| | ITEM 1B. | Unresolved Staff Comments |
See “Detail Coal Operations” in Item 1 of this Annual Report on Form 10-K for a description of our mining properties, incorporated herein by this reference. In addition to our mining properties referenced in the prior sentence, through our CONSOL Marine Terminal located in the Port of Baltimore, we provide coal and export terminal services. Our principal executive offices are located at 1000 CONSOL Energy Drive, Suite 100, Canonsburg, Pennsylvania 15317-6506. See the map under “Our Company” in Item 1 of this Annual Report on Form 10-K for the location of the Company's significantmaterial properties.
Our operations are subject to a variety of risks and disputes normally incidental to our business. As a result, we may, at any given time, be a defendant in various legal proceedings and litigation arising in the ordinary course of business. However, we are not currently subject to any material litigation. Refer to Note 21,22, “Commitments and Contingent Liabilities,” in the Notes to the Audited Consolidated Financial Statements in Item 8 of this Form 10-K, incorporated herein by this reference.
| | ITEM 4. | Mine Safety and Health Administration Safety Data |
Information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in Exhibit 95 to this annual report.
| | ITEM 5. | Market for Registrant's Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities |
Shares of the Company's common stock are listed on the New York Stock Exchange and trade under the symbol “CEIX”. Trading of the Company's common stock began as “when-issued” trading on November 3, 2017 and began as “regular-way” trading on November 29, 2017.
As of January 27, 2020,February 1, 2021, there were 9189 holders of record of our common stock.
The following performance graph compares CONSOL Energy's cumulative total shareholder return to that of the Company's peer group and the Standard & Poor's 500 Stock Index. The previous peer group, for the purposes of the information presented below, is comprised of Alliance Resource Partners LP, Arch Resources, Inc. (formerly known as Arch Coal Inc.), Contura Energy, Inc., Cloud Peak Energy, Inc., Foresight Energy LP, Hallador Energy Company, Peabody Energy Corporation, Ramaco Resources, Inc., Warrior Met Coal, Inc. and Westmoreland Coal Company. The current peer group excludes Cloud Peak Energy Inc. and Westmoreland Coal Company, as these companies are in bankruptcy and do not adequately reflect the trends of the peer group, and Ramaco Resources, Inc. was added to provide a comprehensive industry comparison.
The graph above tracks the performance of an initial investment of $100 in CONSOL Energy's common stock and each member of the peer group and the Standard & Poor's 500 Stock Index, including the reinvestment of any dividends, from November 3, 2017 (beginning of “when-issued” trading) through December 31, 2019. | | | | | | | | | | | | | | | | | | | November 3, 2017 | | November 30, 2017 | | December 31, 2017 | | December 31, 2018 | | December 31, 2019 | CONSOL Energy Inc. | | 100.0 |
| | 200.0 |
| | 359.2 |
| | 288.4 |
| | 132.1 |
| S&P 500 Stock Index | | 100.0 |
| | 102.3 |
| | 103.3 |
| | 96.9 |
| | 124.9 |
| Peer Group | | 100.0 |
| | 104.8 |
| | 117.8 |
| | 100.7 |
| | 66.7 |
| Previous Peer Group | | 100.0 |
| | 105.1 |
| | 117.2 |
| | 100.2 |
| | 66.1 |
|
2020. | | November 3, 2017 | | | November 30, 2017 | | | December 31, 2017 | | | December 31, 2018 | | | December 31, 2019 | | | December 31, 2020 | | CONSOL Energy Inc. | | | 100.0 | | | | 200.0 | | | | 359.2 | | | | 288.4 | | | | 132.1 | | | | 65.7 | | S&P 500 Stock Index | | | 100.0 | | | | 102.3 | | | | 103.3 | | | | 96.9 | | | | 124.9 | | | | 145.3 | | Peer Group | | | 100.0 | | | | 104.8 | | | | 117.8 | | | | 100.7 | | | | 66.7 | | | | 43.7 | |
The above information is being furnished pursuant to Regulation S-K, Item 201 (e) (Performance Graph).
Repurchases of Equity Securities
The following table sets forthThere were no repurchases of the Company's common stockequity securities during the three months ended December 31, 2019: | | | | | | | | | | | | | | | | | | | (a) | | (b) | | (c) | | (d) | | Period | | Total Number of Shares Purchased (1) | | Average Price Paid per Share | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | Maximum Number (or Approximate Dollar Value) of Shares that May Yet be Purchased Under the Plans or Programs (000s omitted) (2) | | October 1, 2019 - October 31, 2019 | | — |
| | $ | — |
| | — |
| | $ | 60,977 |
| (3) | November 1, 2019 - November 30, 2019 | | — |
| | $ | — |
| | — |
| | $ | 57,897 |
| (3) | December 1, 2019 - December 31, 2019 | | — |
| | $ | — |
| | — |
| | $ | 56,102 |
| (3) | Total | | — |
| | $ | — |
| | | | | |
(1) In2020. Since the December 2017 inception of the Company's current stock, unit and debt repurchase program, CONSOL Energy'sEnergy Inc.'s Board of Directors approvedsubsequently amended the program on four separate occasions. As a program toresult of such amendments, the Company may now repurchase from time to time, the Company's outstanding shares of common stock or its 11.00% Senior Secured Second Lien Notes due 2025, in an aggregate amount of up to $50 million through the period ending June 30, 2019. The program was subsequently amended in July 2018 to allow for the repurchase of up to $100$270 million of the Company's outstanding sharesstock and debt until June 30, 2022. As of February 12, 2021, approximately $91.4 million remained available under the stock, unit and debt repurchase program. The program does not obligate CONSOL Energy to acquire any particular amount of its common stock or its 11.00% Senior Secured Second Lien Notes due 2025. Thenotes, and can be modified or suspended at any time at the Company's Board of Directors also authorized the Company to use up to $25 milliondiscretion. See Note 5 - Stock, Unit and Debt Repurchases of the programNotes to purchase CCR's common unitsthe Consolidated Financial Statements in the open market. The program was further amended in May 2019 to allowItem 8 of this Form 10-K for the repurchase of up to $175 million of the Company's outstanding shares of common stock or its 11.00% Senior Secured Second Lien Notes due 2025. The May 2019 expansion also increased the aggregate limit of the amount of CCR's common units that can be purchased under the program to $50 million, which is consistent with the Company's credit facility covenants that prohibit the Company from using more than $50 million for the purchase of CCR's outstanding common units. The program's termination date was also extended, from June 30, 2019 to June 30, 2020. In July 2019, CONSOL Energy's Board of Directors approved an expansion of the program in the amount of $25 million, bringing the aggregate limit of the program to $200 million. The repurchases will be effected from time to time on the open market or in privately negotiated transactions or under a Rule 10b5-1 plan.
(2) Management cannot estimate the number of shares that will be repurchased because purchases are made based upon the Company's stock price, the Company's financial outlook and alternative investment options.
(3) In October 2019, CONSOL Energy utilized approximately $11.362 million to repurchase its 11.00% Senior Secured Second Lien Notes due 2025. In November 2019, CONSOL Energy utilized approximately $3.080 million to repurchase its 11.00% Senior Secured Second Lien Notes due 2025. In December 2019, CONSOL Energy utilized approximately $1.795 million to repurchase its 11.00% Senior Secured Second Lien Notes due 2025.
additional information.Dividends
The declaration and payment of dividends by CONSOL Energy is subject to the discretion of CONSOL Energy's Board of Directors, and no assurance can be given that CONSOL Energy will pay dividends in the future. The determination to pay dividends in the future will depend upon, among other things, general business conditions, CONSOL Energy's financial results, contractual and legal restrictions regarding the payment of dividends by CONSOL Energy, planned investments by CONSOL Energy and such other factors as the Board of Directors deems relevant. The Company's senior secured credit facilitiesSenior Secured Credit Facilities limit CONSOL Energy's ability to pay dividends up to $25 million annually, which increases to $50 million annually when the Company's total net leverage ratio is less than 1.50 to 1.00 and subject to an aggregate amount up to a cumulative credit calculation set forth in the facilities.facilities, with additional conditions of no outstanding borrowings and no more than $200 million of outstanding letters of credit on the Revolving Credit Facility, and the total net leverage ratio shall not be greater than 2.00 to 1.00. The total net leverage ratio was 1.932.54 to 1.00 and the cumulative credit was approximately $35$16 million at December 31, 2019.2020. The cumulative credit starts with $50 million and builds with excess cash flow commencing in 2018. The calculation of the total net leverage ratio excludes the Partnership. The credit facilitiesSenior Secured Credit Facilities do not permit dividend payments in the event of default. The indentureIndenture to the 11.00% Senior Secured Second Lien Notes limits dividends when the Company's total net leverage ratio exceeds 2.00 to 1.00 and subject to an amount not to exceed an annual rate of 4.0% of the quoted public market value per share of such common stock at the time of the declaration. The indentureIndenture does not permit dividend payments in the event of default. See Part III, Item 12. “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” for information relating to CONSOL Energy's equity compensation plans.
ITEM 7. | Management's Discussion and Analysis of Financial Condition and Results of Operations | ITEM 6. | Selected Financial Data |
The following table presentsMerger with CONSOL Coal Resources LP On December 30, 2020, we completed the selected consolidated financial and operating data for, and asacquisition of all of the endoutstanding common units of each of the years ended December 31, 2019, 2018, 2017, 2016CONSOL Coal Resources, and 2015, which is derived from the Company's audited Consolidated Financial Statements. The Company did not operate as a separate, stand-alone entity for all five of the years listed below. SeeCONSOL Coal Resources became our indirect wholly-owned subsidiary (see Note 1, “Significant Accounting Policies,”2 - Major Transactions in the Notes to the Audited Consolidated Financial Statements in Item 8 of this Form 10-K for a discussionadditional information). In connection with the closing of the Company's accounting treatmentCCR Merger, we issued approximately 8.0 million shares of periods priorour common stock to November 28, 2017 whenacquire the approximately 10.9 million common units of CCR held by third-party CCR investors at a fixed exchange ratio of 0.73 shares of CEIX common stock for each CCR unit, for total implied consideration of $51.7 million. COVID-19 Update The Company is monitoring the impact of the COVID-19 pandemic (“COVID-19”) and has taken, and will continue to take, steps to mitigate the potential risks and impact on the Company separatedand its employees. The health and safety of our employees is paramount. In response to two employees testing positive for COVID-19, the Company temporarily curtailed production at the Bailey Mine for two weeks at the end of March. To date, the Company has experienced a few localized outbreaks, but due to the health and safety procedures put in place by the Company, we have been able to continue operating without production curtailment. The Company continues to monitor the health and safety of its employees closely in order to limit potential risks to our employees, contractors, family members and the community. We are considered a critical infrastructure company by the U.S. Department of Homeland Security. As a result, we were exempt from its former parent. The selected consolidated financial and operating dataPennsylvania Governor Tom Wolf's executive order, issued in March 2020, closing all businesses that are not necessarily indicativelife sustaining until Pennsylvania's phased reopening, which began in the second quarter of 2020. The unprecedented decline in coal demand that began in the first quarter hit its lowest point in May 2020, and has improved through the fourth quarter. In response to the decline in demand for our coal as a result of COVID-19, we idled four of our five longwalls for periods of time beginning in the second quarter. As demand improved, we restarted longwalls and ultimately ran four of the resultsfive longwalls for the majority of the third quarter and for the entire fourth quarter. This decline in coal demand has negatively impacted our operational, sales and financial performances year-to-date and we expect that this negative impact will continue as the pandemic continues. However, we saw steady improvement in the demand for our coal throughout the third and fourth quarters of 2020. While some government-imposed shut-downs of non-essential businesses in the United States and abroad have been phased out, there is a possibility that such shut-downs may be expected for any future period, and should be read in conjunction with Item 7 “Management's Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and accompanying notes included in this Annual Report. | | | | | | | | | | | | | | | | | | | | | | (Dollars in thousands, except per share data) | | For the Years Ended December 31, | | | 2019 | | 2018 | | 2017 | | 2016 | | 2015 | Statement of Income Information: | | | | | | | | | | | Coal Revenue | | $ | 1,288,529 |
| | $ | 1,364,292 |
| | $ | 1,187,654 |
| | $ | 1,065,582 |
| | $ | 1,289,036 |
| Terminal Revenue | | 67,363 |
| | 64,926 |
| | 60,066 |
| | 31,464 |
| | 30,967 |
| Freight Revenue | | 19,667 |
| | 43,572 |
| | 73,692 |
| | 46,468 |
| | 20,499 |
| Miscellaneous Other Income | | 53,349 |
| | 58,660 |
| | 73,279 |
| | 82,120 |
| | 68,193 |
| Gain on Sale of Assets | | 1,995 |
| | 565 |
| | 17,212 |
| | 5,228 |
| | 13,025 |
| Total Revenue and Other Income | | $ | 1,430,903 |
| | $ | 1,532,015 |
| | $ | 1,411,903 |
| | $ | 1,230,862 |
| | $ | 1,421,720 |
| Net Income | | $ | 93,558 |
| | $ | 178,785 |
| | $ | 82,569 |
| | $ | 50,450 |
| | $ | 317,421 |
| Net Income Attributable to CONSOL Energy Inc. Shareholders | | $ | 76,001 |
| | $ | 152,976 |
| | $ | 67,629 |
| | $ | 41,496 |
| | $ | 307,011 |
| Dilutive Earnings per Share (1) | | $ | 2.81 |
| | $ | 5.38 |
| | $ | 2.40 |
| | $ | 1.48 |
| | $ | 10.98 |
| Balance Sheet Data (at period end): | | | | | | | | | | | Total Assets | | $ | 2,693,802 |
| | $ | 2,760,727 |
| | $ | 2,707,099 |
| | $ | 2,687,434 |
| | $ | 2,867,733 |
| Total Long-Term Debt | | $ | 662,838 |
| | $ | 734,226 |
| | $ | 865,289 |
| | $ | 313,639 |
| | $ | 286,526 |
| Cash Dividends Declared per Share of Common Stock | | N/A | | N/A | | N/A | | N/A | | N/A |
(1) Priorreinstated after being lifted as COVID-19 continues to 2017, the earnings per share was calculated based on the 27,967,509 shares of CONSOL Energy common stock distributed in conjunction with the completion of the separation and distribution, and is considered pro forma in nature. Prior to November 28, 2017, CONSOL Energy did not have any issued or outstanding common stock.
OTHER OPERATING DATA
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | Years Ended December 31, | | | 2019 | | 2018 | | 2017 | | 2016 | | 2015 | Coal: | | | | | | | | | | | Tons sold (in thousands) | | 27,314 |
| | 27,682 |
| | 26,091 |
| | 24,604 |
| | 22,873 |
| Tons produced (in thousands) | | 27,285 |
| | 27,592 |
| | 26,109 |
| | 24,666 |
| | 22,790 |
| Average sales price of tons produced ($ per ton produced) | | $ | 47.17 |
| | $ | 49.28 |
| | $ | 45.52 |
| | $ | 43.31 |
| | $ | 56.36 |
| Average cost of goods sold ($ per ton produced) | | $ | 37.37 |
| | $ | 35.46 |
| | $ | 35.03 |
| | $ | 34.35 |
| | $ | 41.78 |
| Recoverable coal reserves at end of period (tons in millions) | | 2,226 |
| | 2,261 |
| | 2,298 |
| | 2,361 |
| | 3,047 |
| Number of active mining complexes (at end of period) | | 1 |
| | 1 |
| | 1 |
| | 1 |
| | 1 |
|
| | ITEM 7. | Management's Discussion and Analysis of Financial Condition and Results of Operations |
2019 Highlights:
Net income of $94 million
Net payments, including premiums, on total debt of $183.9 million during the year
Repurchased 1,717,497 CONSOL Energy common shares outstanding at an average price of $19.06 per share
Coal sales volume of 27.3 million tons is the second strongest year ever for the PAMC.
The Harvey mine set an individual production record of 5.0 million tons, exceeding its previous record set in 2018 and marking its third consecutive record-setting year.
The CONSOL Marine Terminal achieved record annual revenue of $67.4 million, marking its third consecutive record-setting year.
Outlook for 2020 and 2021
spread rapidly. We expect that depressed domestic and international demand for our coal will continue for so long as there are widespread, government-imposed shut-downs of business activity. Depressed demand for our coal may also result from a general recession or reduction in overall business activity caused by COVID-19. Additionally, some of our customers have already attempted, and may in the PAMC will produce approximately 24.5 millionfuture attempt, to 26.5 million tonsinvoke force majeure or similar provisions in 2020. the contracts they have in place with us in order to avoid taking possession of and paying us for our coal that they are contractually obligated to purchase. Sustained decrease in demand for our coal and the failure of our customers to purchase coal from us that they are obligated to purchase pursuant to existing contracts would have a material adverse effect on our results of operations and financial condition. The extent to which COVID-19 may adversely impact our business depends on future developments, which are highly uncertain and unpredictable, including new information concerning the severity of the outbreak, the pace and effectiveness of vaccination efforts and the effectiveness of actions globally to contain or mitigate its effects. We expect this will continue to focusnegatively impact our results of operations, cash flows and financial condition. The Company will continue to take steps it believes are appropriate to mitigate the impacts of COVID-19 on sales in domesticits operations, liquidity and international markets. These markets provide us with pricing upside when markets are strong and with volume stability when markets are weak. For financial condition.2020 and 2021, our contracted position, as of February 11, 2020, is at 95% and 43%, respectively, assuming an annual coal sales volume at the midpoint of our guidance range. We believe our committed and contracted position is well-balanced and provides diversification benefits. We are planning to make capital expenditures during 2020 in the range of $125 million to $145 million.
Highlights: | • | Coal shipments recovered to 5.9 million tons in Q4 2020, compared to 4.5 million tons in Q3 2020 and 2.3 million tons in Q2 2020. | | • | Total consolidated indebtedness reduced by $56.2 million – reduced TLA, TLB and Second Lien debt outstanding by $22.5 million, $2.8 million and $54.5 million, respectively. |
| • | Continued to take advantage of strong equipment financing market by raising $60 million of new capital during 2020 at a weighted average interest rate of 6%. | | • | Consummated the CCR merger transaction with strong shareholder support. |
Outlook for 2021: | • | We expect that the PAMC will sell approximately 22 million to 24 million tons in 2021. |
| • | For 2021 and 2022, our contracted position, as of February 9, 2021, is at 18.2 million tons and 5.6 million tons, respectively. |
| • | We are planning to make capital expenditures during 2021 in the range of $100 million to $125 million, excluding any spending on the Itmann project. |
How We Evaluate Our Operations
Our management team uses a variety of financial and operating metrics to analyze our performance. These metrics are significant factors in assessing our operating results and profitability. The metrics include: (i) coal production, sales volumes and average revenue per ton; (ii) cost of coal sold, a non-GAAP financial measure; (iii) cash cost of coal sold, a non-GAAP financial measure; and (iv) average cash margin per ton sold, an operating ratio derived from non-GAAP financial measures; and (v) average cash margin per ton sold, an operating ratio derived from non-GAAP financial measures.
Cost of coal sold, cash cost of coal sold, average margin per ton sold and average cash margin per ton sold normalize the volatility contained within comparable GAAP measures by adjusting certain non-operating or non-cash transactions. Each of these non-GAAP metrics are used as supplemental financial measures by management and by external users of our financial statements, such as investors, industry analysts, lenders and ratings agencies, to assess:
| • | our operating performance as compared to the operating performance of other companies in the coal industry, without regard to financing methods, historical cost basis or capital structure; |
| • | the ability of our assets to generate sufficient cash flow; |
| • | our ability to incur and service debt and fund capital expenditures; |
| • | the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities; and |
| • | the attractiveness of capital projects and acquisitions and the overall rates of return on alternative investment opportunities. |
the ability of our assets to generate sufficient cash flow;
our ability to incur and service debt and fund capital expenditures;
the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities; and
the attractiveness of capital projects and acquisitions and the overall rates of return on alternative investment opportunities.
TheThese non-GAAP financial measures should not be considered an alternative to total costs, net income, operating cash flow, or any other measure of financial performance or liquidity presented in accordance with GAAP. These measures exclude some, but not all, items that affect net income or net cash,measures presented in accordance with GAAP, and these measures and the way we calculate them may vary from those of other companies. As a result, the items presented below may not be comparable to similarly titled measures of other companies.
Reconciliation of Non-GAAP Financial Measures
We evaluate our cost of coal sold and cash cost of coal sold on an aggregate basis. We define cost of coal sold as operating and other production costs related to produced tons sold, along with changes in coal inventory, both in volumes and carrying values. The cost of coal sold includes items such as direct operating costs, royalty and production taxes, direct administration costs, and depreciation, depletion and amortization costs on production assets. Our costs exclude any indirect costs, such as selling, general and administrative costs, freight expenses, interest expenses, depreciation, depletion and amortization costs on non-production assets and other costs not directly attributable to the production of coal. The GAAP measure most directly comparable to cost of coal sold is total costs and expenses. The cash cost of coal sold includes cost of coal sold less depreciation, depletion and amortization costs on production assets. The GAAP measure most directly comparable to cost of coal sold and cash cost of coal sold is total costs and expenses.
The following table presents a reconciliation of cost of coal sold and cash cost of coal sold to total costs and expenses, the most directly comparable GAAP financial measure, on a historical basis, for each of the periods indicated (in thousands).
| | | | | | | | | | | | | | | | Years Ended December 31, | | | 2019 | | 2018 | | 2017 | Total Costs and Expenses | | $ | 1,332,806 |
| | $ | 1,344,402 |
| | $ | 1,242,106 |
| Freight Expense | | (19,667 | ) | | (43,572 | ) | | (73,692 | ) | Selling, General and Administrative Costs | | (67,111 | ) | | (65,346 | ) | | (83,605 | ) | Loss on Debt Extinguishment | | (24,455 | ) | | (3,922 | ) | | — |
| Interest Expense, net | | (66,464 | ) | | (83,848 | ) | | (26,098 | ) | Other Costs (Non-Production) | | (101,900 | ) | | (135,081 | ) | | (129,620 | ) | Depreciation, Depletion and Amortization (Non-Production) | | (32,388 | ) | | (30,961 | ) | | (15,001 | ) | Cost of Coal Sold | | $ | 1,020,821 |
| | $ | 981,672 |
| | $ | 914,090 |
| Depreciation, Depletion and Amortization (Production) | | (174,709 | ) | | (170,303 | ) | | (157,001 | ) | Cash Cost of Coal Sold | | $ | 846,112 |
| | $ | 811,369 |
| | $ | 757,089 |
|
| | Years Ended December 31, | | | | 2020 | | | 2019 | | | 2018 | | Total Costs and Expenses | | $ | 1,030,885 | | | $ | 1,332,806 | | | $ | 1,344,402 | | Freight Expense | | | (39,990 | ) | | | (19,667 | ) | | | (43,572 | ) | Selling, General and Administrative Costs | | | (72,706 | ) | | | (67,111 | ) | | | (65,346 | ) | Gain (Loss) on Debt Extinguishment | | | 21,352 | | | | (24,455 | ) | | | (3,922 | ) | Interest Expense, net | | | (61,186 | ) | | | (66,464 | ) | | | (83,848 | ) | Other Costs (Non-Production) | | | (124,739 | ) | | | (101,900 | ) | | | (135,081 | ) | Depreciation, Depletion and Amortization (Non-Production) | | | (39,668 | ) | | | (32,388 | ) | | | (30,961 | ) | Cost of Coal Sold | | $ | 713,948 | | | $ | 1,020,821 | | | $ | 981,672 | | Depreciation, Depletion and Amortization (Production) | | | (171,092 | ) | | | (174,709 | ) | | | (170,303 | ) | Cash Cost of Coal Sold | | $ | 542,856 | | | $ | 846,112 | | | $ | 811,369 | |
We define average margin per ton sold as average revenue per ton sold, net of average cost of coal sold per ton. We define average cash margin per ton sold as average coal revenue per ton sold, net of average cash cost of coal sold per ton. The GAAP measure most directly comparable to average margin per ton sold and average cash margin per ton sold is total coal revenue.
