not more than 3.00 to 1.00, measured quarterly. The leverage ratio was 0.35 to 1.00 at June 30, 2009. The facility also includes a minimum interest coverage ratio covenant of no less than 3.00 to 1.00,

 

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measured quarterly. This ratio was 68.35 to 1.00 at June 30, 2009. At June 30, 2009, the CNX Gas credit agreement had $81,000 of borrowings outstanding and $14,933 of letters of credit outstanding, leaving $104,067 of capacity available for borrowings and the issuance of letters of credit. The facility bore a weighted average interest rate of 1.50% for the six months ended June 30, 2009.

NOTE 10—COMMITMENTS AND CONTINGENCIES:

CONSOL Energy and its subsidiaries are subject to various lawsuits and claims with respect to such matters as personal injury, wrongful death, damage to property, exposure to hazardous substances, governmental regulations including environmental remediation, employment and contract disputes and other claims and actions arising out of the normal course of business. Our current estimates related to these pending claims, individually and in the aggregate, are immaterial to the financial position, results of operations or cash flows of CONSOL Energy. However, it is reasonably possible that the ultimate liabilities in the future with respect to these lawsuits and claims may be material to the financial position, results of operations or cash flows of CONSOL Energy.

On January 30, 2008, the Pennsylvania Department of Conservation and Natural Resources filed a six-count Complaint in the Court of Common Pleas of Allegheny County, Pennsylvania, asserting claims in both tort and contract against the Company for alleged damage to park property owned by the Commonwealth allegedly due to the Company’s underground mining activities. The Commonwealth claims that the Company’s underground longwall mining activities in the summer of 2005 in Greene County, Pennsylvania, caused cracks and seepage damage to the nearby Ryerson Park Dam. The Commonwealth demolished the Ryerson Dam’s spillway allegedly to protect persons and property, thereby eliminating the Ryerson Park lake. The Commonwealth claims that the Company is liable for dam reconstruction costs, lake restoration costs and natural resources damages totaling $58,000. The theories of liability include general allegations of negligence, breach of contract, strict liability, nuisance, an administrative remedy claim under the Bituminous Mine Subsidence Act and a claim of fraud; the last claim seeking punitive damages. The Court, in ruling on the Company’s Preliminary Objections to the Complaint, stayed the current proceedings in the state court, holding that the Commonwealth should pursue administrative agency review of the claim because full compensatory relief, if warranted, could be provided by the particular administrative agency and then the Environmental Hearing Board, if further relief was sought. Furthermore, the Court found that the Commonwealth could not recover natural resources damages under applicable law. The remainder of the Company’s objections was preserved pending the outcome of the administrative proceedings. The matter is in the early stages of review by the Department of Environmental Protection (DEP). The DEP has set specific dates for the submission of materials regarding the issue of causation with August 3, 2009 being the date for replying to several written inquiries from the DEP. The DEP will likely issue its causation decision prior to year end. The Company has submitted extensive material, including comments from its mining expert that longwall mining activity did not cause damage to the dam. If the DEP determines that there is causation, a second phase will be set to determine the remedy. As to the underlying claim, the Company believes it is not responsible for the damage to the dam, that numerous grounds exist upon which to attack the propriety of the claims, and it will vigorously defend the case. However, it is reasonably possible that the ultimate liability in the future with respect to these claims may be material to the financial position, results of operations, or cash flows of CONSOL Energy.

One of our subsidiaries, Fairmont Supply Company (Fairmont), which distributes industrial supplies, currently is named as a defendant in approximately 25,000 asbestos claims in state courts in Pennsylvania, Ohio, West Virginia, Maryland, Mississippi, New Jersey and Illinois. Because a very small percentage of products manufactured by third parties and supplied by Fairmont in the past may have contained asbestos and many of the pending claims are part of mass complaints filed by hundreds of plaintiffs against a hundred or more defendants, it has been difficult for Fairmont to determine how many of the cases actually involve valid claims or plaintiffs who were actually exposed to asbestos-containing products supplied by Fairmont. In addition, while Fairmont may be entitled to indemnity or contribution in certain jurisdictions from manufacturers of identified products, the availability of such indemnity or contribution is unclear at this time, and in recent years, some of the manufacturers named as defendants in these actions have sought protection from these claims under bankruptcy

 

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laws. Fairmont has no insurance coverage with respect to these asbestos cases. For the six months ended June 30, 2009 and 2008, payments by Fairmont with respect to asbestos cases have not been material. Our current estimates related to these asbestos claims, individually and in the aggregate, are immaterial to the financial position, results of operations and cash flows of CONSOL Energy. However, it is reasonably possible that payments in the future with respect to pending or future asbestos cases may be material to the financial position, results of operations or cash flows of CONSOL Energy.

CONSOL Energy was notified in November 2004 by the United States Environmental Protection Agency (EPA) that it is a potentially responsible party (PRP) under Superfund legislation with respect to the Ward Transformer site in Wake County, North Carolina. At that time, the EPA also identified 38 other PRPs for the Ward Transformer site. On September 16, 2005, the EPA, CONSOL Energy and two other PRPs entered into an administrative Settlement Agreement and Order of Consent, requiring those PRPs to undertake and complete a PCB soil removal action, at and in the vicinity of the Ward Transformer property. In December 2005, the EPA approved the PRPs’ work plan, and field work began the first week of January 2006. On March 12, 2007, another party joined the participating PRPs and reduced CONSOL Energy’s interim allocation share from 46% to 32%. Accordingly, CONSOL Energy recognized a reduction in the previously recognized liability related to this matter. In June 2008, while conducting the PCB soil excavation on the Ward property, it was determined that PCBs may have migrated onto two adjacent properties.

The current estimated cost of remedial action for the area CONSOL Energy was originally named a PRP, including payment of the EPA’s past and future cost, is approximately $55,000. The current estimated cost of the most likely remediation plan for the additional areas discovered is approximately $6,800, although the removal action plan is not yet approved by the EPA. There was $1,120 and $3,456 of expense recognized in Cost of Goods Sold and Other Charges for the three and six months ended June 30, 2009, respectively. CONSOL Energy funded $4,000 in the six months ended June 30, 2009 to an independent trust established for this remediation. The remaining liability of $5,392 is reflected in Other Accrued Liabilities at June 30, 2009. CONSOL Energy and the other participating PRPs are investigating contribution claims against other, non-participating PRPs, and such claims will be brought to recover a share of the costs incurred. CONSOL Energy’s portion of probable recoveries are estimated to be $3,149. Accordingly, an asset has been included in Other Assets for these claims. CONSOL Energy expects the majority of payments related to this liability to be made over the next year. There may be some delay in negotiating settlements with other PRPs who may want settlement of all Ward-related claims. We cannot predict the ultimate outcome of this Superfund site; however, it is reasonably possible that payments in the future with respect to this lawsuit may be material to the financial position, results of operations or cash flows of CONSOL Energy. Also, in September 2008, the EPA notified CONSOL Energy and 60 other PRPs that there were additional areas of potential contamination allegedly related to the Ward Transformer Site. Current estimates of the cost or potential range of cost for this area are not yet available.

As part of conducting mining activities at the Buchanan Mine, our subsidiary, Consolidation Coal Company (“CCC”), has to remove water from the mine. Several actions have arisen with respect to the removal of naturally accumulating and pumped water from the Buchanan Mine:

Yukon Pocahontas Coal Company, Buchanan Coal Company and Sayers-Pocahontas Coal Company filed an action on March 22, 2004 against CCC which is presently pending in the Circuit Court of Buchanan County, Virginia (the “Yukon Action”). The action is related to CCC’s depositing of untreated water from its Buchanan Mine into the void spaces of nearby mines of one of our other subsidiaries, Island Creek Coal Company (“ICCC”). The plaintiffs are seeking to stop CCC from depositing any additional water in these areas, to require CCC to remove the water that is stored there along with any remaining impurities, to recover $300,000 of compensatory and trebled damages and to recover punitive damages. Plaintiffs have twice amended the original complaint to assert additional claims for compensatory damages to the coal and gas estates of up to $3,252,000, punitive damages in the amount of $350,000, as well as interest, costs, and attorneys’ fees, against CCC. Plaintiffs have also added CONSOL Energy, CNX Gas Company, LLC and ICCC as additional defendants asserting additional damage claims of $150,000 against those defendants. The Yukon group has recently filed a

 

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demand for arbitration (the “2008 Arbitration”) against ICCC which makes similar claims relating to breach of the lease for water deposits and lost coal claims.

