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Alpha Natural Resources Announces Results for Fourth Quarter and Full Year 2009

ABINGDON, Va., Feb 09, 2010 /PRNewswire via COMTEX News Network/ -- Alpha Natural Resources, Inc. (NYSE: ANR), a leading U.S. coal producer, reported fourth quarter net income of $18.0 million or $0.15 per diluted share compared to net income of $5.6 million or $0.08 per diluted share last year. The fourth quarter 2009 income from continuing operations was $20.2 million or $0.17 per diluted share compared to income from continuing operations of $33.9 million or $0.49 per diluted share in the fourth quarter of 2008. Excluding amortization of coal supply agreements, merger-related expenses and other revenue from the modification of a coal supply agreement, plus related tax effects, fourth quarter 2009 adjusted income from continuing operations was $62.1 million, or $0.51 per diluted share.

Earnings before interest, taxes, depreciation, depletion and amortization (EBITDA) from continuing operations for the quarter just ended totaled $199.1 million, compared to $93.6 million in the year ago period. Excluding merger-related expenses and other revenue from the modification of a coal supply agreement, fourth quarter 2009 Adjusted EBITDA from continuing operations was $193.4 million.

                    Quarterly Financial & Operating Highlights
                 (millions, except per-share and per-ton amounts)

                                                               Q4       Q4
                                                              2009     2008

    Coal revenues                                           $787.5    $512.8

    Income from continuing operations                        $20.2     $33.9

    Income from continuing operations per diluted share      $0.17     $0.49

    Net  income                                              $18.0      $5.6

    Net income per diluted share                             $0.15     $0.08

    Adjusted income (loss) from continuing operations*       $62.1    ($13.5)

    Adjusted income (loss) from continuing operations per
     diluted share*                                          $0.51    ($0.19)

    EBITDA from continuing operations*                      $199.1     $93.6

    Adjusted EBITDA from continuing operations*             $193.4     $35.8

    Tons of coal sold                                         21.3       6.2

    Coal margin per ton                                      $9.87    $16.01




All quarters have been adjusted for discontinued operations and the fourth quarter 2008 amounts have been adjusted for the adoption of ASC 470-20 on January 1, 2009. Coal revenues and coal margin per ton have been adjusted to reflect a change in the income statement presentation of gains and losses on derivatives.

*These are non-GAAP financial measures. A reconciliation of adjusted income (loss) from continuing operations to income from continuing operations, and a reconciliation of both EBITDA from continuing operations and adjusted EBITDA from continuing operations to income from continuing operations are included in tables accompanying the financial schedules.

"Alpha again delivered solid operating results in the fourth quarter of 2009, and our performance would have been even better had we not experienced severe winter weather in December that temporarily interrupted production and shipments at many of our operations," said Kevin Crutchfield, Alpha's chief executive officer. "More than six months have passed since we completed our merger with Foundation Coal, and the integrated company has consistently delivered strong operating and financial results. We remain focused on execution and operational excellence, and our consistent performance to date demonstrates the benefit of Alpha's enhanced scale and diversification. Our safety performance during 2009 was commendable, with a record low total reportable incident rate that was well below the industry average. Alpha's success directly reflects the dedication, focus and hard work of our entire workforce, and I would like to thank them for their continued efforts.

"Demand for metallurgical coal appears to be increasing; customer discussions are ongoing; and recent indications suggest that the strength is likely to continue throughout 2010. In response to this increasing demand, we are raising our guidance for metallurgical coal shipments in 2010 to a new range of 11 million tons to 13 million tons. As the largest U.S. supplier of metallurgical coal, Alpha remains highly leveraged to this market with 38% of our planned 2010 metallurgical coal shipments yet to be priced. Combined with our expertise in blending and optimization and our ample port capacity including 41% ownership of the DTA terminal, we are well-positioned to benefit from the current momentum in the global metallurgical coal market. With regard to thermal coal, we will continue to scale our production to respond to anticipated demand, and we have adjusted our Eastern thermal shipment guidance to a range of 23 million tons to 26 million tons.