The following table presents a reconciliation of average margin per ton sold and average cash margin per ton sold to total coal revenue, the most directly comparable GAAP financial measure, on a historical basis, for each of the periods indicated (in thousands, except per ton information).
| | Years Ended December 31, | | | | 2020 | | | 2019 | | | 2018 | | Total Coal Revenue (PAMC Segment) | | $ | 771,363 | | | $ | 1,288,529 | | | $ | 1,364,292 | | Operating and Other Costs | | | 667,595 | | | | 948,012 | | | | 946,450 | | Less: Other Costs (Non-Production) | | | (124,739 | ) | | | (101,900 | ) | | | (135,081 | ) | Total Cash Cost of Coal Sold | | | 542,856 | | | | 846,112 | | | | 811,369 | | Add: Depreciation, Depletion and Amortization | | | 210,760 | | | | 207,097 | | | | 201,264 | | Less: Depreciation, Depletion and Amortization (Non-Production) | | | (39,668 | ) | | | (32,388 | ) | | | (30,961 | ) | Total Cost of Coal Sold | | $ | 713,948 | | | $ | 1,020,821 | | | $ | 981,672 | | Total Tons Sold (in millions) | | | 18.7 | | | | 27.3 | | | | 27.7 | | Average Revenue per Ton Sold | | $ | 41.31 | | | $ | 47.17 | | | $ | 49.28 | | Average Cash Cost of Coal Sold per Ton | | | 29.12 | | | | 30.97 | | | | 29.29 | | Depreciation, Depletion and Amortization Costs per Ton Sold | | | 9.12 | | | | 6.40 | | | | 6.17 | | Average Cost of Coal Sold per Ton | | | 38.24 | | | | 37.37 | | | | 35.46 | | Average Margin per Ton Sold | | | 3.07 | | | | 9.80 | | | | 13.82 | | Add: Depreciation, Depletion and Amortization Costs per Ton Sold | | | 9.12 | | | | 6.40 | | | | 6.17 | | Average Cash Margin per Ton Sold | | $ | 12.19 | | | $ | 16.20 | | | $ | 19.99 | |
We define adjusted EBITDA as (i) net income (loss) plus income taxes, net interest expense and depreciation, depletion and amortization, as adjusted for (ii) certain non-cash items, such as long-term incentive awards. The GAAP measure most directly comparable to adjusted EBITDA is net income (loss). | | | | | | | | | | | | | | | | Years Ended December 31, | | | 2019 | | 2018 | | 2017 | Total Coal Revenue | | $ | 1,288,529 |
| | $ | 1,364,292 |
| | $ | 1,187,654 |
| Operating and Other Costs | | 948,012 |
| | 946,450 |
| | 886,709 |
| Less: Other Costs (Non-Production) | | (101,900 | ) | | (135,081 | ) | | (129,620 | ) | Total Cash Cost of Coal Sold | | 846,112 |
| | 811,369 |
| | 757,089 |
| Add: Depreciation, Depletion and Amortization | | 207,097 |
| | 201,264 |
| | 172,002 |
| Less: Depreciation, Depletion and Amortization (Non-Production) | | (32,388 | ) | | (30,961 | ) | | (15,001 | ) | Total Cost of Coal Sold | | $ | 1,020,821 |
| | $ | 981,672 |
| | $ | 914,090 |
| Total Tons Sold (in millions) | | 27.3 |
| | 27.7 |
| | 26.1 |
| Average Revenue per Ton Sold | | $ | 47.17 |
| | $ | 49.28 |
| | $ | 45.52 |
| Average Cash Cost of Coal Sold per Ton | | 30.97 |
| | 29.29 |
| | 29.02 |
| Depreciation, Depletion and Amortization Costs per Ton Sold | | 6.40 |
| | 6.17 |
| | 6.01 |
| Average Cost of Coal Sold per Ton | | 37.37 |
| | 35.46 |
| | 35.03 |
| Average Margin per Ton Sold | | 9.80 |
| | 13.82 |
| | 10.49 |
| Add: Depreciation, Depletion and Amortization Costs per Ton Sold | | 6.40 |
| | 6.17 |
| | 6.01 |
| Average Cash Margin per Ton Sold | | $ | 16.20 |
| | $ | 19.99 |
| | $ | 16.50 |
|
| | For the Year Ended December 31, 2020 | | Dollars in thousands | | PA Mining Complex | | | CONSOL Marine Terminal | | | Other | | | Total Company | | Net Income (Loss) | | $ | 16,185 | | | $ | 32,537 | | | $ | (61,936 | ) | | $ | (13,214 | ) | | | | | | | | | | | | | | | | | | Add: Income Tax Expense | | | — | | | | — | | | | 3,972 | | | | 3,972 | | Add: Interest Expense, net | | | 1,236 | | | | 6,166 | | | | 53,784 | | | | 61,186 | | Less: Interest Income | | | (10 | ) | | | — | | | | (1,220 | ) | | | (1,230 | ) | Earnings (Loss) Before Interest & Taxes (EBIT) | | | 17,411 | | | | 38,703 | | | | (5,400 | ) | | | 50,714 | | | | | | | | | | | | | | | | | | | Add: Depreciation, Depletion & Amortization | | | 198,272 | | | | 5,095 | | | | 7,393 | | | | 210,760 | | | | | | | | | | | | | | | | | | | Earnings Before Interest, Taxes and DD&A (EBITDA) | | $ | 215,683 | | | $ | 43,798 | | | $ | 1,993 | | | $ | 261,474 | | | | | | | | | | | | | | | | | | | Adjustments: | | | | | | | | | | | | | | | | | Stock/Unit-Based Compensation | | $ | 9,905 | | | $ | 558 | | | $ | 1,116 | | | $ | 11,579 | | CCR Merger Fees | | | 2,623 | | | | — | | | | 7,199 | | | | 9,822 | | Gain on Debt Extinguishment | | | — | | | | — | | | | (21,352 | ) | | | (21,352 | ) | Total Pre-tax Adjustments | | | 12,528 | | | | 558 | | | | (13,037 | ) | | | 49 | | | | | | | | | | | | | | | | | | | Adjusted EBITDA | | $ | 228,211 | | | $ | 44,356 | | | $ | (11,044 | ) | | $ | 261,523 | |
| | For the Year Ended December 31, 2019 | | Dollars in thousands | | PA Mining Complex | | | CONSOL Marine Terminal | | | Other | | | Total Company | | Net Income (Loss) | | $ | 197,112 | | | $ | 33,758 | | | $ | (137,312 | ) | | $ | 93,558 | | | | | | | | | | | | | | | | | | | Add: Income Tax Expense | | | — | | | | — | | | | 4,539 | | | | 4,539 | | Add: Interest Expense, net | | | — | | | | 6,088 | | | | 60,376 | | | | 66,464 | | Less: Interest Income | | | — | | | | — | | | | (2,937 | ) | | | (2,937 | ) | Earnings (Loss) Before Interest & Taxes (EBIT) | | | 197,112 | | | | 39,846 | | | | (75,334 | ) | | | 161,624 | | | | | | | | | | | | | | | | | | | Add: Depreciation, Depletion & Amortization | | | 185,616 | | | | 4,078 | | | | 17,403 | | | | 207,097 | | | | | | | | | | | | | | | | | | | Earnings (Loss) Before Interest, Taxes and DD&A (EBITDA) | | $ | 382,728 | | | $ | 43,924 | | | $ | (57,931 | ) | | $ | 368,721 | | | | | | | | | | | | | | | | | | | Adjustments: | | | | | | | | | | | | | | | | | Stock/Unit-Based Compensation | | $ | 11,626 | | | $ | 567 | | | $ | 567 | | | $ | 12,760 | | Loss on Debt Extinguishment | | | — | | | | — | | | | 24,455 | | | | 24,455 | | Total Pre-tax Adjustments | | | 11,626 | | | | 567 | | | | 25,022 | | | | 37,215 | | | | | | | | | | | | | | | | | | | Adjusted EBITDA | | $ | 394,354 | | | $ | 44,491 | | | $ | (32,909 | ) | | $ | 405,936 | |
| | For the Year Ended December 31, 2018 | | Dollars in thousands | | PA Mining Complex | | | CONSOL Marine Terminal | | | Other | | | Total Company | | Net Income (Loss) | | $ | 291,605 | | | $ | 30,647 | | | $ | (143,467 | ) | | $ | 178,785 | | | | | | | | | | | | | | | | | | | Add: Income Tax Expense | | | — | | | | — | | | | 8,828 | | | | 8,828 | | Add: Interest Expense, net | | | — | | | | 6,052 | | | | 77,796 | | | | 83,848 | | Less: Interest Income | | | — | | | | — | | | | (2,146 | ) | | | (2,146 | ) | Earnings (Loss) Before Interest & Taxes (EBIT) | | | 291,605 | | | | 36,699 | | | | (58,989 | ) | | | 269,315 | | | | | | | | | | | | | | | | | | | Add: Depreciation, Depletion & Amortization | | | 178,969 | | | | 3,782 | | | | 18,513 | | | | 201,264 | | | | | | | | | | | | | | | | | | | Earnings (Loss) Before Interest, Taxes and DD&A (EBITDA) | | $ | 470,574 | | | $ | 40,481 | | | $ | (40,476 | ) | | $ | 470,579 | | | | | | | | | | | | | | | | | | | Adjustments: | | | | | | | | | | | | | | | | | Stock/Unit-Based Compensation | | $ | 9,395 | | | $ | 420 | | | $ | 420 | | | $ | 10,235 | | Loss on Debt Extinguishment | | | — | | | | — | | | | 3,922 | | | | 3,922 | | Total Pre-tax Adjustments | | | 9,395 | | | | 420 | | | | 4,342 | | | | 14,157 | | | | | | | | | | | | | | | | | | | Adjusted EBITDA | | $ | 479,969 | | | $ | 40,901 | | | $ | (36,134 | ) | | $ | 484,736 | |
Results of Operations:Year EndedDecember 31, 2020Compared with the Year EndedDecember 31, 2019 Net (Loss) Income Attributable to CONSOL Energy Inc. Shareholders CONSOL Energy reported net loss attributable to CONSOL Energy Inc. shareholders of $10 million for the year ended December 31, 2020, compared to net income attributable to CONSOL Energy Inc. shareholders of $76 million for the year ended December 31, 2019. CONSOL Energy consists of the Pennsylvania Mining Complex and the CONSOL Marine Terminal, as well as various corporate and other business activities that are not allocated to the PAMC or the CONSOL Marine Terminal. The other business activities include the development of the Itmann Mine, the Greenfield Reserves, closed and idle mine activities, selling, general and administrative activities, interest expense and income taxes, as well as various other non-operated activities. PAMC ANALYSIS: The PAMC division's principal activities consist of mining, preparation and marketing of thermal coal. The division also includes selling, general and administrative costs, as well as various other activities assigned to the PAMC division, but not included in the cost components on a per unit basis. The PAMC division had earnings before income tax of $17 million for the year ended December 31, 2020, compared to earnings before income tax of $197 million for the year ended December 31, 2019. Variances are discussed below. | | For the Years Ended December 31, | | (in millions) | | 2020 | | | 2019 | | | Variance | | Revenue: | | | | | | | | | | | | | Coal Revenue | | $ | 771 | | | $ | 1,289 | | | $ | (518 | ) | Freight Revenue | | | 40 | | | | 20 | | | | 20 | | Miscellaneous Other Income | | | 84 | | | | 23 | | | | 61 | | Total Revenue and Other Income | | | 895 | | | | 1,332 | | | | (437 | ) | Cost of Coal Sold: | | | | | | | | | | | | | Operating Costs | | | 543 | | | | 846 | | | | (303 | ) | Depreciation, Depletion and Amortization | | | 171 | | | | 175 | | | | (4 | ) | Total Cost of Coal Sold | | | 714 | | | | 1,021 | | | | (307 | ) | Other Costs: | | | | | | | | | | | | | Other Costs | | | 44 | | | | 20 | | | | 24 | | Depreciation, Depletion and Amortization | | | 27 | | | | 11 | | | | 16 | | Total Other Costs | | | 71 | | | | 31 | | | | 40 | | Freight Expense | | | 40 | | | | 20 | | | | 20 | | Selling, General and Administrative Costs | | | 53 | | | | 63 | | | | (10 | ) | Total Costs and Expenses | | | 878 | | | | 1,135 | | | | (257 | ) | Earnings Before Income Tax | | $ | 17 | | | $ | 197 | | | $ | (180 | ) |
Coal Production The table below presents total tons produced (in thousands) from the Pennsylvania Mining Complex for the periods indicated: | | For the Years Ended December 31, | | Mine | | 2020 | | | 2019 | | | Variance | | Bailey | | | 8,669 | | | | 12,218 | | | | (3,549 | ) | Enlow | | | 5,691 | | | | 10,043 | | | | (4,352 | ) | Harvey | | | 4,410 | | | | 5,024 | | | | (614 | ) | Total | | | 18,770 | | | | 27,285 | | | | (8,515 | ) |
Coal production was 18.8 million tons for the year ended December 31, 2020, compared to 27.3 million tons for the year ended December 31, 2019. The PAMC division's coal production decreased primarily due to the temporary idling of longwalls at the Bailey and Enlow Fork mines. This was mainly in response to weakened customer demand as a result of a warmer than normal winter, followed by global demand destruction due to the COVID-19 pandemic and, in response, the widespread government-imposed shut-downs, which significantly reduced electricity consumption and, therefore, demand for the Company's coal. Coal Operations The PAMC division's coal revenue and cost components on a per unit basis for these periods were as follows: | | For the Years Ended December 31, | | | | 2020 | | | 2019 | | | Variance | | Total Tons Sold (in millions) | | | 18.7 | | | | 27.3 | | | | (8.6 | ) | Average Revenue per Ton Sold | | $ | 41.31 | | | $ | 47.17 | | | $ | (5.86 | ) | | | | | | | | | | | | | | Average Cash Cost of Coal Sold per Ton (1) | | $ | 29.12 | | | $ | 30.97 | | | $ | (1.85 | ) | Depreciation, Depletion and Amortization Costs per Ton Sold (Non-Cash Cost) | | | 9.12 | | | | 6.40 | | | | 2.72 | | Average Cost of Coal Sold per Ton (1) | | $ | 38.24 | | | $ | 37.37 | | | $ | 0.87 | | Average Margin per Ton Sold (1) | | $ | 3.07 | | | $ | 9.80 | | | $ | (6.73 | ) | Add: Depreciation, Depletion and Amortization Costs per Ton Sold | | | 9.12 | | | | 6.40 | | | | 2.72 | | Average Cash Margin per Ton Sold (1) | | $ | 12.19 | | | $ | 16.20 | | | $ | (4.01 | ) |
(1) Average cash cost of coal sold per ton and average cost of coal sold per ton are non-GAAP measures, and average margin per ton sold and average cash margin per ton sold are operating ratios derived from non-GAAP measures. See “How We Evaluate Our Operations - Reconciliation of Non-GAAP Financial Measures” for a reconciliation of non-GAAP measures to the most directly comparable GAAP measures. Coal Revenue Coal revenue was $771 million for the year ended December 31, 2020, compared to $1,289 million for the year ended December 31, 2019. Total tons sold decreased in the period-to-period comparison in response to weakened customer demand due to a warmer than normal winter followed by the COVID-19 pandemic, each of which reduced electricity consumption and, therefore, demand for the Company's coal. Additionally, lower natural gas prices as compared to the prior year contributed to electric generation trending toward gas, rather than coal, as a fuel source. The decrease in overall demand, including in both the domestic and export markets the Company serves, resulted in lower pricing received on the Company's sales contracts. Freight Revenue and Freight Expense Freight revenue is the amount billed to customers for transportation costs incurred. This revenue is based on the weight of coal shipped, negotiated freight rates and method of transportation, primarily rail, used by the customers to which the Company contractually provides transportation services. Freight revenue is completely offset by freight expense. Freight revenue and freight expense were both $40 million for the year ended December 31, 2020, compared to $20 million for the year ended December 31, 2019. The $20 million increase was due to increased shipments to customers where the Company was contractually obligated to provide transportation services. Miscellaneous Other Income Miscellaneous other income was $84 million for the year ended December 31, 2020, compared to $23 million for the year ended December 31, 2019. The $61 million increase was primarily the result of the sale of certain mining rights and additional customer contract buyouts in the year ended December 31, 2020, offset, in part, by a decrease in sales of externally purchased coal to blend and resell. These partial contract buyouts involved negotiations to reduce coal quantities of several customer contracts in exchange for payment of certain fees to the Company, and do not impact forward contract terms. Cost of Coal Sold Cost of coal sold is comprised of operating costs related to produced tons sold, along with changes in both the volumes and carrying values of coal inventory. The costs of coal sold include items such as direct operating costs, royalties and production taxes, direct administration costs and depreciation, depletion, and amortization costs on production assets. Total cost of coal sold was $714 million for the year ended December 31, 2020, or $307 million lower than the $1,021 million for the year ended December 31, 2019. Average cost of coal sold per ton was $38.24 for the year ended December 31, 2020, compared to $37.37 for the year ended December 31, 2019. The decrease in the total cost of coal sold was primarily driven by decreased production activity during the year ended December 31, 2020, mainly in response to weakened market demand, while on a per unit basis, the decreased production resulted in an overall increase in the average cost of coal sold per ton. Other Costs Other costs include items that are assigned to the PAMC division but are not included in unit costs, such as idle mine costs, coal reserve holding costs and purchased coal costs. Total other costs increased $40 million in the year ended December 31, 2020 compared to the year ended December 31, 2019. The increase was primarily attributable to the temporary idling of longwalls at the Bailey and Enlow Fork mines due to the COVID-19 pandemic and, in response, the widespread government-imposed shutdowns, which significantly reduced electricity consumption and industrial activity and, therefore, demand for the Company's coal. Selling, General and Administrative Costs The amount of selling, general and administrative costs related to the PAMC division was $53 million for the year ended December 31, 2020, compared to $63 million for the year ended December 31, 2019. The $10 million decrease in the period-to-period comparison was primarily related to several initiatives launched by management to reduce costs, including compensation reductions, curtailment of discretionary expenses and headcount management, partially offset by fees incurred as a result of the CCR Merger. CONSOL MARINE TERMINAL ANALYSIS: The CONSOL Marine Terminal division provides coal export terminal services through the Port of Baltimore. The division also includes selling, general and administrative activities and interest expense, as well as various other activities assigned to the CONSOL Marine Terminal division. The CONSOL Marine Terminal division had earnings before income tax of $33 million for the year ended December 31, 2020, compared to earnings before income tax of $34 million for the year ended December 31, 2019. | | For the Years Ended December 31, | | (in millions) | | 2020 | | | 2019 | | | Variance | | Revenue: | | | | | | | | | | | | | Terminal Revenue | | $ | 67 | | | $ | 67 | | | $ | — | | Miscellaneous Other Income | | | 1 | | | | 1 | | | | — | | Total Revenue and Other Income | | | 68 | | | | 68 | | | | — | | Other Costs and Expenses: | | | | | | | | | | | | | Operating and Other Costs | | | 20 | | | | 22 | | | | (2 | ) | Depreciation, Depletion and Amortization | | | 5 | | | | 4 | | | | 1 | | Selling, General, and Administrative Costs | | | 4 | | | | 2 | | | | 2 | | Interest Expense, net | | | 6 | | | | 6 | | | | — | | Total Other Costs and Expenses | | | 35 | | | | 34 | | | | 1 | | Earnings Before Income Tax | | $ | 33 | | | $ | 34 | | | $ | (1 | ) |
Overall earnings before income tax were consistent in the period-to-period comparison. The improvement in operating and other costs was the result of cost reduction initiatives implemented at the CONSOL Marine Terminal, and was also directly related to reduced throughput due to weakened export markets and global demand destruction as a result of the COVID-19 pandemic and, in response, the widespread government-imposed shut-downs. However, due to the take-or-pay arrangements in both the years ended December 31, 2020 and 2019, the decline in demand was mitigated. This improvement was offset by an increase in selling, general, and administrative costs, which are allocated to the Company's divisions based on a percentage of resources utilized, a percentage of total revenue and a percentage of total projected capital expenditures. OTHER ANALYSIS: The other division includes revenue and expenses from various corporate and diversified business activities that are not allocated to the PAMC or the CONSOL Marine Terminal divisions. The diversified business activities include the development of the Itmann Mine, the Greenfield Reserves, closed mine activities, selling, general and administrative activities, interest expense and income taxes, as well as various other non-operated activities. Other business activities had a loss before income tax of $59 million for the year ended December 31, 2020, compared to a loss before income tax of $133 million for the year ended December 31, 2019. Variances are discussed below. | | For the Years Ended December 31, | | (in millions) | | 2020 | | | 2019 | | | Variance | | Revenue: | | | | | | | | | | | | | Coal Revenue | | $ | 2 | | | $ | — | | | $ | 2 | | Miscellaneous Other Income | | | 42 | | | | 29 | | | | 13 | | Gain on Sale of Assets | | | 15 | | | | 2 | | | | 13 | | Total Revenue and Other Income | | | 59 | | | | 31 | | | | 28 | | Other Costs and Expenses: | | | | | | | | | | | | | Operating and Other Costs | | | 60 | | | | 61 | | | | (1 | ) | Depreciation, Depletion and Amortization | | | 8 | | | | 17 | | | | (9 | ) | Selling, General, and Administrative Costs | | | 16 | | | | 2 | | | | 14 | | (Gain) Loss on Debt Extinguishment | | | (21 | ) | | | 24 | | | | (45 | ) | Interest Expense, net | | | 55 | | | | 60 | | | | (5 | ) | Total Other Costs and Expenses | | | 118 | | | | 164 | | | | (46 | ) | Loss Before Income Tax | | $ | (59 | ) | | $ | (133 | ) | | $ | 74 | |
Miscellaneous Other Income Miscellaneous other income was $42 million for the year ended December 31, 2020, compared to $29 million for the year ended December 31, 2019. The change is due to the following items: | | For the Years Ended December 31, | | (in millions) | | 2020 | | | 2019 | | | Variance | | Sale of Certain Coal Lease Contracts | | $ | 18 | | | $ | — | | | $ | 18 | | Royalty Income - Non-Operated Coal | | | 12 | | | | 22 | | | | (10 | ) | Litigation Proceeds | | | 9 | | | | — | | | | 9 | | Property Easements and Option Income | | | 1 | | | | 2 | | | | (1 | ) | Rental Income | | | 1 | | | | 2 | | | | (1 | ) | Interest Income | | | 1 | | | | 3 | | | | (2 | ) | Total Miscellaneous Other Income | | $ | 42 | | | $ | 29 | | | $ | 13 | |
The increase in income resulting from the sale of certain coal lease contracts is attributable to one of several transactions completed in the year ended December 31, 2020 related to the Company's non-operating surface and mineral assets outside of the PAMC. These transactions helped to enhance the Company's liquidity and improve its financial flexibility. See Note 2 - Major Transactions in the Notes to the Consolidated Financial Statements in Item 8 of this Form 10-K for additional information. Royalty income - non-operated coal decreased in the period-to-period comparison due to a decline in the revenues earned as a result of less operating activity by third-party companies mining in reserves to which we have a royalty claim. Litigation proceeds in the amount of $9 million were received during the year ended December 31, 2020 as a result of positive developments in legal matters in which the Company is the plaintiff. Gain on Sale of Assets Gain on sale of assets increased $13 million in the period-to-period comparison primarily due to the sale of various gas wells during the year ended December 31, 2020. Operating and Other Costs Operating and other costs were $60 million for the year ended December 31, 2020, compared to $61 million for the year ended December 31, 2019. Operating and other costs decreased in the period-to-period comparison due to the following items: | | For the Years Ended December 31, | | (in millions) | | 2020 | | | 2019 | | | Variance | | Employee-Related Legacy Liability Expense | | $ | 26 | | | $ | 37 | | | $ | (11 | ) | Lease Rental Expense | | | 1 | | | | 1 | | | | — | | Coal Reserve Holding Costs | | | 5 | | | | 5 | | | | — | | Closed and Idle Mines | | | 4 | | | | 4 | | | | — | | Bank Fees | | | 1 | | | | 1 | | | | — | | Litigation Expense | | | 8 | | | | 4 | | | | 4 | | Other | | | 15 | | | | 9 | | | | 6 | | Total Operating and Other Costs | | $ | 60 | | | $ | 61 | | | $ | (1 | ) |
Employee-Related Legacy Liability Expense decreased $11 million in the period-to-period comparison primarily due to changes in actuarial assumptions made at the beginning of each year. See Note 15 - Pension and Other Postretirement Benefits Plans and Note 16 - Coal Workers' Pneumoconiosis and Workers' Compensation in the Notes to the Consolidated Financial Statements in Item 8 of this Form 10-K for additional information. Depreciation, Depletion and Amortization Depreciation, depletion and amortization decreased $9 million in the period-to-period comparison due to adjustments to the Company's asset retirement obligations based on current projected cash outflows. Selling, General and Administrative Costs Selling, general and administrative costs are allocated to the Company's Other division based on a percentage of resources utilized, a percentage of total revenue and a percentage of total projected capital expenditures. The increase of $14 million is primarily a result of fees incurred in connection with the CCR Merger and also a result of increases in the portion of selling, general and administrative expenses allocated to the Other division due to an increase of resources utilized at the Itmann Mine (as a result of its continued development), closed mines and in other business development activities as compared to the prior year. (Gain) Loss on Debt Extinguishment Gain on debt extinguishment of $21 million was recognized in the year ended December 31, 2020 due to the open market repurchases of the Company's 11.00% Senior Secured Second Lien Notes due 2025, which traded well below par value. Loss on debt extinguishment of $24 million was recognized in the year ended December 31, 2019 due to the open market repurchases of the Company's 11.00% Senior Secured Second Lien Notes due 2025, the $110 million required repayment on the Term Loan B Facility, and the refinancing of the Company's Revolving Credit Facility, Term Loan A Facility and Term Loan B Facility. See Note 13 - Debt in the Notes to the Consolidated Financial Statements in Item 8 of this Form 10-K for additional information. Interest Expense, net Interest expense, net of amounts capitalized, is comprised of interest on the Company's Senior Secured Credit Facilities, the 11.00% Senior Secured Second Lien Notes due 2025 and the 5.75% MEDCO Revenue Bonds. Interest expense, net of amounts capitalized, decreased $5 million in the period-to-period comparison, primarily related to the $110 million required repayment on the Term Loan B Facility, as well as the refinancing of the Company's Revolving Credit Facility, Term Loan A Facility and Term Loan B Facility, both of which occurred during the first quarter of 2019. The decrease is also attributable to repurchases of the Company's 11.00% Senior Secured Second Lien Notes due 2025 during the years ended December 31, 2020 and 2019, totaling approximately $54 million and $53 million, respectively (see Note 5 - Stock, Unit and Debt Repurchases of the Notes to the Consolidated Financial Statements in Item 8 of this Form 10-K for additional information). Results of Operations: Year Ended December 31, 2019 Compared with the Year Ended December 31, 2018 Net Income Attributable to CONSOL Energy Inc. Shareholders CONSOL Energy reported net income attributable to CONSOL Energy Inc. shareholders of $76 million for the year ended December 31, 2019, compared to net income attributable to CONSOL Energy Inc. shareholders of $153 million for the year ended December 31, 2018.
CONSOL Energy consists of the Pennsylvania Mining Complex and the CONSOL Marine Terminal, as well as various corporate and other business activities that are not allocated to the PAMC.PAMC or the CONSOL Marine Terminal. The other business activities include the CONSOL Marine Terminal, development of the Itmann Mine, the Greenfield Reserves, closed and idle mine activities, selling, general and administrative activities, interest expense and income taxes, as well as various other non-operated activities.
The PAMC division's principal activities consist of mining, preparation and marketing of thermal coal, sold primarily to power generators.coal. The division also includes selling, general and administrative costs, as well as various other activities assigned to the PAMC division, but not included in the cost components on a per unit basis.
The PAMC division had earnings before income tax of $197 million for the year ended December 31, 2019, compared to earnings before income tax of $291 million for the year ended December 31, 2018. Variances are discussed below. | | For the Years Ended December 31, | | (in millions) | | 2019 | | | 2018 | | | Variance | | Revenue: | | | | | | | | | | | | | Coal Revenue | | $ | 1,289 | | | $ | 1,364 | | | $ | (75 | ) | Freight Revenue | | | 20 | | | | 44 | | | | (24 | ) | Miscellaneous Other Income | | | 23 | | | | 21 | | | | 2 | | Total Revenue and Other Income | | | 1,332 | | | | 1,429 | | | | (97 | ) | Cost of Coal Sold: | | | | | | | | | | | | | Operating Costs | | | 846 | | | | 811 | | | | 35 | | Depreciation, Depletion and Amortization | | | 175 | | | | 170 | | | | 5 | | Total Cost of Coal Sold | | | 1,021 | | | | 981 | | | | 40 | | Other Costs: | | | | | | | | | | | | | Other Costs | | | 20 | | | | 44 | | | | (24 | ) | Depreciation, Depletion and Amortization | | | 11 | | | | 9 | | | | 2 | | Total Other Costs | | | 31 | | | | 53 | | | | (22 | ) | Freight Expense | | | 20 | | | | 44 | | | | (24 | ) | Selling, General and Administrative Costs | | | 63 | | | | 60 | | | | 3 | | Total Costs and Expenses | | | 1,135 | | | | 1,138 | | | | (3 | ) | Earnings Before Income Tax | | $ | 197 | | | $ | 291 | | | $ | (94 | ) |
| | | | | | | | | | | | | | For the Years Ended December 31, | (in millions) | 2019 | | 2018 | | Variance | Revenue: | | | | | | Coal Revenue | $ | 1,289 |
| | $ | 1,364 |
| | $ | (75 | ) | Freight Revenue | 20 |
| | 44 |
| | (24 | ) | Miscellaneous Other Income | 23 |
| | 21 |
| | 2 |
| Total Revenue and Other Income | 1,332 |
| | 1,429 |
| | (97 | ) | Cost of Coal Sold: | | | | |
| Operating Costs | 846 |
| | 811 |
| | 35 |
| Depreciation, Depletion and Amortization | 175 |
| | 170 |
| | 5 |
| Total Cost of Coal Sold | 1,021 |
| | 981 |
| | 40 |
| Other Costs: | | | | |
|
| Other Costs | 20 |
| | 44 |
| | (24 | ) | Depreciation, Depletion and Amortization | 11 |
| | 9 |
| | 2 |
| Total Other Costs | 31 |
| | 53 |
| | (22 | ) | Freight Expense | 20 |
| | 44 |
| | (24 | ) | Selling, General and Administrative Costs | 63 |
| | 60 |
| | 3 |
| Total Costs and Expenses | 1,135 |
| | 1,138 |
| | (3 | ) | Earnings Before Income Tax | $ | 197 |
| | $ | 291 |
| | $ | (94 | ) |
The table below presents total tons produced (in thousands) from the Pennsylvania Mining Complex for the periods indicated: | | For the Years Ended December 31, | | Mine | | 2019 | | | 2018 | | | Variance | | Bailey | | | 12,218 | | | | 12,735 | | | | (517 | ) | Enlow | | | 10,043 | | | | 9,876 | | | | 167 | | Harvey | | | 5,024 | | | | 4,981 | | | | 43 | | Total | | | 27,285 | | | | 27,592 | | | | (307 | ) |
Coal production was 27.3 million tons for the year ended December 31, 2019, compared to 27.6 million tons for the year ended December 31, 2018. The PAMC division's coal production decreased slightly, mainly due to reduced production at the Bailey mine resulting from one additional longwall move and other operational delays. This was partially offset by increased production at the Enlow Fork mine, as geological conditions improved throughout the first half of 2019 compared to the year-ago period. The Harvey mine set an individual production record in 2019, exceeding its previous record set in 2018, and marking its third consecutive record-setting year. The PAMC division's coal revenue and cost components on a per unit basis for these periods were as follows: | | | | | | | | | | | | | | For the Years Ended December 31, | | 2019 | | 2018 | | Variance | Total Tons Sold (in millions) | 27.3 |
| | 27.7 |
| | (0.4 | ) | Average Revenue per Ton Sold | $ | 47.17 |
| | $ | 49.28 |
| | $ | (2.11 | ) | | | | | | | Average Cash Cost of Coal Sold per Ton (1) | $ | 30.97 |
| | $ | 29.29 |
| | $ | 1.68 |
| Depreciation, Depletion and Amortization Costs per Ton Sold (Non-Cash Cost) | 6.40 |
| | 6.17 |
| | 0.23 |
| Average Cost of Coal Sold per Ton (1) | $ | 37.37 |
| | $ | 35.46 |
| | $ | 1.91 |
| Average Margin per Ton Sold | $ | 9.80 |
| | $ | 13.82 |
| | $ | (4.02 | ) | Add: Depreciation, Depletion and Amortization Costs per Ton Sold | 6.40 |
| | 6.17 |
| | 0.23 |
| Average Cash Margin per Ton Sold (1) | $ | 16.20 |
| | $ | 19.99 |
| | $ | (3.79 | ) |
| | For the Years Ended December 31, | | | | 2019 | | | 2018 | | | Variance | | Total Tons Sold (in millions) | | | 27.3 | | | | 27.7 | | | | (0.4 | ) | Average Revenue per Ton Sold | | $ | 47.17 | | | $ | 49.28 | | | $ | (2.11 | ) | | | | | | | | | | | | | | Average Cash Cost of Coal Sold per Ton (1) | | $ | 30.97 | | | $ | 29.29 | | | $ | 1.68 | | Depreciation, Depletion and Amortization Costs per Ton Sold (Non-Cash Cost) | | | 6.40 | | | | 6.17 | | | | 0.23 | | Average Cost of Coal Sold per Ton (1) | | $ | 37.37 | | | $ | 35.46 | | | $ | 1.91 | | Average Margin per Ton Sold (1) | | $ | 9.80 | | | $ | 13.82 | | | $ | (4.02 | ) | Add: Depreciation, Depletion and Amortization Costs per Ton Sold | | | 6.40 | | | | 6.17 | | | | 0.23 | | Average Cash Margin per Ton Sold (1) | | $ | 16.20 | | | $ | 19.99 | | | $ | (3.79 | ) |
(1) Average cash cost of coal sold per ton and average cost of coal sold per ton are non-GAAP measures and average margin per ton sold and average cash margin per ton sold is anare operating ratioratios derived from non-GAAP measures. See “ How We Evaluate Our Operations - Reconciliation of Non-GAAP Financial Measures” for a reconciliation of non-GAAP measures to the most directly comparable GAAP measures.
