National Coal Corp. Reports Third Quarter 2009 Results

November 5, 2009 4:05 PM EST

KNOXVILLE, Tenn.--(BUSINESS WIRE)-- National Coal Corp. (Nasdaq: NCOC):

    --  Third quarter revenues from Tennessee operations increased 19.0% to
        $22.1 million, up from $18.6 million during the year-ago quarter.
    --  Tons of coal sold increased 5.9% to 286,447 tons up from 270,515 tons
        during the year-ago quarter.
    --  The average price per ton increased 15.2% to $75.00 from $65.08 in the
        same year-ago quarter.
    --  For the nine months ended September 30, 2009, net cash flows provided by
        operating activities improved and are reported at $6.6 million, versus a
        negative $3.6 million during the year-ago period.

National Coal Corp. (Nasdaq: NCOC), a Central and Southern Appalachian coal producer, reports that for the three months ended September 30, 2009, it achieved total revenues of $22.1 million based primarily on the sale of 286,447 tons of coal. In the same prior-year period, National Coal generated revenues of $18.6 million primarily through the sale of 270,515 tons of coal.

For the three months ended September 30, 2009, National Coal reported a net loss of $663,950 versus a net loss of $8.4 million during the year-ago quarter. The net loss of $663,950 consists of a loss from continuing operations of $4.5 million or a loss of $0.13/share, and income from discontinued operations net of tax of $3.9 million or earnings of $0.11/share, which includes a gain on disposal of discontinued operations of $23.5 million. The net loss of $8.4 million during the year ago-quarter consists of a loss from continuing operations of $4.5 million or a loss of $0.14/share, and a loss from discontinued operations net of tax of $3.8 million or a loss of $0.11/share.

"Despite a number of economic challenges our results continue to strengthen and show improvement, most dramatically in our reduced loss and our improved cash flow," says Daniel A. Roling, President and CEO of National Coal Corp. "As we look forward to the future we are mindful that even though our anticipated tons to be sold are less than originally contracted, we have not seen any further deterioration since mid summer. We continue to see opportunities for investing in our Tennessee operations and are planning to be well positioned to benefit when the market improves."

During the three months ended September 30, 2009, the average selling price for coal sold from the Company's Tennessee operations increased 15.2% from $65.08 per ton sold during the 2008 period to $75.00 per ton sold during the 2009 period, while tons sold also increased 5.9% from 270,515 tons in 2008 to 286,447 tons in 2009. During 2008, the Company successfully renegotiated several of its existing coal supply agreements resulting in an increased selling price per ton helping generate additional revenues from those contracts for its Tennessee operations in 2009.

The Company also reported a positive EBITDA of $3.5 million versus a negative EBITDA of $4.8 million reported in the year-ago quarter.

At September 30, 2009, the Company had available liquidity of $10.1 million, consisting of $6.0 million available under a short-term revolving credit facility and cash and cash equivalents of approximately $4.1 million. Cash flows provided by (used in) the Tennessee operations were $2.9 million and $(6.2) million for the nine months ended September 30, 2009 and 2008, respectively. "We are currently in discussions to extend the maturity date of our revolving credit facility, which is scheduled to mature on December 15, 2009," said Roling. "We expect to conclude these negotiations within the next several weeks."

Roling explains the Company's cash flow improvements, "Our ability to generate cash has been bolstered by better pricing. As I have said before, the integrity of our contracts has allowed us to move forward in this extremely challenging economic environment."

In addition, the Company was successful during the quarter in securing a bonding program for its reclamation bonds with an insurance company permitting the release of approximately $4.4 million of restricted cash. Management continues to work towards better utilization of all its assets.

The Company produced 201,121 tons of coal during the quarter, a decrease of 24.0% versus the year ago quarter and a decrease of 14% from the prior quarter. The decline in production reflects both the weaker industry conditions and the Company's continuing efforts to control costs, especially in the current economic environment. On a quarter-to-quarter basis, total tons decreased 14%, while total production costs declined only 4.5%, resulting in higher per ton costs. Management anticipates further improvements in its costs in the fourth quarter.

