EXHIBIT 99.1
MASSEY LOGO
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FOR IMMEDIATE RELEASE
Contact:
Katharine W. Kenny
Director, Investor Relations
(804) 788-1824
MASSEY ENERGY REPORTS 4TH QUARTER AND
YEAR END 2003 FINANCIAL RESULTS
Richmond, Virginia, January 29, 2004 - Massey Energy Company (NYSE:MEE) today
reported that financial results for its fourth quarter ended December 31, 2003
were in line with its previously issued guidance. Produced coal revenues of
$323.1 million were up slightly in the 2003 fourth quarter and EBITDA increased
17% to $40.2 million from $34.3 million in the fourth quarter of 2002.
Coal sales volume for the quarter remained relatively flat, at 10.3 million tons
in 2003 versus 10.4 million tons in 2002. Massey reported an after-tax loss for
the fourth quarter of $16.7 million, or $0.22 per share, compared to a loss of
$10.6 million, or $0.14 per share for the comparable period in 2002. The fourth
quarter 2003 loss included a pre-tax charge to interest expense of $6.3 million,
or $0.05 per share, primarily for unamortized financing costs related to the
Company's previous credit facility. These costs were written off at the time of
the November private offering. The fourth quarter 2002 loss included a pre-tax
charge of $10.6 million, or $0.08 per share, representing an arbitration award
in favor of Duke Energy related to a contract dispute.
"Our fourth quarter results were within our projections and our underground
mining operations performed better," commented Don L. Blankenship, Massey
Chairman and CEO. "The fourth quarter of each year is generally a difficult
quarter and this year was typical. Weather-related production issues and
railroad disruptions also contributed to higher costs." Average cash costs for
the fourth quarter of 2003 were almost identical to cash costs in the fourth
quarter of 2002, excluding the impact of the Duke arbitration award.
"As has been widely reported, the coal marketplace remains very strong, both
domestically and abroad," continued Blankenship. The combination of high natural
gas prices, the improving economy, the weak dollar, higher ocean freight rates
and limited coal supply from Central Appalachia has all contributed to this
improvement. Moreover, while coal demand for electricity generation is currently
expected to grow by over 2% in 2004, metallurgical coal demand has also
accelerated. "We believe that the shortage of coal to meet the demand is more
than a short-term phenomenon," said Blankenship. "Worldwide demand for coal
appears strong and is likely to continue to be strong."
For the full year 2003, produced coal revenues decreased 4%, to $1.26 billion
compared to $1.32 billion for 2002. Coal sales volume for the full year
decreased by 3% to 41.0 million tons in 2003 from 42.1 million tons in the same
twelve-month period in 2002. The Company reported an after-tax loss for the year
of $32.3 million, or $0.43 per share, before a $7.9 million, or $0.11 per share,
charge to record the cumulative effect of an accounting change. Including this
charge, the Company reported a loss of $40.2 million, or $0.54 per share,
compared to a loss of $32.6 million, or $0.44 per share, in 2002. The 2002 loss
included pre-tax charges totaling $49.4 million, or $0.42 per share, related to
the reserve taken subsequent to the Harman jury verdict, the Duke arbitration
award and the write-off of capitalized development costs. EBITDA for 2003
totaled $179.0 million, compared to $181.0 million in the previous year.
On November 10, 2003, the Company reported the refinancing of its credit
facility and term loan with a $360 million private offering of 6.625% Senior
Notes due November 15, 2010. Subsequent to the fourth quarter, the Company
completed the realignment of its debt structure with a new asset-based revolving
credit facility, which replaced an existing $80 million accounts receivable
financing program and provides for borrowings of up to $130 million, including a
$100 million sublimit for letters of credit. This realignment began in May of
2003 when the Company issued $132 million in 4.75% Convertible Senior Notes and
resulted in an improved cash position and an increase in overall liquidity.