Levisa Coal Company filed an action on July 10, 2006 against CCC in the Buchanan County Circuit Court (the “Levisa Action”). The action is for injunctive relief and declaratory judgment and sought a court order prohibiting CCC from depositing water from its Buchanan Mine into the void spaces of ICCC’s VP3 mine, part of which is under lease from Levisa Coal Company. The Plaintiff also has noted its intent to also seek an injunction requiring CCC to remove the water already deposited in the VP3 Mine. The plaintiff claims the water adversely affects its remaining coal reserves and coalbed methane production. In mid-November 2006, Levisa Coal Company petitioned the Circuit Court for a temporary injunction prohibiting the further depositing of water into the void spaces which, after a two-day hearing, the Buchanan County Circuit Court denied. Subsequently, the Circuit Court entered an order holding that CCC has the right to store water in the VP3 mine void based upon provisions in this lease and dismissed the action. The Supreme Court of Virginia, on appeal, disagreed with the Circuit Court’s interpretation of the lease, held that CCC has no right to store water in VP3 under the lease, reversed the dismissal, and remanded the case to the Circuit Court to determine whether under equitable principles a permanent injunction should be issued. On September 18, 2008, the Virginia Supreme Court denied CCC’s request for a rehearing of its June 6, 2008 decision and CCC subsequently filed a petition of certiorari with the United States Supreme Court requesting the United States Supreme Court to review and overturn the decision of the Virginia Supreme Court (“CCC’s Petition”). The Supreme Court of the United States directed Levisa to file a response to CCC’s Petition, which response was filed on April 2, 2009 after which the Supreme Court denied CCC’s petition. In January 2009, Levisa moved for summary judgment, requesting the issuance of a permanent injunction preventing further water storage and contending that the Supreme Court of Virginia’s opinion directed CCC to cease pumping. On February 10, 2009, the Circuit Court granted Levisa’s motion and permanently enjoined CCC from any further storage of water in VP3, which injunction was later dissolved on March 17, 2009 by the Supreme Court of Virginia on CCC’s Petition. In addition, Levisa Coal Company has filed an additional motion in the original action with the Circuit Court seeking as additional relief that CCC disgorge profits and other monetary benefits including avoided losses generated by the operation of the Buchanan Mine from the date of the decision of the Virginia Supreme Court or alternatively since the date of its denial of CCC’s rehearing request until such time as all depositing and/or storage of water in the VP3 Mine from the Buchanan Mine ceases. The parties have settled this matter. Under the terms of the settlement, the Company paid Levisa $15,400 in cash and surrendered to Levisa certain leased coal resources and reserves. The settlement has been recognized in Cost of Goods Sold and Other Operating Charges in the six months ended June 30, 2009. Levisa conveyed to CCC the coal and related rights in and around the VP3 mine and assigned to CCC the lease to ICCC that covers that coal.

On June 13, 2008 Levisa Coal Company filed a second action against CCC in the Circuit Court of Buchanan County, Virginia relating to the deposit of water by CCC into the void spaces of the VP3 mine which seeks damages of approximately $300,000, plus interest, costs and attorneys’ fees, which second action CCC moved to consolidate with the Levisa Action. This action was voluntarily dismissed by Levisa on or about February 10, 2009 without prejudice.

Meredith Ellis Jennings and several other individuals and entities filed an action on July 8, 2008 against CCC and CNX Gas in the Circuit Court of Buchanan County, Virginia (the “Pobst/Combs Action”). The plaintiffs alleged that they hold real property interests and royalty interests in gas including coalbed methane gas in and around the VP3 mine. The action, which has been voluntarily dismissed, was for injunctive relief and a court order prohibiting CCC from depositing water from its Buchanan Mine into the void spaces of the VP3 mine and requiring CCC to remove water from the void spaces of the VP3 mine. The settlement of the Pobst/Combs Action is covered by the settlement agreement in principal which settled the Levisa Action, as described above.

CCC has obtained revision to its environmental permit from the Division of Mined Land Reclamation (“DMLR”) of the Virginia Department of Mines, Minerals and Energy (“DMME”) to deposit water from its Buchanan Mine into void spaces of VP3, and to permit the discharge of water into the nearby Levisa River under controlled conditions. Plaintiffs in the Yukon Action and the Levisa Action along with the Town of Grundy,

 

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Virginia, Buchanan County Board of Supervisors, and others have requested the DMME to reconsider the permit revisions issued by DMLR. Requests for temporary relief to prevent CCC from constructing and operating pursuant to the permit revisions pending a final hearing before the DMME have been rejected by the Director of the DMME. The hearing to be conducted by the Director of the DMME through a Hearing Officer appointed by the Supreme Court of Virginia has not yet been scheduled. On June 13, 2006, the plaintiffs in the Yukon Action also filed an action against the DMME in the Circuit Court of Buchanan County, Virginia seeking to enjoin DMLR and DMME from issuing the permit revisions, which were ultimately issued in September 2006 and are the subject of the administrative appeal to the Director of DMME described above. The Levisa Action plaintiff filed a nearly identical action. DMME filed demurrers, but no hearing has been conducted since the DMME issued the permit in September 2006. On December 4, 2006, both the plaintiffs in the Yukon Action and Levisa nonsuited their respective “Citizen Suits,” and Buchanan County is expected to agree to not to pursue its objections, subject to certain conditions, as part of the settlement of the Buchanan County license tax issues described below.

We believe that CCC has and continues to have the right to deposit mine water from Buchanan Mine into void spaces at nearby mines, including VP3. We also believe DMME properly issued environmental permits to CCC authorizing it to deposit naturally accumulating water from the Buchanan Mine into VP3 as well as discharging water into the Levisa River under the controlled conditions established by the permits. CCC and the other named CONSOL Energy defendants in the Yukon Action, the Levisa Action and the Pobst/Combs Action deny all liability and intend to vigorously defend the actions filed against them in connection with the removal and deposit of water from the Buchanan Mine that the Levisa Action and the Pobst/Combs Action have been settled as described above without the admission of any liability. CCC also intends to vigorously defend the environmental permits issued to it. Consequently, we have not recognized any liability related to these actions, except in connection with the tentative settlement of the Levisa Action and Pobst Combs Action described above. However, if a temporary or permanent injunction were to be issued against CCC, if the environmental permits were temporarily suspended or revoked, or if damages were awarded to plaintiffs, the result may be material to the financial position, results of operations or cash flows of CONSOL Energy.

On October 24, 2006, CONSOL Energy and CCC were served with a summons in the name of the Commonwealth of Virginia with the Circuit Court of Buchanan County, Virginia regarding a special grand jury presentment in response to citizens’ complaints that noise resulting from the ventilation fan at the Buchanan Mine constitutes a public nuisance. CONSOL Energy and CCC deny that the operation of the ventilation fan is a public nuisance and intend to vigorously defend this proceeding. However, if the operation of the ventilation fan is ordered to be stopped, the result may be material to the financial position, results of operations or cash flows of CONSOL Energy.

On August 1, 2007, Bluestone Coal Corporation filed a lawsuit against the Company and its subsidiary, CNX Land Resources, in the United States District Court for the Southern District of West Virginia. The suit alleges that the Company breached a contract that allegedly provides Bluestone with an option to lease coal reserves within a seven-and-one-half mile radius of Bishop, WV and seeks damages of $1,200,000. The writing relied upon only refers to a right of first refusal, rather than an option. The Company has filed a motion for summary judgment based upon the fact that the alleged option did not contain the material terms necessary to avoid the bar of the statute of frauds. The Company believes that it should prevail as a matter of law and, if the motion is denied, intends to vigorously defend the case. However, if there were to be an adverse jury verdict, the result may be material to the financial position, results of operations or cash flows of CONSOL Energy.