Outlook

Year-to-date the Company invested approximately $5.5 million in equipment and mine development in its Tennessee operations and for the balance of the year, management expects to incur approximately $0.6 million to maintain existing assets in Tennessee. "Due to the continued weak demand for coal and the uncertainty of the economic recovery we have lowered our anticipated capital expenditures for the balance of the year. However, looking forward significant opportunity exists to increase production at the appropriate time to meet a recovery in demand for coal," explains Roling.

Total domestic coal consumption has declined significantly - about 11.5% - so far this year, which will make it two years in a row for lower coal demand. This lower demand is being driven by a decline in electricity generation, which has declined about 4% through late October, following a decline of 3.9% during 2008. Given that almost 93% of all coal consumed in the Untied States is used to generate electricity, this fall off in demand for electricity has had a direct impact on coal demand. Year-to-date total coal production has declined about 7.5% while Appalachian production has declined 8.2%.

Roling says his opinion of the industry's future is bullish. "Looking forward, I believe a recovery in economic activity will stimulate demand for both electricity and coal. Increases in consumption through 2010, even slight increases, should help reduce coal stockpile levels in the electric utility sector to more normal levels. With that said, I believe it is highly likely an improving economy will result in increased demand for energy, especially coal, among utilities, industrial customers, and steel companies resulting in a much stronger operating environment for coal producers."

About National Coal Corp.

Headquartered in Knoxville, Tenn., National Coal Corp., through its wholly owned subsidiary, National Coal Corporation, is engaged in coal mining in East Tennessee. Currently, National Coal employs about 325 people. National Coal sells steam coal to electric utilities and industrial companies in the Southeastern United States. For more information and to sign-up for instant news alerts visit www.nationalcoal.com.

Information about Forward Looking Statements

This release contains "forward-looking statements" that include information relating to future events and future financial and operating performance. Examples of forward looking-statements include anticipated benefits of capital improvements and new mines, the anticipated reduction in future periods of costs associated with lower production in the current period, the Company's negotiation of an extension of the maturity date of its revolving credit facility, and an anticipated strengthening coal market in the future. Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by which, that performance or those results will be achieved. Forward-looking statements are based on information available at the time they are made and/or management's good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause these differences include, but are not limited to: (i) the worldwide demand for coal; (ii) the price of coal; (iii) the price of alternative fuel sources; (iv) the supply of coal and other competitive factors; (v) the costs to mine and transport coal; (vi) the ability to obtain new mining permits; (vii) the costs of reclamation of previously mined properties; (viii) the risks of expanding coal production; (ix) the ability to bring new mining properties on-line on schedule; (x) industry competition; (xi) our ability to continue to execute our growth strategies; and (xii) general economic conditions. These and other risks are more fully described in the Company's filings with the Securities and Exchange Commission including the Company's most recently filed Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, which should be read in conjunction herewith for a further discussion of important factors that could cause actual results to differ materially from those in the forward-looking statements. Forward-looking statements speak only as of the date they are made. You should not put undue reliance on any forward-looking statements. We assume no obligation to update forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information, except to the extent required by applicable securities laws. If we do update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.

NATIONAL COAL CORP.

CALCULATION OF EBITDA

(Unaudited)