Mr. Crutchfield continued, "Last week Alpha entered into a 50/50 joint venture with Rice Energy, LP through which we are beginning to develop our valuable Marcellus shale gas resource in southwestern Pennsylvania where we control nearly 20,000 acres of one of the Marcellus' most productive regions. The initial phase of development is underway, and we are currently drilling the first of four wells planned for 2010. Rice Energy brings technical and managerial expertise with extensive experience drilling and fracturing wells in the Marcellus, and this partnership enables Alpha to capture value from our Marcellus shale asset without diverting focus away from our coal business.

"We remain on track to achieve the synergies that we laid out at the end of July. Much of the anticipated synergies were expected to stem from blending and optimization, particularly for metallurgical products and export shipments. In light of increasing global demand for metallurgical coal, these marketing synergies have the potential to exceed our initial estimates in 2010. Going forward, we are intensely focused on delivering the consistent execution made possible by Alpha's post-merger base of operations, which is arguably the most diverse of any domestic coal producer," Mr Crutchfield concluded.

Financial Performance - Fourth Quarter

The fourth quarter of 2009 is the first reporting period that includes a full three months of results from the former Foundation operations, compared to the third quarter of 2009 which included just two months of Foundation results. Fourth quarter results are not comparable to Alpha stand-alone results reported for the year-ago period.

Full Year 2009 Results

Liquidity and Capital Resources

Cash provided by operations (including discontinued operations) for the quarter ended December 31, 2009 was $194.1 million, compared with $122.3 million for Alpha stand-alone in the fourth quarter of 2008. Cash provided by operations (including discontinued operations) for the full year 2009 was $356.2 million, compared with $458.0 million in 2008.

Capital expenditures (including discontinued operations) for the fourth quarter and full year 2009 were $84.3 million and $187.1 million, respectively, versus $24.1 million and $137.8 million in the comparable periods of 2008.

The company had available liquidity of approximately $1.1 billion as of year-end 2009, including cash, cash equivalents and marketable securities of $584.0 million and $536.0 million available under the company's revolving credit and accounts receivable securitization facilities. Total long-term debt and note payable outstanding at December 31, 2009 was $790.3 million, compared with $451.3 million at December 31, 2008.

Market Overview

Coal-fired generation of electricity declined by greater than 10% in 2009, an unprecedented drop driven by a host of variables, including a severe economic recession and fuel switching resulting from low-cost natural gas. Despite reduced coal production, which fell an estimated 100 million tons in 2009, utility inventories were persistently high and were estimated to exceed 200 million tons nationwide at the end of November. In that environment, demand for thermal coal waned and pricing was under considerable downward pressure.

As 2010 begins, prospects for the thermal coal market have begun to improve. A prolonged period of severe winter weather throughout much of the United States increased electricity generation while at the same time interrupting coal production and transportation logistics. According to Genscape, the result was an approximately 30 million ton decline in nationwide utility inventories in December and January. This would suggest that utility inventories are now roughly 170-175 million tons. Relative to conditions in 2009, economic recovery is widely anticipated in 2010 which should lead to increased electricity generation, particularly in heavily industrialized regions of the country that rely on low-cost, coal-fired electricity. The increased price of natural gas also suggests that much of the fuel switching observed last year is likely to reverse. In addition, further coal production cutbacks appear probable in 2010 driven by the roll-off of higher priced legacy contracts. In light of these trends, utility inventories are anticipated to return to more normal levels by the second half of 2010. This market improvement is reflected in thermal coal spot prices which have increased recently and in coal futures prices which point to rising prices for the foreseeable future.

Demand for metallurgical coal has strengthened worldwide. Faced with a global recession in 2009, the primary source of demand growth for metallurgical coal throughout much of the year was China, which became a net importer of coal for the first time and imported more than 30 million tons of metallurgical coal, or approximately 15% of the world's seaborne supply. By year-end, demand for metallurgical coal elsewhere in the world had begun to recover as U.S. steel-making capacity utilization rose above 60% from a low in the 30s, and Europe exhibited a similar trend. Currently worldwide steel production is estimated to be on an annual pace of approximately 1.3 billion tons, with over 600 million tons expected from China alone in 2010.