On February 14, 2007, GeoMet, Inc. and certain of its affiliates filed a lawsuit against CNX Gas Company LLC and Island Creek Coal Company, a subsidiary of CONSOL Energy, in the Circuit Court for the County of Tazewell, Virginia (Case No. CL07000065-00). The lawsuit alleged that CNX Gas conspired with Island Creek and has violated the Virginia Antitrust Act and tortiously interfered with GeoMet’s contractual relations, prospective contracts and business expectancies. CNX Gas and Island Creek filed motions to dismiss all counts of the complaint. On December 19, 2007, the court granted CNX Gas’ and Island Creek’s motions to dismiss all

 

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counts, with leave for GeoMet to file an amended complaint. On March 31, 2008, GeoMet filed an amended complaint. The amended complaint is again against CNX Gas and Island Creek, but it added CONSOL Energy and Cardinal States Gathering Company as additional defendants. The amended complaint restates allegations that CNX Gas, Island Creek and now CONSOL Energy and Cardinal States Gathering Company violated the Virginia Antitrust Act and tortuously interfered with GeoMet’s contractual relations, prospective contracts and business expectancies. The amended complaint seeks injunctive relief, compensatory damages of $385,600 and treble damages. CNX Gas continues to believe this lawsuit to be without merit and intends to vigorously defend it. On June 3, 2009, the court granted in part and denied in part CNX Gas’ motion to dismiss the case on the basis of the pleadings only, dismissing the anti-trust claim of violating the essential facilities doctrine and the state law claims of tortious interference with contractual relations, prospective contracts and business expectancies, but allowing the remaining claims to proceed in the litigation. We cannot predict the ultimate outcome of this litigation; however, it is reasonably possible that the ultimate liabilities in the future with respect to these lawsuits and claims may be material to the financial position, results of operations, or cash flows of CNX Gas.

On January 7, 2009, CNX Gas received a civil investigative demand for information and documents from the Attorney General of the Commonwealth of Virginia regarding the company’s exploration, production, transportation and sale of coalbed methane gas in Virginia. According to the request, the Attorney General is investigating whether the company may have violated the Virginia Antitrust Act. The request for information does not constitute the commencement of legal proceedings and does not make any specific allegations against the company. CNX Gas does not believe that it has violated the Virginia Antitrust Act and the company is cooperating with the Attorney General’s investigation.

The Company is a party to a case captioned Earl Kennedy et. al v. CNX Gas and CONSOL Energy in the Court of Common Pleas of Greene County, Pennsylvania (Case No. 225 of 2007). The lawsuit alleges that CNX Gas and CONSOL Energy conspired and were unjustly enriched, trespassed, converted, and committed fraud relating to gas and other minerals allegedly belonging to Mr. Kennedy. The complaint, as amended, seeks injunctive relief, including having CNX Gas and CONSOL Energy be removed from the property, quiet title and compensatory damages of $20,000. The suit also sought to overturn existing law as to the ownership of coalbed methane in Pennsylvania, but that claim was dismissed by the court on July 2, 2009, in response to cross motions for summary judgment on that issue. CNX Gas believes this lawsuit to be without merit and intends to vigorously defend it. We cannot predict the ultimate outcome of this litigation; however, it is reasonably possible that the ultimate liabilities in the future with respect to these lawsuits and claims may be material to the financial position, results of operations, or cash flows of CNX Gas.

In April 2005, Buchanan County, Virginia (through its Board of Supervisors and Commissioner of Revenue) filed a “Motion for Judgment Pursuant to the Declaratory Judgment Act Virginia Code § 8.01-184” against CNX Gas Company LLC in the Circuit Court of the County of Buchanan (Case No. CL05000149-00) for the year 2002; the county has since filed and served two substantially similar cases for years 2003, 2004 and 2005. These cases have been consolidated. The complaint alleges that our calculation of the license tax on the basis of the wellhead value (sales price less post production costs) rather than the sales price is improper. For the period from 1999 through mid 2002, we paid the tax on the basis of the sales price, but we have filed a claim for a refund for these years. Since 2002, we have continued to pay Buchanan County taxes based on our method of calculating the taxes. However, we have been accruing an additional liability reflected in Other Liabilities on our balance sheet in an amount based on the difference between our calculation of the tax and Buchanan County’s calculation. We believe that this litigation will settle on terms that will not have a material adverse impact on the financial position or the results of operations of CNX Gas.

In 1999, CNX Gas was named in a suit brought by a group of royalty owners that lease gas development rights to CNX Gas in southwest Virginia. The suit alleged the underpayment of royalties to the group of royalty owners. The claim of underpayment of royalties related to the interpretation of permissible deductions from production revenues upon which royalties are calculated. The deductions at issue relate to post-production expenses of gathering, compression and transportation. CNX Gas was ordered to pay, and subsequently paid,

 

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damages to the group of royalty owners that brought the suit. A final payment was subsequently made to the plaintiffs to adjust all royalties owed to the plaintiffs for subsequent periods, which effectively settled this case. CNX Gas recognized an estimated liability for other similarly situated plaintiffs who could bring similar claims. This amount is included in Other Liabilities on the balance sheet and is evaluated quarterly. CNX Gas believes that the final resolution of this matter will not have a material effect on our financial position, results of operations or cash flows.

In July 2007, production at the Buchanan Mine was suspended after several roof falls in previously mined areas damaged some of the ventilation controls inside the mine, requiring a general evacuation of the mine by employees. The mine atmosphere was continually monitored to determine the impact of the roof falls on the mine’s ventilation system and the overall mine atmosphere. On March 17, 2008, Buchanan Mine resumed production. This incident was covered under our property and business interruption insurance policy, subject to certain deductibles. Business interruption recoveries of $50,000 were recognized as Other Income in the six months ended June 30, 2008, $42,000 in the coal segment and $8,000 in the gas segment. The total recoveries for this incident under our insurance policy were $75,000. No other insurance recoveries for this incident will be received.

On October 3, 2008 the Emergency Economic Stabilization Act of 2008 (the EESA Act) was signed into law. The EESA Act contains a section that authorizes certain coal producers and exporters who have filed a Black Lung Excise Tax (BLET) return on or after October 1, 1990, to request a refund of the BLET paid on export sales during these years. The EESA Act requires that the U.S. Treasury refund a coal producer or exporter an amount equal to the BLET erroneously paid on export sales in prior years along with interest computed at the statutory rates applicable to overpayments.

In the three months ended June 30, 2009, CONSOL Energy collected the BLET receivable and related interest in the amount of $59,723. Upon collection of the refunds, CONSOL Energy paid third parties $4,358. CONSOL Energy recognized $55,795 in the year ended December 31, 2008 that was included in Black Lung Excise Tax Refund in the consolidated statements of income. In the three and six months ended June 30, 2009, CONSOL Energy recognized additional income related to the collection of the receivable in the amount of $348 and $700, respectively, which was also reflected in Black Lung Excise Tax Refund line in the consolidated statements of income. CONSOL Energy also recognized additional expense related to the collection of the receivable in the amount of $1,134 for the three and six months ended June 30, 2009 that is included in Cost of Goods Sold and Other Operating Charges.

 

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At June 30, 2009, CONSOL Energy has provided the following financial guarantees, unconditional purchase obligations and letters of credit to certain third parties, as described by major category in the following table. These amounts represent the maximum potential total of future payments that we could be required to make under these instruments. These amounts have not been reduced for potential recoveries under recourse or collateralization provisions. Generally, recoveries under reclamation bonds would be limited to the extent of the work performed at the time of the default. No amounts related to these financial guarantees and letters of credits are recorded as liabilities on the financial statements. CONSOL Energy management believes that these guarantees will expire without being funded, and therefore the commitments will not have a material adverse effect on financial condition.