Coal revenue was $1,289 million for the year ended December 31, 2019, compared to $1,364 million for the year ended December 31, 2018. The $75 million decrease was primarily attributable to a $2.11 lower average sales price per ton sold in the 2019 period, mainly driven by lower domestic netback contract pricing compared to the year-ago period, as well as a decrease in tons sold. This decrease was partially offset by an increase in prices the Company received for its export coal.
Freight Revenue and Freight Expense
Freight revenue is the amount billed to customers for transportation costs incurred. This revenue is based on the weight of coal shipped, negotiated freight rates and method of transportation, primarily rail, used by the customers to which the Company contractually provides transportation services. Freight revenue is completely offset by freight expense. Freight revenue and freight expense were both $20 million for the year ended December 31, 2019, compared to $44 million for the year ended December 31, 2018. The $24 million decrease was due to decreased shipments to customers where the Company was contractually obligated to provide transportation services.
Miscellaneous Other Income
Miscellaneous other income was $23 million for the year ended December 31, 2019, compared to $21 million for the year ended December 31, 2018. The $2 million increase was primarily the result of customer contract buyouts totaling $10 million in the year ended December 31, 2019, offset, in part, by a decrease in sales of externally purchased coal to blend and resell.
Cost of coal sold is comprised of operating costs related to produced tons sold, along with changes in both the volumes and carrying values of coal inventory. The costs of coal sold include items such as direct operating costs, royalties and production taxes, direct administration costs and depreciation, depletion, and amortization costs on production assets. Total cost of coal sold was $1,021 million for the year ended December 31, 2019, or $40 million higher than the $981 million for the year ended December 31, 2018. Total costs per ton sold were $37.37 per ton in the year ended December 31, 2019, compared to $35.46 per ton in the year ended December 31, 2018. The increase in the total cost of coal sold was primarily driven by additional equipment rebuilds and longwall overhauls due to the timing of longwall moves and panel development. Also, the Company faced atypical challenges during 2019, including a roof fall and equipment breakdowns. These geological and equipment-related issues resulted in higher mine maintenance and project expenses. Subsidence expense also increased in the year-to-year comparison, primarily due to the timing and nature of the properties undermined. Other costs include items that are assigned to the PAMC division but are not included in unit costs, such as coal reserve holding costs and purchased coal costs. Total other costs decreased $22 million in the year ended December 31, 2019 compared to the year ended December 31, 2018. The decrease was primarily attributable to additional costs incurred in the year-ago period related to externally purchased coal to blend and resell, discretionary employee benefit expenses and demurrage charges. Selling, General and Administrative Costs
At December 31, 2019, CONSOL Energy was party to a service agreement with CCR that required CONSOL Energy to provide certain selling, general and administrative services to CCR. These services are paid monthly based on an agreed-upon fixed fee that is reset at least annually. See Note 24 - Related Party Transactions of the Notes to the Consolidated Financial Statements in Item 8 of this Form 10-K for additional information. An additional portion of CONSOL Energy's selling, general and administrative costs are allocated to the PAMC division, outside of the service agreement, based on a percentage of total revenue and a percentage of total projected capital expenditures. The amount of selling, general and administrative costs related to the PAMC division was $63 million for the year ended December 31, 2019, compared to $60 million for the year ended December 31, 2018. The $3 million increase in the period-to-period comparison was primarily related to accelerated non-cash amortization recorded in the year ended December 31, 2019 for retiree-eligible employees who received awards under the Company's Performance Incentive Plan and an increase in expenditures related to the conversion to and implementation of a different Enterprise Resource and Planning system, partially offset by the reversal of stock-based compensation expense related to forfeitures of awards under the Company's Performance Incentive Plan during the year ended December 31, 2019.
CONSOL MARINE TERMINAL ANALYSIS: The CONSOL Marine Terminal division provides coal export terminal services through the Port of Baltimore. The division also includes selling, general and administrative activities and interest expense, as well as various other activities assigned to the CONSOL Marine Terminal division. The CONSOL Marine Terminal division had earnings before income tax of $34 million for the year ended December 31, 2019, compared to earnings before income tax of $31 million for the year ended December 31, 2018. | | For the Years Ended December 31, | | (in millions) | | 2019 | | | 2018 | | | Variance | | Revenue: | | | | | | | | | | | | | Terminal Revenue | | $ | 67 | | | $ | 65 | | | $ | 2 | | Miscellaneous Other Income | | | 1 | | | | 2 | | | | (1 | ) | Total Revenue and Other Income | | | 68 | | | | 67 | | | | 1 | | Other Costs and Expenses: | | | | | | | | | | | | | Operating and Other Costs | | | 22 | | | | 24 | | | | (2 | ) | Depreciation, Depletion and Amortization | | | 4 | | | | 4 | | | | — | | Selling, General, and Administrative Costs | | | 2 | | | | 2 | | | | — | | Interest Expense, net | | | 6 | | | | 6 | | | | — | | Total Other Costs and Expenses | | | 34 | | | | 36 | | | | (2 | ) | Earnings Before Income Tax | | $ | 34 | | | $ | 31 | | | $ | 3 | |
Overall earnings before income tax were improved in the period-to-period comparison. A take-or-pay agreement was entered into during the year ended December 31, 2018. A full year of revenue was earned under this agreement during the year ended December 31, 2019, which resulted in an improvement in Terminal Revenue in the period-to-period comparison. This was coupled with an improvement in operating and other costs as a result of cost reduction efforts. OTHER ANALYSIS: The other division includes revenue and expenses from various corporate and diversified business activities that are not allocated to the PAMC division.or the CONSOL Marine Terminal divisions. The diversified business activities include the CONSOL Marine Terminal, development of the Itmann Mine, the Greenfield Reserves, closed and idle mine activities, selling, general and administrative activities, interest expense and income taxes, as well as various other non-operated activities.
Other business activities had a loss before income tax of $99$133 million for the year ended December 31, 2019, compared to a loss before income tax of $103$134 million for the year ended December 31, 2018. Variances are discussed below. | | | | | | | | | | | | | | For the Years Ended December 31, | (in millions) | 2019 | | 2018 | | Variance | Revenue: | | | | | | Terminal Revenue | $ | 67 |
| | $ | 65 |
| | $ | 2 |
| Miscellaneous Other Income | 30 |
| | 38 |
| | (8 | ) | Gain on Sale of Assets | 2 |
| | 1 |
| | 1 |
| Total Revenue and Other Income | 99 |
| | 104 |
| | (5 | ) | Other Costs and Expenses: | | | | | | Operating and Other Costs | 83 |
| | 92 |
| | (9 | ) | Depreciation, Depletion and Amortization | 21 |
| | 22 |
| | (1 | ) | Selling, General, and Administrative Costs | 4 |
| | 5 |
| | (1 | ) | Loss on Debt Extinguishment | 24 |
| | 4 |
| | 20 |
| Interest Expense, net | 66 |
| | 84 |
| | (18 | ) | Total Other Costs and Expenses | 198 |
| | 207 |
| | (9 | ) | Loss Before Income Tax | $ | (99 | ) | | $ | (103 | ) | | $ | 4 |
|
Terminal Revenue
Terminal revenue consists of sales from the CONSOL Marine Terminal, which is located on approximately 200 acres in the Port of Baltimore, Maryland and provides access to international coal markets. CONSOL Marine Terminal sales were $67 | | For the Years Ended December 31, | | (in millions) | | 2019 | | | 2018 | | | Variance | | Revenue: | | | | | | | | | | | | | Miscellaneous Other Income | | $ | 29 | | | $ | 36 | | | $ | (7 | ) | Gain on Sale of Assets | | | 2 | | | | 1 | | | | 1 | | Total Revenue and Other Income | | | 31 | | | | 37 | | | | (6 | ) | Other Costs and Expenses: | | | | | | | | | | | | | Operating and Other Costs | | | 61 | | | | 68 | | | | (7 | ) | Depreciation, Depletion and Amortization | | | 17 | | | | 18 | | | | (1 | ) | Selling, General and Administrative Costs | | | 2 | | | | 3 | | | | (1 | ) | Loss on Debt Extinguishment | | | 24 | | | | 4 | | | | 20 | | Interest Expense, net | | | 60 | | | | 78 | | | | (18 | ) | Total Other Costs and Expenses | | | 164 | | | | 171 | | | | (7 | ) | Loss Before Income Tax | | $ | (133 | ) | | $ | (134 | ) | | $ | 1 | |
Miscellaneous Other Income Miscellaneous other income was $29 million for the year ended December 31, 2019, compared to $65 million for the year ended December 31, 2018. The $2 million increase in the period-to-period comparison resulted from additional revenue earned in the year ended December 31, 2019 from one of the Company's customers.
Miscellaneous Other Income
Miscellaneous other income was $30 million for the year ended December 31, 2019, compared to $38$36 million for the year ended December 31, 2018. The change is due to the following items:
| | For the Years Ended December 31, | | (in millions) | | 2019 | | | 2018 | | | Variance | | Royalty Income - Non-Operated Coal | | $ | 22 | | | $ | 25 | | | $ | (3 | ) | Property Easements and Option Income | | | 2 | | | | 6 | | | | (4 | ) | Rental Income | | | 2 | | | | 3 | | | | (1 | ) | Interest Income | | | 3 | | | | 2 | | | | 1 | | Total Miscellaneous Other Income | | $ | 29 | | | $ | 36 | | | $ | (7 | ) |
| | | | | | | | | | | | | | For the Years Ended December 31, | (in millions) | 2019 | | 2018 | | Variance | Royalty Income - Non-Operated Coal | $ | 22 |
| | $ | 25 |
| | $ | (3 | ) | Property Easements and Option Income | 2 |
| | 6 |
| | (4 | ) | Rental Income | 3 |
| | 4 |
| | (1 | ) | Interest Income | 3 |
| | 2 |
| | 1 |
| Other Income | — |
| | 1 |
| | (1 | ) | Total Miscellaneous Other Income | $ | 30 |
| | $ | 38 |
| | $ | (8 | ) |
Operating and Other Costs
Operating and other costs were $83$61 million for the year ended December 31, 2019, compared to $92$68 million for the year ended December 31, 2018. Operating and other costs decreased in the period-to-period comparison due to the following items: | | | | | | | | | | | | | | | | For the Years Ended December 31, | (in millions) | | 2019 | | 2018 | | Variance | Terminal Operating Costs | | $ | 22 |
| | $ | 24 |
| | $ | (2 | ) | Employee-Related Legacy Liability Expense | | 37 |
| | 42 |
| | (5 | ) | Lease Rental Expense | | 1 |
| | 2 |
| | (1 | ) | Coal Reserve Holding Costs | | 5 |
| | 2 |
| | 3 |
| Closed and Idle Mines | | 4 |
| | 4 |
| | — |
| Bank Fees | | 1 |
| | 3 |
| | (2 | ) | Litigation Expense | | 4 |
| | 4 |
| | — |
| Other | | 9 |
| | 11 |
| | (2 | ) | Total Operating and Other Costs | | $ | 83 |
| | $ | 92 |
| | $ | (9 | ) |
| | For the Years Ended December 31, | | (in millions) | | 2019 | | | 2018 | | | Variance | | Employee-Related Legacy Liability Expense | | $ | 37 | | | $ | 42 | | | $ | (5 | ) | Lease Rental Expense | | | 1 | | | | 2 | | | | (1 | ) | Coal Reserve Holding Costs | | | 5 | | | | 2 | | | | 3 | | Closed and Idle Mines | | | 4 | | | | 4 | | | | — | | Bank Fees | | | 1 | | | | 3 | | | | (2 | ) | Litigation Expense | | | 4 | | | | 4 | | | | — | | Other | | | 9 | | | | 11 | | | | (2 | ) | Total Operating and Other Costs | | $ | 61 | | | $ | 68 | | | $ | (7 | ) |
Employee-Related Legacy Liability Expense decreased $5 million in the period-to-period comparison primarily due to changes in the actuarial measurement of net periodic benefit costassumptions made at the beginning of each year. See Note 1415 - Pension and Other Postretirement Benefits Plans and Note 16 - Coal Workers' Pneumoconiosis and Workers' Compensation in the Notes to the Consolidated Financial Statements in Item 8 of this Form 10-K for additional information.
Depreciation, Depletion and Amortization
Depreciation, depletion, and amortization decreased $1 million in the period-to-period comparison due to adjustments to the Company's asset retirement obligations during the year ended December 31, 2019 based on current projected cash outflows.
Selling, General and Administrative Costs
Selling, general and administrative costs are allocated to the Company's Other division based on a percentage of total revenue and a percentage of total projected capital expenditures. Selling, general and administrative costs remained materially consistent in the period-to-period comparison.
Loss on Debt Extinguishment
Loss on debt extinguishment of $24 million was recognized in the year ended December 31, 2019 due to the open market repurchases of the Company's 11.00% Senior Secured Second Lien Notes due 2025, the $110 million required repayment on the Term Loan B Facility, and the refinancing of the Company's Revolving Credit Facility, Term Loan A Facility and Term Loan B Facility. See Note 1213 - Debt in the Notes to the Consolidated Financial Statements in Item 8 of this Form 10-K for additional information.
Loss on debt extinguishment of $4 million was recognized in the year ended December 31, 2018 due to accelerated payments made on the Term Loan A Facility and the open market repurchases of the Company's 11.00% Senior Secured Second Lien Notes due 2025.
Interest expense,Expense, net of amounts capitalized, is comprised of interest on the Company's Senior Secured Credit Facilities, the 11.00% Senior Secured Second Lien Notes due 2025 and the 5.75% MEDCO Revenue Bonds. Interest expense, net of amounts capitalized, decreased $18 million in the period-to-period comparison, primarily related to the $110 million required repayment on the Term Loan B Facility, as well as the refinancing of the Company's Revolving Credit Facility, Term Loan A Facility and Term Loan B Facility, both of which occurred during the first quarter of 2019. The decrease is also attributable to repurchases of the Company's 11.00% Senior Secured Second Lien Notes during the year ended December 31, 2019 (see Note 5 - Stock, Unit and Debt Repurchases of the Notes to the Consolidated Financial Statements in Item 8 of this Form 10-K for additional information).
Results of Operations: Year Ended December 31, 2018 Compared with the Year Ended December 31, 2017
Net Income Attributable to CONSOL Energy Inc. Shareholders
CONSOL Energy reported net income attributable to CONSOL Energy Inc. shareholders of $153 million for the year ended December 31, 2018, compared to net income attributable to CONSOL Energy Inc. shareholders of $68 million for the year ended December 31, 2017.
CONSOL Energy consists of the Pennsylvania Mining Complex, as well as various corporate and other business activities that are not allocated to the PAMC. The other business activities include the CONSOL Marine Terminal, the Greenfield Reserves, closed and idle mine activities, selling, general and administrative activities, interest expense and income taxes, as well as various other non-operated activities.
PAMC ANALYSIS:
The PAMC division's principal activities consist of mining, preparation and marketing of thermal coal, sold primarily to power generators. The division also includes selling, general and administrative costs, as well as various other activities assigned to the PAMC division, but not included in the cost components on a per unit basis.
The PAMC division had earnings before income tax of $291 million for the year ended December 31, 2018, compared to earnings before income tax of $189 million for the year ended December 31, 2017. Variances are discussed below.
| | | | | | | | | | | | | | For the Years Ended December 31, | (in millions) | 2018 | | 2017 | | Variance | Revenue: | | | | | | Coal Revenue | $ | 1,364 |
| | $ | 1,188 |
| | $ | 176 |
| Freight Revenue | 44 |
| | 74 |
| | (30 | ) | Miscellaneous Other Income | 21 |
| | 23 |
| | (2 | ) | Gain on Sale of Assets | — |
| | 6 |
| | (6 | ) | Total Revenue and Other Income | 1,429 |
| | 1,291 |
| | 138 |
| Cost of Coal Sold: | | | | | | Operating Costs | 811 |
| | 757 |
| | 54 |
| Depreciation, Depletion and Amortization | 170 |
| | 157 |
| | 13 |
| Total Cost of Coal Sold | 981 |
| | 914 |
| | 67 |
| Other Costs: | | | | | | Other Costs | 44 |
| | 22 |
| | 22 |
| Depreciation, Depletion and Amortization | 9 |
| | 10 |
| | (1 | ) | Total Other Costs | 53 |
| | 32 |
| | 21 |
| Freight Expense | 44 |
| | 74 |
| | (30 | ) | Selling, General and Administrative Costs | 60 |
| | 72 |
| | (12 | ) | Interest Expense, net | — |
| | 10 |
| | (10 | ) | Total Costs and Expenses | 1,138 |
| | 1,102 |
| | 36 |
| Earnings Before Income Tax | $ | 291 |
| | $ | 189 |
| | $ | 102 |
|
Coal Production
The table below presents total tons produced (in thousands) from the Pennsylvania Mining Complex for the periods indicated:
| | | | | | | | | | | | | For the Years Ended December 31, | Mine | | 2018 | | 2017 | | Variance | Bailey | | 12,735 |
| | 12,124 |
| | 611 |
| Enlow | | 9,876 |
| | 9,180 |
| | 696 |
| Harvey | | 4,981 |
| | 4,805 |
| | 176 |
| Total | | 27,592 |
| | 26,109 |
| | 1,483 |
|
Coal production was 27.6 million tons for the year ended December 31, 2018, compared to 26.1 million tons for the year ended December 31, 2017. The PAMC division's coal production increased 1.5 million tons, primarily to satisfy increased demand for its products in the domestic and export markets, as well as improved productivity, initial benefits from automation projects and improved geological conditions at the Enlow Fork mine.
Coal Operations
The PAMC division's coal revenue and cost components on a per unit basis for these periods were as follows: | | | | | | | | | | | | | | For the Years Ended December 31, | | 2018 | | 2017 | | Variance | Total Tons Sold (in millions) | 27.7 |
| | 26.1 |
| | 1.6 |
| Average Revenue per Ton Sold | $ | 49.28 |
| | $ | 45.52 |
| | $ | 3.76 |
| | | | | | | Average Cash Cost of Coal Sold per Ton (1) | $ | 29.29 |
| | $ | 29.02 |
| | $ | 0.27 |
| Depreciation, Depletion and Amortization Costs per Ton Sold (Non-Cash Cost) | 6.17 |
| | 6.01 |
| | 0.16 |
| Average Cost of Coal Sold per Ton (1) | $ | 35.46 |
| | $ | 35.03 |
| | $ | 0.43 |
| Average Margin per Ton Sold | $ | 13.82 |
| | $ | 10.49 |
| | $ | 3.33 |
| Add: Depreciation, Depletion and Amortization Costs per Ton Sold | 6.17 |
| | 6.01 |
| | 0.16 |
| Average Cash Margin per Ton Sold (1) | $ | 19.99 |
| | $ | 16.50 |
| | $ | 3.49 |
|
(1) Average cash cost of coal sold per ton and average cost of coal sold per ton are non-GAAP measures and average cash margin per ton sold is an operating ratio derived from non-GAAP measures. See “How We Evaluate Our Operations - Reconciliation of Non-GAAP Financial Measures” for a reconciliation of non-GAAP measures to the most directly comparable GAAP measures.
Coal Revenue
Coal revenue was $1,364 million for the year ended December 31, 2018, compared to $1,188 million for the year ended December 31, 2017. The $176 million increase was attributable to a 1.6 million increase in tons sold and a $3.76 higher average sales price per ton sold. The increase in tons sold was driven by increased demand from the Company's domestic customers, largely due to higher burn. The higher average sales price per ton sold in the 2018 period was primarily the result of higher realizations on the Company's netback contracts due to strong power prices and an increased demand in the international thermal and crossover metallurgical coal markets the Company serves.
Freight Revenue and Freight Expense
Freight revenue is the amount billed to customers for transportation costs incurred. This revenue is based on the weight of coal shipped, negotiated freight rates and method of transportation, primarily rail, used by the customers to which the Company contractually provides transportation services. Freight revenue is completely offset by freight expense. Freight revenue and freight expense were both $44 million for the year ended December 31, 2018, compared to $74 million for the year ended December 31, 2017. The $30 million decrease was due to decreased shipments to customers where the Company was contractually obligated to provide transportation services.
Miscellaneous Other Income
Miscellaneous other income was $21 million for the year ended December 31, 2018, compared to $23 million for the year ended December 31, 2017. The $2 million decrease was primarily the result of a customer contract buyout in the amount of $10 million in the year ended December 31, 2017, offset, in part, by an increase in sales of externally purchased coal to blend and resell in the year ended December 31, 2018.
Gain on Sale of Assets
Gain on sale of assets decreased$6 million in the period-to-period comparison primarily due to the sale of certain coal rights during the year ended December 31, 2017.
Cost of Coal Sold
Cost of coal sold is comprised of operating costs related to produced tons sold, along with changes in both the volumes and carrying values of coal inventory. The costs of coal sold include items such as direct operating costs, royalties and production taxes, direct administration costs and depreciation, depletion, and amortization costs on production assets. Total cost of coal sold was $981 million for the year ended December 31, 2018, or $67 million higher than the $914 million for the year ended December 31, 2017. Total costs per ton sold were $35.46 per ton in the year ended December 31, 2018, compared to $35.03 per ton in the year ended December 31, 2017. The increase in the total cost of coal sold was primarily driven by an increase in production-related costs as more coal was mined to meet market demand. The increase in the average cost per ton sold was the result of additional royalties and production taxes due to a $3.76 per ton higher average sales price. Since the fourth quarter of 2017, the Company has seen modest inflation in the cost of supplies that contain steel and other commodities for which prices are strengthening, as well as in the cost of contract labor. The Company has been able to successfully offset these inflationary pressures through productivity gains, initial benefits from automation investments and a reduction in lease/rental expense.
Other Costs
Other costs include items that are assigned to the PAMC division but are not included in unit costs, such as coal reserve holding costs and purchased coal costs. Total other costs increased $21 million in the year ended December 31, 2018 compared to the year ended December 31, 2017. The increase was primarily attributable to an increase in costs related to externally purchased coal to blend and resell, discretionary employee benefit expenses and demurrage charges in the year ended December 31, 2018. This increase was partially offset by prior year severance costs related to organizational restructuring.
Selling, General and Administrative Costs
At December 31, 2018, CONSOL Energy was party to a service agreement with CCR that required CONSOL Energy to provide certain selling, general and administrative services to CCR. These services are paid monthly based on an agreed-upon fixed fee that is reset at least annually. See Note 24 - Related Party Transactions of the Notes to the Consolidated Financial Statements in Item 8 of this Form 10-K for additional information. An additional portion of CONSOL Energy's selling, general and administrative costs are allocated to the PAMC division, outside of the service agreement, based on a percentage of total revenue and a percentage of total projected capital expenditures. The amount of selling, general and administrative costs related to the PAMC division was $60 million for the year ended December 31, 2018, compared to $72 million for the year ended December 31, 2017. The $12 million decrease in the period-to-period comparison was primarily due to long-term incentive compensation recognized in the prior year in relation to an award modification due to organizational restructuring. This was offset, in part, by an increase in short-term incentive compensation paid to employees based on the results of operations achieved at the Company's mines and increases in purchased services related to the conversion to a different Enterprise Resource and Planning system.
Interest Expense, net
Interest expense, net of amounts capitalized, decreased $10 million in the period-to-period comparison. For the year ended December 31, 2017, net interest expense was primarily comprised of interest on the Original CCR Credit Facility (see Note 24 - Related Party Transactions of the Notes to the Consolidated Financial Statements in Item 8 of this Form 10-K for additional information). No such interest expense was incurred during the year ended December 31, 2018, as the Original CCR Credit Facility was refinanced through the Affiliated Company Credit Agreement on November 28, 2017.
OTHER ANALYSIS:
The other division includes revenue and expenses from various corporate and diversified business activities that are not allocated to the PAMC division. The diversified business activities include the CONSOL Marine Terminal, the Greenfield Reserves, closed and idle mine activities, selling, general and administrative activities, interest expense and income taxes, as well as various other non-operated activities.
Other business activities had a loss before income tax of $103 million for the year ended December 31, 2018, compared to a loss before income tax of $19 million for the year ended December 31, 2017. Variances are discussed below.
| | | | | | | | | | | | | | For the Years Ended December 31, | (in millions) | 2018 | | 2017 | | Variance | Revenue: | | | | | | Terminal Revenue | $ | 65 |
| | $ | 60 |
| | $ | 5 |
| Miscellaneous Other Income | 38 |
| | 50 |
| | (12 | ) | Gain on Sale of Assets | 1 |
| | 11 |
| | (10 | ) | Total Revenue and Other Income | 104 |
| | 121 |
| | (17 | ) | Other Costs and Expenses: | | | | | | Operating and Other Costs | 92 |
| | 108 |
| | (16 | ) | Depreciation, Depletion and Amortization | 22 |
| | 5 |
| | 17 |
| Selling, General and Administrative Costs | 5 |
| | 11 |
| | (6 | ) | Loss on Debt Extinguishment | 4 |
| | — |
| | 4 |
| Interest Expense, net | 84 |
| | 16 |
| | 68 |
| Total Other Costs and Expenses | 207 |
| | 140 |
| | 67 |
| Loss Before Income Tax | $ | (103 | ) | | $ | (19 | ) | | $ | (84 | ) |
Terminal Revenue
Terminal revenue consists of sales from the CONSOL Marine Terminal, which is located on 200 acres in the Port of Baltimore, Maryland and provides access to international coal markets. CONSOL Marine Terminal sales were $65 million for the year ended December 31, 2018, compared to $60 million for the year ended December 31, 2017. The $5 million increase in the period-to-period comparison resulted from additional revenue earned in the year ended December 31, 2018 from one of the Company's customers. This customer's contractual arrangement contains a take-or-pay element, which provides a certain level of monthly throughput tons for a fixed amount.