Because the Asian market requires increasing volumes of seaborne metallurgical coal, less supply will be available to satisfy demand as steel production and coking coal consumption increases in the United States, Europe, Brazil and elsewhere. This shift of seaborne coking coal supply towards Asia should provide a significant opportunity for Appalachian producers, including Alpha, to benefit from a strengthening market in the Atlantic basin, in addition to allowing domestic producers to opportunistically ship directly into Asian markets. As the largest supplier of metallurgical coal in the United States, and with substantial export terminal capacity, Alpha is uniquely positioned to benefit directly from the increasingly favorable conditions in the metallurgical coal market.

Outlook

Alpha remains committed to managing production to match customer demand. Accordingly, Alpha has increased its 2010 shipment guidance range for metallurgical coal by one million tons to a range of 11-13 million tons, up from the previous range of 10-12 million tons. Likewise, Alpha is adjusting its Eastern steam coal shipment guidance to a range of 23-26 million tons in order to match production with expected demand. In the West, 2010 shipment guidance remains unchanged as Alpha has committed and priced approximately 100% of anticipated shipments.

Cost of coal sales per ton in 2010 are currently anticipated to range from $8.30 to $8.90 in the West and from $54.00 to $57.00 in the East. Selling, general and administrative expenses are expected to range between $150 million and $165 million, reflecting modest inflation and the gradual ramp up in synergistic savings which should be most evident in the second half of 2010. Depreciation, depletion and amortization expense is estimated to range from $370 million to $390 million in 2010, and financial reporting interest expense is estimated to range from $70 million to $80 million. Capital expenditures for the full year 2010 are anticipated to range from $340 million to $390 million, and include the annual bonus bid payment of the Eagle Butte LBA, provisions for growth capital associated with the Marcellus shale gas development joint venture, development of Deep Mine 41 which is anticipated to achieve full production in 2011, and sustaining capital for Alpha's existing coal mining and coalbed methane operations.

Alpha is also establishing volume guidance for 2011. PRB shipments in 2011 are expected to range from 48 million tons to 52 million tons, with 77% committed and priced at prices $1.00 greater than the average realizations embedded in the 2010 committed and priced volumes. Eastern steam coal shipments in 2011 are expected to range from 23 million tons to 28 million tons, with 44% committed and priced and 26% committed and un-priced. Eastern metallurgical coal shipments in 2011 are expected to range from 11 million tons to 14 million tons, with 15% committed and priced and 47% committed and un-priced.

                                     Guidance
               (in millions, except per-ton and percentage amounts)


                                                   2010          2011
                                                   ----          ----
    Average per Ton Sales Realization
     on Committed and Priced Coal
     Shipments(1)
    -------------------------------------
        West                                      $10.93        $11.93
        ----                                      ------        ------
        Eastern Steam                             $65.54        $67.03
        -------------                             ------        ------
        Eastern Met                              $104.63         $123.97
        -----------                              -------         -------
    Coal Shipments(2)                          81.0 - 89.0     82.0 - 94.0
    ----------------                           -----------     -----------
        West                                   47.0 - 50.0     48.0 - 52.0
        ----                                   -----------     -----------
        Eastern Steam                          23.0 - 26.0     23.0 - 28.0
        -------------                          -----------     -----------
        Eastern Met                            11.0 - 13.0     11.0 - 14.0
        -----------                            -----------     -----------
    Committed and Priced (%)(3)                     92%             59%
    --------------------------                     ---             ---
        West                                       100%             77%
        ----                                       ---             ---
        Eastern Steam                               93%             44%
        -------------                              ---             ---
        Eastern Met                                 62%             15%
        -----------                                ---             ---
    Committed and Un-priced (%)(4)                   3%             14%
    -----------------------------                  ---             ---
        West                                         0%              0%
        ----                                       ---             ---
        Eastern Steam                                3%             26%
        -------------                              ---             ---
        Eastern Met                                 15%             47%
        -----------                                ---             ---
    West - Cost of Coal Sales per Ton         $8.30 - $8.90
    ---------------------------------         -------------
    East - Cost of Coal Sales per Ton        $54.00 - $57.00
    ---------------------------------        ---------------
    Selling, General & Administrative
     Expense                                   $150 - $165
    ---------------------------------          -----------
    Depletion, Depreciation &
     Amortization                              $370 - $390
    -------------------------                  -----------
    Interest Expense                            $70 - $80
    ----------------                            ---------
    Capital Expenditures                       $340 - $390