EBITDA is defined as net loss plus (i) other (income) expense, net, (ii)
interest expense, (iii) depreciation, depletion, accretion and amortization
minus (iv) interest income, (v) income tax benefits, and (vi) income from joint
ventures. We present Adjusted EBITDA, including stock compensation expense and
discontinued operations, net of tax, to enhance understanding of our operating
performance. We use Adjusted EBITDA as a criterion for evaluating our
performance relative to that of our peers, including measuring our cost
effectiveness and return on capital, assessing our allocations of resources and
production efficiencies and making compensation decisions. We believe that
Adjusted EBITDA is an operating performance measure that provides investors and
analysts with a measure of our operating performance and permits them to
evaluate our cost effectiveness and production efficiencies relative to
competitors. In addition, our management uses Adjusted EBITDA to monitor and
evaluate our business operations. However, Adjusted EBITDA is not a measurement
of financial performance under accounting principles generally accepted in the
United States of America ("GAAP") and may not be comparable to other similarly
titled measures of other companies. Adjusted EBITDA should not be considered as
an alternative to cash flows from operating activities, determined in
accordance with GAAP, as indicators of cash flows. The following reconciles our
net loss to Adjusted EBITDA:

                 Three Months Ended            Nine Months Ended

                 September 30,                 September 30,

                 2009          2008            2009             2008

Net loss         $ (663,950 )  $ (8,389,873 )  $ (14,899,936 )  $ (27,562,983 )

Other (income)   (39,324    )  (23,653      )  (63,944       )  1,831,526
expense, net

Interest income  (65,175    )  (180,143     )  (222,281      )  (572,460      )

Interest expense 1,910,496     1,616,725       5,037,908        5,626,763

Depreciation,
depletion,       2,392,606     2,141,220       7,528,951        7,035,844
amortization and
accretion

EBITDA           3,534,653     (4,835,724   )  (2,619,302    )  (13,641,310   )

Stock
compensation     421,661       535,353         1,126,961        980,654
expense

Discontinued
operations, net  (3,872,741 )  3,841,312       1,485,157        8,153,317
of tax

Adjusted EBITDA  $ 83,573      $ (459,059   )  $ (7,184      )  $ (4,507,339  )

National Coal Corp.

Condensed Consolidated Balance Sheets

(Unaudited)

                                           September 30, 2009  December 31, 2008

Assets

Current Assets:

 Cash and cash equivalents                 $ 4,060,409         $ 3,908,469

 Restricted cash                           1,374,643           -

 Accounts receivable, net                  1,227,488           474,351

 Inventory                                 3,722,220           2,957,654

 Prepaid and other current assets          1,312,315           1,282,777

 Current assets of discontinued operations -                   9,751,877

  Total Current Assets                     11,697,075          18,375,128

Property, plant, equipment and mine        42,389,955          43,674,758
development, net

Deferred financing costs                   859,974             1,238,267

Restricted cash                            7,543,608           11,338,137

Other non-current assets                   1,469,247           1,562,901

Long-term assets of discontinued           -                   71,620,026
operations

  Total Assets                             $ 63,959,859        $ 147,809,217

Liabilities and Stockholders' (Deficit)
Equity

Current Liabilities:

 Accounts payable                          $ 13,280,165        $ 6,188,085

 Accrued expenses                          2,654,284           880,632

 Borrowings under short-term line of       4,000,000           -
 credit

 Current maturities of long - term debt    1,586,361           2,336,191

 Current installments of obligations under 1,676,217           1,886,251
 capital leases

 Current portion of asset retirement       145,282             145,282
 obligations

 Deferred revenue                          -                   1,241,840

 Current liabilities of discontinued       -                   11,735,695
 operations

  Total Current Liabilities                23,342,309          24,413,976

Long - term debt, less current maturities, 41,538,006          41,892,645
net of discount

Obligations under capital leases, less     175,549             1,314,188
current installments

Asset retirement obligations, less current 4,087,145           3,763,720
portion

Deferred revenue                           1,116,042           1,303,655

Other non-current liabilities              1,942,037           2,138,235

Long-term liabilities of discontinued      -                   67,492,063
operations

  Total Liabilities                        72,201,088          142,318,482

Stockholders' (Deficit) Equity:

 Common Stock, $.0001 par value; 80
 million shares authorized;

  34,379,889 and 34,184,824 shares issued
  and outstanding at September 30, 2009

  and December 31, 2008, respectively      3,437               3,418

 Additional paid - in capital              115,938,899         114,770,946

 Accumulated deficit                       (124,183,565 )      (109,283,629  )

  Total Stockholders' (Deficit) Equity     (8,241,229   )      5,490,735

  Total Liabilities and Stockholders'      $ 63,959,859        $ 147,809,217
  (Deficit) Equity

The Condensed Consolidated Balance Sheet as of December 31, 2008 was derived
from Audited Financials.