 

     Amount and Duration of Commitment
     Total
Amounts
Committed
   Less Than
1 Year
   1-3 Years    3-5 Years    Beyond
5 Years

Letters of Credit:

              

Employee-Related

   $ 192,724    $ 96,471    $ 96,253    $ —      $ —  

Environmental

     63,502      60,637      2,865      —        —  

Gas

     14,933      172      14,761      —        —  

Other

     11,950      11,850      100      —        —  
                                  

Total Letters of Credit

     283,109      169,130      113,979      —        —  
                                  

Surety Bonds:

              

Employee-Related

     192,151      180,651      11,500      —        —  

Environmental

     340,515      315,560      24,955      —        —  

Gas

     4,904      4,863      41      —        —  

Other

     10,222      10,158      64      —        —  
                                  

Total Surety Bonds

     547,792      511,232      36,560      —        —  
                                  

Guarantees:

              

Coal

     358,257      215,055      138,234      1,999      2,969

Gas

     33,048      29,948      —        —        3,100

Other

     252,789      33,374      59,889      47,993      111,533
                                  

Total Guarantees

     644,094      278,377      198,123      49,992      117,602
                                  

Total Commitments

   $ 1,474,995    $ 958,739    $ 348,662    $ 49,992    $ 117,602
                                  

Employee-related financial guarantees have primarily been provided to support the United Mine Workers’ of America’s 1992 Benefit Plan and various state workers’ compensation self-insurance programs. Environmental financial guarantees have primarily been provided to support various performance bonds related to reclamation and other environmental issues. Gas financial guarantees have primarily been provided to support various performance bonds related to land usage and restorative issues. Other guarantees have been extended to support insurance policies, legal matters and various other items necessary in the normal course of business. Other guarantees have also been provided to promise the full and timely payments to lessors of mining equipment and support various other items necessary in the normal course of business. Surety bonds are typically renewed each year. However, the majority of the surety bonds are non-cancelable by the issuer, most notably for employee-related and environmental obligations.

 

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CONSOL Energy and CNX Gas enter into long-term unconditional purchase obligations to procure major equipment purchases, natural gas firm transportation, gas drilling services and other operating goods and services. These purchase obligations are not recorded on the Consolidated Balance Sheet. As of June 30, 2009, the purchase obligations for each of the next five years and beyond were as follows:

 

Obligations Due

   Amount

Less than 1 year

   $ 66,576

1-3 years

     63,773

3-5 years

     50,282

More than 5 years

     314,826
      

Total purchase obligations

   $ 495,457
      

NOTE 11—DERIVATIVES

CONSOL Energy enters into financial derivative instruments to manage our exposure to commodity price volatility. Our derivatives are accounted for under Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities” (SFAS 133), as amended. We measure every derivative instrument at fair value and record it on the balance sheet as either an asset or liability. Changes in the fair value of the derivatives are recorded currently in earnings unless special hedge accounting criteria are met. For derivatives designated as fair value hedges, the changes in fair value of both the derivative instrument and the hedged item are recorded in earnings. For derivatives designated as cash flow hedges, the effective portions of changes in fair value of the derivative are reported in other comprehensive income or loss and reclassified into earnings in the same period or periods which the forecasted transaction affects earnings. The ineffective portions of hedges are recognized in earnings in the current year. CONSOL Energy currently utilizes only cash flow hedges that are considered highly effective.

CONSOL Energy formally assesses both at inception of the hedge and on an ongoing basis, whether each derivative is highly effective in offsetting changes in the fair values or the cash flows of the hedged item. If it is determined that a derivative is not highly effective as a hedge or if a derivative ceases to be a highly effective hedge, CONSOL Energy will discontinue hedge accounting prospectively.

CONSOL Energy is exposed to credit risk in the event of nonperformance by counterparties. The creditworthiness of counterparties is subject to continuing review. All of the counterparties to CONSOL Energy’s natural gas derivative instruments also participate in CONSOL Energy’s revolving credit facility. The Company has not experienced any issues of non-performance by derivative counterparties.

CONSOL Energy has entered into forward and option contracts on various commodities to manage the price risk associated with the forecasted revenues from those commodities. The objective of these hedges is to reduce the variability of the cash flows associated with the forecasted revenues from the underlying commodities.

As of June 30, 2009, the total notional amount of the Company’s outstanding natural gas forward contracts was 96.3 Bcf. These forward contracts are forecasted to settle through December 31, 2012 and meet the criteria for cash flow hedge accounting prescribed under SFAS 133. During the next twelve months, $106,452 of unrealized gain is expected to be reclassified from other comprehensive income and into earnings. No gains or losses have been reclassified into earnings as a result of the discontinuance of cash flow hedges.

As of June 30, 2009, the total notional amount of the Company’s outstanding coal sales options was 138 tons. These options do not qualify for hedge accounting under SFAS 133 and are expected to settle or expire over the next six months.

 

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The fair value of CONSOL Energy’s derivative instruments at June 30, 2009 is as follows:

 

     Asset Derivatives    Liability Derivatives
     2009    2009
     Balance Sheet
Location
   Fair
Value
   Balance Sheet
Location
   Fair
Value

Derivatives designated as hedging instruments under Statement 133

           

Natural Gas Price Swaps

   Prepaid Expense    $ 175,463       $ —  

Natural Gas Price Swaps

   Other Assets      18,874         —  
                   

Total derivatives designated as hedging instruments under Statement 133

      $ 194,337       $ —  
                   

Derivatives not designated as hedging instruments under Statement 133

           

Coal Sales Options

      $ —      Other Liabilities    $ 30
                   

Total derivatives not designated as hedging instruments under Statement 133

      $ —         $ 30
                   

Total Derivatives

      $ 194,337       $ 30
                   

The Effect of Derivative Instruments on the Consolidated Statement of Income

for the Three Months Ended June 30, 2009

 

Derivatives in Statement 133

Cash Flow Hedging Relationship

   Amount of
Gain (Loss)
Recognized
in OCI on
Derivatives
2009
   Location of
Gain (Loss)
Reclassified
from
Accumulated
OCI into
Income
   Amount of
Gain (Loss)
Reclassified
from
Accumulated
OCI into
Income

2009
   Location of
Gain (Loss)
Recognized
in Income on
Derivatives
   Amount of
Gain (Loss)
Recognized
in Income on
Derivatives
2009
 

Natural Gas Price Swaps

   $ 30,394    Outside Sales    $ 66,120    Outside Sales    $ (494
                            

Total

   $ 30,394       $ 66,120       $ (494
                            

 

Derivatives not Designated as Hedging Instruments under Statement 133

   Location of
Gain (Loss)
Recognized

in Income on
Derivatives
   Amount of
Gain (Loss)
Recognized
in Income on
Derivatives
2009

Coal Sales Options

   Other Income    $ 203
         

Total

      $ 203
         

 

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The Effect of Derivative Instruments on the Consolidated Statement of Income

for the Six Months Ended June 30, 2009

 

Derivatives in Statement 133

Cash Flow Hedging Relationship

   Amount of
Gain (Loss)
Recognized
in OCI on
Derivatives
2009
   Location of
Gain (Loss)
Reclassified
from
Accumulated
OCI into
Income
   Amount of
Gain (Loss)
Reclassified
from
Accumulated
OCI into
Income

2009
   Location of
Gain (Loss)
Recognized

in Income on
Derivatives
   Amount of
Gain (Loss)
Recognized
in Income on
Derivatives
2009
 

Natural Gas Price Swaps

   $ 109,342    Outside Sales    $ 116,738    Outside Sales    $ (869
                            

Total

   $ 109,342       $ 116,738       $ (869
                            

 

Derivatives not Designated as Hedging Instruments under Statement 133

   Location of
Gain (Loss)
Recognized
in Income on
Derivatives
   Amount of
Gain (Loss)
Recognized
in Income on
Derivatives
2009

Coal Sales Options

   Other Income    $ 2,338
         

Total

      $ 2,338
         

NOTE 12—OTHER COMPREHENSIVE INCOME:

Total comprehensive income, net of tax, for the six months ended June 30, 2009 was as follows:

 

     Treasury
Rate
Lock
    Change in
Fair Value
of Cash Flow
Hedges
    Adjustments
for SFAS 158
    Accumulated
Other
Comprehensive
Loss
 

Balance at December 31, 2008

   $ 263      $ 102,625      $ (564,788   $ (461,900

Net increase in value of cash flow hedges

     —          91,112        —          91,112   

Reclassification of cash flow hedges from other comprehensive income to earnings

     —          (96,554     —          (96,554

Current period change

     (41     —          190        149   
                                

Comprehensive Income

     222        97,183        (564,598     (467,193

Comprehensive income attributable to Noncontrolling Interest

     —          (1,085     11        (1,074
                                

Balance at June 30, 2009

   $ 222      $ 96,098      $ (564,587   $ (468,267
                                

NOTE 13—FAIR VALUE OF FINANCIAL INSTRUMENTS:

The financial instruments measured at fair value on a recurring basis are summarized below:

 

     Fair Value Measurements at June 30, 2009

Description

   Quoted Prices in
Active Markets
for Identical
Instruments
(Level 1)
   Significant
Other
Observable
Inputs
(Level 2)
    Significant
Unobservable
Inputs

(Level 3)

Gas Cash Flow Hedges

   $ —      $ 194,337      $ —  

Coal Sales Options

   $ —      $ (30   $ —  

Statement of Financial Accounting Standards No. 107, “Disclosures About Fair Value of Financial Instruments” (SFAS 107) requires the disclosure of the estimated fair value of financial instruments including

 

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those financial instruments for which the Statement of Financial Accounting Standard No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (SFAS 159) fair value option was not elected. The following methods and assumptions were used to estimate the fair value of those financial instruments:

Cash and cash equivalents: The carrying amount reported in the balance sheets for cash and cash equivalents approximates its fair value due to the short maturity of these instruments.