Notes:

  • Based on committed and priced coal shipments as of February 8, 2010.
  • Eastern shipments in 2010 and 2011 include an estimated 2.0 to 3.0 million tons of brokered coal per year.
  • As of February 8, 2010, compared to the midpoint of shipment guidance range.
  • In 2010, committed and un-priced Eastern tons include approximately 1.8 million tons of met coal subject to market pricing, approximately 0.2 million tons of steam coal subject to market pricing, and 0.5 million tons of steam coal subject to collared pricing with an average pricing range of $65.00 to $76.00 per ton. In 2011, committed and unpriced Eastern tons include approximately 5.9 million tons of met coal subject to market pricing, approximately 3.3 million of steam coal subject to market pricing, approximately 2.9 million tons of steam coal subject to collared pricing with an average pricing range of $50.00 to $62.00 per ton, and legacy contracts covering approximately 0.4 million tons of steam coal subject to average indexed pricing estimated at $69.21 per ton.

    About Alpha Natural Resources

    Alpha Natural Resources is one of America's premier coal suppliers with coal production capacity of greater than 90 million tons a year. Alpha is the nation's leading supplier and exporter of metallurgical coal used in the steel-making process and is a major supplier of thermal coal to electric utilities and manufacturing industries across the country. The Company, through its affiliates, employs approximately 6,400 people and operates more than 60 mines and 14 coal preparation facilities in the regions of Northern and Central Appalachia and the Powder River Basin. More information about Alpha can be found on the Company's Web site at www.alphanr.com.

    Forward Looking Statements

    This news release includes forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on Alpha's expectations and beliefs concerning future events and involve risks and uncertainties that may cause actual results to differ materially from current expectations. These factors are difficult to predict accurately and may be beyond Alpha's control. The following factors are among those that may cause actual results to differ materially from our forward-looking statements:

    These and other risks and uncertainties are discussed in greater detail in old Alpha's and Foundation's Annual Reports on Form 10-K and other documents filed with the Securities and Exchange Commission. Forward-looking statements in this news release or elsewhere speak only as of the date made. New uncertainties and risks come up from time to time, and it is impossible for Alpha to predict these events or how they may affect the Company. Alpha has no duty to, and does not intend to, update or revise the forward-looking statements in this news release after the date it is issued. In light of these risks and uncertainties, investors should keep in mind that the results, events or developments disclosed in any forward-looking statement made in this news release may not occur.

    FINANCIAL TABLES FOLLOW

                      Alpha Natural Resources, Inc. and Subsidiaries
                      Condensed Consolidated Statements of Operations
                      (In Thousands Except Shares and Per Share Data)
                                        (Unaudited)
    
                                     Three Months Ended           Year Ended
                                        December 31,             December 31,
                                     -------------------         -------------
                                       2009        2008        2009        2008
                                       ----        ----        ----        ----
    
        Revenues:
           Coal sales                $787,460    $512,750  $2,210,629  $2,140,367
           Freight and
            handling                   60,783      58,957     189,874     279,853
           Other                       45,044      11,893      95,004      48,533
                                       ------      ------      ------      ------
              Total                   893,287     583,600   2,495,507   2,468,753
                                      -------     -------   ---------   ---------
    