Miscellaneous Other Income
Miscellaneous other income was $38 million for the year ended December 31, 2018, compared to $50 million for the year ended December 31, 2017. The change is due to the following items:
| | | | | | | | | | | | | | | | For the Years Ended December 31, | (in millions) | | 2018 | | 2017 | | Variance | Royalty Income - Non-Operated Coal | | $ | 25 |
| | $ | 28 |
| | $ | (3 | ) | Property Easements and Option Income | | 6 |
| | 2 |
| | 4 |
| Rental Income | | 4 |
| | 14 |
| | (10 | ) | Interest Income | | 2 |
| | 3 |
| | (1 | ) | Other Income | | 1 |
| | 3 |
| | (2 | ) | Total Miscellaneous Other Income | | $ | 38 |
| | $ | 50 |
| | $ | (12 | ) |
Rental Income decreased $10 million primarily due to a decrease in lease payments received as a result of the sale of certain subleased equipment to a third party in the second quarter of 2017.
Gain on Sale of Assets
Gain on sale of assets decreased $10 million in the period-to-period comparison primarily due to the sale of certain coal reserves during the year ended December 31, 2017.
Operating and Other Costs
Operating and other costs were $92 million for the year ended December 31, 2018, compared to $108 million for the year ended December 31, 2017. Operating and other costs decreased in the period-to-period comparison due to the following items:
| | | | | | | | | | | | | | | | For the Years Ended December 31, | (in millions) | | 2018 | | 2017 | | Variance | Terminal Operating Costs | | $ | 24 |
| | $ | 21 |
| | $ | 3 |
| Employee-Related Legacy Liability Expense | | 42 |
| | 55 |
| | (13 | ) | Lease Rental Expense | | 2 |
| | 10 |
| | (8 | ) | Coal Reserve Holding Costs | | 2 |
| | 5 |
| | (3 | ) | Closed and Idle Mines | | 4 |
| | 7 |
| | (3 | ) | Bank Fees | | 3 |
| | — |
| | 3 |
| Litigation Expense | | 4 |
| | — |
| | 4 |
| Other | | 11 |
| | 10 |
| | 1 |
| Total Operating and Other Costs | | $ | 92 |
| | $ | 108 |
| | $ | (16 | ) |
Employee-Related Legacy Liability Expense decreased $13 million in the period-to-period comparison primarily due to modifications made to the actuarial calculation of net periodic benefit cost at the beginning of each year. Additionally, pension settlement expense is required when lump sum distributions made for a given plan year exceed the total of the service and interest costs for that same plan year. Settlement accounting was triggered in the year ended December 31, 2017. See Note 14 - Pension and Other Postretirement Benefit Plans in the Notes to the Consolidated Financial Statements in Item 8 of this Form 10-K for additional information.
Lease Rental Expense decreased $8 million primarily due to the sale of certain subleased equipment to a third party in the second quarter of 2017.
Bank Fees represent costs associated with the Company's securitization facility (see Note 10 - Accounts Receivable Securitization in the Notes to the Consolidated Financial Statements in Item 8 of this Form 10-K for additional information).
Depreciation, Depletion and Amortization
Depreciation, depletion, and amortization increased $17 million in the period-to-period comparison, mainly as a result of a credit adjustment related to changes in the Company's asset retirement obligations during the year ended December 31, 2017.
Selling, General and Administrative Costs
Selling, general and administrative costs are allocated to the Company's Other division based on a percentage of total revenue and a percentage of total projected capital expenditures. The decrease of $6 million is primarily due to additional costs incurred in the year ended December 31, 2017 related to modifications of stock-based compensation awards as a result of the separation and distribution. Prior to the separation and distribution, additional selling, general and administrative costs were allocated from the Company's former parent to the Other division, which did not occur in the year ended December 31, 2018.
Loss on Debt Extinguishment
Loss on debt extinguishment of $4 million was recognized in the year ended December 31, 2018 due to accelerated payments made on the Term Loan A Facility and the open market repurchases of the 11.00% Senior Secured Second Lien Notes due 2025.
Interest Expense, net
Interest expense, net of amounts capitalized, of $84 million and $16 million for the years ended December 31, 2018 and 2017, respectively, is primarily comprised of interest on the 5.75% MEDCO Revenue Bonds, as well as interest and fees on the Company's Revolving Credit Facility, Term Loan A Facility, Term Loan B Facility and the 11.00% Senior Secured Second Lien Notes. These debt facilities were entered into as a result of the separation and distribution that occurred on November 28, 2017.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make judgments, estimates and assumptions that affect reported amounts of assets and liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities in the Consolidated Financial Statements and at the date of the financial statements. See Note 1 - Significant Accounting Policies in the Notes to the Consolidated Financial Statements in Item 8 of this Form 10-K for further discussion. CONSOL Energy bases its estimates on historical experience and on various other assumptions that it believes are reasonable under the circumstances, the results of which form the basis for making the judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. The Company evaluates its estimates on an on-going basis. Actual results could differ from those estimates upon subsequent resolution of identified matters. Management believes that the estimates utilized are reasonable. The following critical accounting policies are materially impacted by judgments, assumptions and estimates used in the preparation of the Consolidated Financial Statements.
Asset Retirement Obligations
The Surface Mining Control and Reclamation Act established operational, reclamation and closure standards for all aspects of surface mining as well as most aspects of deep mining. CONSOL Energy accrues for the costs of current coal mine disturbance and final coal mine and gas well closure, including the cost of treating mine water discharge where necessary. Estimates of the Company's total asset retirement obligations, which are based upon permit requirements and CONSOL Energy engineering expertise related to these requirements, including the current portion, were approximately $272$249 million at December 31, 2019.2020. This liability is reviewed annually, or when events and circumstances indicate an adjustment is necessary, by CONSOL Energy management and engineers. The estimated liability can significantly change if actual costs vary from assumptions or if governmental regulations change significantly.
Accounting for asset retirement obligations requires that the fair value of an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. For active locations, the present value of the estimated asset retirement obligations is capitalized as part of the carrying amount of the long-lived asset. For locations that have been fully depleted or closed, the present value of the change is recorded directly to the consolidated statements of income. Asset retirement obligations primarily relate to the reclamation of land upon mine closure, the treatment of mine water discharge where necessary, and the plugging of gas wells acquired for mining purposes. Changes in the assumptions used to calculate the liabilities can have a significant effect on the asset retirement obligations. The amounts of assets and liabilities recorded are dependent upon a number of variables, including the estimated future expenditures, estimated mine lives, assumptions involving profit margins, inflation rates and the assumed credit-adjusted risk-free interest rate. Accounting for asset retirement obligations also requires depreciation of the capitalized asset retirement obligation and accretion of the asset retirement obligation over time. The depreciation will generally be determined on a units-of-production basis, whereas the accretion to be recognized will escalate over the life of the producing assets.
The Company believes that the accounting estimates related to asset retirement obligations are “critical accounting estimates” because the Company must assess the expected amount and timing of asset retirement obligations. In addition, the Company must determine the estimated present value of future liabilities. Future results of operations for any particular quarterly or annual period could be materially affected by changes in the Company’s assumptions.
Deferred tax assets and liabilities are recognized using enacted tax rates for the estimated future tax effects of temporary differences between the book and tax basis of recorded assets and liabilities. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that some portion of the deferred tax asset will not be realized. All available evidence, both positive and negative, must be considered in determining the need for a valuation allowance. At December 31, 2019,2020, CONSOL Energy has deferred tax assets in excess of deferred tax liabilities of approximately $104$69 million. At December 31, 2019,2020, CONSOL Energy had a valuation allowance of $1$3 million on deferred tax assets.
CONSOL Energy evaluates all tax positions taken on the state and federal tax filings to determine if the position is more likely than not to be sustained upon examination. For positions that meet the more likely than not to be sustained criteria, an evaluation to determine the largest amount of benefit, determined on a cumulative probability basis, that is more likely than not to be realized upon ultimate settlement is determined. A previously recognized tax position is reversed when it is subsequently determined that a tax position no longer meets the more likely than not threshold to be sustained. The evaluation of the sustainability of a tax position and the probable amount that is more likely than not is based on judgment, historical experience and on various other assumptions that CONSOL Energy believes are reasonable under the circumstances. The results of these estimates, that are not readily apparent from other sources, form the basis for recognizing an uncertain tax liability. Actual results could differ from those estimates upon subsequent resolution of identified matters.
The Company believes that accounting estimates related to income taxes are “critical accounting estimates” because the Company must assess the likelihood that deferred tax assets will be recovered from future taxable income and exercise judgment regarding the amount of financial statement benefit to record for uncertain tax positions. When evaluating whether or not a valuation allowance must be established on deferred tax assets, the Company exercises judgment in determining whether it is more likely than not (a likelihood of more than 50%) that some portion or all of the deferred tax assets will not be realized. The Company considers all available evidence, both positive and negative, to determine whether, based on the weight of the evidence, a valuation allowance is needed, including carrybacks, tax planning strategies, reversal of deferred tax assets and liabilities and forecasted future taxable income. In making the determination related to uncertain tax positions, the Company considers the amounts and probabilities of the outcomes that could be realized upon ultimate settlement of an uncertain tax position using the facts, circumstances and information available at the reporting date to establish the appropriate amount of financial statement benefit. To the extent that an uncertain tax position or valuation allowance is established or increased or decreased during a period, the Company must include an expense or benefit within tax expense in the income statement. Future results of operations for any particular quarterly or annual period could be materially affected by changes in the Company’s assumptions.
Recoverable Coal Reserves
There are numerous uncertainties inherent in estimating quantities and values of economically recoverable coal reserves, including many factors beyond the Company's control. As a result, estimates of economically recoverable coal reserves are by their nature uncertain. Information about CONSOL Energy's reserves consists of estimates based on engineering, economic and geological data assembled and analyzed by the Company's staff. CONSOL Energy's coal reserves are periodically reviewed by an independent third party consultant. Some of the factors and assumptions which impact economically recoverable reserve estimates include:
geological conditions;
historical production from the area compared with production from other producing areas;
the assumed effects of regulations and taxes by governmental agencies;
assumptions governing future prices; and
future operating costs.
| • | historical production from the area compared with production from other producing areas; |
| • | the assumed effects of regulations and taxes by governmental agencies; |
| • | assumptions governing future prices; and |
Each of these factors may in fact vary considerably from the assumptions used in estimating reserves. For these reasons, estimates of the economically recoverable quantities of coal attributable to a particular group of properties, and classifications of these reserves based on risk of recovery and estimates of future net cash flows, may vary substantially. Actual production, revenues and expenditures with respect to the Company's reserves will likely vary from estimates, and these variances may be material. See “Risk Factors” in Item 1A of this report for a discussion of the uncertainties in estimating CONSOL Energy's reserves.
Liquidity and Capital Resources
CONSOL Energy's potential sources of liquidity include cash generated from operations, cash on hand, borrowings under the revolving credit facility and securitization facility (which are discussed below), and, if necessary, the ability to issue additional equity or debt securities. The Company believes that cash generated from these sources will be sufficient to meet its short-term working capital requirements, long-term capital expenditure requirements, and debt servicing obligations, as well as to provide required letters of credit.
The demand for coal experienced unprecedented decline toward the end of the first quarter of 2020, which continued for much of the year, driven by widespread government-imposed lockdowns caused by the COVID-19 pandemic. This decline in coal demand has negatively impacted our operational, sales and financial performances and we expect that this negative impact will continue for at least as long as the pandemic continues. However, we saw steady improvement in the demand for our coal throughout the third and fourth quarters of 2020. During the fourth quarter of 2020, the Company made repayments of $10 million, $6 million, $9 million and $1 million on its finance leases, Term Loan A Facility, 11.00% Senior Secured Second Lien Notes and Term Loan B Facility, respectively. As of December 31, 2020, our total liquidity was $326 million, including $51 million of cash and cash equivalents. As of December 31, 2020, our $400 million revolving credit facility has no borrowings and is currently only used for providing letters of credit with $126 million issued. While some government-imposed shut-downs of non-essential businesses in the United States and abroad have been phased out, there is a possibility that such shut-downs may be reinstated as COVID-19 continues to spread rapidly. We expect that depressed demand for our coal will continue for so long as there is a widespread, government-imposed shut-down of business activity. Depressed demand for our coal may also result from a general recession or reduction in overall business activity caused by COVID-19. Additionally, some of our customers have already attempted, and may in the future attempt, to invoke force majeure or similar provisions in the contracts they have in place with us in order to avoid taking possession of and paying us for our coal that they are contractually obligated to purchase. Sustained decrease in demand for our coal and the failure of our customers to purchase coal from us that they are obligated to purchase pursuant to existing contracts would have a material adverse effect on our results of operations and financial condition. The extent to which COVID-19 may adversely impact our business depends on future developments, which are highly uncertain and unpredictable, including new information concerning the severity of the outbreak and the pace and effectiveness of vaccination efforts or actions globally to contain or mitigate its effects. We expect this matter to negatively impact our results of operations, cash flows and financial condition. The Company will continue to take the appropriate steps to mitigate the impact on the Company's operations, liquidity and financial condition. In March 2020, the President of the United States signed the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) into law. The CARES Act has various liquidity boosting provisions that affect the Company related to income taxes and employee taxes. The Company has evaluated the various provisions, particularly the increased amount of deductible interest from 30% of adjusted taxable income to 50% for tax years 2019 and 2020. This is expected to reduce the Company's cash tax burden for 2019 and 2020, resulting in additional cash flow from operations. In addition to a decrease in the cash paid for income taxes, the Company has deferred the payment of its portion of Social Security payroll taxes in accordance with the provisions of the CARES Act. Also, for the year ended December 31, 2020, the Company is entitled to approximately $3 million in payroll retention credits in accordance with the provisions of the CARES Act. These sources of cash flow will aid in reducing uncertainty over the economic and operational impacts of COVID-19. The Company expects to generatemaintain adequate liquidity through its operating cash flow and revolving credit facility to fund its working capital and capital expenditures requirements. The Company's cash flow from operations in 2020 due towas supported by its strong contracted position and consistentongoing cost and capital control measures. As further discussed below, theThe Company experiencedstarted experiencing some delays in collections of accounts receivable in 2019. Ifthe second half of 2019; however, the COVID-related decline in demand has impacted some of our customers, resulting in continued delays in collections and delivering contracted tons. This trend improved during the third and fourth quarters of 2020, although global demand for coal remained challenging. However, if these delays continue or increase, the Company may have less cash flow from operations and may have less borrowing capacity under its Securitization Facility (whichsecuritization facility (under which borrowing capacity is based on certain current accounts receivable). As the Company moves into 2020, it will continue to monitor the creditworthiness of its customers.
The Company started a capital construction project on the coursePAMC coal refuse disposal area in 2017, which is expected to continue through 2021. The Company began construction of the Itmann Mine in the second half of 2019. Full production fromGiven the mine is expectedongoing uncertainty in 2021 upon completion of a new preparation plant. The Company's 2020 capital needs are expectedthe marketplace, COVID-related demand decline and other corporate priorities, the Company chose to be between $125 million to $145 million, which is decreased from 2019 levels due to lower expected equipment-related expenditures and reducedslow the spending on buildings and structures.
CONSOL Energy believes its business will generate adequate cash flows and liquidity to meet reasonable increasesconstruction of the Itmann Mine in the cost of supplies that are passed on from suppliers. CONSOL Energy will also continue to seek alternative sources of supplies and replacement materials to offset any unexpected increase in the cost of supplies.
2020.Uncertainty in the financial markets brings additional potential risks to CONSOL Energy. These risks include a reduction of our ability to raise capital in the equity markets due to declines in the Company's stock price, less availability and higher costs of additional credit, potential counterparty defaults, and commercial bank failures. Financial market disruptions may impact the Company's collection of trade receivables. As a result, CONSOL Energy regularly monitors the creditworthiness of its customers and counterparties and manages credit exposure through payment terms, credit limits, prepayments and security. Given Over the statepast year, the insurance markets have been increasingly challenging, particularly for coal companies. We have experienced rising premiums, reduced coverage and fewer providers willing to underwrite policies and surety bonds. Terms have generally become more unfavorable, including increases in the amount of collateral required to secure surety bonds. Further cost burdens on our ability to maintain adequate insurance and bond coverage may adversely impact our operations, financial position and liquidity. The Company is continuing to actively monitor the effects of the current globalongoing COVID-19 pandemic on its liquidity and capital resources. As disclosed previously and above, we took several steps during 2020 to reinforce our liquidity. From a coal market,shipment perspective, the decline in coal demand seemed to have hit its lowest point in May 2020, and has since shown some improvement. However, if the demand for our coal continues to decrease, this could adversely affect our liquidity in future quarters. Our Revolving Credit Facility, Term Loan A Facility, Term Loan B Facility, Securitization Facility and the Indenture entered into in connection with our 11.00% Senior Secured Second Lien Notes due 2025 (collectively, the “Credit Facilities”) contain certain financial covenants. Events resulting from the effects of COVID-19 may negatively impact our liquidity and, as wella result, our ability to comply with these covenants, which were amended during the second quarter of 2020. These events could lead us to seek further amendments or waivers from our lenders, limit access to or require accelerated repayment of amounts borrowed under the Credit Facilities, or require us to pursue alternative financing. We have no assurance that any such alternative financing, if required, could be obtained at terms acceptable to us, or at all, as the impact of trade tariffs, CONSOL Energy has experienced a slowing of collections within its customer group. CONSOL Energy does not believe that this represents an abnormal business risk, and expects this trend to reverse in 2020 given the anticipated implementation of and adherence to the executed 'Phase I' trade agreement with China.
The Company owns an undivided interest in 75%result of the PAMC and the Partnership owns the remaining undivided 25% interesteffects of the PAMC. AsCOVID-19 on capital markets at such time.
| | | | | | | | | | | | | | For the Years Ended December 31, | | 2019 | | 2018 | | Change | Cash Provided by Operating Activities | $ | 245 |
| | $ | 414 |
| | $ | (169 | ) | Cash Used in Investing Activities | $ | (173 | ) | | $ | (154 | ) | | $ | (19 | ) | Cash Used in Financing Activities | $ | (257 | ) | | $ | (149 | ) | | $ | (108 | ) |
| | For the Years Ended December 31, | | | | 2020 | | | 2019 | | | Change | | Cash Provided by Operating Activities | | $ | 129 | | | $ | 245 | | | $ | (116 | ) | Cash Used in Investing Activities | | $ | (76 | ) | | $ | (173 | ) | | $ | 97 | | Cash Used in Financing Activities | | $ | (82 | ) | | $ | (257 | ) | | $ | 175 | |
Cash provided by operating activities decreased $169$116 million in the period-to-period comparison, primarily due to an $85 million decrease inthe impact of COVID-19 on the net income a slowing of customer collections in 2019 compared to an acceleration of customer collections in 2018, and other working capital changes that occurred throughout both periods.
the Company.Cash used in investing activities increased $19decreased $97 million in the period-to-period comparison. Capital expenditures increaseddecreased primarily due to an increaseas a result of cost control measures put into place in airshaft construction projects, belt system related expenditures, purchases of land and equipment, and rebuilds of owned equipment, as well as expenditures relatedresponse to the development ofCOVID-19 pandemic and the Itmann Mine. | | | | | | | | | | | | | | For the Years Ended December 31, | | 2019 | | 2018 | | Change | Building and Infrastructure | $ | 66 |
| | $ | 46 |
| | $ | 20 |
| Equipment Purchases and Rebuilds | 57 |
| | 43 |
| | 14 |
| Refuse Storage Area | 32 |
| | 34 |
| | (2 | ) | IS&T Infrastructure | 5 |
| | 11 |
| | (6 | ) | Other | 10 |
| | 12 |
| | (2 | ) | Total Capital Expenditures | $ | 170 |
| | $ | 146 |
| | $ | 24 |
|
overall decline in coal markets. | | For the Years Ended December 31, | | | | 2020 | | | 2019 | | | Change | | Building and Infrastructure | | $ | 41 | | | $ | 66 | | | $ | (25 | ) | Equipment Purchases and Rebuilds | | | 25 | | | | 57 | | | | (32 | ) | Refuse Storage Area | | | 17 | | | | 32 | | | | (15 | ) | IS&T Infrastructure | | | 1 | | | | 5 | | | | (4 | ) | Other | | | 2 | | | | 10 | | | | (8 | ) | Total Capital Expenditures | | $ | 86 | | | $ | 170 | | | $ | (84 | ) |
Cash used in financing activities increased $108decreased $175 million in the period-to-period comparison. During the year ended December 31, 2020, total payments of $80 million were made on the Company's Term Loan A Facility, Term Loan B Facility and 11.00% Senior Secured Second Lien Notes. The Company also received proceeds of approximately $19 million related to finance leasing arrangements in the year ended December 31, 2020. In connection with the June 2020 amendment of the Company's credit facility, approximately $8 million of financing-related fees and charges were paid in the year ended December 31, 2020. During the year ended December 31, 2019, total payments of $188 million were made on the Company's Term Loan B Facility, 11.00% Senior Secured Second Lien Notes and the Term Loan A Facility, which included athe required excess cash flow repayment of $110 million on the Term Loan B Facility (see Note 1213 - Debt for additional information). The Company received additional proceeds on its Term Loan A Facility in the amount of $26 million as a result of the debt refinancing that occurred during the first quarter ofyear ended December 31, 2019. In connection with the debt refinancing, approximately $18 million of financing-related fees and charges were paid.paid in the year ended December 31, 2019. Also during the year ended December 31, 2019, CONSOL Energy shares were repurchased and CONSOL Coal Resources LP units were purchased, totaling $33 million.
During the year ended December 31, 2018, total payments of $56 million were made on the Company's Term Loan A Facility, Term Loan B Facility and 11.00% Senior Secured Second Lien Notes. The Company paid its former parent $18 million related to the final settlement of shared, spin-related fees. Additionally, CONSOL Energy shares were repurchased and CONSOL Coal Resources LP units were purchased, totaling $29 million.
Senior Secured Credit Facilities
In November 2017, the Company entered into a revolving credit facility with commitments up to $300 million (the “Revolving Credit Facility”), a Term Loan A Facility of up to $100 million (the “TLA Facility”) and a Term Loan B Facility of up to $400 million (the “TLB Facility”, and together with the Revolving Credit Facility and the TLA Facility, the “Senior Secured Credit Facilities”). On March 28, 2019, the Company amended the Senior Secured Credit Facilities (the “amendment”) to increase the borrowing commitment of the Revolving Credit Facility to $400 million and reallocate the principal amounts outstanding under the TLA Facility and TLB Facility. As a result,On June 5, 2020, the principal amount outstandingCompany amended the Senior Secured Credit Facilities (the “amendment”) to provide eight quarters of financial covenant relaxation, effect an increase in the rate at which borrowings under the Revolving Credit Facility and the TLA Facility was $100 millionbear interest, and the principal amount outstanding under the TLB Facility was $275 million.add an anti-cash hoarding provision. Borrowings under the Company’sCompany's Senior Secured Credit Facilities bear interest at a floating rate which can be, at the Company’sCompany's option, either (i) LIBOR plus an applicable margin or (ii) an alternate base rate plus an applicable margin. The applicable margin for the Revolving Credit Facility and TLA Facility depends on the total net leverage ratio, whereas the applicable margin for the TLB Facility is fixed. The amendment reducedincreased the applicable margin by 50 basis points on both the Revolving Credit Facility and the TLA Facility, and by 150 basis points on the TLB Facility. The amendment also extended the maturity dates of the Senior Secured Credit Facilities. The maturity date of the Revolving Credit and TLA Facilities was extended from November 28, 2021 tois March 28, 2023. The TLB Facility's maturity date was extended from November 28, 2022 tois September 28, 2024. Beginning inIn June 2019, the TLA Facility is being amortizedbegan amortizing in equal quarterly installments of (i) 3.75% of the original principal amount thereof, for the first four consecutive quarterly installments commencing with the quarter ended June 30, 2019, (ii) 6.25% of the original principal amount thereof for the subsequent eight quarterly installments commencing with the quarter ended June 30, 2020 and (iii) 8.75% of the original principal amount thereof
for the quarterly installments thereafter, with the remaining balance due at final maturity. Beginning inIn June 2019, the TLB Facility is being amortizedbegan amortizing in equal quarterly installments in an amount equal to 0.25% per annum of the amended principal amount thereof, with the remaining balance due at final maturity.
Obligations under the Senior Secured Credit Facilities are guaranteed by (i) all owners of the 75% undivided economic interest in the PAMC held by the Company, (ii) any other members of the Company’s group that own any portion of the collateral securing the Revolving Credit Facility, and (iii) subject to certain customary exceptions and agreed materiality thresholds, all other existing or future direct or indirect wholly ownedwholly-owned restricted subsidiaries of the Company (excluding the Partnership and its wholly-owned subsidiaries).Company. The obligations are secured by, subject to certain exceptions (including a limitation of pledges of equity interests in certain subsidiaries and certain thresholds with respect to real property), a first-priority lien on (i) the Company’s 75% undivided economic interest in the Pennsylvania Mining Complex, (ii) the limited partner units of the Partnership held by the Company, (iii) the equity interests in CONSOL Coal Resources GP LLC held by the Company (iv) the CONSOL Marine Terminal and (v) the 1.5 billion tons of Greenfield Reserves. The Senior Secured Credit Facilities contain a number of customary affirmative covenants. In addition, the Senior Secured Credit Facilities contain a number of negative covenants, including (subject to certain exceptions) limitations on (among other things): indebtedness, liens, investments, acquisitions, dispositions, restricted payments, and prepayments of junior indebtedness. The amendment expandedadded additional conditions to be met for the covenants relating to finance leases,investments in joint ventures, general investments, share repurchases, dividends, and repurchases of the Second Lien Notes. The additional conditions require no outstanding borrowings and no more than $200 million of outstanding letters of credit on the Revolving Credit Facility. Further restrictions apply to investments in joint venture investmentsventures, share repurchases and annual share repurchase baskets. The amendment also amendeddividends that require the restricted payments covenanttotal net leverage ratio shall not be greater than 2.00 to permit up to a $50 million annual dividend.
1.00.The Revolving Credit Facility and TLA Facility also include financial covenants, including (i) a maximum first lien gross leverage ratio, (ii) a maximum total net leverage ratio, and (iii) a minimum fixed charge coverage ratio. CONSOL Energy must maintain a maximum first lien gross leverage ratio covenant of no more than 2.00 to 1.00, measured quarterly, stepping down to 1.75 to 1.00 in March 2020. The maximum first lien gross leverage ratio is calculated as the ratio of Consolidated First Lien Debt to Consolidated EBITDA, excluding the Partnership. The maximum first lien gross leverage ratio was 1.19 to 1.00 at December 31, 2019. CONSOL Energy must maintain a maximum total net leverage ratio covenant of no more than 3.00 to 1.00, measured quarterly, stepping down to 2.75 to 1.00 in March 2020. The maximum total net leverage ratio is calculated as the ratio of Consolidated Indebtedness, minus Cash on Hand, to Consolidated EBITDA, excluding the Partnership. The maximum total net leverage ratio was 1.93 to 1.00 at December 31, 2019.EBITDA. Consolidated EBITDA, as used in the covenant calculation, excludes non-cash compensation expenses, non-recurring transaction expenses, extraordinary gains and losses, gains and losses on discontinued operations, non-cash charges related to legacy employee liabilities and gains and losses on debt extinguishment, and includes cash distributions received from the Partnership and subtracts cash payments related to legacy employee liabilities. The facilities also include a minimum fixed charge coverage covenantmaximum total net leverage ratio is calculated as the ratio of no less than 1.10Consolidated Indebtedness, minus Cash on Hand, to 1.00, measured quarterly.Consolidated EBITDA. The minimum fixed charge coverage ratio is calculated as the ratio of Consolidated EBITDA to Consolidated Fixed Charges, excluding the Partnership.Charges. Consolidated Fixed Charges, as used in the covenant calculation, include cash interest payments, cash payments for income taxes, scheduled debt repayments, dividends paid, and Maintenance Capital Expenditures. The amendment revised the financial covenants applicable to the Revolving Credit Facility and TLA Facility relating to the maximum first lien gross leverage ratio, maximum total net leverage ratio and minimum fixed charge coverage ratio, so that for the fiscal quarters ending June 30, 2020 through March 31, 2021, the maximum first lien gross leverage ratio shall be 2.50 to 1.00, the maximum total net leverage ratio shall be 3.75 to 1.00, and the minimum fixed charge coverage ratio shall be 1.00 to 1.00; for the fiscal quarters ending June 30, 2021 through September 30, 2021, the maximum first lien gross leverage ratio shall be 2.25 to 1.00 and the maximum total net leverage ratio shall be 3.50 to 1.00; for the fiscal quarters ending June 30, 2021 through March 31, 2022, the minimum fixed charge coverage ratio shall be 1.05 to 1.00; for the fiscal quarters ending December 31, 2021 through March 31, 2022, the maximum first lien gross leverage ratio shall be 2.00 to 1.00 and the maximum total net leverage ratio shall be 3.25 to 1.00; and for the fiscal quarters ending on or after June 30, 2022, the maximum first lien gross leverage ratio shall be 1.75 to 1.00, the maximum total net leverage ratio shall be 2.75 to 1.00 and the minimum fixed charge coverage ratio shall be 1.10 to 1.00. The maximum first lien gross leverage ratio was 1.64 to 1.00 at December 31, 2020. The maximum total net leverage ratio was 2.54 to 1.00 at December 31, 2020. The minimum fixed charge coverage ratio was 1.361.56 to 1.00 at December 31, 2019.