Short-term notes payable: The carrying amount reported in the balance sheets for short-term notes payable approximates its fair value due to the short-term maturity of these instruments.

Long-term debt: The fair values of long-term debt are estimated using discounted cash flow analyses, based on CONSOL Energy’s current incremental borrowing rates for similar types of borrowing arrangements.

The carrying amounts and fair values of financial instruments for which SFAS 159 was not elected are as follows:

 

     June 30, 2009     December 31, 2008  
     Carrying
Amount
    Fair Value     Carrying
Amount
    Fair Value  

Cash and cash equivalents

   $ 108,311      $ 108,311      $ 138,512      $ 138,512   

Short-term notes payable

   $ (452,000   $ (452,000   $ (557,700   $ (557,700

Long-term debt

   $ (400,013   $ (406,149   $ (402,287   $ (390,278

NOTE 14—SEGMENT INFORMATION:

CONSOL Energy has two principal business units: Coal and Gas. The principal activities of the Coal unit are mining, preparation and marketing of steam coal, sold primarily to power generators, and metallurgical coal, sold to metal and coke producers. The Coal unit includes four reportable segments. These reportable segments are Northern Appalachian, Central Appalachian, Metallurgical and Other Coal. Each of these reportable segments includes a number of operating segments (mines). For the six months ended June 30, 2009, the Northern Appalachian aggregated segment includes the following mines: Blacksville #2, Robinson Run, McElroy, Loveridge, Bailey, Enlow Fork, Shoemaker and Mine 84. For the six months ended June 30, 2009, the Central Appalachian aggregated segment includes the following mines: Jones Fork, the Fola Complex, the Miller Creek Complex and the Terry Eagle Complex. For the six months ended June 30, 2009, the Metallurgical aggregated segment includes the Buchanan and Amonate mines. The Other Coal segment includes our purchased coal activities, idled mine cost, coal segment business units not meeting aggregation criteria, as well as various other activities assigned to the coal segment but not allocated to each individual mine. The principal activity of the Gas unit is to produce pipeline quality methane gas for sale primarily to gas wholesalers. CONSOL Energy’s All Other classification is made up of the Company’s terminal services, river and dock services, industrial supply services and other business activities, including rentals of buildings and flight operations. Intersegment sales have been recorded at amounts approximating market. Operating profit for each segment is based on sales less identifiable operating and non-operating expenses. Certain reclassifications of 2008 segment information have been made to conform to the 2009 presentation. Reclassifications include changes between mines reflected in Central Appalachian and Other Coal segments to reflect the current aggregation criteria.

 

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Industry segment results for the three months ended June 30, 2009:

 

    Northern
Appalachian
  Central
Appalachian
  Metallurgical     Other
Coal
  Total
Coal
  Gas   All
Other
    Corporate,
Adjustments
&
Eliminations
    Consolidated

Sales—outside

  $ 618,034   $ 125,382   $ 16,419      $ 23,031   $ 782,866   $ 150,759   $ 60,516      $ —        $ 994,141

Sales—Gas Royalty Interests

    —       —       —          —       —       8,666     —          —          8,666

Sales—Purchased Gas

    —       —       —          —       —       1,166     —          —          1,166

Freight—outside

    —       —       —          27,087     27,087     —       —          —          27,087

Intersegment transfers

    —       —       —          —       —       107     37,664        (37,771     —  
                                                           

Total Sales and Freight

  $ 618,034   $ 125,382   $ 16,419      $ 50,118   $ 809,953   $ 160,698   $ 98,180      $ (37,771   $ 1,031,060
                                                           

Earnings (Loss) Before Income Taxes (A)

  $ 165,020   $ 23,439   $ (40,250   $ 1,517   $ 149,726   $ 53,116   $ (3,072   $ (26,515   $ 173,255
                                                           

Segment assets (B)

          $ 4,382,989   $ 2,182,678   $ 324,952      $ 466,681      $ 7,357,300
                                         

Depreciation, depletion and amortization

          $ 77,585   $ 24,883   $ 5,007      $ —        $ 107,475
                                         

Capital expenditures

          $ 111,961   $ 80,213   $ 4,685      $ —        $ 196,859
                                         

 

(A) Includes equity in earnings of unconsolidated affiliates of $1,046, $295 and $2,098 for Coal, Gas and All Other, respectively.
(B) Includes investments in unconsolidated equity affiliates of $11,419, $24,511 and $41,776 for Coal, Gas and All Other, respectively.

Industry segment results for the three months ended June 30, 2008:

 

    Northern
Appalachian
  Central
Appalachian
    Metallurgical   Other
Coal
    Total
Coal
  Gas   All
Other
  Corporate,
Adjustments
&
Eliminations
    Consolidated

Sales—outside

  $ 525,213   $ 130,674      $ 130,952   $ 60,389      $ 847,228   $ 179,475   $ 84,707   $ —        $ 1,111,410

Sales—Gas Royalty Interests

    —       —          —       —          —       22,515     —       —          22,515

Sales—Purchased Gas

    —       —          —       —          —       1,647     —       —          1,647

Freight—outside

    —       —          —       63,927        63,927     —       —       —          63,927

Intersegment transfers

    —       —          —       —          —       1,444     36,391     (37,835     —  
                                                           

Total Sales and Freight

  $ 525,213   $ 130,674      $ 130,952   $ 124,316      $ 911,155   $ 205,081   $ 121,098   $ (37,835   $ 1,199,499
                                                           

Earnings (Loss) Before Income Taxes (C)

  $ 74,621   $ (7,270   $ 53,097   $ (35,479   $ 84,969   $ 103,105   $ 7,677   $ (21,163   $ 174,588
                                                           

Segment assets (D)

          $ 4,110,732   $ 1,614,398   $ 246,675   $ 619,430      $ 6,591,235
                                       

Depreciation, depletion and amortization

          $ 74,295   $ 16,592   $ 4,888   $ —        $ 95,775
                                       

Capital expenditures

          $ 104,963   $ 149,254   $ 5,718   $ —        $ 259,935
                                       

 

(C) Includes equity in earnings of unconsolidated affiliates of $218, $6 and $2,066 for Coal, Gas and All Other, respectively.
(D) Includes investments in unconsolidated equity affiliates of $6,925, $24,769 and $36,505 for Coal, Gas and All Other, respectively.