        Costs and expenses:
           Coal sales
            (exclusive of
            items shown
            separately
            below)                    577,415     413,961   1,616,905   1,627,960
           Gain on sale of
            coal reserves                   -      (1,490)          -     (12,936)
           Freight and
            handling                   60,783      58,957     189,874     279,853
           Other expense                5,366      55,602      21,016      91,461
           Depreciation,
            depletion and
            amortization               97,592      39,421     252,395     164,969
           Amortization of
            acquired coal
            supply agreements,
            net                        69,625           -     127,608           -
           Selling, general
            and
            administrative
            expenses
            (exclusive of
            depreciation,
              depletion and
               amortization
               shown above)            52,783      14,961     170,414      71,923
                                       ------      ------     -------      ------
              Total                   863,564     581,412   2,378,212   2,223,230
                                      -------     -------   ---------   ---------
    
        Income from operations         29,723       2,188     117,295     245,523
                                       ------       -----     -------     -------
    
        Other income (expense):
           Interest expense           (19,971)     (9,587)    (82,825)    (39,812)
           Interest income                494       1,649       1,769       7,351
           Loss on early
            extinguishment of
            debt                            -           -      (5,641)    (14,702)
           Gain on
            termination of
            Cliff's merger                  -      56,315           -      56,315
           Miscellaneous income
            (expense)                   2,149      (4,312)      3,186      (3,834)
                                        -----      ------       -----      ------
              Total other
               income
               (expense),
               net                    (17,328)     44,065     (83,511)      5,318
                                      -------      ------     -------       -----
    
        Income from continuing
         operations before
         income taxes                  12,395      46,253      33,784     250,841
        Income tax benefit
         (expense)                      7,853     (12,356)     33,023     (52,242)
                                        -----     -------      ------     -------
        Income from continuing
         operations                    20,248      33,897      66,807     198,599
                                       ------      ------      ------     -------
    
        Discontinued
         operations:
           Loss from discontinued
            operations before
            income taxes               (2,678)     (7,793)    (14,278)    (27,383)
           Mine closure/asset
            impairment charges              -     (30,172)          -     (30,172)
           Gain (loss) on
            sale of
            discontinued
            items                           -         (13)          -      13,622
           Income tax benefit             377       9,689       5,476      11,035
                                          ---       -----       -----      ------
              Loss from
               discontinued
               operations              (2,301)    (28,289)     (8,802)    (32,898)
                                       ------     -------      ------     -------
    
        Net income                    $17,947      $5,608     $58,005    $165,701
                                      =======      ======     =======    ========
    
        (Loss) earnings per
         common share:
           Basic (loss)
            earnings per
            common share:
              Income from
               continuing
               operations               $0.17       $0.49       $0.74       $2.90
              Loss from
               discontinued
               operations               (0.02)      (0.41)      (0.10)      (0.48)
                                        -----       -----       -----       -----
              Net income                $0.15       $0.08       $0.64       $2.42
                                        =====       =====       =====       =====
    
           Diluted (loss)
            earnings per
            common share:
              Income from
               continuing
               operations               $0.17       $0.49       $0.73       $2.83
              Loss from
               discontinued
               operations               (0.02)      (0.41)      (0.10)      (0.47)
                                        -----       -----       -----       -----
              Net income                $0.15       $0.08       $0.63       $2.36
                                        =====       =====       =====       =====
    
        Weighted average
         shares outstanding:
           Weighted average
            shares--basic         119,175,485  69,591,733  90,662,718  68,453,724
           Weighted average
             shares--diluted      121,550,204  70,597,715  91,702,628  70,259,735
    
        This information is intended to be reviewed in conjunction with the
        company's filings with the U.S. Securities and Exchange Commission.
    
    
    
                      Alpha Natural Resources, Inc. and Subsidiaries
                     Supplemental Sales, Operations and Financial Data
                    (In Thousands, Except Per Ton and Percentage Data)
                                        (Unaudited)
    
                                       Three Months Ended         Year Ended
                                           December 31,          December 31,
                                        ------------------       -------------
                                          2009      2008        2009        2008
                                          ----      ----        ----        ----
    
        Tons sold from
         continuing
         operations(1):
           Powder River Basin            12,134         -      20,752           -
           Eastern steam                  6,591     3,758      18,318      15,525
           Eastern metallurgical          2,546     2,414       8,130      11,372
                                          -----     -----       -----      ------
               Total                     21,271     6,172      47,200      26,897
                                         ======     =====      ======      ======
    