2020. The Company was in compliance with all of its financial covenants under the Senior Secured Credit Facilities as of December 31, 2020.The TLB Facility also includes a financial covenant that requires the Company to repay a certain amount of its borrowings under the TLB Facility within ten business days after the date it files its Form 10-K with the Securities and Exchange Commission (“SEC”) if the Company has excess cash flow (as defined in the credit agreement for the Senior Secured Credit Facilities) during the year covered by the applicable Form 10-K. During the year ended December 31, 2019, CONSOL Energy made the required repayment of approximately $110 million based on the amount of the Company's excess cash flow as of December 31, 2018. For fiscal year 2018, such repayment was equal to 75% of the Company'sCompany’s excess cash flow less any voluntary prepayments of its borrowings under the TLB Facility made by the Company during 2018. For all subsequent fiscal years, the required repayment is equal to a certain percentage of the Company'sCompany’s excess cash flow for such year, ranging from 0% to 75% depending on the Company'sCompany’s total net leverage ratio, less the amount of certain voluntary prepayments made by the Company, if any, under the TLB Facility during such fiscal year. The amendment reduced the maximum amount of the mandatory annual excess cash flow sweep under the TLB Facility by 25%. Based on the Company's excess cash flow calculation, no repayment was required with respect to the year ended December 31, 2019 and approximately $5 million is required with respect to the year ended December 31, 2019. As such, as of December 31, 2019, no amount related to the prepayment of the TLB Facility in connection with the excess cash flow requirement has been classified as Current Portion of Long-Term Debt in the Consolidated Balance Sheets.
2020.During the year ended December 31, 2019, the Company entered into interest rate swaps, which effectively converted $150 million of the TLB Facility's floating interest rate to a fixed interest rate for the twelve months ending December 31, 2020 and 2021, and $50 million of the TLB Facility's floating interest rate to a fixed interest rate for the twelve months ending December 31, 2022.
The Senior Secured Credit Facilities contain customary events of default, including with respect to a failure to make payments when due, cross-default and cross-judgment default and certain bankruptcy and insolvency events.
At December 31, 2019,2020, the Revolving Credit Facility had no borrowings outstanding and $70$126 million of letters of credit outstanding, leaving $330$274 million of unused capacity. From time to time, CONSOL Energy is required to post financial assurances to satisfy contractual and other requirements generated in the normal course of business. Some of these assurances are posted to comply with federal, state or other government agencies' statutes and regulations. CONSOL Energy sometimes uses letters of credit to satisfy these requirements and these letters of credit reduce the Company's borrowing facility capacity.
On November 30, 2017, (1)(i) CONSOL Marine Terminals LLC, as an originator of receivables, (ii) CONSOL Pennsylvania Coal Company LLC (“CONSOL Pennsylvania”), as an originator of receivables and as initial servicer of the receivables for itself and the other originators (collectively, the “Originators”), each a wholly-owned subsidiary of CONSOL Energy, and (iii) CONSOL Funding LLC (the “SPV”), a Delaware special purpose entity and wholly-owned subsidiary of CONSOL Energy, as buyer, entered into a Purchase and Sale Agreement (the “Purchase and Sale Agreement”) and (2)(i) CONSOL Thermal Holdings LLC, an indirect, wholly-owned subsidiary of the Partnership, as sub-originator (the “Sub-Originator”), and (ii) CONSOL Pennsylvania, as buyer and as initial servicer of the receivables for itself and the Sub-Originator, entered into a Sub-Originator Sale Agreement (the “Sub-Originator PSA”). In addition, on that date,November 30, 2017, the SPV entered into a Receivables Financing Agreement (the “Receivables Financing Agreement”) by and among (i) the SPV, as borrower, (ii) CONSOL Pennsylvania, as initial servicer, (iii) PNC Bank, as administrative agent, LC Bank and lender, and (iv) the additional persons from time to time party thereto as lenders. Together, the Purchase and Sale Agreement, the Sub-Originator PSA and the Receivables Financing Agreement establish the primary terms and conditions of an accounts receivable securitization program (the “Securitization”). In August 2018,March 2020, the securitization facility was amended to, among other things, extend the term of the securitization facility for three years endingmaturity date from August 30, 2021.
2021 to March 27, 2023.Pursuant to the Securitization, (i) the Sub-Originator sells current and future trade receivables to CONSOL Pennsylvania and (ii) the Originators sell and/or contribute current and future trade receivables (including receivables sold to CONSOL Pennsylvania by the Sub-Originator) to the SPV and the SPV, in turn, pledges its interests in the receivables to PNC Bank, which either makes loans or issues letters of credit on behalf of the SPV. The maximum amount of advances and letters of credit outstanding under the Securitization may not exceed $100 million.
Loans under the Securitization accrue interest at a reserve-adjusted LIBOR market index rate equal to the one-month Eurodollar rate. Loans and letters of credit under the Securitization also accrue a program fee and a letter of credit participation fee, respectively, ranging from 2.00% to 2.50% per annum depending on the total net leverage ratio of CONSOL Energy. In addition, the SPV paid certain structuring fees to PNC Capital Markets LLC and will pay other customary fees to the lenders, including a fee on unused commitments equal to 0.60% per annum.
The SPV’s assets and credit are not available to satisfy the debts and obligations owed to the creditors of CONSOL Energy, the Sub-Originator or any of the Originators. The Sub-Originator, the Originators and CONSOL Pennsylvania as servicer are independently liable for their own customary representations, warranties, covenants and indemnities. In addition, CONSOL Energy has guaranteed the performance of the obligations of the Sub-Originator, the Originators and CONSOL Pennsylvania as servicer, and will guarantee the obligations of any additional originators or successor servicer that may become party to the Securitization. However, neither CONSOL Energy nor its affiliates will guarantee collectability of receivables or the creditworthiness of obligors thereunder.
The agreements comprising the Securitization contain various customary representations and warranties, covenants and default provisions which provide for the termination and acceleration of the commitments and loans under the Securitization in certain circumstances including, but not limited to, failure to make payments when due, breach of representation, warranty or covenant, certain insolvency events or failure to maintain the security interest in the trade receivables, and defaults under other material indebtedness.
At December 31, 2019,2020, eligible accounts receivable totaled approximately $41$32 million. At December 31, 2019,2020, the facility had no outstanding borrowings and $41$31 million of letters of credit outstanding, leaving available borrowing capacity$1 million of $71 thousand.unused capacity. Costs associated with the receivables facility totaled $1,441$1,156 thousand for the year ended December 31, 2019.2020. These costs have been recorded as financing fees which are included in Operating and Other Costs in the Consolidated Statements of Income. The Company has not derecognized any receivables due to its continued involvement in the collections efforts.
11.00% Senior Secured Second Lien Notes due 2025
On November 13, 2017, the Company issued $300 million in aggregate principal amount of 11.00% Senior Secured Second Lien Notes due 2025 (the “Second Lien Notes”) pursuant to an indenture (the “Indenture”) dated as of November 13, 2017, by and between the Company and UMB Bank, N.A., a national banking association, as trustee and collateral trustee (the “Trustee”).
On November 28, 2017, certain subsidiaries of the Company executed a supplement to the Indenture and became party to the Indenture as a guarantor (the “Guarantors”). The Second Lien Notes are secured by second priority liens on substantially all of the assets of the Company and the Guarantors that are pledged and on a first-priority basis as collateral securing the Company’s obligations under the Senior Secured Credit Facilities (described above), subject to certain exceptions under the Indenture.
On or after November 15, 2021, the Company may redeem all or part of the Second Lien Notes at the redemption prices set forth below, plus accrued and unpaid interest, if any, to, but not including, the redemption date (subject to the rights of holders of the Second Lien Notes on the relevant record date to receive interest due on the relevant interest payment date), beginning on November 15 of the years indicated: | | | | | | Year | Percentage | | | 2021 | 105.50% | | | 2022 | 102.75% | | | 2023 and thereafter | 100.00% | |
Prior to November 15, 2020, the Company may on one or more occasions redeem up to 35% of the principal amount of the Second Lien Notes with an amount of cash not greater than the amount of the net cash proceeds from one or more equity offerings at a redemption price equal to 111.00% of the principal amount of the Second Lien Notes to be redeemed, plus accrued and unpaid interest, if any, to, but not including, the date of redemption, as long as at least 65% of the aggregate principal amount of the Second Lien Notes originally issued on the issue date (excluding Second Lien Notes held by the Company and its subsidiaries) remains outstanding after each such redemption and the redemption occurs within less than 180 days after the date of the closing of the equity offering.
Year | | Percentage | | 2021 | | | 105.50 | % | 2022 | | | 102.75 | % | 2023 and thereafter | | | 100.00 | % |
At any time or from time to time prior to November 15, 2021, the Company may also redeem all or a part of the Second Lien Notes, at a redemption price equal to 100% of the principal amount thereof plus the Applicable Premium, as defined in the Indenture, plus accrued and unpaid interest, if any, to, but not including, the redemption date (subject to the rights of holders of the Second Lien Notes on the relevant record date to receive interest due on the relevant interest payment date).
The Indenture contains covenants that will limit the ability of the Company and the Guarantors, to (i) incur, assume or guarantee additional indebtedness or issue preferred stock; (ii) create liens to secure indebtedness; (iii) declare or pay dividends on the Company’s common stock, redeem stock or make other distributions to the Company’s stockholders; (iv) make investments; (v) restrict dividends, loans or other asset transfers from the Company’s restricted subsidiaries; (vi) merge or consolidate, or sell, transfer, lease or dispose of substantially all of the Company’s assets; (vii) sell or otherwise dispose of certain assets, including equity interests in subsidiaries; (viii) enter into transactions with affiliates; and (ix) create unrestricted subsidiaries. These covenants are subject to important exceptions and qualifications. If the Second Lien Notes achieve an investment grade rating from both Standard & Poor’s Ratings Services and Moody’s Investors Service, Inc. and no default under the Indenture exists, many of the foregoing covenants will terminate and cease to apply. The Indenture also contains customary events of default, including (i) default for 30 days in the payment when due of interest on the Notes; (ii) default in payment when due of principal or premium, if any, on the Notes at maturity, upon redemption or otherwise; (iii) covenant defaults,defaults; (iv) cross-defaults to certain indebtedness, and (v) certain events of bankruptcy or insolvency with respect to the Company or any of the Guarantors. If an event of default occurs and is continuing, the Trustee or the holders of at least 25% in aggregate principal amount of the then outstanding Second Lien Notes may declare all the Notes to be due and payable immediately. If an event of default arises from certain events of bankruptcy or insolvency, with respect to the Company, any restricted subsidiary of the Company that is a significant subsidiary or any group of restricted subsidiaries of the Company that, taken together, would constitute a significant subsidiary, all outstanding Second Lien Notes will become due and payable immediately without further action or notice.
If the Company experiences certain kinds of changes of control, holders of the Second Lien Notes will be entitled to require the Company to repurchase all or any part of that holder’s Second Lien Notes pursuant to an offer on the terms set forth in the Indenture. The Company will offer to make a cash payment equal to 101% of the aggregate principal amount of the Second Lien Notes repurchased plus accrued and unpaid interest on the Second Lien Notes repurchased to, but not including, the date of purchase, subject to the rights of holders of the Notes on the relevant record date to receive interest due on the relevant interest payment date.
The Second Lien Notes were issued in a private offering that iswas exempt from the registration requirements of the Securities Act, to qualified institutional buyers in accordance with Rule 144A and to persons outside of the United States pursuant to Regulation S under the Securities Act.
Affiliated Company Credit Agreement with Partnership
On November 28, 2017, the Company also entered into an Affiliated Company Credit Agreement with the Partnership and certain of its subsidiaries (the “Partnership Credit Parties”) under which the Company provides as lender a revolving credit facility in an aggregate principal amount of up to $275 million to the Partnership Credit Parties. In connection with the completion of the separation, the Partnership drew an initial $201 million, the net proceeds of which were used to repay the Original CCR Credit Facility and to provide working capital for the Partnership following the separation and for other general corporate purposes.
On March 28, 2019, the Affiliated Company Credit Agreement was amended to extend the maturity date from February 27, 2023 to December 28, 2024. The collateral obligations under the Affiliated Company Credit Agreement generally mirror the Original CCR Credit Facility, as does the list of entities that will act as guarantors thereunder. The Affiliated Company Credit Agreement is subject to financial covenants relating to a maximum first lien gross leverage ratio and a maximum total net leverage ratio, which will be calculated on a consolidated basis for the Partnership and its restricted subsidiaries at the end of each fiscal quarter. The Partnership was in compliance with each of these financial covenants at December 31, 2019. The Affiliated Company Credit Agreement also contains a number of customary affirmative covenants and negative covenants, including limitations on the ability of the Partnership to incur additional indebtedness, grant liens, and make investments, acquisitions, dispositions, restricted payments, and prepayments of junior indebtedness (subject to certain limited exceptions).
Contractual Obligations
CONSOL Energy is required to make future payments under various contracts. CONSOL Energy also has commitments to fund its pension plans, provide payments for other postretirement benefit plans, and fund capital projects. The following is a summary of the Company's significant contractual obligations at December 31, 2019 (in thousands):
| | | | | | | | | | | | | | | | | | | | | | Payments due by Year | | Less Than 1 Year | | 1-3 Years | | 3-5 Years | | More Than 5 Years | | Total | Purchase Order Firm Commitments | $ | 1,237 |
| | $ | 425 |
| | $ | — |
| | $ | — |
| | $ | 1,662 |
| Long-Term Debt | 32,053 |
| | 65,084 |
| | 275,139 |
| | 325,089 |
| | 697,365 |
| Interest on Long-Term Debt | 52,865 |
| | 100,676 |
| | 94,430 |
| | 31,050 |
| | 279,021 |
| Finance Lease Obligations | 18,219 |
| | 7,722 |
| | 1,314 |
| | — |
| | 27,255 |
| Interest on Finance Lease Obligations | 901 |
| | 257 |
| | 64 |
| | — |
| | 1,222 |
| Operating Lease Obligations | 24,065 |
| | 36,473 |
| | 12,619 |
| | 15,958 |
| | 89,115 |
| Long-Term Liabilities—Employee Related (a) | 56,821 |
| | 108,118 |
| | 104,213 |
| | 493,879 |
| | 763,031 |
| Other Long-Term Liabilities (b) | 149,574 |
| | 39,082 |
| | 27,822 |
| | 184,301 |
| | 400,779 |
| Total Contractual Obligations (c) | $ | 335,735 |
| | $ | 357,837 |
| | $ | 515,601 |
| | $ | 1,050,277 |
| | $ | 2,259,450 |
|
_________________________
| | (a) | Employee related long-term liabilities include other post-employment benefits and work-related injuries and illnesses. Estimated salaried retirement contributions required to meet minimum funding standards under ERISA are excluded from the pay-out table due to the uncertainty regarding amounts to be contributed. CONSOL Energy does not expect to contribute to the pension plan in 2020. |
| | (b) | Other long-term liabilities include asset retirement obligations and other long-term liability costs. |
| | (c) | The significant obligations table does not include obligations to taxing authorities due to the uncertainty surrounding the ultimate settlement of amounts and timing of these obligations. |
At December 31, 2019,2020, CONSOL Energy had total long-term debt and finance lease obligations of $725$666 million outstanding, including the current portion of long-term debt of $50$54 million. This long-term debt consisted of: An aggregate principal amount of $273 million in connection with the Term Loan B (TLB) Facility, due in September 2024, less $1 million of unamortized bond discount. Borrowings under the TLB Facility bear interest at a floating rate.
An aggregate principal amount of $222 million of 11.00% Senior Secured Second Lien Notes due in November 2025. Interest on the notes is payable May 15 and November 15 of each year.
An aggregate principal amount of $89 million in connection with the Term Loan A (TLA) Facility, due in March 2023. Borrowings under the TLA Facility bear interest at a floating rate.
An aggregate principal amount of $103 million of industrial revenue bonds which were issued to finance the Baltimore port facility, bear interest at 5.75% per annum and mature in September 2025. Interest on the industrial revenue bonds is payable March 1 and September 1 of each year. Payment of the principal and interest on the notes is guaranteed by CONSOL Energy.
| | • | An aggregate principal amount of $10$270 million in connection with asset-backed financing. Approximately $6 million isthe Term Loan B (TLB) Facility, due in December 2020September 2024, less $1 million of unamortized bond discount. Borrowings under the TLB Facility bear interest at a floating rate. |
| • | An aggregate principal amount of $167 million of 11.00% Senior Secured Second Lien Notes due in November 2025. Interest on the notes is payable May 15 and November 15 of each year. |
| • | An aggregate principal amount of $66 million in connection with the Term Loan A (TLA) Facility, due in March 2023. Borrowings under the TLA Facility bear interest at a floating rate. |
| • | An aggregate principal amount of $103 million of industrial revenue bonds which were issued to finance the Baltimore port facility, bear interest at 5.75% per annum and mature in September 2025. Interest on the industrial revenue bonds is payable March 1 and September 1 of each year. Payment of the principal and interest on the notes is guaranteed by CONSOL Energy. |
| • | Advance royalty commitments of $2 million with a weighted average interest rate of 5.96%,13.68% per annum. |
| • | An aggregate principal amount of $59 million of finance leases and approximately $4 million is due in September 2024 at anasset-backed financing arrangements with a weighted average interest rate of 5.79% and 3.61%., respectively. |
Advance royalty commitments of $2 million with a weighted average interest rate of 10.78% per annum.
An aggregate principal amount of $27 million of finance leases with a weighted average interest rate of 5.20% per annum.
At December 31, 2019,2020, CONSOL Energy had no borrowings outstanding and approximately $70$126 million of letters of credit outstanding under the $400 million senior secured Revolving Credit Facility. At December 31, 2019,2020, CONSOL Energy had no borrowings outstanding and approximately $41$31 million of letters of credit outstanding under the $100 million Securitization Facility. Stock, Unit and Debt Repurchases
In December 2017, CONSOL Energy’s Board of Directors approved a program to repurchase, from time to time, the Company's outstanding shares of common stock or its 11.00% Senior Secured Second Lien Notes due 2025, in an aggregate amount of up to $50 million through the period ending June 30, 2019. The program was subsequently amended by CONSOL Energy's Board of Directors in July 2018 to allow up to $100 million of repurchases of the Company's common stock or its 11.00% Senior Secured Second Lien Notes due 2025, subject to certain limitations in the Company's current credit agreement and that certain tax matters agreement entered into by and between the Company and its former parent on November 28, 2017 (the “TMA”). The Company's Board of Directors also authorized the Company to use up to $25 million of the program to purchase CONSOL Coal Resources LP's outstanding common units in the open market. In May 2019, CONSOL Energy's Board of Directors approved an expansion of the program in the amount of $75 million, bringing the aggregate limit of the program to $175 million. The May 2019 expansion also increased the aggregate limit of the amount of CONSOL Coal Resources LP's common units that can be purchased under the program to $50 million, which is consistent with the Company's credit facility covenants that prohibit the Company from using more than $50 million for the purchase of CONSOL Coal Resources LP's outstanding common units. The Company's Board of Directors also approved extending the termination date of the program from June 30, 2019 to June 30, 2020. In July 2019, CONSOL Energy's Board of Directors approved an expansion of the program in the amount of $25 million, bringing the aggregate limit of the program to $200 million.
On May 8, 2020, CONSOL Energy's Board of Directors approved an expansion of the stock, unit and debt repurchase program. The aggregate amount of the program's expansion was $70 million, bringing the total amount of the Company's stock, unit and debt repurchase program to $270 million. The Company's Board of Directors also approved extending the termination date of the program from June 30, 2020 to June 30, 2022. Under the terms of the program, CONSOL Energy is permitted to make repurchases in the open market, in privately negotiated transactions, accelerated repurchase programs or in structured share repurchase programs. CONSOL Energy is also authorized to enter into one or more 10b5-1 plans with respect to any of the repurchases. Any repurchases of common stock, notes or units are to be funded from available cash on hand or short-term borrowings. The program does not obligate CONSOL Energy to acquire any particular amount of its common stock, notes or units, and can be modified or suspended at any time at the Company’s discretion. The program is conducted in compliance with applicable legal requirements and within the limits imposed by any credit agreement, receivables purchase agreement, indenture or the TMA and is subject to market conditions and other factors.
During the year ended December 31, 2019,2020, the Company repurchasedspent approximately $53$32 million to retire $54 million of its 11.00% Senior Secured Second Lien Notes due 2025. Also2025, which continued to trade well below par value. No common shares were repurchased and no common Partnership units were purchased under this program during the year ended December 31, 2019, 1,717,497 shares2020.
Total Equity and Dividends Total equity attributable to CONSOL Energy was $554 million at December 31, 2020 and $572 million at December 31, 2019 and $552 million at December 31, 2018.2019. See the Consolidated Statements of Stockholders' Equity in Item 8 of this Form 10-K for additional details. On December 30, 2020, the Merger of CCR was completed (see Note 2 – Major Transactions). CONSOL Energy accounted for the change in its ownership interest in CCR as an equity transaction, which was reflected as a reduction of noncontrolling interest with corresponding increases to common stock and capital in excess of par value. The declaration and payment of dividends by CONSOL Energy is subject to the discretion of CONSOL Energy's Board of Directors, and no assurance can be given that CONSOL Energy will pay dividends in the future. The determination to pay dividends in the future will depend upon, among other things, general business conditions, CONSOL Energy's financial results, contractual and legal restrictions regarding the payment of dividends by CONSOL Energy, planned investments by CONSOL Energy and such other factors as the Board of Directors deems relevant. The Company's senior secured credit facilitiesSenior Secured Credit Facilities limit CONSOL Energy's ability to pay dividends up to $25 million annually, which increases to $50 million annually when the Company's total net leverage ratio is less than 1.50 to 1.00 and subject to an aggregate amount up to a cumulative credit calculation set forth in the facilities.facilities, with additional conditions of no outstanding borrowings and no more than $200 million of outstanding letters of credit on the Revolving Credit Facility, and the total net leverage ratio shall not be greater than 2.00 to 1.00. The total net leverage ratio was 1.932.54 to 1.00 and the cumulative credit was approximately $35$16 million at December 31, 2019.2020. The cumulative credit starts with $50 million and builds with excess cash flow commencing in 2018. The calculation of the total net leverage ratio excludes the Partnership. The credit facilitiesSenior Secured Credit Facilities do not permit dividend payments in the event of default. The Indenture to the 11.00% Senior Secured Second Lien Notes limits dividends when the Company's total net leverage ratio exceeds 2.00 to 1.00 and subject to an amount not to exceed an annual rate of 4.0% of the quoted public market value per share of such common stock at the time of the declaration. The Indenture does not permit dividend payments in the event of default. In connection with the separation and distribution, the Partnership entered into an intercompany loan arrangement with the Company with an initial outstanding balance of $201 million. The Partnership used the initial loan to repay outstanding borrowings under the prior revolving credit facility, which was then terminated. The new intercompany loan arrangement similarly limits the Partnership's ability to pay distributions to its unitholders (including the Company) when the Partnership's net leverage ratio exceeds 3.25 to 1.00 or the Partnership's first lien gross leverage ratio exceeds 2.75 to 1.00.
On January 24, 2020, the Board of Directors of CCR's general partner declared a cash distribution of $0.5125 per unit to CCR's limited partner unitholders and the holder of the general partner interest. The cash distribution will be paid on February 14, 2020 to the unitholders of record at the close of business on February 10, 2020.
Upon payment of the cash distribution with respect to the quarter ended June 30, 2019, the financial requirements for the conversion of all CCR subordinated units were satisfied. As a result, on August 16, 2019, all 11,611,067 of CCR's subordinated units, owned entirely by CONSOL Energy Inc., were converted into common units on a one-for-one basis. The conversion did not impact the amount of the cash distribution paid or the total number of CCR's outstanding units representing limited partner interests.
Off-Balance Sheet Transactions CONSOL Energy does not maintain off-balance sheet transactions, arrangements, obligations or other relationships with unconsolidated entities or others that are reasonably likely to have a material current or future effect on CONSOL Energy’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources which are not disclosed in the Notes to the Consolidated Financial Statements of this Form 10-K. CONSOL Energy participates in the United Mine Workers of America (the “UMWA”) Combined Benefit Fund and the UMWA 1992 Benefit Plan which generally accepted accounting principles recognize on a pay-as-you-go basis. These benefit arrangements may result in additional liabilities that are not recognized on the Consolidated Balance Sheet at December 31, 2019.2020. The various multi-employer benefit plans are discussed in Note 16—17—Other Employee Benefit Plans in the Notes to the Consolidated Financial Statements in Item 8 of this Form 10-K. CONSOL Energy's total contributions under the Coal Industry Retiree Health Benefit Act of 1992 were $5,383, $6,042 $6,829 and $7,647$6,829 for the years ended December 31, 2020, 2019 2018 and 2017,2018, respectively. Based on available information at December 31, 2019,2020, CONSOL Energy's obligation for the UMWA Combined Benefit Fund and 1992 Benefit Plan is estimated to be approximately $62,295.$56,039. CONSOL Energy also uses a combination of surety bonds, corporate guarantees and letters of credit to secure its financial obligations for employee-related, environmental, performance and various other items which are not reflected on the Consolidated Balance Sheet at December 31, 2019.2020. Management believes these items will expire without being funded. See Note 21—22—Commitments and Contingent Liabilities in the Notes to the Consolidated Financial Statements included in Item 8 of this Form 10-K for additional details of the various financial guarantees that have been issued by CONSOL Energy.
Recent Accounting Pronouncements
In January 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2021-01 - Reference Rate Reform (Topic 848) to clarify that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. Specifically, certain provisions in Topic 848, if elected by an entity, apply to derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform. Amendments in this Update to the expedients and exceptions in Topic 848 capture the incremental consequences of the scope clarification and tailor the existing guidance to derivative instruments affected by the discounting transition. Management has elected to apply this Update subsequent to March 12, 2020. Management is currently evaluating the impact of this guidance, but does not expect this update to have a material impact on the Company's financial statements. In March 2020, the FASB issued ASU 2020-04 - Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in this Update provide optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. In response to concerns about structural risks of interbank offered rates (IBORs), and, particularly, the risk of cessation of the London Interbank Offered Rate (LIBOR), regulators in several jurisdictions around the world have undertaken reference rate reform initiatives to identify alternative reference rates that are more observable or transaction based and less susceptible to manipulation. This Update also provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this Update apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The amendments in this Update are effective for all entities as of March 12, 2020 through December 31, 2022. An entity may elect to apply the amendments for contract modifications by Topic or Industry Subtopic as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. Once elected for a Topic or an Industry Subtopic, the amendments in this Update must be applied prospectively for all eligible contract modifications for that Topic or Industry Subtopic. Management has elected to apply this Update subsequent to March 12, 2020. Management is currently evaluating the impact of this guidance, but does not expect this update to have a material impact on the Company's financial statements. In January 2020, the FASB issued Accounting Standards Update (“ASU”)ASU 2020-01 - Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) to. The amendments in this Update clarify certain interactions between the guidance to account for certain equity securities under Topic 321, the guidance to account for investments under the equity method of accounting in Topic 323, and the guidance in Topic 815, which could change how an entity accounts for an equity security under the measurement alternative or a forward contract or purchased option to purchase securities that, upon settlement of the forward contract or exercise of the purchased option, would be accounted for under the equity method of accounting or the fair value option in accordance with Topic 825, Financial Instruments. These amendments improve current GAAP by reducing diversity in practice and increasing comparability of the accounting for these interactions. These changes will beThe amendments in this Update are effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Early adoption is permitted. Management does not expect this update to have a material impact on the Company's financial statements.