Massey ended the fourth quarter with available liquidity of $149.4 million,
including $60.6 million availability on its previously outstanding accounts
receivable program and $88.8 million in cash. Total debt at the end of the
quarter was $788.0 million, consisting of the $132 million of Convertible Senior
Notes, $360 million of 6.625% Senior Notes, $283 million of 6.95% Senior Notes
and $16.2 million of capital lease obligations, less the fair value hedging
adjustment of $3.2 million related to an interest rate swap on $240 million of
the Company's November note offering. After deducting available cash of $88.8
million and restricted cash of $141.8 million that supported letters of credit,
net debt totaled $557.4 million. Total debt-to-book capitalization ratio was
50.9% at December 31, 2003, an increase from 40.5% at December 31, 2002. Total
net debt-to-book capitalization was 42.3% at December 31, 2003 compared to 39.0%
at December 31, 2002.
The Company projects sales of 45 to 47 million tons in 2004, with sales
commitments currently at 45 million tons. The average sales price per ton for
2004 is expected to be between $33.00 and $34.00, compared to an average sales
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price per ton of $31.44 for the fourth quarter of 2003 and $30.79 for the full
year 2003. Current sales commitments for 2005 and 2006 total approximately 38
and 14 million tons, respectively, at higher sales prices.
"We continue to expect EBITDA of between $240 and $320 million for 2004," stated
Blankenship. "However, we expect a relatively weak first quarter because, as
often occurs this time of year, we are experiencing weather-related operational
and shipping issues, combined with some lower-priced carryover tonnage." The
Company further noted that its four longwalls are scheduled to move to new
panels in the first quarter ending March 31, 2004. The Company anticipates
shipping between 10.5 and 11.5 million tons during the quarter at an estimated
average price per ton of between $32.50 and $33.00. For the first quarter,
Massey projects financial results of between breakeven and a loss of $0.20 per
share, and EBITDA of between $40 and $60 million.
Capital expenditures during 2003 totaled $181 million, including $20 million
related to the purchase of surface mine reserves and approximately $17 million
related to the buyout of a longwall equipment lease. Capital expenditures in
2002 totaled $135 million. The Company now anticipates capital expenditure
levels of between $160 and $180 million for 2004, excluding buyouts of existing
operating leases. DD&A totaled $196.5 million in 2003 compared to $207.7 million
in 2002, which included the write-off of $13.2 million in capitalized
development costs. DD&A is currently expected to total $200 to $210 million in
2004.
"We are encouraged by the receipt of new permits that will allow us to mine in
some lower cost areas at our Edwight, Constitution and Superior surface mines,"
said Blankenship. "We are also investing in new surface mining equipment for
several mines, including our large Twilight mine, to help us improve our
productivity and respond to the strong market conditions."
Massey Energy Company, headquartered in Richmond, Virginia, is the fourth
largest coal company in the United States based on produced coal revenue.
CONFERENCE CALL WEBCAST AND REPLAY: The Company will hold a conference call with
management to discuss fourth quarter earnings on Friday morning, January 30,
2004, at 11:00 a.m. ET. The call can be accessed via the Massey Energy Company
website at www.masseyenergyco.com. A replay of the conference call will also be
available via the website and also by telephone. The conference call replay via
telephone can be accessed through 11:59 p.m. ET on February 6, 2004 by dialing
(800) 369-1248 or (402) 220-9835.
FORWARD-LOOKING STATEMENTS: The preceding release contains forward-looking
statements regarding projected earnings levels, cost reductions, new contracts
and financial performance. Such forward-looking statements reflect current
analysis of existing information. Caution must be exercised in relying on
forward-looking statements. Due to known and unknown risks, the Company's actual
results may differ materially from its expectations or projections. Factors
potentially contributing to such differences include, among others: competition
in coal markets; inherent risks of coal mining beyond the Company's control,
including weather and geologic conditions; fluctuation in coal prices which
could adversely affect the Company's operating results and cash flows;
deregulation of the electric utility industry; failure to receive anticipated
new contracts; customer cancellations of, or breaches to, existing contracts;
customer delays or defaults in making payments; fluctuations in the demand for,
price and availability of, coal due to labor and transportation costs and
disruptions, governmental regulations, foreign currency changes and other
factors; and greater than expected environmental and safety regulation, costs
and liabilities. The forward-looking statements are also based on various
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operating assumptions regarding, among other things, overhead costs and
employment levels that may not be realized. While most risks affect only future
costs or revenues anticipated by the Company, some risks might relate to
accruals that have already been reflected in earnings. The Company's failure to
receive payments of accrued amounts could result in a charge against future
earnings.