    
        Average realized price per
         ton sold from continuing
         operations (2):
           Powder River Basin            $10.52        $-      $10.47          $-
           Eastern steam                  62.57     53.83       65.30       51.80
           Eastern metallurgical          97.18    128.60       98.08      117.50
              Weighted average total     $37.02    $83.08      $46.84      $79.58
    
        Coal sales from continuing
         operations revenue summary
           Powder River Basin          $127,618        $-    $217,187          $-
           Eastern steam                412,424   202,309   1,196,121     804,188
           Eastern metallurgical        247,418   310,441     797,321   1,336,179
                                        -------   -------     -------   ---------
              Total coal sales revenue $787,460  $512,750  $2,210,629  $2,140,367
                                       ========  ========  ==========  ==========
    
    
        Cost of coal sales from
         continuing operations per ton
         (3):
           Powder River Basin             $8.48        $-       $8.30          $-
           East (4)                       51.94     67.07       54.63       60.53
              Weighted average total     $27.15    $67.07      $34.26      $60.53
    
        Weighted average coal
         margin per ton (5)               $9.87    $16.01      $12.58      $19.05
        Weighted average coal
         margin percentage (6)             26.7%     19.3%       26.9%       23.9%
    
        Cash flows provided by
         operating activities
         including discontinued
         operations                    $194,103  $122,240    $356,220    $458,043
        Capital expenditures including
         discontinued operations        $84,277   $24,119    $187,093    $137,751
    
    
    
                                                                   As of
                                                                   -----
                                                         December 31, December 31,
                                                             2009         2008
                                                         ------------ ------------
        Liquidity ($ in 000's):
           Cash and cash equivalents                       $465,869     $676,190
           Marketable securities
            with maturities of less
            than one year (7)                                29,463            -
           Marketable securities with
            maturities of greater
            than one year (8)                                88,877            -
           Unused revolving
            credit facility                                 536,367      292,425
                                                            -------      -------
              Total available liquidity                  $1,120,576     $968,615
                                                         ==========     ========
    
        (1) Stated in thousands of short tons.
        (2) Coal sales revenue divided by tons sold.  This statistic is stated as
            free on board (FOB) at the processing plant.
        (3) Cost of coal sales divided by tons sold.  The cost of coal sales per
            ton for the Powder River Basin and the East includes only costs
            associated with active mines.  The weighted average total includes
            cost of coal sales for active mines plus cost of coal sales assigned
            to closed or idle mines that are not presented as discontinued
            operations.
        (4) East includes the Company's operations in Central Appalachia (CAPP)
            and Northern Appalachia (NAPP) and excludes amounts for closed or
            idled mines.
        (5) Weighted average total sales realization per ton less weighted
            average total cost of coal sales per ton.
        (6) Weighted average coal margin per ton divided by weighted average
            total sales realization per ton.
        (7) Classified as a current asset on the balance sheet.
        (8) Classified as a non-current asset on the balance sheet.
    
        This information is intended to be reviewed in conjunction with the
        company's filings with the U.S. Securities and Exchange Commission.
    
    
    
                      Alpha Natural Resources, Inc. and Subsidiaries
                          Condensed Consolidated Balance Sheets
                                      (In Thousands)
                                       (Unaudited)
    
                                                        December 31, December 31,
                                                            2009         2008
                                                        ------------ ------------
    
        Cash and cash equivalents                           $465,869     $676,190
        Trade accounts receivable, net                       232,631      163,674
        Inventories, net                                     176,372       86,594
        Short-term marketable securities                      29,463            -
        Prepaid expenses and other current assets            133,530       65,325
                                                             -------       ------
              Total current assets                         1,037,865      991,783
        Property, equipment and mine development
         costs, net                                        1,082,446      356,758
        Owned and leased mineral rights, net               1,985,855      180,458
        Owned lands                                           91,262       12,882
        Goodwill                                             357,868       20,547
        Acquired coal supply agreements, net                 396,491            -
        Deferred income taxes                                      -       83,689
        Long-term marketable securities                       88,877            -
        Other non-current assets                              68,147       63,721
                                                              ------       ------
              Total assets                                $5,108,811   $1,709,838
                                                          ==========   ==========
    