In December 2019, the FASB issued ASU 2019-12 - Income Taxes (Topic 740) to reduce the complexity of accounting for income taxes while maintaining or improving the usefulness of the information provided to users of financial statements. The amendments in Update 2019-12 will remove the following exceptions: (1) the exception to the incremental approach for intra-period tax allocation; (2) exceptions to accounting for basis differences when there are ownership changes in foreign investments; and (3) the exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year. The amendments in Update 2019-12 will also simplify the accounting for income taxes in the areas of franchise tax, step up in the tax basis of goodwill associated with a business combination, allocation of current and deferred tax expense to a legal entity that is not subject to tax in its separate financial statements, and presentation of the effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date. The updateUpdate adds minor codification improvements for income taxes related to employee stock ownership plans and investments in qualified affordable housing projects accounted for using the equity method. These changes will be effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted. Management does not expect this update to have a material impact on the Company's financial statements.
In August 2018, the FASB issued ASU 2018-15 - Intangibles - Goodwill and Other - Internal Use Software (Subtopic 350-40) to help entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement (hosting arrangement) by providing guidance for determining when the arrangement includes a software license. The amendments in Update 2018-15 align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements of capitalizing implementation costs incurred to develop or obtain internal-use software. These changes will be effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Management does not expect this update to have a material impact on the Company's financial statements.
In August 2018, the FASB issued ASU 2018-14 - Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20) to improve the effectiveness of disclosures in the notes to the financial statements by facilitating clear communication of the information required by GAAP. The amendments modify the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. These changes will be effective for fiscal years ending after December 15, 2020, including interim periods within those fiscal years. Management is currently evaluating the impactThe Company adopted this guidance may have on the Company’s financial statements.
In August 2018, the FASB issued ASU 2018-13 - Fair Value Measurement (Topic 820) to improve the effectiveness of disclosures in the notes to the financial statements by facilitating clear communication of the information required by GAAP. The amendments modify the disclosure requirements on fair value measurements including the consideration of costs2020, and benefits. These changes will be effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Management does not expect this update to have athere was no material impact on the Company's financial statements.
In June 2016, the FASB issued ASU 2016-13 - Financial Instruments-Credit Losses (Topic 326): MeasurementTable of Credit Losses on Financial Instruments, which provides financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. To achieve this, the amendments in this Update replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The measurement of expected credit losses will be based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. In May 2019, the FASB updated Topic 326 by issuing ASU 2019-05, Financial Instruments-Credit Losses (Topic 326): Targeted Transition Relief, which provides entities that have certain instruments within the scope of Subtopic 326-20, Financial Instruments-Credit Losses - Measured at Amortized Cost, with an option to irrevocably elect the fair value option in Subtopic 825-10, Financial Instruments-Overall, applied on an instrument-by-instrument basis for eligible instruments, upon
adoption of Topic 326. The amendments in these Updates will be applied using a modified-retrospective approach and, for public entities, are effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. CONSOL Energy's exposure to credit losses is concentrated on trade and other receivables arising from contractual agreements. Additional disclosures will be required to describe the nature and amount of the Company's credit losses, including the significant assumptions and judgments required to value the losses, and the accounting policy elections taken. The Company is implementing processes and controls to review the credit losses for appropriate accounting treatment in the context of the standards and to generate disclosures required under the standards, which the Company expects to disclose in its Quarterly Report on Form 10-Q for the first quarter of 2020. As of the filing date of this Form 10-K, based on the Company's historical collection efforts, current industry trends in the markets the Company serves and the financial health of the Company's counterparties, the expected credit losses recognized upon adoption of this guidance are not expected to have a material impact on the Company's financial statements.
| | ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
In addition to the risks inherent in operations, CONSOL Energy is exposed to financial, market, political and economic risks. The following discussion provides additional detail regarding the Company's exposure to the risks related to changes in commodity prices, interest rates and foreign exchange rates.
CONSOL Energy is exposed to market price risk in the normal course of selling coal. CONSOL Energy sells coal in the spot market and under both short-term and multi-year contracts that may contain base prices subject to pre-established price adjustments that reflect (i) variances in the quality characteristics of coal delivered to the customer beyond threshold quality characteristics specified in the applicable sales contract, (ii) the actual calorific value of coal delivered to the customer, and/or (iii) changes in electric power prices in the markets in which the Company's customers operate, as adjusted for any factors set forth in the applicable contract.
CONSOL Energy has established risk management policies and procedures to strengthen the internal control environment of the marketing of commodities produced from its asset base. CONSOL Energy's market risk strategy incorporates fundamental risk management tools to assess market price risk and establish a framework in which management can maintain a portfolio of transactions within pre-defined risk parameters.
CONSOL Energy's interest expense is sensitive to changes in the general level of interest rates in the United States. At December 31, 2019,2020, CONSOL Energy had $352$328 million aggregate principal amount of debt outstanding under fixed-rate instruments, including unamortized debt issuance costs of $5$3 million, and $361$329 million of debt outstanding under variable-rate instruments, including unamortized debt issuance costs of $5$7 million. CONSOL Energy's primary exposure to market risk for changes in interest rates relates to the Company's senior secured credit facilities, under which therefacilities. We enter into hedging arrangements in an effort to limit our exposure to interest rate volatility. These hedging arrangements may reduce, but will not eliminate, the potential effects of changing interest rates on our cash flow from operations for the periods covered by these arrangements. Furthermore, while intended to help reduce the effects of volatile interest rates, such transactions, depending on the hedging instrument used, may limit our potential gains if interest rates were $361 million of borrowings atto fall substantially over the price established by the hedge. Currently, our hedging arrangements partially mitigate our exposure to fluctuations in LIBOR interest rates through December 31, 2019.2022. A hypothetical 100 basis-point increase in the average rate for CONSOL Energy's senior secured credit facilitiesvariable-rate instruments would decrease pre-tax future earnings by $4$2 million.
Foreign Exchange Rate Risk
All of CONSOL Energy’s transactions are denominated in U.S. dollars, and, as a result, the Company does not have material exposure to currency exchange-rate risks. However, because coal is sold internationally in U.S. dollars, general economic conditions in foreign markets and changes in foreign currency exchange rates may provide the Company's international competitors with a competitive advantage. If CONSOL Energy's competitors' currencies decline against the U.S. dollar or against the Company's international customers' local currencies, those competitors may be able to offer lower prices for coal to the Company's customers. Furthermore, if the currencies of CONSOL Energy's overseas customers were to significantly decline in value in comparison to the U.S. dollar, those customers may seek decreased prices for the coal the Company sells to them. Consequently, currency fluctuations could adversely affect the competitiveness of CONSOL Energy's coal in international markets.
| | ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
| Page | | | | | | Page | Report of Independent Registered Public Accounting Firm | | Consolidated Statements of Income for the Years Ended December 31, 2020, 2019 2018 and 20172018 | | 2018 | | 2019 | | Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 2020, 2019 2018 and 20172018 | | Consolidated Statements of Cash Flows for the Years Ended December 31, 2020, 2019 and 2018 2017 | | Notes to the Audited Consolidated Financial Statements | |
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of CONSOL Energy Inc. and Subsidiaries
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of CONSOL Energy Inc. and Subsidiaries (the Company) as of December 31, 20192020 and 2018,2019, the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2019,2020, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20192020 and 2018,2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019,2020, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2019,2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 14, 202012, 2021 expressed an unqualified opinion thereon.
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosures to which it relates.
| | | | Asset Retirement Obligations - Closed Mines | | | | Description of the Matter | | CONSOL Energy accrues for the costs of current coal mine disturbance and final coal mine and gas well closure, including the cost of treating mine water discharge where necessary. Estimates of the Company’s asset retirement obligations are based upon permit requirements and CONSOL Energy’s assessment of these requirements. The total asset retirement obligations, including the current portion, were approximately $272$249 million at December 31, 2019.2020. This liability is reviewed annually, or when events and circumstances indicate an adjustment is necessary, by CONSOL Energy management and engineers. The estimated liability can significantly change if actual costs vary from the assumptions used in estimating the obligation or if governmental regulations change significantly. As discussed in Note 1 and Note 78 of the consolidated financial statements, the Company’s accounting for Asset Retirement Obligations requires that the fair value of an Asset Retirement Obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. For active locations, the present value of the estimated asset retirement costs is capitalized as part of the carrying amount of the long-lived asset. For locations that have been fully depleted, or closed, the present value of the change is recorded directly to the consolidated statements of income.
Auditing the amounts recorded for closed-mine asset retirement obligations is complex due to the nature of the assumptions used in the measurement process. The amounts recorded for asset retirement obligations are dependent upon a number of factors, including the estimated future expenditures, estimated mine life, inflation rates and the assumed credit-adjusted risk-free interest rate. | | | | How We Addressed the Matter in Our Audit | | We tested controls that address the risk of material misstatement relating to the measurement of the closed-mine asset retirement obligation. For example, we tested controls over management’s review of the asset retirement obligation calculation, management’s review over the timing and amount of expected asset retirement costs and management’s review over the significant assumptions discussed above. To test the closed-mine asset retirement obligation calculation, our audit procedures included, among others, assessing the methodology, testing the significant assumptions discussed above and testing the underlying data used by the Company in its analyses. We compared the assumptions used in developing the inflation rate, credit-adjusted risk-free rate and proved reserves used by management to historical trends, published reports and publicly available information. We compared the expected amounts and timing of asset retirement obligations costs to historical data and evaluated the changes in those amounts. For example, we evaluated management’s methodology for determining the amount and timing of asset retirement obligation costs which is utilized to measure the asset retirement obligation, to current year activity, published pricing data and historical amounts. In addition, we also involved our specialist to assist in our evaluation of management’s assumptions, of its closed mines, including regulatory requirements, reclamation plans, estimated asset retirement obligation costs, and engineering drawings for consistency with permit requirements. We also tested the completeness and accuracy of the data used in the Company’s calculation. |
We have served as the Company's auditor since 2017. February 14, 202012, 2021
CONSOL ENERGY INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands, except per share data) | | For the Years Ended December 31, | | | | 2020 | | | 2019 | | | 2018 | | Revenue and Other Income: | | | | | | | | | | | | | Coal Revenue | | $ | 772,662 | | | $ | 1,288,529 | | | $ | 1,364,292 | | Terminal Revenue | | | 66,810 | | | | 67,363 | | | | 64,926 | | Freight Revenue | | | 39,990 | | | | 19,667 | | | | 43,572 | | Miscellaneous Other Income (Note 4) | | | 126,886 | | | | 53,349 | | | | 58,660 | | Gain on Sale of Assets | | | 15,295 | | | | 1,995 | | | | 565 | | Total Revenue and Other Income | | | 1,021,643 | | | | 1,430,903 | | | | 1,532,015 | | Costs and Expenses: | | | | | | | | | | | | | Operating and Other Costs | | | 667,595 | | | | 948,012 | | | | 946,450 | | Depreciation, Depletion and Amortization | | | 210,760 | | | | 207,097 | | | | 201,264 | | Freight Expense | | | 39,990 | | | | 19,667 | | | | 43,572 | | Selling, General and Administrative Costs | | | 72,706 | | | | 67,111 | | | | 65,346 | | (Gain) Loss on Debt Extinguishment | | | (21,352 | ) | | | 24,455 | | | | 3,922 | | Interest Expense, net | | | 61,186 | | | | 66,464 | | | | 83,848 | | Total Costs and Expenses | | | 1,030,885 | | | | 1,332,806 | | | | 1,344,402 | | (Loss) Earnings Before Income Tax | | | (9,242 | ) | | | 98,097 | | | | 187,613 | | Income Tax Expense (Note 6) | | | 3,972 | | | | 4,539 | | | | 8,828 | | Net (Loss) Income | | | (13,214 | ) | | | 93,558 | | | | 178,785 | | Less: Net (Loss) Income Attributable to Noncontrolling Interest | | | (3,459 | ) | | | 17,557 | | | | 25,809 | | Net (Loss) Income Attributable to CONSOL Energy Inc. Shareholders | | $ | (9,755 | ) | | $ | 76,001 | | | $ | 152,976 | | | | | | | | | | | | | | | (Loss) Earnings per Share: | | | | | | | | | | | | | Total Basic (Loss) Earnings per Share | | $ | (0.37 | ) | | $ | 2.82 | | | $ | 5.48 | | Total Dilutive (Loss) Earnings per Share | | $ | (0.37 | ) | | $ | 2.81 | | | $ | 5.38 | |
| | | | | | | | | | | | |
| For the Years Ended December 31, | | 2019 | | 2018 | | 2017 | Revenue and Other Income: | | | | | | Coal Revenue | $ | 1,288,529 |
| | $ | 1,364,292 |
| | $ | 1,187,654 |
| Terminal Revenue | 67,363 |
| | 64,926 |
| | 60,066 |
| Freight Revenue | 19,667 |
| | 43,572 |
| | 73,692 |
| Miscellaneous Other Income (Note 4) | 53,349 |
| | 58,660 |
| | 73,279 |
| Gain on Sale of Assets | 1,995 |
| | 565 |
| | 17,212 |
| Total Revenue and Other Income | 1,430,903 |
| | 1,532,015 |
| | 1,411,903 |
| Costs and Expenses: | | | | | | Operating and Other Costs | 948,012 |
| | 946,450 |
| | 886,709 |
| Depreciation, Depletion and Amortization | 207,097 |
| | 201,264 |
| | 172,002 |
| Freight Expense | 19,667 |
| | 43,572 |
| | 73,692 |
| Selling, General and Administrative Costs | 67,111 |
| | 65,346 |
| | 83,605 |
| Loss on Debt Extinguishment | 24,455 |
| | 3,922 |
| | — |
| Interest Expense, net | 66,464 |
| | 83,848 |
| | 26,098 |
| Total Costs and Expenses | 1,332,806 |
| | 1,344,402 |
| | 1,242,106 |
| Earnings Before Income Tax | 98,097 |
| | 187,613 |
| | 169,797 |
| Income Tax Expense (Note 6) | 4,539 |
| | 8,828 |
| | 87,228 |
| Net Income | 93,558 |
| | 178,785 |
| | 82,569 |
| Less: Net Income Attributable to Noncontrolling Interest | 17,557 |
| | 25,809 |
| | 14,940 |
| Net Income Attributable to CONSOL Energy Inc. Shareholders | $ | 76,001 |
| | $ | 152,976 |
| | $ | 67,629 |
| | | | | | | Earnings per Share: | | | | | | Total Basic Earnings per Share | $ | 2.82 |
| | $ | 5.48 |
| | $ | 2.42 |
| Total Dilutive Earnings per Share | $ | 2.81 |
| | $ | 5.38 |
| | $ | 2.40 |
|
The accompanying notes are an integral part of these financial statements.
CONSOL ENERGY INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Dollars in thousands) | | For the Years Ended December 31, | | | | 2020 | | | 2019 | | | 2018 | | Net (Loss) Income | | $ | (13,214 | ) | | $ | 93,558 | | | $ | 178,785 | | Other Comprehensive Income (Loss): | | | | | | | | | | | | | Actuarially Determined Long-Term Liability Adjustments: | | | | | | | | | | | | | Amortization of Prior Service Credits (net of tax: $619, $697, $662) | | | (1,786 | ) | | | (2,075 | ) | | | (2,246 | ) | Recognized Net Actuarial Loss (net of tax: $(5,596), $(3,958), $(5,590)) | | | 16,161 | | | | 11,773 | | | | 18,960 | | Other Comprehensive (Loss) Gain before Reclassifications (net of tax: $109, $11,690, $(14,986)) | | | (145 | ) | | | (34,830 | ) | | | 49,627 | | Unrecognized Loss on Derivatives: | | | | | | | | | | | | | Unrealized Loss on Cash Flow Hedges (net of tax: $674, $37, $0) | | | (2,004 | ) | | | (117 | ) | | | 0 | | Other Comprehensive Income (Loss) | | | 12,226 | | | | (25,249 | ) | | | 66,341 | | | | | | | | | | | | | | | Comprehensive (Loss) Income | | $ | (988 | ) | | $ | 68,309 | | | $ | 245,126 | | | | | | | | | | | | | | | Less: Comprehensive (Loss) Income Attributable to Noncontrolling Interest | | | (3,400 | ) | | | 17,551 | | | | 25,803 | | | | | | | | | | | | | | | Comprehensive Income Attributable to CONSOL Energy Inc. Shareholders | | $ | 2,412 | | | $ | 50,758 | | | $ | 219,323 | |
| | | | | | | | | | | | | | For the Years Ended December 31, | | 2019 | | 2018 | | 2017 | Net Income | $ | 93,558 |
| | $ | 178,785 |
| | $ | 82,569 |
| Other Comprehensive Income (Loss): | | | | | | Actuarially Determined Long-Term Liability Adjustments: | | | | | | Amortization of Prior Service Credits (net of tax: $697, $662, $1,076) | (2,075 | ) | | (2,246 | ) | | (1,832 | ) | Recognized Net Actuarial Loss (net of tax: $(3,958), $(5,590), $(9,039)) | 11,773 |
| | 18,960 |
| | 15,391 |
| Settlement Loss (net of tax: $0, $0, $(2,312)) | — |
| | — |
| | 7,841 |
| Other Comprehensive (Loss) Gain before Reclassifications (net of tax: $11,690, $(14,986), $(26,360)) | (34,830 | ) | | 49,627 |
| | 73,519 |
| Unrecognized Loss on Derivatives: | | | | | | Unrealized Loss on Cash Flow Hedges (net of tax: $37, $0, $0) | (117 | ) | | — |
| | — |
| Other Comprehensive (Loss) Income | (25,249 | ) | | 66,341 |
| | 94,919 |
| | | | | | | Comprehensive Income | $ | 68,309 |
| | $ | 245,126 |
| | $ | 177,488 |
| | | | | | | Less: Comprehensive Income Attributable to Noncontrolling Interest | 17,551 |
| | 25,803 |
| | 14,896 |
| | | | | | | Comprehensive Income Attributable to CONSOL Energy Inc. Shareholders | $ | 50,758 |
| | $ | 219,323 |
| | $ | 162,592 |
|
The accompanying notes are an integral part of these financial statements.
CONSOL ENERGY INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in thousands) | | December 31, | | | December 31, | | | | 2020 | | | 2019 | | ASSETS | | | | | | | | | Current Assets: | | | | | | | | | Cash and Cash Equivalents | | $ | 50,850 | | | $ | 80,293 | | Accounts and Notes Receivable | | | | | | | | | Trade Receivables, net | | | 118,289 | | | | 131,688 | | Other Receivables, net | | | 42,157 | | | | 40,984 | | Inventories (Note 9) | | | 56,200 | | | | 54,131 | | Prepaid Expenses and Other Assets | | | 25,445 | | | | 30,933 | | Total Current Assets | | | 292,941 | | | | 338,029 | | Property, Plant and Equipment (Note 10): | | | | | | | | | Property, Plant and Equipment | | | 5,143,696 | | | | 5,008,180 | | Less—Accumulated Depreciation, Depletion and Amortization | | | 3,094,634 | | | | 2,916,015 | | Total Property, Plant and Equipment—Net | | | 2,049,062 | | | | 2,092,165 | | Other Assets: | | | | | | | | | Deferred Income Taxes (Note 6) | | | 68,821 | | | | 103,505 | | Right of Use Asset - Operating Leases (Note 14) | | | 53,436 | | | | 72,632 | | Other, net | | | 59,106 | | | | 87,471 | | Total Other Assets | | | 181,363 | | | | 263,608 | | TOTAL ASSETS | | $ | 2,523,366 | | | $ | 2,693,802 | |
| | | | | | | | | | December 31, 2019 | | December 31, 2018 | ASSETS | | | | Current Assets: | | | | Cash and Cash Equivalents | $ | 80,293 |
| | $ | 235,677 |
| Restricted Cash | — |
| | 29,258 |
| Accounts and Notes Receivable | | | | Trade Receivables, net of Allowance | 131,688 |
| | 87,589 |
| Other Receivables | 40,984 |
| | 41,355 |
| Inventories (Note 8) | 54,131 |
| | 48,646 |
| Prepaid Expenses and Other Assets | 30,933 |
| | 31,430 |
| Total Current Assets | 338,029 |
| | 473,955 |
| Property, Plant and Equipment (Note 9): | | | | Property, Plant and Equipment | 5,008,180 |
| | 4,838,171 |
| Less—Accumulated Depreciation, Depletion and Amortization | 2,916,015 |
| | 2,731,643 |
| Total Property, Plant and Equipment—Net | 2,092,165 |
| | 2,106,528 |
| Other Assets: | | | | Deferred Income Taxes (Note 6) | 103,505 |
| | 77,545 |
| Right of Use Asset - Operating Leases (Note 13) | 72,632 |
| | — |
| Other | 87,471 |
| | 102,699 |
| Total Other Assets | 263,608 |
| | 180,244 |
| TOTAL ASSETS | $ | 2,693,802 |
| | $ | 2,760,727 |
|
The accompanying notes are an integral part of these financial statements.
CONSOL ENERGY INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in thousands) | | December 31, | | | December 31, | | | | 2020 | | | 2019 | | LIABILITIES AND EQUITY | | | | | | | | | Current Liabilities: | | | | | | | | | Accounts Payable | | $ | 71,229 | | | $ | 106,223 | | Current Portion of Long-Term Debt (Note 13 and Note 14) | | | 53,846 | | | | 50,272 | | Other Accrued Liabilities (Note 12) | | | 243,395 | | | | 235,769 | | Total Current Liabilities | | | 368,470 | | | | 392,264 | | Long-Term Debt: | | | | | | | | | Long-Term Debt (Note 13) | | | 566,858 | | | | 653,802 | | Finance Lease Obligations (Note 14) | | | 36,203 | | | | 9,036 | | Total Long-Term Debt | | | 603,061 | | | | 662,838 | | Deferred Credits and Other Liabilities: | | | | | | | | | Postretirement Benefits Other Than Pensions (Note 15) | | | 387,637 | | | | 432,496 | | Pneumoconiosis Benefits (Note 16) | | | 229,720 | | | | 202,142 | | Asset Retirement Obligations (Note 8) | | | 228,182 | | | | 250,211 | | Workers’ Compensation (Note 16) | | | 64,390 | | | | 61,194 | | Salary Retirement (Note 15) | | | 35,359 | | | | 49,930 | | Operating Lease Liability (Note 14) | | | 35,655 | | | | 55,413 | | Other | | | 17,373 | | | | 14,919 | | Total Deferred Credits and Other Liabilities | | | 998,316 | | | | 1,066,305 | | TOTAL LIABILITIES | | | 1,969,847 | | | | 2,121,407 | | Stockholders’ Equity: | | | | | | | | | Common Stock, $0.01 Par Value; 62,500,000 Shares Authorized, 34,031,374 Shares Issued and Outstanding at December 31, 2020; 25,932,618 Shares Issued and Outstanding at December 31, 2019 | | | 340 | | | | 259 | | Capital in Excess of Par Value | | | 642,887 | | | | 523,762 | | Retained Earnings | | | 246,850 | | | | 259,903 | | Accumulated Other Comprehensive Loss | | | (336,558 | ) | | | (348,725 | ) | Total CONSOL Energy Inc. Stockholders’ Equity | | | 553,519 | | | | 435,199 | | Noncontrolling Interest | | | 0 | | | | 137,196 | | TOTAL EQUITY | | | 553,519 | | | | 572,395 | | TOTAL LIABILITIES AND EQUITY | | $ | 2,523,366 | | | $ | 2,693,802 | |
| | | | | | | | | | December 31, 2019 | | December 31, 2018 | LIABILITIES AND EQUITY | | | | Current Liabilities: | | | | Accounts Payable | $ | 106,223 |
| | $ | 130,930 |
| Current Portion of Long-Term Debt (Note 12 and Note 13) | 50,272 |
| | 134,812 |
| Other Accrued Liabilities (Note 11) | 235,769 |
| | 226,434 |
| Total Current Liabilities | 392,264 |
| | 492,176 |
| Long-Term Debt: | | | | Long-Term Debt (Note 12) | 653,802 |
| | 708,536 |
| Finance Lease Obligations (Note 13) | 9,036 |
| | 25,690 |
| Total Long-Term Debt | 662,838 |
| | 734,226 |
| Deferred Credits and Other Liabilities: | | | | Postretirement Benefits Other Than Pensions (Note 14) | 432,496 |
| | 441,246 |
| Pneumoconiosis Benefits (Note 15) | 202,142 |
| | 165,001 |
| Asset Retirement Obligations (Note 7) | 250,211 |
| | 235,984 |
| Workers’ Compensation (Note 15) | 61,194 |
| | 59,742 |
| Salary Retirement (Note 14) | 49,930 |
| | 64,172 |
| Operating Lease Liability (Note 13) | 55,413 |
| | — |
| Other | 14,919 |
| | 16,569 |
| Total Deferred Credits and Other Liabilities | 1,066,305 |
| | 982,714 |
| TOTAL LIABILITIES | 2,121,407 |
| | 2,209,116 |
| Stockholders’ Equity: | | | | Common Stock, $0.01 Par Value; 62,500,000 Shares Authorized, 25,932,618 Shares Issued and Outstanding at December 31, 2019; 27,437,844 Shares Issued and Outstanding at December 31, 2018 | 259 |
| | 274 |
| Capital in Excess of Par Value | 523,762 |
| | 550,995 |
| Retained Earnings | 259,903 |
| | 182,148 |
| Accumulated Other Comprehensive Loss | (348,725 | ) | | (323,482 | ) | Total CONSOL Energy Inc. Stockholders’ Equity | 435,199 |
| | 409,935 |
| Noncontrolling Interest | 137,196 |
| | 141,676 |
| TOTAL EQUITY | 572,395 |
| | 551,611 |
| TOTAL LIABILITIES AND EQUITY | $ | 2,693,802 |
| | $ | 2,760,727 |
|
The accompanying notes are an integral part of these financial statements.