Additional information concerning these and other factors can be found in press
releases as well as Massey's public filings with the Securities and Exchange
Commission, including the Company's Form 10-K (as amended by Form 10-K/A) for
the year ended December 31, 2002, its subsequently filed interim reports and its
Form S-4 filed on January 21, 2004. Massey's filings are available either
publicly, under the Investor Relations page of Massey's website,
www.masseyenergyco.com, or upon request from Massey's Investor Relations
Department: (866) 814-6512. Massey disclaims any intent or obligation to update
its forward-looking statements. For further information, please contact:
Investor Relations, Katharine W. Kenny, (804) 788-1824, of Massey or e-mail the
Company at www.masseyenergyco.com.
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MASSEY ENERGY COMPANY
CONSOLIDATED FINANCIAL RESULTS - UNAUDITED
(in Millions, except # of employees, per share & per ton information)
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For the three months ended For the twelve months ended
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December 31, December 31, December 31, December 31,
2003 2002 2003 2002
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Revenues
Produced coal revenue $ 323.1 $ 321.3 $ 1,262.1 $ 1,318.9
Freight and handling revenue 25.3 30.4 91.8 112.0
Purchased coal revenue 32.1 34.8 115.3 117.1
Bond repurchase income - 3.3 0.6 3.3
Insurance settlement - - 17.7 -
Other revenue 14.1 20.8 65.9 78.8
------- -------- --------- ----------
Total revenues 394.6 410.6 1,553.4 1,630.1
Costs and expenses
Cost of produced coal revenue 281.6 296.4 1,115.9 1,166.2
Freight and handling costs 25.3 30.4 91.8 112.0
Cost of purchased coal revenue 32.3 34.4 117.2 119.6
Depreciation, depletion and amortization applicable to: -
Cost of produced coal revenue 52.4 45.5 192.0 203.9
Selling, general and administrative 1.1 1.1 4.5 3.8
Selling, general and administrative 12.9 12.8 39.7 40.1
Other expense 2.3 2.3 9.8 11.2
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Total costs and expenses 407.9 422.9 1,570.9 1,656.8
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Earnings (Loss) from operations (13.3) (12.3) (17.5) (26.7)
Interest income 1.8 1.6 5.2 4.5
Interest expense (18.4) (9.0) (48.3) (35.3)
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Loss before taxes (29.9) (19.7) (60.6) (57.5)
Income tax benefit (13.2) (9.1) (28.3) (24.9)
------- -------- --------- ----------
Loss before cumulative effect of change in
accounting principle (16.7) (10.6) (32.3) (32.6)
Cumulative effect of change in accounting principle, net of
tax of $5.0 million - - (7.9) -
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Net Loss $ (16.7) $ (10.6) $ (40.2) $ (32.6)
======= ======== ========= ==========
Loss per share - (Basic and Diluted)
Loss before cumulative effect of change in
accounting principle $ (0.22) $ (0.14) $ (0.43) $ (0.44)
Cumulative effect of change in accounting principle, net of tax - - (0.11) -
------- -------- --------- ----------
Net loss $ (0.22) $ (0.14) $ (0.54) $ (0.44)
======= ======== ========= ==========
Shares used to calculate loss per share
Basic and Diluted 74.7 74.5 74.6 74.4
======= ======== ========= ==========
EBIT $ (13.3) $ (12.3) $ (17.5) $ (26.7)
EBITDA $ 40.2 $ 34.3 $ 179.0 $ 181.0
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Three months ended Twelve months ended
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December 31, December 31, December 31, December 31,
2003 2002 2003 2002
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Produced tons sold:
Utility 6.6 7.0 27.6 27.4
Metallurgical 2.7 2.5 9.6 10.9
Industrial 1.0 0.9 3.8 3.8
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Total produced tons sold 10.3 10.4 41.0 42.1
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Total tons produced 10.1 10.4 41.0 43.9
Produced coal revenue per ton sold
Utility $ 29.81 $ 28.39 $ 29.08 $ 28.83
Metallurgical $ 34.45 $ 35.45 $ 34.63 $ 35.77
Industrial $ 34.04 $ 36.14 $ 33.48 $ 36.42
Produced coal revenue per ton sold $ 31.44 $ 30.80 $ 30.79 $ 31.30