        Current portion of long-term debt                    $33,500         $232
        Note payable                                               -       18,288
        Trade accounts payable                               143,400      102,975
        Accrued expenses and other current liabilities       258,180      140,459
                                                             -------      -------
              Total current liabilities                      435,080      261,954
        Long-term debt                                       756,753      432,795
        Pension and postretirement medical benefit
         obligations                                         682,991       60,211
        Asset retirement obligation                          190,724       90,565
        Deferred income taxes                                316,577            -
        Other non-current liabilities                        135,397       68,621
                                                             -------       ------
              Total liabilities                            2,517,522      914,146
        Stockholders' equity                               2,591,289      795,692
                                                           ---------      -------
              Total liabilities and stockholders'
               equity                                     $5,108,811   $1,709,838
                                                          ==========   ==========
    
    
        This information is intended to be reviewed in conjunction with the
        company's filings with the U.S. Securities and Exchange Commission.
    
    
    
                    Alpha Natural Resources, Inc. and Subsidiaries
           Reconciliation of Adjusted EBITDA from Continuing Operations to
                           Income from Continuing Operations
                                    (In Thousands)
                                     (Unaudited)
    
        EBITDA from continuing operations and adjusted EBITDA from continuing
        operations are non-GAAP measures used by management to gauge operating
        performance and normalized levels of earnings.  Alpha defines EBITDA from
        continuing operations as income from continuing operations plus interest
        expense, income tax expense, depreciation, depletion and amortization,
        and amortization of coal supply agreements less interest income and
        income tax benefit.  Alpha defines adjusted EBITDA from continuing
        operations as EBITDA from continuing operations plus expenses
        attributable to the merger with Foundation Coal Holdings, Inc., losses on
        early extinguishment of debt, less various gains and losses not expected
        to recur on a quarterly basis.  The definition of adjusted EBITDA from
        continuing operations may be changed periodically by management to adjust
        for significant items important to an understanding of operating trends.
        Management presents EBITDA from continuing operations and adjusted EBITDA
        from continuing operations as a supplemental measure of the company's
        performance and debt service capacity that may be useful to securities
        analysts, investors and others.  EBITDA from continuing operations and
        adjusted EBITDA from continuing operations are not, however, a measure of
        financial performance under U.S. GAAP and should not be considered as an
        alternative to net income, income from continuing operations or operating
        income as determined in accordance with U.S. GAAP.  Moreover, EBITDA from
        continuing operations and adjusted EBITDA from continuing operations are
        not calculated identically by all companies.  A reconciliation of EBITDA
        from continuing operations and adjusted EBITDA from continuing operations
        to income from continuing operations, the most directly comparable U.S.
        GAAP measure is provided in the table below.
    
                                       Three Months Ended      Year Ended
                                          December 31,        December 31,
                                       ------------------     ------------
                                          2009     2008      2009      2008
    
        Income from
         continuing
         operations                     $20,248  $33,897   $66,807  $198,599
        Interest expense                 19,971    9,587    82,825    39,812
        Interest income                    (494)  (1,649)   (1,769)   (7,351)
        Income tax (benefit) expense     (7,853)  12,356   (33,023)   52,242
        Depreciation,
         depletion and
         amortization                    97,592   39,421   252,395   164,969
        Amortization of acquired
         coal supply agreements          69,625        -   127,608         -
                                         ------      ---   -------       ---
           EBITDA from
            continuing
            operations                  199,089   93,612   494,843   448,271
        Merger related expenses          12,437        -    59,034         -
        Gain on sale of
         coal reserves                        -   (1,490)        -   (12,936)
        Gain on termination
         of Cliff's merger                    -  (56,315)        -   (56,315)
        Other revenue from coal
         supply agreement
         modification                   (18,100)       -   (18,100)        -
        Loss on early
         extinguishment of
         debt                                 -        -     5,641    14,702
                                            ---      ---     -----    ------
           Adjusted EBITDA from
            continuing operations      $193,426  $35,807  $541,418  $393,722
                                       ========  =======  ========  ========
    
        This information is intended to be reviewed in conjunction with the
        company's filings with the U.S. Securities and Exchange Commission.
    