See Accompanying Notes to Condensed Consolidated Financial Statements.

National Coal Corp.

Condensed Consolidated Statements of Operations

(Unaudited)

                For the Three Months Ended      For the Nine Months Ended

                September 30,                   September 30,

                2009            2008            2009             2008

Revenues:

 Coal sales     $ 21,483,618    $ 17,604,657    $ 62,325,476     $ 49,084,206

 Other revenues 637,181         976,683         2,400,759        2,340,838

  Total         22,120,799      18,581,340      64,726,235       51,425,044
  revenues

Operating
expenses:

 Cost of coal
 sales
 (exclusive of
 depreciation,  20,028,882      16,457,270      58,295,500       48,735,619
 depletion,
 amortization
 and accretion)

 Cost of
 services
 (exclusive of
 depreciation,  608,274         840,599         2,316,948        1,985,087
 depletion,
 amortization
 and accretion)

 Depreciation,
 depletion,     2,392,606       2,141,220       7,528,951        7,035,844
 amortization
 and accretion

 General and    1,821,731       2,277,883       5,247,932        6,192,331
 administrative

  Total
  operating     24,851,493      21,716,972      73,389,331       63,948,881
  expenses

Loss from
continuing      (2,730,694   )  (3,135,632   )  (8,663,096    )  (12,523,837   )
operations

Other income
(expense):

 Interest       (1,910,496   )  (1,616,725   )  (5,037,908    )  (5,626,763    )
 expense

 Interest       65,175          180,143         222,281          572,460
 income

 Other          39,324          23,653          63,944           (1,831,526    )

  Other income
  (expense),    (1,805,997   )  (1,412,929   )  (4,751,683    )  (6,885,829    )
  net

Loss from
continuing
operations      (4,536,691   )  (4,548,561   )  (13,414,779   )  (19,409,666   )
before income
taxes

Income tax      -               -               -                -
benefit

Loss from
continuing      (4,536,691   )  (4,548,561   )  (13,414,779   )  (19,409,666   )
operations

Income (loss)
from
discontinued    3,872,741       (3,841,312   )  (1,485,157    )  (8,153,317    )
operations, net
of taxes

Net loss        (663,950     )  (8,389,873   )  (14,899,936   )  (27,562,983   )

Preferred stock -               (40,328      )  -                (120,106      )
dividend

Net loss
attributable to $ (663,950   )  $ (8,430,201 )  $ (14,899,936 )  $ (27,683,089 )
common
shareholders

Earnings (loss)
per common
share from
continuing      $ (0.13      )  $ (0.14      )  $ (0.40       )  $ (0.64       )
operations -
basic and
diluted

Earnings (loss)
per common
share from
discontinued    $ 0.11          $ (0.11      )  $ (0.04       )  $ (0.26       )
operations -
basic and
diluted

Earnings (loss)
per common      $ (0.02      )  $ (0.25      )  $ (0.44       )  $ (0.90       )
share - basic
and diluted

Weighted
average common  34,009,439      33,139,355      33,987,742       30,688,851
shares
outstanding

See Accompanying Notes to Condensed
Consolidated Financial Statements.

