Coal Tattoo

In the wake of a speech yesterday in which U.S. Rep. George Miller questioned the commitment of Alpha Natural Resources to ending Massey Energy’s questionable safety practices, Alpha officials are saying this morning that their integration of Massey operations into Alpha is going well. Alpha CEO Kevin Crutchfield explained it this way:

We have completed ‘Running Right’ training for the entire hourly workforce at all legacy Massey operations, and we have begun a training program directed at supervisory personnel. The benefits are already becoming clear: incident rates at the legacy Massey operations are declining; employee feedback is overwhelmingly positive; and the annualized voluntary turnover rate for legacy Massey declined to single digits in the month of September, down from more than 20 percent earlier in the year. At Alpha, we understand that having an empowered workforce working together within the ‘Running Right’ culture is inextricably linked to our ability to operate safely, maintain strong employee morale, minimize turnover, and thereby deliver operational excellence.

The integration of the legacy Massey operations remains on track, and over time we anticipate continued improvement in safety performance, enhanced productivity and meaningful synergies from fostering a unified ‘Running Right’ culture throughout our organization, all of which will drive value and accrue to the benefit of Alpha’s shareholders.

That’s from the first Alpha quarterly earnings statement to include a full quarter of operations since the takeover of Massey was finalized in June. You can read the full press release here, and Alpha is scheduled to discuss the results during a conference call later this morning.

Among the results:

— Alpha Natural Resources, Inc. (NYSE: ANR), a leading U.S. coal producer, reported third quarter net income of $66.4 million or $0.29 per diluted share compared to net income of $31.9 million or $0.27 per diluted share for the third quarter last year. Income from continuing operations for the third quarter was $66.4 million or $0.29 per diluted share compared to income from continuing operations of $32.4 million or $0.27 per diluted share for the third quarter of 2010. Excluding certain merger-related and other unusual items described in our “Reconciliation of Adjusted Income from Continuing Operations to Income from Continuing Operations,” third quarter 2011 adjusted income from continuing operations was $79.9 million or $0.35 per diluted share.

— Total revenues were $2.3 billion compared to $1.0 billion for Alpha stand-alone in the third quarter of 2010, and coal revenues were $2.0 billion compared to $0.9 billion for Alpha stand-alone in the third quarter last year. Coal revenues were significantly higher than the year-ago period due primarily to the inclusion of the first full quarter of shipments from legacy Massey operations, which contributed $805.4 million of coal revenues for the quarter, combined with a 38 percent increase in average per ton realizations on metallurgical coal compared with Alpha stand-alone in the third quarter of 2010. Freight and handling revenues and other revenues were $213.8 million and $93.0 million, respectively, during the third quarter versus $85.3 million and $19.9 million, respectively, for Alpha stand-alone in the third quarter of 2010.

— Total costs and expenses during the third quarter of 2011 were $2.2 billion compared to $952 million for Alpha stand-alone in the third quarter of 2010. Cost of coal sales in the third quarter was $1.7 billion, which included $770 million from legacy Massey operations. Adjusted cost of coal sales in the East averaged $75.81 per ton compared with $63.04 for Alpha stand-alone in the third quarter last year. The 2011 per ton cost of coal sales in the East has been adjusted to exclude UBB charges of $10.6 million and closed-mine asset retirement obligation charges of $37.1 million primarily related to changes in estimated future costs of water treatment, as well as merger-related expenses of $62.6 million, including a $39.7 million non-cash charge from selling acquired coal inventories written up to fair value in acquisition accounting and $22.9 million related to retention, severance and employee benefit alignment expenses. The higher cost of coal sales per ton in the East compared to the year-ago quarter is primarily the result of the following factors: reduced production and shipments from our Emerald longwall mine due to geological challenges; lower than expected thermal coal production and shipments from Central Appalachia; more metallurgical coal production; higher variable costs due to the increased volumes and higher per ton realizations on metallurgical coal shipments; increased per ton cost of purchased coal; higher diesel fuel costs; and general inflationary pressures.