    
    
                      Alpha Natural Resources, Inc. and Subsidiaries
          Reconciliation of Adjusted Income (Loss) from Continuing Operations to
                             Income from Continuing Operations
                                      (In Thousands)
                                        (Unaudited)
    
        Adjusted income (loss) from continuing operations and adjusted diluted
        earnings per common share from continuing operations are non-GAAP
        measures used by management to gauge performance and normalized earnings
        levels.  Alpha defines adjusted income from continuing operations as
        income from continuing operations plus expenses attributable to the
        merger with Foundation Coal Holdings, Inc., losses on early
        extinguishment of debt, the portion of interest expense attributable to
        termination of an interest rate swap, and amortization of coal supply
        agreements, less various gains and losses that are not expected to recur
        on a quarterly basis, discrete income tax benefits from reversal of
        valuation allowances for deferred tax assets and estimated income tax
        effects of the pre-tax adjustments.  Adjusted diluted earnings per common
        share from continuing operations is adjusted income from continuing
        operations divided by weighted average diluted shares.  The definition of
        adjusted income from continuing operations may be changed periodically by
        management to adjust for significant items important to an understanding
        of operating trends.  Management presents adjusted income from continuing
        operations and adjusted earnings per share from continuing operations as
        supplemental measures of the company's performance that it believes are
        useful to securities analysts, investors and others in assessing the
        company's performance over time.  Adjusted income from continuing
        operations and adjusted diluted earnings per common share from continuing
        operations are not, however, measures of financial performance under U.S.
        GAAP and should not be considered as an alternative to net income, income
        from continuing operations, operating income or diluted earnings per
        share from continuing operations as determined in accordance with U.S.
        GAAP.  Moreover, adjusted income from continuing operations and adjusted
        diluted earnings per common share from continuing operations are not
        calculated identically by all companies.  A reconciliation of adjusted
        income from continuing operations to income from continuing operations,
        the most directly comparable U.S. GAAP measure, and the weighted average
        diluted shares used to calculate adjusted earnings per common share from
        continuing operations are provided in the table below.
    
    
    
                                      Three Months Ended          Year Ended
                                         December 31,             December 31,
                                      ------------------         -------------
                                       2009        2008        2009        2008
    
        Income from
         continuing
         operations                   $20,248     $33,897     $66,807    $198,599
        Gain on sale of
         coal reserves                      -      (1,490)          -     (12,936)
        Gain on termination
         of Cliff's merger                  -     (56,315)          -     (56,315)
        Merger related expenses        12,437           -      59,034           -
        Loss on early
         extinguishment of
         debt                               -           -       5,641      14,702
        Charge arising from
         termination of hedge
         accounting for
         interest rate
           swap                             -           -      23,549           -
        Other revenue
         from coal
         supply
         agreement
         modification                 (18,100)          -     (18,100)          -
        Amortization of acquired
         coal supply agreements        69,625           -     127,608           -
        Estimated income tax
         effect of above
         adjustments                  (22,069)     14,359     (61,162)     13,545
        Reversal of deferred
         income tax asset
         valuation allowance/loss
         disallowance                       -      (3,919)    (22,185)    (14,819)
                                          ---      ------     -------     -------
           Adjusted income (loss)
            from
               continuing
            operations                $62,141    $(13,468)   $181,192    $142,776
                                      =======    ========    ========    ========
    
           Weighted average
            shares--diluted       121,550,204  70,597,715  91,702,628  70,259,735
                                  ===========  ==========  ==========  ==========
    
           Adjusted diluted
            earnings
               (loss) per common
            share
               from continuing
            operations                  $0.51      $(0.19)      $1.98       $2.03
    
        This information is intended to be reviewed in conjunction with the
        company's filings with the U.S. Securities and Exchange Commission.
    
    
    
    
    
    

    SOURCE Alpha Natural Resources, Inc.

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