Average cash cost per ton $ 28.66 $ 29.67 $ 28.19 $ 28.64
Capital expenditures $ 94.7 $ 13.1 $ 180.6 $ 135.1
Number of employees 4,430 4,552 4,430 4,552
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December 31, December 31,
2003 2002
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ASSETS
Cash and cash equivalents $ 88.8 $ 2.7
Trade and other accounts receivable 152.6 175.8
Inventories 206.6 193.7
Other current assets 255.6 137.6
Net property, plant and equipment 1,480.2 1,534.5
Other noncurrent assets 194.7 197.1
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Total assets $ 2,378.5 $ 2,241.4
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LIABILITIES AND SHAREHOLDERS' EQUITY
Short term debt $ 3.7 $ 264.0
Other current liabilities 256.3 305.5
Long-term debt 784.3 286.0
Other noncurrent liabilities 575.3 577.7
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Total liabilities 1,619.6 1,433.2
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Total shareholders' equity 758.9 808.2
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Total liabilities and shareholders' equity $ 2,378.5 $ 2,241.4
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Note 1: The number of shares used to calculate basic loss per share is based on
the weighted average outstanding shares of Massey Energy during the respective
periods. The number of shares used to calculate diluted earnings (loss) per
share is based on the number of shares used to calculate basic earnings (loss)
per share plus the dilutive effect of options and other stock-based instruments
held by Massey employees each period. In accordance with accounting principles
generally accepted in the United States, the effect of dilutive securities was
excluded from the calculation of the diluted loss per common share in the three
months and twelve months ended December 31, 2003 and 2002, as such inclusion
would result in antidilution.
Note 2: EBIT is defined as net income (loss) before deducting cumulative effect
of accounting change, net, income taxes, and interest, or income (loss) from
operations, which is a measure of performance calculated in accordance with
generally accepted accounting principles. EBITDA is defined as EBIT before
deducting depreciation, depletion, and amortization. Although EBITDA is not a
measure of performance calculated in accordance with generally accepted
accounting principles, management believes that it is useful to an investor in
evaluating Massey because it is widely used in the coal industry as a measure to
evaluate a company's operating performance before debt expense and its cash
flow. EBITDA does not purport to represent operating income, net income and cash
generated by operating activities and should not be considered in isolation or
as a substitute for measures of performance in accordance with generally
accepted accounting principles. In addition, because EBITDA is not calculated
identically by all companies, the presentation here may not be comparable to
other similarly titled measures of other companies. The table below shows how we
calculate EBITDA.
Three months ended Twelve months ended
December 31, December 31
----------------------- ------------------------
2003 2002 2003 2002
-------- -------- -------- --------
Net Loss $ (16.7) $ (10.6) $ (40.2) $ (32.6)
Cumulative effect of change in accounting principle, net - - 7.9 -
-------- -------- -------- --------
Loss before cumulative effect of change in accounting principle, net (16.7) (10.6) (32.3) (32.6)
Income tax benefit (13.2) (9.1) (28.3) (24.9)
Interest expense (income), net 16.6 7.4 43.1 30.8
-------- -------- -------- --------
Income (loss) from operations (13.3) (12.3) (17.5) (26.7)
Depreciation, depletion and amortization 53.5 46.6 196.5 207.7
-------- -------- -------- --------
EBITDA $ 40.2 $ 34.3 $ 179.0 $ 181.0
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Note 3: "Average cash cost per ton" is calculated as the sum of Cost of produced
coal revenue and Selling, general and administrative expense (excluding
Depreciation, depletion and amortization), divided by total produced tons sold.