CONSOL ENERGY INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’STOCKHOLDERS’ EQUITY (Dollars in thousands) | | | | | | | | | | | | | | | | | | Total | | | | | | | | | | | | | | | | Capital in | | | | | | | Accumulated | | | CONSOL | | | | | | | | | | | | | | | | Excess | | | Retained | | | Other | | | Energy Inc. | | | Non- | | | | | | | | Common | | | of Par | | | (Deficit) | | | Comprehensive | | | Stockholders’ | | | Controlling | | | Total | | | | Stock | | | Value | | | Earnings | | | (Loss) Income | | | Equity | | | Interest | | | Equity | | December 31, 2017 | | $ | 280 | | | $ | 552,793 | | | $ | (43,713 | ) | | $ | (305,100 | ) | | $ | 204,260 | | | $ | 139,381 | | | $ | 343,641 | | Net Income | | | 0 | | | | 0 | | | | 152,976 | | | | 0 | | | | 152,976 | | | | 25,809 | | | | 178,785 | | Actuarially Determined Long-Term Liability Adjustments (Net of $19,914 Tax) | | | 0 | | | | 0 | | | | 0 | | | | 66,347 | | | | 66,347 | | | | (6 | ) | | | 66,341 | | Comprehensive Income | | | 0 | | | | 0 | | | | 152,976 | | | | 66,347 | | | | 219,323 | | | | 25,803 | | | | 245,126 | | Separation Adjustments | | | 0 | | | | 7,216 | | | | 0 | | | | 0 | | | | 7,216 | | | | 0 | | | | 7,216 | | Issuance of Common Stock | | | 1 | | | | (1 | ) | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | Repurchases of Common Stock (708,245 Shares) | | | (7 | ) | | | (13,988 | ) | | | (11,844 | ) | | | 0 | | | | (25,839 | ) | | | 0 | | | | (25,839 | ) | Purchase of CCR Units (167,958 Units) | | | 0 | | | | (905 | ) | | | 0 | | | | 0 | | | | (905 | ) | | | (2,174 | ) | | | (3,079 | ) | Reclassification of Stranded Tax Effect of Change in Tax Law | | | 0 | | | | 0 | | | | 84,729 | | | | (84,729 | ) | | | 0 | | | | 0 | | | | 0 | | Amortization of Stock-Based Compensation Awards | | | 0 | | | | 8,392 | | | | 0 | | | | 0 | | | | 8,392 | | | | 1,843 | | | | 10,235 | | Shares/Units Withheld for Taxes | | | 0 | | | | (2,512 | ) | | | 0 | | | | 0 | | | | (2,512 | ) | | | (912 | ) | | | (3,424 | ) | Distributions to Noncontrolling Interest | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | (22,265 | ) | | | (22,265 | ) | December 31, 2018 | | $ | 274 | | | $ | 550,995 | | | $ | 182,148 | | | $ | (323,482 | ) | | $ | 409,935 | | | $ | 141,676 | | | $ | 551,611 | | Net Income | | | 0 | | | | 0 | | | | 76,001 | | | | 0 | | | | 76,001 | | | | 17,557 | | | | 93,558 | | Actuarially Determined Long-Term Liability Adjustments (Net of $8,429 Tax) | | | 0 | | | | 0 | | | | 0 | | | | (25,126 | ) | | | (25,126 | ) | | | (6 | ) | | | (25,132 | ) | Interest Rate Hedge (Net of ($37) Tax) | | | 0 | | | | 0 | | | | 0 | | | | (117 | ) | | | (117 | ) | | | 0 | | | | (117 | ) | Comprehensive Income (Loss) | | | 0 | | | | 0 | | | | 76,001 | | | | (25,243 | ) | | | 50,758 | | | | 17,551 | | | | 68,309 | | Issuance of Common Stock | | | 2 | | | | (2 | ) | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | Repurchases of Common Stock (1,717,497 Shares) | | | (17 | ) | | | (34,470 | ) | | | 1,754 | | | | 0 | | | | (32,733 | ) | | | 0 | | | | (32,733 | ) | Purchase of CCR Units (26,297 Units) | | | 0 | | | | (29 | ) | | | 0 | | | | 0 | | | | (29 | ) | | | (340 | ) | | | (369 | ) | Amortization of Stock-Based Compensation Awards | | | 0 | | | | 11,351 | | | | 0 | | | | 0 | | | | 11,351 | | | | 1,409 | | | | 12,760 | | Shares/Units Withheld for Taxes | | | 0 | | | | (4,083 | ) | | | 0 | | | | 0 | | | | (4,083 | ) | | | (880 | ) | | | (4,963 | ) | Distributions to Noncontrolling Interest | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | (22,220 | ) | | | (22,220 | ) | December 31, 2019 | | $ | 259 | | | $ | 523,762 | | | $ | 259,903 | | | $ | (348,725 | ) | | $ | 435,199 | | | $ | 137,196 | | | $ | 572,395 | | Net Loss | | | 0 | | | | 0 | | | | (9,755 | ) | | | 0 | | | | (9,755 | ) | | | (3,459 | ) | | | (13,214 | ) | Actuarially Determined Long-Term Liability Adjustments (Net of ($4,868) Tax) | | | 0 | | | | 0 | | | | 0 | | | | 14,171 | | | | 14,171 | | | | 59 | | | | 14,230 | | Interest Rate Hedge (Net of ($674) Tax) | | | 0 | | | | 0 | | | | 0 | | | | (2,004 | ) | | | (2,004 | ) | | | 0 | | | | (2,004 | ) | Comprehensive (Loss) Income | | | 0 | | | | 0 | | | | (9,755 | ) | | | 12,167 | | | | 2,412 | | | | (3,400 | ) | | | (988 | ) | Adoption of ASU 2016-13 (Net of ($1,109) Tax) | | | 0 | | | | 0 | | | | (3,298 | ) | | | 0 | | | | (3,298 | ) | | | 0 | | | | (3,298 | ) | Issuance of Common Stock | | | 2 | | | | (2 | ) | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | Amortization of Stock-Based Compensation Awards | | | 0 | | | | 11,161 | | | | 0 | | | | 0 | | | | 11,161 | | | | 418 | | | | 11,579 | | Shares/Units Withheld for Taxes | | | 0 | | | | (646 | ) | | | 0 | | | | 0 | | | | (646 | ) | | | (217 | ) | | | (863 | ) | Distributions to Noncontrolling Interest | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | (5,575 | ) | | | (5,575 | ) | CCR Merger | | | 79 | | | | 108,612 | | | | 0 | | | | 0 | | | | 108,691 | | | | (128,422 | ) | | | (19,731 | ) | December 31, 2020 | | $ | 340 | | | $ | 642,887 | | | $ | 246,850 | | | $ | (336,558 | ) | | $ | 553,519 | | | $ | 0 | | | $ | 553,519 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Common Stock | | Capital in Excess of Par Value | | Retained (Deficit) Earnings | | Parent Net Investment | | Accumulated Other Comprehensive (Loss) Income | | Total CONSOL Energy Inc. Stockholders’ Equity | | Non- Controlling Interest | | Total Equity | December 31, 2016 | $ | — |
| | $ | — |
| | $ | — |
| | $ | 1,057,694 |
| | $ | (400,063 | ) | | $ | 657,631 |
| | $ | 142,493 |
| | $ | 800,124 |
| Net (Loss) Income | — |
| | — |
| | (43,713 | ) | | 111,342 |
| | — |
| | 67,629 |
| | 14,940 |
| | 82,569 |
| Actuarially Determined Long-Term Liability Adjustments (Net of $30,323 Tax) | — |
| | — |
| | — |
| | — |
| | 94,963 |
| | 94,963 |
| | (44 | ) | | 94,919 |
| Comprehensive (Loss) Income | — |
| | — |
| | (43,713 | ) | | 111,342 |
| | 94,963 |
| | 162,592 |
| | 14,896 |
| | 177,488 |
| Net Parent Distributions | — |
| | — |
| | — |
| | (207,008 | ) | | — |
| | (207,008 | ) | | — |
| | (207,008 | ) | Spin Distribution to CNX Resources | — |
| | — |
| | — |
| | (425,000 | ) | | — |
| | (425,000 | ) | | — |
| | (425,000 | ) | Separation Adjustments | — |
| | 537,028 |
| | — |
| | (537,028 | ) | | — |
| | — |
| | — |
| | — |
| Issuance of Common Stock | 280 |
| | (280 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| Amortization of Stock-Based Compensation Awards | — |
| | 16,212 |
| | — |
| | — |
| | — |
| | 16,212 |
| | 5,873 |
| | 22,085 |
| Shares/Units Withheld for Taxes | — |
| | (167 | ) | | — |
| | — |
| | — |
| | (167 | ) | | (1,989 | ) | | (2,156 | ) | Distributions to Noncontrolling Interest | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (21,892 | ) | | (21,892 | ) | December 31, 2017 | $ | 280 |
| | $ | 552,793 |
| | $ | (43,713 | ) | | $ | — |
| | $ | (305,100 | ) | | $ | 204,260 |
| | $ | 139,381 |
| | $ | 343,641 |
| Net Income | — |
| | — |
| | 152,976 |
| | — |
| | — |
| | 152,976 |
| | 25,809 |
| | 178,785 |
| Actuarially Determined Long-Term Liability Adjustments (Net of $19,914 Tax) | — |
| | — |
| | — |
| | — |
| | 66,347 |
| | 66,347 |
| | (6 | ) | | 66,341 |
| Comprehensive Income | — |
| | — |
| | 152,976 |
| | — |
| | 66,347 |
| | 219,323 |
| | 25,803 |
| | 245,126 |
| Separation Adjustments | — |
| | 7,216 |
| | — |
| | — |
| | — |
| | 7,216 |
| | — |
| | 7,216 |
| Issuance of Common Stock | 1 |
| | (1 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| Repurchases of Common Stock (708,245 Shares) | (7 | ) | | (13,988 | ) | | (11,844 | ) | | — |
| | — |
| | (25,839 | ) | | — |
| | (25,839 | ) | Purchase of CCR Units (167,958 Units) | — |
| | (905 | ) | | — |
| | — |
| | — |
| | (905 | ) | | (2,174 | ) | | (3,079 | ) | Reclassification of Stranded Tax Effect of Change in Tax Law | — |
| | — |
| | 84,729 |
| | — |
| | (84,729 | ) | | — |
| | — |
| | — |
| Amortization of Stock-Based Compensation Awards | — |
| | 8,392 |
| | — |
| | — |
| | — |
| | 8,392 |
| | 1,843 |
| | 10,235 |
| Shares/Units Withheld for Taxes | — |
| | (2,512 | ) | | — |
| | — |
| | — |
| | (2,512 | ) | | (912 | ) | | (3,424 | ) | Distributions to Noncontrolling Interest | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (22,265 | ) | | (22,265 | ) | December 31, 2018 | $ | 274 |
| | $ | 550,995 |
| | $ | 182,148 |
| | $ | — |
| | $ | (323,482 | ) | | $ | 409,935 |
| | $ | 141,676 |
| | $ | 551,611 |
| Net Income | — |
| | — |
| | 76,001 |
| | — |
| | — |
| | 76,001 |
| | 17,557 |
| | 93,558 |
| Actuarially Determined Long-Term Liability Adjustments (Net of ($8,429) Tax) | — |
| | — |
| | — |
| | — |
| | (25,126 | ) | | (25,126 | ) | | (6 | ) | | (25,132 | ) | Interest Rate Hedge (Net of ($37) Tax) | — |
| | — |
| | — |
| | — |
| | (117 | ) | | (117 | ) | | — |
| | (117 | ) | Comprehensive Income (Loss) | — |
| | — |
| | 76,001 |
| | — |
| | (25,243 | ) | | 50,758 |
| | 17,551 |
| | 68,309 |
| Issuance of Common Stock | 2 |
| | (2 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| Repurchases of Common Stock (1,717,497 Shares) | (17 | ) | | (34,470 | ) | | 1,754 |
| | — |
| | — |
| | (32,733 | ) | | — |
| | (32,733 | ) | Purchase of CCR Units (26,297 Units) | — |
| | (29 | ) | | — |
| | — |
| | — |
| | (29 | ) | | (340 | ) | | (369 | ) | Amortization of Stock-Based Compensation Awards | — |
| | 11,351 |
| | — |
| | — |
| | — |
| | 11,351 |
| | 1,409 |
| | 12,760 |
| Shares/Units Withheld for Taxes | — |
| | (4,083 | ) | | — |
| | — |
| | — |
| | (4,083 | ) | | (880 | ) | | (4,963 | ) | Distributions to Noncontrolling Interest | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (22,220 | ) | | (22,220 | ) | December 31, 2019 | $ | 259 |
| | $ | 523,762 |
| | $ | 259,903 |
| | $ | — |
| | $ | (348,725 | ) | | $ | 435,199 |
| | $ | 137,196 |
| | $ | 572,395 |
|
The accompanying notes are an integral part of these financial statements.
CONSOL ENERGY INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) | | For the Years Ended December 31, | | | | 2020 | | | 2019 | | | 2018 | | Cash Flows from Operating Activities: | | | | | | | | | | | | | Net (Loss) Income | | $ | (13,214 | ) | | $ | 93,558 | | | $ | 178,785 | | Adjustments to Reconcile Net (Loss) Income to Net Cash Provided by Operating Activities: | | | | | | | | | | | | | Depreciation, Depletion and Amortization | | | 210,760 | | | | 207,097 | | | | 201,264 | | Stock/Unit-Based Compensation | | | 11,579 | | | | 12,760 | | | | 10,235 | | Gain on Sale of Assets | | | (15,295 | ) | | | (1,995 | ) | | | (565 | ) | Amortization of Debt Issuance Costs | | | 7,447 | | | | 6,416 | | | | 8,858 | | (Gain) Loss on Debt Extinguishment | | | (21,352 | ) | | | 24,455 | | | | 3,922 | | Deferred Income Taxes | | | 11,685 | | | | (17,419 | ) | | | (16,482 | ) | Equity in Earnings of Affiliates | | | 1,251 | | | | 0 | | | | 0 | | Changes in Operating Assets: | | | | | | | | | | | | | Trade and Other Receivables | | | 11,130 | | | | (38,960 | ) | | | 39,157 | | Inventories | | | (2,069 | ) | | | (5,485 | ) | | | 4,774 | | Prepaid Expenses and Other Assets | | | 7,574 | | | | 497 | | | | (7,307 | ) | Changes in Other Assets | | | (21,058 | ) | | | 17,302 | | | | 15,583 | | Changes in Operating Liabilities: | | | | | | | | | | | | | Accounts Payable | | | (30,759 | ) | | | (21,714 | ) | | | 37,488 | | Other Operating Liabilities | | | (2,915 | ) | | | (7,884 | ) | | | (38,659 | ) | Changes in Other Liabilities | | | (25,433 | ) | | | (24,062 | ) | | | (23,528 | ) | Net Cash Provided by Operating Activities | | | 129,331 | | | | 244,566 | | | | 413,525 | | Cash Flows from Investing Activities: | | | | | | | | | | | | | Capital Expenditures | | | (86,004 | ) | | | (169,739 | ) | | | (145,749 | ) | Proceeds from Sales of Assets | | | 9,899 | | | | 2,201 | | | | 2,103 | | Other Investing Activity | | | (229 | ) | | | (5,003 | ) | | | (10,000 | ) | Net Cash Used in Investing Activities | | | (76,334 | ) | | | (172,541 | ) | | | (153,646 | ) | Cash Flows from Financing Activities: | | | | | | | | | | | | | Proceeds from Finance Lease Obligations | | | 19,314 | | | | 0 | | | | 0 | | Payments on Finance Lease Obligations | | | (28,295 | ) | | | (18,549 | ) | | | (15,484 | ) | Proceeds from Term Loan A | | | 0 | | | | 26,250 | | | | 0 | | Payments on Term Loan A | | | (22,500 | ) | | | (11,250 | ) | | | (26,250 | ) | Payments on Term Loan B | | | (2,750 | ) | | | (124,437 | ) | | | (4,000 | ) | Payments on Second Lien Notes | | | (32,064 | ) | | | (59,421 | ) | | | (28,182 | ) | Proceeds from Asset-Backed Financing | | | 0 | | | | 3,757 | | | | 0 | | Payments on Asset-Backed Financing | | | (705 | ) | | | (240 | ) | | | 0 | | Distributions to Noncontrolling Interest | | | (5,575 | ) | | | (22,220 | ) | | | (22,265 | ) | Shares/Units Withheld for Taxes | | | (863 | ) | | | (4,963 | ) | | | (3,424 | ) | Repurchases of Common Stock | | | 0 | | | | (32,733 | ) | | | (25,839 | ) | Purchases of CCR Units | | | 0 | | | | (369 | ) | | | (3,079 | ) | Spin Distribution to CNX Resources Corporation | | | 0 | | | | 0 | | | | (18,234 | ) | Debt Issuance and Financing Fees | | | (9,002 | ) | | | (12,492 | ) | | | (2,166 | ) | Net Cash Used in Financing Activities | | | (82,440 | ) | | | (256,667 | ) | | | (148,923 | ) | Net (Decrease) Increase in Cash and Cash Equivalents and Restricted Cash | | | (29,443 | ) | | | (184,642 | ) | | | 110,956 | | Cash and Cash Equivalents and Restricted Cash at Beginning of Period | | | 80,293 | | | | 264,935 | | | | 153,979 | | Cash and Cash Equivalents and Restricted Cash at End of Period | | $ | 50,850 | | | $ | 80,293 | | | $ | 264,935 | |
| | | | | | | | | | | | | | For the Years Ended December 31, | | 2019 | | 2018 | | 2017 | Cash Flows from Operating Activities: | | | | | | Net Income | $ | 93,558 |
| | $ | 178,785 |
| | $ | 82,569 |
| Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: | | | | | | Depreciation, Depletion and Amortization | 207,097 |
| | 201,264 |
| | 172,002 |
| Stock/Unit-Based Compensation | 12,760 |
| | 10,235 |
| | 22,085 |
| Gain on Sale of Assets | (1,995 | ) | | (565 | ) | | (17,212 | ) | Amortization of Debt Issuance Costs | 6,416 |
| | 8,858 |
| | 977 |
| Loss on Debt Extinguishment | 24,455 |
| | 3,922 |
| | — |
| Deferred Income Taxes | (17,419 | ) | | (16,482 | ) | | 16,610 |
| Changes in Operating Assets: | | | | | | Trade and Other Receivables | (38,960 | ) | | 39,157 |
| | (44,417 | ) | Inventories | (5,485 | ) | | 4,774 |
| | (3,259 | ) | Prepaid Expenses and Other Assets | 497 |
| | (7,307 | ) | | (2,877 | ) | Changes in Other Assets | 17,302 |
| | 15,583 |
| | 5,729 |
| Changes in Operating Liabilities: | | | | | | Accounts Payable | (21,714 | ) | | 37,488 |
| | 7,043 |
| Other Operating Liabilities | (7,884 | ) | | (38,659 | ) | | 46,421 |
| Changes in Other Liabilities | (24,062 | ) | | (23,526 | ) | | (40,765 | ) | Other | — |
| | (2 | ) | | 3,204 |
| Net Cash Provided by Operating Activities | 244,566 |
| | 413,525 |
| | 248,110 |
| Cash Flows from Investing Activities: | | | | | | Capital Expenditures | (169,739 | ) | | (145,749 | ) | | (81,413 | ) | Proceeds from Sales of Assets | 2,201 |
| | 2,103 |
| | 24,582 |
| Other Investing Activity | (5,003 | ) | | (10,000 | ) | | — |
| Net Cash Used in Investing Activities | (172,541 | ) | | (153,646 | ) | | (56,831 | ) | Cash Flows from Financing Activities: | | | | | | Payments on Finance Lease Obligations | (18,549 | ) | | (15,484 | ) | | (3,904 | ) | Proceeds from Term Loan A | 26,250 |
| | — |
| | 100,000 |
| Payments on Term Loan A | (11,250 | ) | | (26,250 | ) | | — |
| Proceeds from Term Loan B | — |
| | — |
| | 392,147 |
| Payments on Term Loan B | (124,437 | ) | | (4,000 | ) | | — |
| Proceeds from Second Lien Notes | — |
| | — |
| | 300,000 |
| Payments on Second Lien Notes | (52,648 | ) | | (25,724 | ) | | — |
| Proceeds from Asset-Backed Financing | 3,757 |
| | — |
| | — |
| Payments on Asset-Backed Financing | (240 | ) | | — |
| | — |
| Net Payments on Revolver - MLP | — |
| | — |
| | (201,000 | ) | Distributions to Noncontrolling Interest | (22,220 | ) | | (22,265 | ) | | (21,892 | ) | Shares/Units Withheld for Taxes | (4,963 | ) | | (3,424 | ) | | (2,156 | ) | Repurchases of Common Stock | (32,733 | ) | | (25,839 | ) | | — |
| Purchases of CCR Units | (369 | ) | | (3,079 | ) | | — |
| Spin Distribution to CNX Resources Corporation | — |
| | (18,234 | ) | | (425,000 | ) | Other Parent Net Distributions | — |
| | — |
| | (156,502 | ) | Premium Paid on Extinguishment of Debt | (6,773 | ) | | (2,458 | ) | | — |
| Debt Issuance and Financing Fees | (12,492 | ) | | (2,166 | ) | | (32,304 | ) | Net Cash Used in Financing Activities | (256,667 | ) | | (148,923 | ) | | (50,611 | ) | Net (Decrease) Increase in Cash and Cash Equivalents and Restricted Cash | (184,642 | ) | | 110,956 |
| | 140,668 |
| Cash and Cash Equivalents and Restricted Cash at Beginning of Period | 264,935 |
| | 153,979 |
| | 13,311 |
| Cash and Cash Equivalents and Restricted Cash at End of Period | $ | 80,293 |
| | $ | 264,935 |
| | $ | 153,979 |
|
The accompanying notes are an integral part of these financial statements.
CONSOL ENERGY INC. AND SUBSIDIARIES NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share data)
NOTE 1—1—SIGNIFICANT ACCOUNTING POLICIES:
Unless otherwise indicated or except where the context otherwise requires, references to “we,” “our,” “us,” “our Company,” “the Company” and “CONSOL Energy” refer to CONSOL Energy Inc. and its subsidiaries on or after November 28, 2017 and to CONSOL Mining Corporation and its subsidiaries prior to November 28, 2017, except to the extent of any discussion of the financial condition, results of operations, cash flows, and other business activities of the Company on or prior to November 28, 2017 that relate specifically to the Coal Business, in which case such references shall be to the Predecessor.
A summary of the significant accounting policies of CONSOL Energy Inc. and its subsidiaries (“we,” “our,” “us,” “our Company,” “the Company” and “CONSOL Energy”) is presented below. These, together with the other notes that follow, are an integral part of the Consolidated Financial Statements. The Consolidated Financial Statements include the accounts of CONSOL Energy Inc. and its wholly ownedwholly-owned and majority-owned and/or controlled subsidiaries. The portion of these entities that is not owned by the Company is presented as non-controlling interest. All significant intercompany transactions and accounts have been eliminated in consolidation.
Prior to the separation, CONSOL Energy did not operate as a separate, standalone entity. The Company's operations were included in its former parent's financial results. Accordingly, for all periods prior to the separation and distribution, the accompanying Consolidated Financial Statements were prepared from the Company's former parent's historical accounting records and were presented on a standalone basis as if the Company's operations had been conducted independently from its former parent. Such Consolidated Financial Statements include the historical operations that were considered to comprise the Company's businesses, as well as certain assets and liabilities that were historically held at the Company's former parent's corporate level but were specifically identifiable or otherwise attributable to the Company. The Company's former parent's net investment in these operations is reflected as Parent Net Investment in the accompanying Consolidated Financial Statements. All significant intercompany transactions between the Company's former parent and the Company were included within Parent Net Investment in the accompanying Consolidated Financial Statements.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, as well as various disclosures. Actual results could differ from those estimates. The most significant estimates included in the preparation of the consolidated financial statements are related to other postretirement benefits, coal workers' pneumoconiosis, workers' compensation, salary retirement benefits, stock-based compensation, asset retirement obligations, deferred income tax assets and liabilities, contingencies and the values of coal properties. Cash and Cash Equivalents Cash and cash equivalents include cash on hand and on deposit at banking institutions as well as all highly liquid short-term securities with original maturities of three months or less. Restricted cash represents cash collateral supporting the Company's surety bond portfolio and letters of credit issued under the Company's accounts receivable securitization program.
As of December 31, 2020 and 2019, the Company had no restricted cash.
Trade Receivables and Allowance for Doubtful Accounts Credit LossesTrade receivables are recorded at the invoiced amount and do not bear interest. Trade credit is extended based upon evaluations of each customer's ability to perform its obligations, which is assessed regularly. An allowanceSee Note 7 - Credit Losses for doubtful accounts is determined based upon an agingadditional information regarding the Company's measurement of customer accounts and a review for collectibility of specific accounts. Amounts are written off against the allowance in the period in which the receivable is deemed uncollectible. The allowance for doubtful accounts was $2,100 as of December 31, 2019. NaN allowance for doubtful accounts was recorded as of December 31, 2018. In addition, thereexpected credit losses. There were no material financing receivables with a contractual maturity greater than one year at December 31, 2020 and 2019 or 2018. Inventories are stated at the lower of cost or net realizable value. The cost of coal inventories is determined by the first-in, first-outfirst-in, first-out (FIFO) method. Coal inventory costs include labor, supplies, equipment costs, operating overhead, depreciation, depletion, amortization, and other related costs. The cost of supplies inventory is determined by the average cost method and includes operating and maintenance supplies to be used in the Company's coal operations.
Property, Plant and Equipment
Property, plant and equipment is recorded at cost upon acquisition. Expenditures which extend the useful lives of existing plant and equipment are capitalized. Interest costs applicable to major asset additions are capitalized during the construction period. Costs of additional mine facilities required to maintain production after a mine reaches the production stage, generally referred to as “receding face costs,” are expensed as incurred; however, the costs of additional airshafts and new portals are capitalized. Planned major maintenance costs which do not extend the useful lives of existing plant and equipment are expensed as incurred.
Coal exploration costs are expensed as incurred. Coal exploration costs include those incurred to ascertain existence, location, extent or quality of ore or minerals before beginning the development stage of the mine. Costs of developing new underground mines and certain underground expansion projects are capitalized. Underground development costs, which are costs incurred to make the mineral physically accessible, include costs to prepare property for shafts, driving main entries for ventilation, haulage, personnel, construction of airshafts, roof protection and other facilities.
Airshafts and capitalized mine development associated with a coal reserve are amortized on a units-of-production basis as the coal is produced so that each ton of coal is assigned a portion of the unamortized costs. The Company employs this method to match costs with the related revenues realized in a particular period. Rates are updated when revisions to coal reserve estimates are made. Coal reserve estimates are reviewed when information becomes available that indicates a reserve change is needed, or at a minimum once a year. Any material effect from changes in estimates is disclosed in the period the change occurs. Amortization of development costs begins when the development phase is complete and the production phase begins. At an underground mine, the end of the development phase and the beginning of the production phase takes place when construction of the mine for economic extraction is substantially complete. Coal extracted during the development phase is incidental to the mine’s production capacity and is not considered to shift the mine into the production phase.
Coal reserves are either owned in fee or controlled by lease. The duration of the leases vary; however, the lease terms are generally extended automatically to the exhaustion of economically recoverable reserves, as long as active mining continues. Coal interests held by lease provide the same rights as fee ownership for mineral extraction and are legally considered real property interests. Depletion of leased coal interests is computed using the units-of-production method over recoverable coal reserves. The Company also makes advance payments (advanced mining royalties) to lessors under certain lease agreements that are recoupable against future production, and it makes payments that are generally based upon a specified rate per ton or a percentage of gross realization from the sale of the coal. The Company evaluates its properties for impairment issues whenever events or circumstances indicate that the carrying amount may not be recoverable.
Costs to obtain coal lands are capitalized based on the cost at acquisition and are amortized using the units-of-production method over all estimated recoverable reserve tons assigned and accessible to the mine. Recoverable coal reserves are estimated on a clean coal ton equivalent, which excludes non-recoverable coal reserves and anticipated central preparation plant processing refuse. Rates are updated when revisions to coal reserve estimates are made. Coal reserve estimates are reviewed when events and circumstances indicate a reserve change is needed, or at a minimum once a year. Amortization of coal interests begins when the coal reserve is produced. At an underground mine, a ton is considered produced once it reaches the surface area of the mine. Any material effect from changes in estimates is disclosed in the period the change occurs.
Advance mining royalties are advance payments made to lessors under terms of mineral lease agreements that are recoupable against future production using the units-of-production method. Depletion of leased coal interests is computed using the units-of-production method over recoverable coal reserves. Advance mining royalties and leased coal interests are evaluated for impairment issues whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Any revisions are accounted for prospectively as changes in accounting estimates.
When properties are retired or otherwise disposed, the related cost and accumulated depreciation are removed from the respective accounts and any profit or loss on disposition is recognized in Gain on Sale of Assets in the Consolidated Statements of Income.
Depreciation of plant and equipment is calculated using the straight-line method over the estimated useful lives or lease terms, generally as follows:
| | | | | Years | | Buildings and improvements | | | 10 to 45 | | Machinery and equipment | | | 3 to 25 | | Leasehold improvements | | | Life of Lease | |
Capitalization of Interest
Interest costs associated with the development of significant properties and projects are capitalized until the project is substantially complete and ready for its intended use. A weighted average cost of borrowing rate is used. For the years ended December 31, 2020, 2019 2018, and 2017,2018, capitalized interest totaled $1,911, $6,686 and $6,033, and $1,444, respectively.
Impairment of Long-lived Assets
Impairment of long-lived assets is recorded when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying value. The carrying value of the assets is then reduced to its estimated fair value which is usually measured based on an estimate of future discounted cash flows. There were no indicators of impairment and, therefore, no impairment losses were recorded during the years ended December 31, 2020, 2019 2018, and 2017.
