The company's March 2001 quarterly income was, however, inflated by a coal export sales excise tax resolution while this year’s result was also impacted by lower coal sales.

"Our coal and gas operations ran well during the quarter," said J Brett Harvey, president and chief executive. "Unfortunately, the warm winter weather in our principal markets and the sluggish United States economy dampened energy demand, significantly reducing coal sales and driving down coal and gas prices."

Coal sales were more than 3 million tons lower than forecast, and 3 million tons lower than the same period a year ago, prompting the company to reduce planned coal production this year by 5 million to 6 million tons, 7%-8% below the amount forecasted at the beginning of the year.

Total coal sales for the quarter just ended were 17.4 million tons, compared with 20.4 million tons for the three months ended March 31, 2001. Production was 19.9 million tons, compared with 20 million tons in the same period a year ago.

Average realized sales price per ton was US$26.28 for the quarter just ended, compared with US$23.92 for the same period a year earlier. Production costs per ton of company-produced coal were US$23.42 per ton, compared with US$20.75 a year earlier. The increase in unit costs primarily was due to higher labor costs.

"Although costs are not yet where we want them to be," said Harvey, "total costs per ton in March were US$22.24, reflecting the efforts we have made to reduce our costs."

"Obviously, this will not be the year that we had hoped to have," Harvey commented. "We are prepared to take advantage of the rebound in energy markets. However, the speed of our recovery will depend on the rate of growth in electricity demand in the second half of the year."

Harvey said coal stockpiles at power plants are still above normal, although the situation has improved since the first of the year. "The variance above normal has narrowed," Harvey said. "If electricity demand grows 1.5%-2% for the remainder of the year, our expectations are that inventory levels will be back to normal levels by late summer."

Harvey said the pricing environment for coal producers has improved in the last two months: "We see a US$1 to US$2 per ton improvement in spot prices," he said. "Keep in mind, however, that this is still US$6 to US$8 dollars per ton lower than a year ago."