Although Average cash cost per ton is not a measure of performance calculated in
accordance with generally accepted accounting principles, management believes
that it is useful to an investor in evaluating Massey because it is widely used
in the coal industry as a measure to evaluate a company's control over its cash
costs. Average cash cost per ton should not be considered in isolation or as a
substitute for measures of performance in accordance with generally accepted
accounting principles. In addition, because Average cash cost per ton is not
calculated identically by all companies, the presentation here may not be
comparable to other similarly titled measures of other companies. The table
below reconciles the most directly comparable generally accepted accounting
principle measure of Total costs and expenses per ton to Average cash cost per
ton.
Three months ended December 31, Twelve months ended December 31,
------------------------------------- ----------------------------------------
2003 2002 2003 2002
----------------- ----------------- ------------------ -------------------
$ per ton $ per ton $ per ton $ per ton
- ------- - ------- - ------- - -------
Total Costs and expenses $ 407.9 $ 39.59 $ 422.9 $40.58 $ 1,570.9 $38.32 $ 1,656.8 $ 39.33
Less: Freight and handling costs 25.3 $ 2.46 30.4 $ 2.92 91.8 $ 2.24 112.0 $ 2.66
Less: Cost of purchased coal revenue 32.3 $ 3.14 34.4 $ 3.30 117.2 $ 2.86 119.6 $ 2.84
Less: Depreciation, depletion and amortization 53.5 $ 5.21 46.6 $ 4.47 196.5 $ 4.79 207.7 $ 4.93
Less: Other expense 2.3 $ 0.22 2.3 $ 0.22 9.8 $ 0.24 11.2 $ 0.26
------- ------- ------- ------ --------- ------ --------- -------
Average Cash cost $ 294.5 $ 28.66 $ 309.2 $29.67 $ 1,155.6 $28.19 $ 1,206.3 $ 28.64
======= ======= ========= =========
Note 4: Certain 2002 amounts have been reclassified to conform with the 2003
presentation.
Note 5: "Net debt" is calculated as the sum of Current debt and Long-term debt
less Cash and cash equivalents and Restricted cash, which is included in Other
current assets. Although Net debt is not a measure of performance calculated in
accordance with generally accepted accounting principles, management believes
that it is useful to an investor in evaluating Massey because it provides a
clearer comparison of the Company's debt position from period to period. Net
debt should not be considered in isolation or as a substitute for measures of
performance in accordance with generally accepted accounting principles. The
table below reconciles the most directly comparable generally accepted
accounting principle measure of Long-term debt to Net debt.
December 31,
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2003 2002
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Long-term debt $ 784.3 $ 286.0
Plus: Current debt 3.7 264.0
Less: Cash and cash equivalents 88.8 2.7
Less: Restricted cash 141.8 31.5
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Net debt $ 557.4 $ 515.8
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Note 6: The "Total debt-to-book capitalization" ratio is calculated as the sum
of Current debt and Long-term debt divided by the sum of Current debt, Long-term
debt and Total shareholders' equity. The "Total net debt-to-book capitalization"
ratio is calculated as the sum of Net debt (calculated in Note 5) divided by the
sum of Net debt and Total shareholders' equity. The tables below calculate the
Total debt-to-book capitalization and Total net debt-to-book capitalization
ratios.
December 31,
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2003 2002
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Long-term debt $ 784.3 $ 286.0
Plus: Current debt 3.7 264.0
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Total debt (numerator) 788.0 550.0
Plus: Total shareholders' equity 758.9 808.2
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Book capitalization (demoninator) $ 1,546.9 $ 1,358.2
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Total debt-to-book capitalization ratio 50.9% 40.5%
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Net debt (from Note 5) (numerator) 557.4 515.8
Plus: Total shareholders' equity 758.9 808.2
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Adjusted book capitalization (demoninator) $ 1,316.3 $ 1,324.0
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Total net debt-to-book capitalization ratio 42.3% 39.0%
================ =====================