Blankenship
RICHMOND, Va. -- Massey Energy cited litigation costs in its second quarter, saying it offset strong operating results.
On Thursday, Massey reported a 38 percent increase in coal revenue and an 8 percent increase in produced coal tons sold over the second quarter of 2007.
"Produced coal revenue for the quarter was a record $710.3 million compared to $516.2 million in the second quarter of 2007," the company said in a press release. "Produced tons sold reached 10.8 million in the quarter compared to 10.0 million in the second quarter last year."
But the company said it lost $93.3 million, or $1.16 per share, in the period. By comparison, Massey earned $34.9 million, or 43 cents per share, in the same period last year. That is because the company booked a $245.3 million pre-tax charge related to the ongoing litigation with Wheeling-Pittsburgh Steel Company.
"This charge offset the strong operating results of the quarter," the company release said. "Including the WP litigation charge, Massey reported a net loss of $93.3 million or $1.16 per share for the second quarter of 2008."
The charge relates to a $260 million verdict in a contract dispute with Wheeling Pittsburgh Steel. Massey had set aside $16 million for the case, but set aside more after the state Supreme Court refused to hear Massey's appeal in May. Massey likely will filed an appeal with the U.S. Supreme Court.
In the release, Massey CEO Don Blankenship also mentioned the Wheeling Pitt suit.
"Our members and our resource groups performed well in the second quarter and we were pleased with our operating results," Blankenship said. "Produced coal revenue and average revenue per ton reached new records and, excluding the Wheeling Pitt charge, we also set new records for operating cash margin per ton, EBITDA and earnings per share."
In May, the state Supreme Court refused to hear two appeals related to the $219 million verdict in the Wheeling Pitt case, which was the seventh largest jury verdict in the nation in 2007, according to the National Law Journal.
A Brooke County jury ordered Massey to pay $219.7 million in damages -- $120 million compensatory and $100 million punitive -- last July to Wheeling-Pitt for violating the terms of a coal supply agreement. The judge later added interest charges that brought the judgment to $240 million.
According to Massey, the contract dispute originated in 2004 when Central, a Massey subsidiary, declared force majeure on portions of its coal shipment obligations due to conditions beyond its control. Wheeling-Pitt sued seeking damages related to its cost of replacement coal and coke and repairs to its coke ovens.
Massey had sought the appeal after the verdict and the circuit court's denial of motions.
In May after the appeal refusals, Massey issued a press release saying it will continue to challenge the verdict.
"We are obviously disappointed that the Court decided not to hear a case of such importance," said M. Shane Harvey, general counsel for Massey. "We strongly believe that the case should be reviewed by an appellate court and we will vigorously explore all options, including an appeal to the United States Supreme Court."