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Alpha Natural Resources Inc. Reports Operating Results (10-Q)

May 07, 2010 | About:
Todd Sullivan

10qk

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Alpha Natural Resources Inc. (ANR) filed Quarterly Report for the period ended 2010-03-31.

Alpha Natural Resources Inc. has a market cap of $5.1 billion; its shares were traded at around $42.19 with a P/E ratio of 22.4 and P/S ratio of 2. Alpha Natural Resources Inc. had an annual average earning growth of 16.1% over the past 5 years.ANR is in the portfolios of David Williams of Columbia Value and Restructuring Fund, John Keeley of Keeley Fund Management, NWQ Managers of NWQ Investment Management Co, George Soros of Soros Fund Management LLC, Jim Simons of Renaissance Technologies LLC, Steven Cohen of SAC Capital Advisors.

Highlight of Business Operations:

Total revenues increased $436.0 million, or 90% for the three months ended March 31, 2010 compared to the three months ended March 31, 2009. The increase in total revenues consisted of the addition of $460.3 million in revenues from the Foundation operations, partially offset by a decrease of $24.3 million in revenues from the legacy Alpha operations. The decrease in revenues from the legacy Alpha operations was due to a decrease in coal revenues of $44.2 million, or 10%, partially offset by an increase in freight and handling revenues of $17.7 million, which are offset by an equivalent increase in freight and handling costs and a $2.2 million increase in other revenues.

Income from continuing operations decreased $32.0 million, or 69% for the three months ended March 31, 2010 compared to the three months ended March 31, 2009. The decrease was largely due to an increase in operating costs and expenses of $447.8 million, increased interest expense of $12.3 million and $7.7 million in additional income tax expense. The increases in the expense items noted above were largely offset by the increase in total revenues of $436.0 million.

The increase in operating costs and expenses of $447.8 million consisted of the addition of $427.7 million in operating costs and expenses from the Foundation operations and an increase of $20.1 million in operating costs and expenses related to the legacy Alpha operations. The increase in operating costs and expenses of $20.1 million related to the legacy Alpha operations was due to increased freight and handling costs and other expenses of $18.9 million and increased selling, general and administrative expenses of $15.0 million, partially offset by decreases in cost of coal sales and depreciation, depletion and amortization of $6.6 million and $7.2 million, respectively. Operating costs and expenses related to the Foundation operations of $427.7 million consisted of $278.6 million of cost of coal sales, $66.0 million of amortization of acquired coal supply agreements, $62.1 million of depreciation, depletion and amortization expenses, $16.3 million of selling, general and administrative expenses, and $4.7 million of other miscellaneous expenses.

The consolidated weighted average coal sales realization per ton for the three months ended March 31, 2010 was $38.91 compared to $82.36 for the three months ended March 31, 2009. The decrease was largely attributable to the inclusion of coal sales from our Western Coal Operations, which has a substantially lower coal sales realization per ton due to the difference in pricing for coal in the Powder River Basin and in the eastern coal basins. The difference in pricing between Powder River Basin coal and eastern basin coal is more fully explained in our segment analysis below. The weighted average coal sales realization per ton for the legacy Alpha operations was $82.53 for the three months ended March 31, 2010 compared to $82.36 for the three months ended March 31, 2009. The consolidated weighted average sales per ton during the three months ended March 31, 2010 reflects a higher proportion of metallurgical coal sales volumes to total coal sales volumes for the legacy Alpha operations compared to the prior year period. The weighted average coal sales realization per ton for the Foundation operations was $26.86, which reflects a high proportion of coal sales volumes from the Western Coal Operations at an average coal sales realization per ton of $10.81. Coal sales realization per ton for eastern steam coal was $65.28 and coal sales realization per ton for eastern metallurgical coal was $126.86 for the Foundation operations for the three months ended March 31, 2010.

Consolidated coal margin percentage, calculated as consolidated coal revenues less consolidated cost of coal sales (excluding closed or idled mines), divided by consolidated coal revenues, was 31% for the three months ended March 31, 2010 compared to 28% for the three months ended March 31, 2009. Coal margin percentage for the Foundation operations was 38% and coal margin percentage for the legacy Alpha operations was 22% for the three months ended March 31, 2010. Consolidated coal margin per ton, calculated as consolidated coal sales realization per ton less consolidated cost of coal sales per ton, was $12.15 for the three months ended March 31, 2010 compared to $23.02 for the three months ended March 31, 2009. Coal margin per ton for the Foundation operations was $10.22 per ton and coal margin per ton for the legacy Alpha operations was $18.42 per ton for the three months ended March 31, 2010.

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