 

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Industry segment results for the six months ended June 30, 2009:

 

    Northern
Appalachian
  Central
Appalachian
  Metallurgical     Other
Coal
    Total
Coal
  Gas   All
Other
  Corporate,
Adjustments
&
Eliminations
    Consolidated

Sales—outside

  $ 1,302,356   $ 251,881   $ 87,371      $ 59,494      $ 1,701,102   $ 312,664   $ 130,619   $ —        $ 2,144,385

Sales—Gas Royalty Interests

    —       —       —          —          —       21,298     —       —          21,298

Sales—Purchased Gas

    —       —       —          —          —       2,631     —       —          2,631

Freight—outside

    —       —       —          58,003        58,003     —       —       —          58,003

Intersegment transfers

    —       —       —          —          —       542     75,183     (75,725     —  
                                                           

Total Sales and Freight

  $ 1,302,356   $ 251,881   $ 87,371      $ 117,497      $ 1,759,105   $ 337,135   $ 205,802   $ (75,725   $ 2,226,317
                                                           

Earnings (Loss) Before Income Taxes (E)

  $ 413,350   $ 22,362   $ (17,989   $ (52,356   $ 365,367   $ 142,121   $ 5,931   $ (55,458   $ 457,961
                                                           

Segment assets (F)

          $ 4,382,989   $ 2,182,678   $ 324,952   $ 466,681      $ 7,357,300
                                       

Depreciation, depletion and amortization

          $ 155,790   $ 47,702   $ 10,202   $ —        $ 213,694
                                       

Capital expenditures

          $ 272,896   $ 213,763   $ 9,760   $ —        $ 496,419
                                       

 

(E) Includes equity in earnings of unconsolidated affiliates of $2,474, $557 and $3,769 for Coal, Gas and All Other, respectively.
(F) Includes investments in unconsolidated equity affiliates of $11,419, $24,511 and $41,776 for Coal, Gas and All Other, respectively.

Industry segment results for the six months ended June 30, 2008:

 

    Northern
Appalachian
  Central
Appalachian
    Metallurgical   Other
Coal
    Total
Coal
  Gas   All
Other
  Corporate,
Adjustments
&
Eliminations
    Consolidated

Sales—outside

  $ 1,048,376   $ 257,307      $ 141,677   $ 87,958      $ 1,535,318   $ 306,874   $ 155,543   $ —        $ 1,997,735

Sales—Gas Royalty Interests

    —       —          —       —          —       39,019     —       —          39,019

Sales—Purchased Gas

    —       —          —       —          —       5,186     —       —          5,186

Freight—outside

    —       —          —       108,671        108,671     —       —       —          108,671

Intersegment transfers

    —       —          —       —          —       4,586     69,327     (73,913     —  
                                                           

Total Sales and Freight

  $ 1,048,376   $ 257,307      $ 141,677   $ 196,629      $ 1,643,989   $ 355,665   $ 224,870   $ (73,913   $ 2,150,611
                                                           

Earnings (Loss) Before Income Taxes (G)

  $ 188,210   $ (9,961   $ 45,244   $ (75,328   $ 148,165   $ 181,031   $ 10,190   $ (45,014   $ 294,372
                                                           

Segment assets (H)

          $ 4,110,732   $ 1,614,398   $ 246,675   $ 619,430      $ 6,591,235
                                       

Depreciation, depletion and amortization

          $ 146,131   $ 32,537   $ 9,835   $ —        $ 188,503
                                       

Capital expenditures

          $ 190,165   $ 235,806   $ 10,306   $ —        $ 436,277
                                       

 

(G) Includes equity in earnings of unconsolidated affiliates of $674, $116 and $2,855 for Coal, Gas and All Other, respectively.
(H) Includes investments in unconsolidated equity affiliates of $6,925, $24,769 and $36,505 for Coal, Gas and All Other, respectively.

 

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Table of Contents

Reconciliation of Segment Information to Consolidated Amounts:

Earnings Before Income Taxes:

 

     For the Three Months
Ended June 30,
    For the Six Months
Ended June 30,
 
     2009     2008     2009     2008  

Segment Earnings Before Income Taxes for total reportable business segments

   $  202,842      $  188,074      $  507,488      $  329,196   

Segment Earnings Before Income Taxes for all other businesses

     (3,072     7,677        5,931        10,190   

Incentive Compensation (I)

     (6,139     (5,234     (14,980     (12,013

Compensation from restricted stock unit grants, stock option expense and performance share unit expense (I)

     (6,116     (5,842     (14,902     (10,770

Interest income (expense), net and other non-operating activity (I)

     (6,754     (10,087     (15,186     (22,231

Corporate Restructuring (I)

     37        —          (2,847     —     

Lease Settlement (I)

     (7,543     —          (7,543     —     
                                

Earnings Before Income Taxes

   $ 173,255      $ 174,588      $ 457,961      $ 294,372   
                                

 

     June 30,
     2009    2008

Total Assets:

     

Segment assets for total reportable business segments

   $ 6,565,667    $ 5,725,130

Segment assets for all other businesses

     324,952      246,675

Items excluded from segment assets:

     

Cash and other investments (I)

     101,206      32,503

Deferred tax assets

     364,614      548,536

Recoverable income taxes

     —        37,186

Bond issuance costs

     861      1,205
             

Total Consolidated Assets

   $ 7,357,300    $ 6,591,235
             

 

(I) Excludes amounts specifically related to the gas segment.

NOTE 15—GUARANTOR SUBSIDIARIES FINANCIAL INFORMATION:

The payment obligations under the $250,000, 7.875% per annum notes due March 1, 2012 issued by CONSOL Energy are jointly and severally, and also fully and unconditionally guaranteed by several subsidiaries of CONSOL Energy. In accordance with positions established by the Securities and Exchange Commission (“SEC”), the following financial information sets forth separate financial information with respect to the parent, CNX Gas, an 83.3% owned guarantor subsidiary, the remaining guarantor subsidiaries and the non-guarantor subsidiaries. CNX Gas is presented in a separate column in accordance with SEC Regulation S-X Rule 3-10. CNX Gas Corporation is a reporting company under Section 12(b) of the Securities Exchange Act of 1933, and as such, CNX Gas Corporation files its own financial statements with the Securities and Exchange Commission and those financial statements, when filed, are publicly available on Edgar. The principal elimination entries include investments in subsidiaries and certain intercompany balances and transactions. CONSOL Energy, the parent, and a guarantor subsidiary manage several assets and liabilities of all other 100% owned subsidiaries. These include, for example, deferred tax assets, cash and other post-employment liabilities. These assets and liabilities are reflected as parent company or guarantor company amounts for purposes of this presentation.

 

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Table of Contents

Income Statement for the three months ended June 30, 2009:

 

     Parent
Issuer
    CNX Gas
Guarantor
   Other
Subsidiary
Guarantors
    Non-
Guarantors
   Elimination     Consolidated  

Sales—Outside

   $ —        $ 150,863    $ 799,027      $ 44,686    $ (435   $ 994,141   

Sales—Purchased Gas

     —          1,166      —          —        —          1,166   

Sales—Gas Royalty Interests

     —          8,666      —          —        —          8,666   

Freight—Outside

     —          —        27,087        —        —          27,087   

Other Income (including equity earnings)

     140,605        913      26,225        5,669      (133,907     39,505   
                                              

Total Revenue and Other Income

     140,605        161,608      852,339        50,355      (134,342     1,070,565   

Cost of Goods Sold and Other Operating Charges

     28,843        53,360      463,940        43,993      53,068        643,204   

Purchased Gas Costs

     —          390      —          —        —          390   

Gas Royalty Interests’ Costs

     —          6,470      —          —        (12     6,458   

Related Party Activity

     2,972        —        33,288        359      (36,619     —     

Freight Expense

     —          —        27,087        —        —          27,087   

Selling, General and Administrative Expense

     —          18,366      32,473        341      (15,553     35,627   

Depreciation, Depletion and Amortization

     3,284        24,883      78,643        665      —          107,475   

Interest Expense

     3,147        1,931      1,951        4      (88     6,945   

Taxes Other Than Income

     1,536        3,406      64,831        699      —          70,472   

Black Lung Excise Tax Refund

     —          —        (348     —        —          (348
                                              

Total Costs

     39,782        108,806      702,213        46,061      796        897,310   
                                              

Earnings (Loss) Before Income Taxes

     100,823        52,802      150,126        4,294      (135,138     173,255   

Income Tax Expense (Benefit)

     (12,516     20,146      45,162        1,624      —          54,416   
                                              

Earnings (Loss) before Noncontrolling Interest

     113,339        32,656      104,964        2,670      (135,138     118,839   

Noncontrolling Interest

     —          321      (321     —        (5,500     (5,500
                                              

Net Income Attributable to CONSOL Energy Inc. Shareholders

   $ 113,339      $ 32,977    $ 104,643      $ 2,670    $ (140,638   $ 113,339   
                                              

 

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Table of Contents

Balance Sheet at June 30, 2009:

 

     Parent
Issuer
    CNX Gas
Guarantor
    Other
Subsidiary
Guarantors
    Non-
Guarantors
   Elimination     Consolidated