National Coal Corp.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

                                                For the Nine Months Ended

                                                September 30,

                                                2009             2008

Operating Activities

Net loss                                        $ (14,899,936 )  $ (27,562,983 )

Adjustments to reconcile net loss to net cash
provided by (used in)

 operating activities:

  Loss from discontinued operations, net of tax 1,485,157        8,153,317

  Depreciation, depletion, amortization and     7,528,951        7,035,844
  accretion

  Amortization of deferred financing costs      688,438          381,246

  Amortization of debt discount                 500,323          523,942

  Gain on disposal of assets                    (74,789       )  (632          )

  Loss on sale of Straight Creek properties     -                413,843

  Loss on extinguishment of debt                -                1,676,840

  Settlement of asset retirement obligations    (41,469       )  (70,925       )

  Stock option expense                          1,126,961        980,654

  Changes in operating assets and liabilities:

  Accounts receivable                           (753,137      )  647,650

  Inventory                                     (940,665      )  (348,851      )

  Prepaid and other current assets              678,192          (44,206       )

  Other non - current assets                    158,155          825,000

  Accounts payable and accrued expenses         8,865,730        1,251,687

  Deferred revenue                              (1,241,840    )  (187,614      )

  Other non - current liabilities               (196,198      )  115,219

Net cash flows provided by (used in) operating  2,883,873        (6,209,969    )
activities from continuing operations

Net cash flows provided by operating activities 3,676,903        2,608,789
from discontinued operations

Net cash flows provided by (used in) operating  6,560,776        (3,601,180    )
activities

Investing Activities

Capital expenditures                            (5,445,127    )  (5,967,415    )

Proceeds from sale of Straight Creek properties -                10,711,399

Decrease in restricted cash                     2,419,886        5,034,465

Additions to prepaid royalties                  (64,500       )  (470,319      )

Net cash (used in) provided by investing        (3,089,741    )  9,308,130
activities from continuing operations

Net cash used in investing activities from      (2,153,052    )  (1,815,251    )
discontinued operations

Net cash (used in) provided by investing        (5,242,793    )  7,492,879
activities

Financing Activities

Proceeds from issuance of common and preferred  -                10,863,256
stock

Proceeds from stock option exercises            -                1,037,125

Proceeds under short-term line of credit        5,000,000        -

Repayments of short-term line of credit         (1,000,000    )  -

Repayments of long-term debt                    (2,347,374    )  (12,540,290   )

Repayments of obligations under capital leases  (1,555,560    )  (342,351      )

Payments for deferred financing costs           (439,258      )  (13,040       )

Payment of deferred dividends                   -                (114,216      )

Net cash flows used in financing activities     (342,192      )  (1,109,516    )
from continuing operations

Net cash flows used in financing activities     (823,851      )  (1,400,960    )
from discontinued operations

Net cash flows used in financing activities     (1,166,043    )  (2,510,476    )

Net increase in cash and cash equivalents       151,940          1,381,223

Cash and cash equivalents at beginning of       3,908,469        9,854,351
period

Cash and cash equivalents at end of period      $ 4,060,409      $ 11,235,574

Supplemental Cash Flow Information

 Cash paid during the year for interest from    $ 2,810,643      $ 4,094,437
 continuing operations

 Cash paid during the year for interest from    555,806          8,346,143
 discontinued operations

 Non-cash investing and financing activities from continued
 operations:

  Series A cumulative convertible preferred     $ -              $ 3,346,650
  stock converted to common stock

  Preferred stock effective dividends           -                131,712

  Preferred stock dividends converted to common -                120,107
  stock

  10.5% Senior Secured Notes exchanged for      -                12,735,848
  common stock

  Financed equipment acquisitions               34,852           1,579,938

  Equipment acquired through obligations under  336,000          952,131
  capital leases

  Asset retirement obligations incurred,        -                158,300
  acquired or recosted

  Common stock issued for mineral rights        -                5,000,000

 Non-cash investing and financing activities from discontinued
 operations:

  Financed equipment acquisitions               $ 42,848         $ 1,866,386

  Asset retirement obligations incurred,        324,332          1,820,917
  acquired or recosted

  Interest and fees paid in-kind or financed    2,100,000        -

  Equipment acquired through obligations under  -                181,050
  capital leases

See Accompanying Notes to Condensed Consolidated Financial
Statements.

    Source: National Coal Corp.

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