Assets:

             

Current Assets:

             

Cash and Cash Equivalents

   $ 94,405      $ 7,570      $ 2,540      $ 3,796    $ —        $ 108,311

Accounts and Notes Receivable:

             

Trade

     —          32,990        114        147,648      —          180,752

Other

     188        1,859        12,755        6,119      —          20,921

Inventories

     —          —          266,308        58,347      —          324,655

Recoverable Income Taxes

     —          —          —          —        —          —  

Deferred Income Taxes

     127,873        (64,770     —          —        —          63,103

Prepaid Expenses

     29,324        176,855        20,904        1,379      —          228,462
                                             

Total Current Assets

     251,790        154,504        302,621        217,289      —          926,204

Property, Plant and Equipment: Property, Plant and Equipment

     174,758        2,287,374        7,775,249        28,273      —          10,265,654

Less-Accumulated Depreciation, Depletion and Amortization

     76,419        372,770        3,894,043        19,343      —          4,362,575
                                             

Property, Plant and Equipment—Net

     98,339        1,914,604        3,881,206        8,930      —          5,903,079

Other Assets:

             

Deferred Income Taxes

     642,326        (340,815     —          —        —          301,511

Investment in Affiliates

     4,243,806        24,511        828,285        2,251      (5,021,147     77,706

Other

     68,557        24,174        43,926        12,143      —          148,800
                                             

Total Other Assets

     4,954,689        (292,130     872,211        14,394      (5,021,147     528,017
                                             

Total Assets

   $ 5,304,818      $ 1,776,978      $ 5,056,038      $ 240,613    $ (5,021,147   $ 7,357,300
                                             

Liabilities and Stockholders’ Equity:

             

Current Liabilities:

             

Accounts Payable

   $ 67,977      $ 57,201      $ 88,685      $ 18,273    $ —        $ 232,136

Accounts Payable (Recoverable)- Related Parties

     2,117,517        4,892        (2,255,958     133,549      —          —  

Short-Term Notes Payable

     371,000        81,000        —          —        —          452,000

Current Portion of Long-Term Debt

     412        8,461        12,935        423      —          22,231

Accrued Income Taxes

     (4,049     8,940        —          —        —          4,891

Other Accrued Liabilities

     469,221        25,546        52,257        7,166      —          554,190
                                             

Total Current Liabilities

     3,022,078        186,040        (2,102,081     159,411      —          1,265,448

Long-Term Debt:

     250,097        70,506        140,357        632      —          461,592

Deferred Credits and Other Liabilities:

             

Postretirement Benefits Other Than Pensions

     —          2,917        2,491,137        —        —          2,494,054

Pneumoconiosis

     —          —          194,984        —        —          194,984

Mine Closing

     —          —          393,653        —        —          393,653

Gas Well Closing

     —          7,951        76,163        —        —          84,114

Workers’ Compensation

     —          —          131,959        —        —          131,959

Deferred Revenue

     —          —          —          —        —          —  

Salary Retirement

     167,587        —          —          —        —          167,587

Reclamation

     —          —          21,818        —        —          21,818

Other

     114,780        29,773        10,747        —        —          155,300
                                             

Total Deferred Credits and Other Liabilities

     282,367        40,641        3,320,461        —        —          3,643,469

Noncontrolling Interest

     —          (1,616     1,616        —        236,515        236,515

Stockholders’ Equity

     1,750,276        1,481,407        3,695,685        80,570      (5,257,662     1,750,276
                                             

Total Liabilities and Stockholders’ Equity

   $ 5,304,818      $ 1,776,978      $ 5,056,038      $ 240,613    $ (5,021,147   $ 7,357,300
                                             

 

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Table of Contents

Income Statement for the three months ended June 30, 2008

 

     Parent
Issuer
    CNX Gas
Guarantor
   Other
Subsidiary
Guarantors
    Non-
Guarantors
    Elimination     Consolidated  

Sales—Outside

   $ —        $ 180,919    $ 863,301      $ 68,737      $ (1,547   $ 1,111,410   

Sales—Purchased Gas

     —          1,647      —          —          —          1,647   

Sales—Gas Royalty Interests

     —          22,515      —          —          —          22,515   

Freight—Outside

     —          —        63,927        —          —          63,927   

Other Income (including equity earnings)

     120,179        728      482        10,050        (120,042     11,397   
                                               

Total Revenue and Other Income

     120,179        205,809      927,710        78,787        (121,589     1,210,896   

Cost of Goods Sold and Other Operating Charges

     19,082        37,472      629,859        29,917        24,405        740,735   

Purchased Gas Costs

     —          1,522      —          —          —          1,522   

Gas Royalty Interests’ Costs

     —          21,913      —          —          (33     21,880   

Related Party Activity

     5,011        —        (25,129     38,047        (17,929  

Freight Expense

     —          —        63,927        —          —          63,927   

Selling, General and

     —          —        —          —          —       

Administrative Expense

     —          14,883      25,310        (284     (9,265     30,644   

Depreciation, Depletion and

     —          —        —          —          —          —     

Amortization

     2,158        16,592      74,236        2,791        (2     95,775   

Interest Expense

     1,440        1,683      5,434        135        (166     8,526   

Taxes Other Than Income

     1,783        7,575      61,550        2,391        —          73,299   
                                               

Total Costs

     29,474        101,640      835,187        72,997        (2,990     1,036,308   
                                               

Earnings (Loss) Before Income Taxes

     90,705        104,169      92,523        5,790        (118,599     174,588   

Income Tax Expense (Benefit)

     (10,307     40,131      29,783        2,191        —          61,798   
                                               

Earnings (Loss) before Noncontrolling Interest

     101,012        64,038      62,740        3,599        (118,599     112,790   

Noncontrolling Interest

     —          217      (217     —          (11,778     (11,778
                                               

Net Income Attributable to CONSOL Energy Inc. Shareholders

   $ 101,012      $ 64,255    $ 62,523      $ 3,599      $ (130,377   $ 101,012   
                                               

 

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Table of Contents

Balance Sheet at December 31, 2008:

 

     Parent
Issuer
   CNX Gas
Guarantor
    Other
Subsidiary
Guarantors
    Non-
Guarantors
   Elimination     Consolidated

Assets:

              

Current Assets:

              

Cash and Cash Equivalents

   $ 132,471    $ 1,926      $ 1,714      $ 2,401    $ —        $ 138,512

Accounts and Notes Receivable:

              

Trade

     —        61,764        35        159,930      —          221,729

Other

     1,767      3,080        68,910        5,795      —          79,552

Inventories

     —          184,140        43,670      —          227,810

Recoverable Income Taxes

     3,560      30,302        —          —        —          33,862

Deferred Income Taxes

     115,599      (55,000     —          —        —          60,599

Prepaid Expenses

     23,612      152,786        40,409        4,943      —          221,750
                                            

Total Current Assets

     277,009      194,858        295,208        216,739      —          983,814

Property, Plant and Equipment:

              

Property, Plant and Equipment

     175,027      2,111,383        7,608,922        84,956      —          9,980,288

Less—Accumulated Depreciation, Depletion and Amortization

     71,781      322,470        3,793,378        26,687      —          4,214,316
                                            

Property, Plant and Equipment—Net

     103,246      1,788,913        3,815,544        58,269      —          5,765,972

Other Assets:

              

Deferred Income Taxes

     664,881      (331,338     —          —        —          333,543

Investment in Affiliates

     3,734,125      25,204        930,708        1,102      (4,618,143     72,996

Other

     77,253      60,998        32,334        43,548      —          214,133
                                            

Total Other Assets

     4,476,259      (245,136     963,042        44,650      (4,618,143     620,672
                                            

Total Assets

   $ 4,856,514    $ 1,738,635      $ 5,073,794      $ 319,658    $ (4,618,143   $ 7,370,458
                                            

Liabilities and Stockholders’ Equity:

              

Current Liabilities:

              

Accounts Payable

   $ 87,734    $ 100,565      $ 159,677      $ 37,221    $ —        $ 385,197

Accounts Payable (Recoverable)—Related Parties

     1,853,629      2,234        (1,992,924     137,061      —          —  

Short-Term Notes Payable

     485,000      72,700        —          —        —          557,700

Current Portion of Long-Term Debt

     1,473      8,462        12,093        373      —          22,401

Accrued Income Taxes

     —        —          —          —        —          —  

Other Accrued Liabilities

     410,086      42,089        84,417        9,850      —          546,442
                                            

Total Current Liabilities

     2,837,922      226,050        (1,736,737     184,505      —          1,511,740

Long-Term Debt:

     252,145      74,682        140,956        568      —          468,351

Deferred Credits and Other Liabilities:

              

Postretirement Benefits Other Than Pensions

     —        2,728        2,490,616        —        —          2,493,344

Pneumoconiosis

     —        —          190,261        —        —          190,261

Mine Closing

     —        —          393,112        11,517      —          404,629

Gas Well Closing

     —        7,401        73,153        —        —          80,554

Workers’ Compensation

     —        —          128,477        —        —          128,477

Deferred Revenue

     —        —          —          —        —          —  

Salary Retirement

     194,567      —          —          —        —          194,567

Reclamation

     —        —          15,363        22,830      —          38,193

Other

     109,693      42,900        7,698        25,705      —          185,996
                                            

Total Deferred Credits and Other Liabilities

     304,260      53,029        3,298,680        60,052      —          3,716,021

Noncontrolling Interest

          —          —        212,159        212,159

Total Consol Energy Inc. Stockholders’ Equity

     1,462,187      1,384,874        3,370,895        74,533      (4,830,302     1,462,187
                                            

Total Liabilities and Stockholders’ Equity

   $ 4,856,514    $ 1,738,635      $ 5,073,794      $ 319,658    $ (4,618,143   $ 7,370,458
                                            

 

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Income Statement for the six months ended June 30, 2009:

 

     Parent
Issuer
    CNX Gas
Guarantor
   Other
Subsidiary
Guarantors
    Non-
Guarantors
   Elimination     Consolidated  

Sales—Outside

   $ —        $ 313,203    $ 1,737,451      $ 95,166    $ (1,435   $ 2,144,385   

Sales—Purchased Gas

     —          2,631      —          —        —          2,631   

Sales—Gas Royalty Interests

     —          21,298      —          —        —          21,298   

Freight—Outside

     —          —        58,003        —        —          58,003   

Other Income (including equity earnings)

     354,964        2,860      38,969        11,631      (345,425     62,999   
                                              

Total Revenue and Other Income

     354,964        339,992      1,834,423        106,797      (346,860     2,289,316   

Cost of Goods Sold and Other Operating Charges

     47,339        86,973      982,236        91,835      102,795        1,311,178   

Purchased Gas Costs

     —          1,920      —          —        —          1,920   

Gas Royalty Interests’ Costs

     —          17,071      —          —        (22     17,049   

Related Party Activity

     3,519        —        61,446        787      (65,752     —     

Freight Expense

     —          —        58,003        —        —          58,003   

Selling, General and Administrative Expense

     —          34,616      58,566        666      (27,405     66,443   

Depreciation, Depletion and Amortization

     6,627        47,702      159,893        1,326      (1,854     213,694   

Interest Expense

     6,972        3,888      4,763        8      (174     15,457   

Taxes Other Than Income

     3,416        5,939      137,608        1,348      —          148,311   

Black Lung Excise Tax Refund

     —          —        (700          (700
                                              

Total Costs

     67,873        198,109      1,461,815        95,970      7,588        1,831,355   
                                              

Earnings (Loss) Before Income Taxes

     287,091        141,883      372,608        10,827      (354,448     457,961   

Income Tax Expense (Benefit)

     (22,067     54,586      97,536        4,096      —          134,151   
                                              

Earnings (Loss) before Noncontrolling Interest

     309,158        87,297      275,072        6,731      (354,448     323,810   

Noncontrolling Interest

     —          584      (584     —        (14,652     (14,652
                                              

Net Income Attributable to CONSOL Energy Inc. Shareholders

   $ 309,158      $ 87,881    $ 274,488      $ 6,731    $ (369,100   $ 309,158   
                                              

 

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Income Statement for the six months ended June 30, 2008:

 

     Parent
Issuer
    CNX Gas
Guarantor
   Other
Subsidiary
Guarantors
    Non-
Guarantors
   Elimination     Consolidated  

Sales—Outside

   $ —        $ 311,460    $ 1,557,619      $ 134,104    $ (5,448   $ 1,997,735   

Sales—Purchased Gas

     —          5,186      —          —        —          5,186   

Sales—Gas Royalty Interests

     —          39,019      —          —        —          39,019   

Freight—Outside

     —          —        108,671        —        —          108,671   

Other Income (including equity earnings)

     209,319        10,757      56,683        19,293      (210,036     86,016   
                                              

Total Revenue and Other Income

     209,319        366,422      1,722,973        153,397      (215,484     2,236,627   

Cost of Goods Sold and Other Operating Charges

     32,683        62,319      1,140,901        56,237      85,321        1,377,461   

Purchased Gas Costs

     —          4,943      —          —        —          4,943   

Gas Royalty Interests’ Costs

     —          38,002      —          —        (48     37,954   

Related Party Activity

     1,397        —        (7,866     76,691      (70,222     —     

Freight Expense

     —          —        108,671        —        —          108,671   

Selling, General and Administrative Expense

     —          27,721      47,012        2,148      (15,767     61,114   

Depreciation, Depletion and Amortization

     4,269        32,537      148,158        5,426      (1,887     188,503   

Interest Expense

     9,741        3,155      5,704        270      (166     18,704   

Taxes Other Than Income

     3,413        12,800      123,928        4,764      —          144,905   
                                              

Total Costs

     51,503        181,477      1,566,508        145,536      (2,769     1,942,255   
                                              

Earnings (Loss) Before Income Taxes

     157,816        184,945      156,465        7,861      (212,715     294,372   

Income Tax Expense (Benefit)

     (18,278     71,127      41,528        2,974      —          97,351   
                                              

Earnings (Loss) before Noncontrolling Interest

     176,094        113,818      114,937        4,887      (212,715     197,021   

Noncontrolling Interest

     —          358      (358     —        (20,927     (20,927
                                              

Net Income Attributable to CONSOL Energy Inc. Shareholders

   $ 176,094      $ 114,176    $ 114,579      $ 4,887    $ (233,642   $ 176,094   
                                              

 

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Table of Contents

For the six months ended June 30, 2009:

 

     Parent     CNX Gas     Guarantor     Non-
Guarantor
    Elimination    Consolidated  

Net Cash Provided by Operating Activities

   $ 111,297      $ 214,075      $ 239,235      $ 1,639      $ —      $ 566,246   
                                               

Cash Flows from Investing Activities:

             

Capital Expenditures

   $ —        $ (213,763   $ (282,656   $ —        $ —      $ (496,419

Investment in Equity Affiliates

     —          1,250        840        —          —        2,090   

Other Investing Activities

     —          245        47,939        —          —        48,184   
                                               

Net Cash Used in Investing Activities

   $ —        $ (212,268   $ (233,877   $ —        $ —      $ (446,145
                                               

Cash Flows from Financial Activities:

             

Dividends Paid

   $ (36,128   $ —        $ —        $ —        $ —      $ (36,128

Purchase of Common Stock

     —          —          —          —          —        —     

Proceeds from Short Term Borrowing

     (114,000     8,300        —          —          —        (105,700

Other Financing Activities

     765        (4,463     (4,532     (244     —        (8,474
                                               

Net Cash (Used in) Provided by Financing Activities

   $ (149,363   $ 3,837      $ (4,532   $ (244   $ —      $ (150,302
                                               

For the six months ended June 30, 2008:

 

     Parent     CNX Gas     Guarantor     Non-
Guarantor
    Elimination    Consolidated  

Net Cash Provided by Operating Activities

   $ 93,526      $ 186,779      $ 189,017      $ 655      $ —      $ 469,977   
                                               

Cash Flows from Investing Activities:

             

Capital Expenditures

   $ —        $ (235,806   $ (199,705   $ (766   $ —      $ (436,277

Investment in Equity Affiliates

     —          1,081        (1,900     —          —        (819

Other Investing Activities

     —          450        16,830        —          —        17,280   
    </