The Company files a consolidated federal income tax return and utilizes the asset and liability method to account for income taxes. The provision for income taxes represents amounts paid or estimated to be payable, net of amounts refunded or estimated to be refunded, for the current year and the change in deferred taxes, exclusive of amounts recorded in Other Comprehensive Income (Loss) Income.. Any refinements to prior years’ taxes made due to subsequent information are reflected as adjustments in the current period. Deferred income tax assets and liabilities are determined based on temporary differences between the financial reporting and tax bases of assets and liabilities and are recognized using enacted tax rates for the effect of such temporary differences. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized. In accounting for uncertainty in income taxes of a tax position taken or expected to be taken in a tax return, the Company utilizes a recognition threshold and measurement attribute for the financial statement recognition and measurement. The recognition threshold requires the Company to determine whether it is more likely than not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position in order to record any financial statement benefit. If it is more likely than not that a tax position will be sustained, then the Company must measure the tax position to determine the amount of benefit to recognize in the financial statements. The tax position is measured at the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement.
Postretirement Benefits Other Than Pensions Postretirement benefit obligations established by the Coal Industry Retiree Health Benefit Act of 1992 (the Coal Act) are treated as a multi-employer plan which requires expense to be recorded for the associated obligations as payments are made. Postretirement benefits other than pensions, except for those established pursuant to the Coal Act, are accounted for in accordance with the Retirement Benefits Compensation and Non-retirement Postemployment Benefits Compensation Topics of the FASBFinancial Accounting Standards Board (“FASB”) Accounting Standards Codification, which requires employers to accrue the cost of such retirement benefits for the employees' active service periods. Such liabilities are determined on an actuarial basis and CONSOL Energy administers these liabilities through a combination of self-insured and fully insured agreements. Differences between actual and expected results or changes in the value of obligations are recognized through Other Comprehensive Income (Loss) Income. .Pneumoconiosis Benefits and Workers' Compensation CONSOL Energy is required by federal and state statutes to provide benefits to certain current and former totally disabled employees or their dependents for awards related to coal workers' pneumoconiosis. CONSOL Energy is also required by various state statutes to provide workers' compensation benefits for employees who sustain employment-related physical injuries or some types of occupational disease. Workers' compensation benefits include compensation for disability, medical costs, and on some occasions, the cost of rehabilitation. CONSOL Energy is primarily self-insured for these benefits. Provisions for estimated benefits are determined on an actuarial basis.
Asset Retirement Obligations
Mine closing costs and costs associated with dismantling and removing de-gasification facilities are accrued using the accounting treatment prescribed by the Asset Retirement and Environmental Obligations Topic of the FASB Accounting Standards Codification. This topic requires the fair value of an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. For active locations, the present value of the estimated asset retirement obligation is capitalized as part of the carrying amount of the long-lived asset. For locations that have been fully depleted or closed, the present value of the change is recorded directly to the consolidated statements of income. Generally, the capitalized asset retirement obligation is depreciated on a units-of-production basis. Accretion of the asset retirement obligation is recognized over time and generally will escalate over the life of the producing asset. Accretion is included in Depreciation, Depletion and Amortization on the Consolidated Statements of Income. Asset retirement obligations primarily relate to the closure of mines, which includes treatment of water and the reclamation of land upon exhaustion of coal reserves. Accrued mine closing costs, perpetual care costs, reclamation and costs associated with dismantling and removing de-gasification facilities are regularly reviewed by management and are revised for changes in future estimated costs and regulatory requirements. Subsidence occurs when there is sinking or shifting of the ground surface due to the removal of underlying coal. Areas affected may include, although are not limited to, streams, property, roads, pipelines and other land and surface structures. Total estimated subsidence claims are recognized in the period when the related coal has been extracted and are included in Operating and Other Costs on the Consolidated Statements of Income and Other Accrued Liabilities on the Consolidated Balance Sheets. On occasion, CONSOL Energy prepays the estimated damages prior to undermining the property, in return for a release of liability. Prepayments are included as assets and either recognized as Prepaid Expenses and Other Assets or in Other Assets on the Consolidated Balance Sheets if the payment is made less than or greater than one year, respectively, prior to undermining the property. CONSOL Energy has non-contributory defined benefit retirement plans. Effective December 31, 2015, CONSOL's qualified defined benefit retirement plan was frozen. The benefits for these plans are based primarily on years of service and employees' pay. These plans are accounted for using the guidance outlined in the Compensation - Retirement Benefits Topic of the FASB Accounting Standards Codification. The costcosts of these retiree benefits are recognized over the employees' service periods. CONSOL Energy uses actuarial methods and assumptions in the valuation of defined benefit obligations and the determination of expense. Differences between actual and expected results or changes in the value of obligations and plan assets are recognized through Other Comprehensive Income (Loss) Income.
.
Eligible CONSOL Energy employees have historically participated in equity-based compensation plans. CONSOL Energy recognizes compensation expense for all stock-based compensation awards based on the grant date fair value estimated in accordance with the provisions of the Stock Compensation Topic of the FASB Accounting Standards Codification. CONSOL Energy recognizes these compensation costs on a straight-line basis over the requisite service period of the award, which is generally the award's vesting term. The compensation expense recorded by CONSOL Energy, in all periods presented, includes the expense associated with employees historically attributable to CONSOL Energy operations as well as the operations of its predecessor.
Under the CCR 2015 Long-Term Incentive Plan (the “LTIP”), the General Partner issued long-term equity basedequity-based awards intended to compensate the recipients thereof based on the performance of CCR’s common units and the recipients' continued service during the vesting period, as well as to align CCR’s long-term interests with those of the unitholders. The LTIP limits the number of units that may be delivered pursuant to vested awards to 2,300,000 common units, subject to proportionate adjustment in the event of unit splits and similar events. Common units subject to awards that are canceled, forfeited, withheld to satisfy exercise prices or tax withholding obligations or otherwise terminated without delivery of the common units will be available for delivery pursuant to other awards.
The General Partner has also granted equity-based phantom units that vest over a period of a director’s continued service. The phantom units will be paid in common units or an amount of cash equal to the fair market value of a unit based on the vesting date. The awards may accelerateaccelerated upon a change in controlcompletion of CCR.the CCR Merger (see Note 2 - Major Transactions for additional information). Compensation expense is recognized on a straight-line basis over the requisite service period, which is generally the vesting term.
Revenues are generally recognized when title passes to the customers and the price is fixed and determinable. Generally, title passes when coal is loaded at the central preparation facility and, on occasion, at terminal locations or other customer destinations. The Company's coal contract revenue per ton is fixed and determinable and adjusted for nominal quality adjustments. Some coal contracts also contain positive electric power price-related adjustments in addition to a fixed base price per ton. None of theThe Company’s coal contracts generally do not allow for retroactive adjustments to pricing after title to the coal has passed. See Note 3 - Revenue for additional information.
Freight Revenue and Expense
Shipping and handling costs invoiced to coal customers and paid to third-partythird-party carriers are recorded as Freight Revenue and Freight Expense, respectively.
From time to time, CONSOL Energy, or its subsidiaries, is subject to various lawsuits and claims with respect to such matters as personal injury, wrongful death, damage to property, exposure to hazardous substances, governmental regulations (including environmental remediation), employment and contract disputes, and other claims and actions arising out of the normal course of business. Liabilities are recorded when it is probable that obligations have been incurred and the amounts can be reasonably estimated. Estimates are developed through consultation with legal counsel involved in the defense of these matters and are based upon the nature of the lawsuit, progress of the case in court, view of legal counsel, prior experience in similar matters and management's intended response. Environmental liabilities are not discounted or reduced by possible recoveries from third-parties.third-parties. Legal fees associated with defending these various lawsuits and claims are expensed when incurred.
The Company generally utilizes derivative instruments to manage exposures to interest rate risk on long-term debt. The Company enters into interest rate swaps in order to achieve a mix of fixed and variable rate debt that it deems appropriate. These interest rate swaps have been designated as cash flow hedges of future variable interest payments and are accounted for as an asset or a liability in the accompanying Consolidated Balance Sheets at their fair value (see Note 2021 - Fair Value of Financial Instruments for additional information).
In a cash flow hedge, the Company hedges the risk of changes in future cash flows related to the underlying item being hedged. Changes in the fair value of the derivative instrument used as a hedge instrument in a cash flow hedge are recorded in other comprehensive income or loss. Amounts in other comprehensive income or loss are reclassified to earnings when the hedged transaction affects earnings and are classified in a manner consistent with the transaction being hedged. The Company evaluates the effectiveness of its hedging relationships both at the hedge's inception and on an ongoing basis. Any ineffective portion of the change in fair value of a derivative instrument used as a hedge instrument in a cash flow hedge is recognized immediately in earnings. Basic earnings per share are computed by dividing net (loss) income attributable to CONSOL Energy Inc. shareholders by the weighted average shares outstanding during the reporting period. Dilutive earnings per share are computed similarly to basic earnings per share, except that the weighted average shares outstanding are increased to include additional shares from restricted stock units and performance share units, if dilutive. The number of additional shares is calculated by assuming that outstanding restricted stock units and performance share units were released, and that the proceeds from such activities were used to acquire shares of common stock at the average market price during the reporting period. The table below sets forth the share-based awards that have been excluded from the computation of the diluted earnings per share because their effect would be anti-dilutive: | | | | | | | | | | | For the Years Ended | | December 31, | | 2019 | | 2018 | | 2017 | Anti-Dilutive Restricted Stock Units | 175,752 |
| | 620 |
| | 1,469 |
| Anti-Dilutive Performance Share Units | 20,202 |
| | 6,363 |
| | — |
| | 195,954 |
| | 6,983 |
| | 1,469 |
|
| | For the Years Ended | | | | December 31, | | | | 2020 | | | 2019 | | | 2018 | | Anti-Dilutive Restricted Stock Units | | | 1,400,950 | | | | 175,752 | | | | 620 | | Anti-Dilutive Performance Share Units | | | 110,470 | | | | 20,202 | | | | 6,363 | | | | | 1,511,420 | | | | 195,954 | | | | 6,983 | |
The computations for basic and dilutive (loss) earnings per share are as follows: | | | | | | | | | | | | | | For the Years Ended | Dollars in thousands, except per share data | December 31, | | 2019 | | 2018 | | 2017 | Numerator: | | | | | | Net Income
| $ | 93,558 |
| | $ | 178,785 |
| | $ | 82,569 |
| Less: Net Income Attributable to Noncontrolling Interest | 17,557 |
| | 25,809 |
| | 14,940 |
| Net Income Attributable to CONSOL Energy Inc. Shareholders | $ | 76,001 |
| | $ | 152,976 |
| | $ | 67,629 |
| | | | | | | Denominator: | | | | | | Weighted-average shares of common stock outstanding | 26,938,339 |
| | 27,928,245 |
| | 27,968,188 |
| Effect of dilutive shares | 132,769 |
| | 491,517 |
| | 206,046 |
| Weighted-average diluted shares of common stock outstanding | 27,071,108 |
| | 28,419,762 |
| | 28,174,234 |
| | | | | | | Earnings per Share: | | | | | | Basic | $ | 2.82 |
| | $ | 5.48 |
| | $ | 2.42 |
| Dilutive | $ | 2.81 |
| | $ | 5.38 |
| | $ | 2.40 |
|
Prior | | For the Years Ended | | Dollars in thousands, except per share data | | December 31, | | | | 2020 | | | 2019 | | | 2018 | | Numerator: | | | | | | | | | | | | | Net (Loss) Income | | $ | (13,214 | ) | | $ | 93,558 | | | $ | 178,785 | | Less: Net (Loss) Income Attributable to Noncontrolling Interest | | | (3,459 | ) | | | 17,557 | | | | 25,809 | | Net (Loss) Income Attributable to CONSOL Energy Inc. Shareholders | | $ | (9,755 | ) | | $ | 76,001 | | | $ | 152,976 | | | | | | | | | | | | | | | Denominator: | | | | | | | | | | | | | Weighted-average shares of common stock outstanding | | | 26,066,971 | | | | 26,938,339 | | | | 27,928,245 | | Effect of dilutive shares * | | | 0 | | | | 132,769 | | | | 491,517 | | Weighted-average diluted shares of common stock outstanding | | | 26,066,971 | | | | 27,071,108 | | | | 28,419,762 | | | | | | | | | | | | | | | (Loss) Earnings per Share: | | | | | | | | | | | | | Basic | | $ | (0.37 | ) | | $ | 2.82 | | | $ | 5.48 | | Dilutive | | $ | (0.37 | ) | | $ | 2.81 | | | $ | 5.38 | |
* During periods in which the Company incurs a net loss, diluted weighted average shares outstanding are equal to November 28, 2017, CONSOL Energy did not have any issued orbasic weighted average shares outstanding common stock. because the effect of all equity awards is anti-dilutive. As of December 31, 2019,2020, CONSOL Energy has 500,000 shares of preferred stock, none of which wereare issued or outstanding.
Shares of common stock outstanding were as follows: | | | | | | | | | | | 2019 | | 2018 | | 2017 | Balance, Beginning of Year | 27,437,844 |
| | 27,973,281 |
| | — |
| Issuance Related to Separation and Distribution (1) | — |
| | — |
| | 27,967,509 |
| Retirement Related to Stock Repurchase (2) | (1,717,497 | ) | | (708,245 | ) | | — |
| Issuance Related to Stock-Based Compensation (3) | 212,271 |
| | 172,808 |
| | 5,772 |
| Balance, End of Year | 25,932,618 |
| | 27,437,844 |
| | 27,973,281 |
|
| | 2020 | | | 2019 | | | 2018 | | Balance, Beginning of Year | | | 25,932,618 | | | | 27,437,844 | | | | 27,973,281 | | Issuance Related to CCR Merger (1) | | | 7,967,690 | | | | 0 | | | | 0 | | Retirement Related to Stock Repurchase (2) | | | 0 | | | | (1,717,497 | ) | | | (708,245 | ) | Issuance Related to Stock-Based Compensation (3) | | | 131,066 | | | | 212,271 | | | | 172,808 | | Balance, End of Year | | | 34,031,374 | | | | 25,932,618 | | | | 27,437,844 | |
(1) | | (1) | See Note 2 - Separation from the Company's Former ParentMajor Transactions for additional information. |
(2) | | (2) | See Note 5 - Stock, Unit and Debt Repurchases for additional information. |
(3) | | (3) | See Note 1718 - Stock-Based Compensation for additional information. |
Recent Accounting Pronouncements
In January 2020, 2021, the Financial Accounting Standards Board (“FASB”)FASB issued Accounting Standards Update (“ASU”) 2020-012021-01 - Reference Rate Reform (Topic 848) to clarify that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. Specifically, certain provisions in Topic 848, if elected by an entity, apply to derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform. Amendments in this Update to the expedients and exceptions in Topic 848 capture the incremental consequences of the scope clarification and tailor the existing guidance to derivative instruments affected by the discounting transition. Management has elected to apply this Update subsequent to March 12, 2020. Management is currently evaluating the impact of this guidance, but does not expect this update to have a material impact on the Company's financial statements. In March 2020, the FASB issued ASU 2020-04 - Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in this Update provide optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. In response to concerns about structural risks of interbank offered rates (IBORs), and, particularly, the risk of cessation of the London Interbank Offered Rate (LIBOR), regulators in several jurisdictions around the world have undertaken reference rate reform initiatives to identify alternative reference rates that are more observable or transaction based and less susceptible to manipulation. This Update also provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this Update apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The amendments in this Update are effective for all entities as of March 12, 2020 through December 31, 2022. An entity may elect to apply the amendments for contract modifications by Topic or Industry Subtopic as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. Once elected for a Topic or an Industry Subtopic, the amendments in this Update must be applied prospectively for all eligible contract modifications for that Topic or Industry Subtopic. Management has elected to apply this Update subsequent to March 12, 2020. Management is currently evaluating the impact of this guidance, but does not expect this update to have a material impact on the Company's financial statements. In January 2020, the FASB issued ASU 2020-01 - Investments - Equity Securities (Topic 321)321), Investments - Equity Method and Joint Ventures (Topic 323)323), and Derivatives and Hedging (Topic 815) to815). The amendments in this Update clarify certain interactions between the guidance to account for certain equity securities under Topic 321, the guidance to account for investments under the equity method of accounting in Topic 323, and the guidance in Topic 815, which could change how an entity accounts for an equity security under the measurement alternative or a forward contract or purchased option to purchase securities that, upon settlement of the forward contract or exercise of the purchased option, would be accounted for under the equity method of accounting or the fair value option in accordance with Topic 825, Financial Instruments. These amendments improve current GAAP by reducing diversity in practice and increasing comparability of the accounting for these interactions. These changes will beThe amendments in this Update are effective for fiscal years beginning after December 15, 2020, includingand interim periods within those fiscal years. Early adoption is permitted. Management does not expect this update to have a material impact on the Company's financial statements.
In December 2019, the FASB issued ASU 2019-122019-12 - Income Taxes (Topic 740)740) to reduce the complexity of accounting for income taxes while maintaining or improving the usefulness of the information provided to users of financial statements. The amendments in Update 2019-122019-12 will remove the following exceptions: (1)(1) the exception to the incremental approach for intra-period tax allocation; (2)(2) exceptions to accounting for basis differences when there are ownership changes in foreign investments; and (3)(3) the exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year. The amendments in Update 2019-122019-12 will also simplify the accounting for income taxes in the areas of franchise tax, step up in the tax basis of goodwill associated with a business combination, allocation of current and deferred tax expense to a legal entity that is not subject to tax in its separate financial statements, and presentation of the effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date. The updateUpdate adds minor codification improvements for income taxes related to employee stock ownership plans and investments in qualified affordable housing projects accounted for using the equity method. These changes will be effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted. Management does not expect this update to have a material impact on the Company's financial statements.
In August 2018, the FASB issued ASU 2018-15 2018- Intangibles - Goodwill and Other - Internal Use Software (Subtopic 350-40) to help entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement (hosting arrangement) by providing guidance for determining when the arrangement includes a software license. The amendments in Update 2018-15 align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements of capitalizing implementation costs incurred to develop or obtain internal-use software. These changes will be effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Management does not expect this update to have a material impact on the Company's financial statements.
In August 2018, the FASB issued ASU 2018-1414 - Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20)715-20) to improve the effectiveness of disclosures in the notes to the financial statements by facilitating clear communication of the information required by GAAP. The amendments modify the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. These changes will be effective for fiscal years ending after December 15, 2020, including interim periods within those fiscal years. Management is currently evaluating the impactThe Company adopted this guidance may have on the Company’s financial statements.
In August 2018, the FASB issued ASU 2018-13 - Fair Value Measurement (Topic 820) to improve the effectiveness of disclosures in the notes to the financial statements by facilitating clear communication of the information required by GAAP. The amendments modify the disclosure requirements on fair value measurements including the consideration of costs2020, and benefits. These changes will be effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Management does not expect this update to have athere was no material impact on the Company's financial statements.
In June 2016,Reclassifications During the FASB issued ASU 2016-13 - Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which provides financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. To achieve this, the amendments in this Update replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The measurement of expected credit losses will be based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. In May 2019, the FASB updated Topic 326 by issuing ASU 2019-05, Financial Instruments-Credit Losses (Topic 326): Targeted Transition Relief, which provides entities that have certain instruments within the scope of Subtopic 326-20, Financial Instruments-Credit Losses - Measured at Amortized Cost, with an option to irrevocably elect the fair value option in Subtopic 825-10, Financial Instruments-Overall, applied on an instrument-by-instrument basis for eligible instruments, upon adoption of Topic 326. The amendments in these Updates will be applied using a modified-retrospective approach and, for public entities, are effective for fiscal years beginning after year ended December 15, 2019 and interim periods within those fiscal years. CONSOL Energy's exposure to credit losses is concentrated on trade and other receivables arising from contractual agreements. Additional disclosures will be required to describe the nature and amount of the Company's credit losses, including the significant assumptions and judgments required to value the losses, and the accounting policy elections taken. The Company is implementing processes and controls to review the credit losses for appropriate accounting treatment in the context of the standards and to generate disclosures required under the standards, which 31, 2020, the Company expectsadded the CONSOL Marine Terminal to discloseits reportable segments disclosed in its Quarterly Report on Form 10-Q forNote 23 - Segment Information. As a result, certain reclassifications of 2019 and 2018 segment information have been made to conform to the first quarter of 2020. As of2020 presentation. During the filing date of this Form 10-K, based on the Company's historical collection efforts, current industry trends in the markets the Company serves and the financial health of the Company's counterparties, the expected credit losses recognized upon adoption of this guidance are not expected to have a material impact on the Company's financial statements.
Reclassifications
Certainyear ended December 31, 2019, certain 2018 amounts in prior periods have beenwere reclassified to conform with the report classifications of the current period,2019, including the reclassification of restricted cash, previously included in Prepaid Expenses and Other Assets on the Consolidated Balance Sheets, as well as the reclassification of amortization of debt issuance costs and loss on debt extinguishment within the Operating Activities section of the Consolidated Statements of Cash Flows. These reclassifications had no effect on previously reported total assets, net income, stockholders' equity or cash flow from operating activities.
NOTE 2—SEPARATION FROM THE COMPANY'S FORMER PARENT: In 2—MAJOR TRANSACTIONS:Merger with CONSOL Coal Resources LP On October 22, 2020, CONSOL Energy, the Partnership, the General Partner, a wholly-owned subsidiary of CONSOL Energy and one of its wholly-owned subsidiaries (“Merger Sub”) entered into a definitive merger agreement (the “Merger Agreement”) pursuant to which Merger Sub merged with and into the Partnership, with the Partnership surviving as an indirect, wholly-owned subsidiary of CONSOL Energy (the “Merger”). On December 2016, 30, 2020, the Company's former parent announced its intentMerger was completed and CONSOL Energy issued 7,967,690 shares of common stock to separate into 2 independent, publicly-traded companies - an independent, publicly-traded coal company and an independent, publicly-traded oil and natural gas exploration and production company. In anticipationacquire the 10,912,138 common units of CCR not owned by CONSOL Energy prior to the Merger at a fixed exchange ratio of 0.73 shares of CONSOL Energy common stock for each CCR unit, for total implied consideration of $51,710. As a result of the separation,Merger, CCR's common units are no longer publicly traded. Except for the Partnership's incentive distribution rights, which were automatically canceled immediately prior to the effective time of the Merger for no consideration in accordance with CCR's partnership agreement, the interests in CCR owned by CONSOL Energy was originally formedand its subsidiaries remain outstanding as CONSOL Mining Corporationlimited partner interests in Delaware on June 21, 2017the surviving entity. The General Partner will continue to holdown the following assets of the Company's former parent (collectively, the “Coal Business”): (i) itsnon-economic general partner interest in the Pennsylvania Mining Complexsurviving entity. Since CONSOL Energy controlled CCR prior to the Merger and certain related coal assets, (ii)continues to control CCR after the Merger, CONSOL Energy accounted for the change in its ownership interest in CNX Coal Resources LP,CCR as an equity transaction, which ownswas reflected as a 25% undividedreduction of noncontrolling interest stakewith corresponding increases to common stock and capital in excess of par value. No gain or loss was recognized in CONSOL Energy's Consolidated Statements of Income as a result of the Merger. The tax effects of the Merger were reported as adjustments to deferred income taxes and capital in excess of par value. Prior to the effective date of the Merger, public unitholders held a 39.3% equity interest in CCR's outstanding common units and CONSOL Energy owned the remaining 60.7% equity interest. The earnings of CCR that were attributed to its common units held by the public prior to the Merger are reflected in Net (Loss) Income Attributable to Noncontrolling Interest in the PAMC, (iii)Consolidated Statements of Income. We incurred $9,822 of transaction costs directly attributable to the Merger during the year ended December 31, 2020, including financial advisory, legal service and other professional fees, which were recorded to Selling, General and Administrative Costs in the Consolidated Statements of Income. Settlement Transaction with Murray Energy On September 16, 2020, CONSOL entered into a settlement transaction with (i) Murray Energy Holdings Co., Murray Energy Corporation, and their direct and indirect subsidiaries (such entities that are debtors in possession in Murray Energy Holdings Co.’s jointly administered Chapter 11 cases, the “Debtors”) and (ii) ACNR Holdings, Inc. (together with its direct and indirect subsidiaries, “Murray NewCo”) to fully and finally resolve the disputes raised in the CONSOL Marine TerminalAdversary Case and (iv) undeveloped coal reserves (Greenfield Reserves) locatedany and all other disputes, controversies, or causes of action between and among them related to (a) the Debtors’ rejection of the 2013 stock purchase agreement (“SPA”) and CONSOL’s waiver of any objection thereto; (b) the Debtors’ assumption and assignment to Murray NewCo (or its designated direct or indirect subsidiaries) and payment of certain cure and other amounts relating to the First Overriding Royalty Agreement, as amended, the Second Overriding Royalty Agreement, as amended, the Water Treatment Cost Sharing Agreement, as amended, and the Master Entry Driver Lease Agreement; (c) the Debtors’ assumption and assignment to Murray NewCo (or its designated direct or indirect subsidiaries) of the Cooperation and Safety Agreement, the Surface Use Agreement, the Substation and Power Line Agreement, the Substation and Power Line Rights-of-Way, the McMillian Assignment, the Partial Powerline Assignment, the 2013 Well Plugging Consent Order and Agreement, and the 2020 Well Plugging Agreement; (d) the Debtors’ and CONSOL’s continued cooperation about certain matters consistent with historical practice, including (i) with respect to each parties’ payment obligations related to certain claims relating to certain worker’s compensation, Black Lung, and long-term disability and (ii) with respect to easements and boundaries as set forth in the Northern Appalachian, Central Appalachian and Illinois basins and certain related coal assets and liabilities. The Registration Statement on Form 10 (as amended) filed by the Company with the SEC describes the Company2013 SPA and the assetsClosing Land Letter Agreement; (e) the Debtors’ assumption of, and liabilities that compriseCONSOL’s payment of certain amounts relating to, the Coal Business that it now owns after completionSplit Leases; (f) CONSOL’s transfer to Murray NewCo (or its designated direct or indirect subsidiaries), and Murray NewCo’s (or its designated direct or indirect subsidiaries’) payment for, certain coalbed methane wells, gas wells, and land; (g) the usage by CONSOL of the separationpower structure of Murray NewCo (or its designated direct or indirect subsidiaries) on agreed upon terms and distribution.
The separation occurred on November 28, 2017, through the pro rata distribution by the Company's former parent of allDebtors’ and Murray NewCo’s release of the outstanding common stockalleged claim for CONSOL’s prior usage; (h) CONSOL’s dismissal of CONSOL Mining Corporation to its shareholders. In connection with the separation, CONSOL Mining Corporation changed its name to CONSOL Energy Inc. v Murray Energy Holdings Co., et al., Adversary Case 2:20-ap-02036, with prejudice, which dismissal will be contingent upon (1) the Debtors’ assumption and assignment to Murray NewCo (or its designated direct or indirect subsidiaries) of the Company's former parent changed its name to CNX Resources Corporation. In addition, CNX Coal Resources LP changed its name toAssumed CONSOL Coal Resources LPAgreements and its ticker to CCR.
In connection(2) the Debtors’ compliance with the separationterms of the CONSOL Term Sheets and distribution,other agreements consistent with these transactions; and (i) certain other terms and conditions consistent with the foregoing. The foregoing agreements and compromises, which have been memorialized in definitive documentation, shall be treated as a single, integrated transaction. The effect of the agreements, as amended, in the normal course of business resulted in CONSOL recognizing (a) Miscellaneous Other Income of $18,561 related to the Sale of Certain Coal Lease Contracts and other income, (b) Gain on Sale of Assets of $6,230 related to the sale of certain gas wells and equipment, and (c) a reduction of Operating and Other Costs of $1,940 as a result of expense rebates offset with various cure costs, all of which are included in the Consolidated Statements of Income for the year ended December 31, 2020. As of December 31, 2020, the various transactions between the parties resulted in $4,867 of Other Receivables, net, and $22,055 of Other Assets, net, included in the Consolidated Balance Sheets. As of December 31, 2019, various transactions between the parties resulted in $13,567 of Other Receivables, net, included in the Consolidated Balance Sheets. See Note 22 - Commitments and Contingent Liabilities with respect to additional information relating to certain liabilities of the Company entered into a separation and distribution agreement with its former parent on November 28, 2017 (the “SDA”) that identified the assets ofunder the Coal Business that were transferred to the Company, the liabilities the Company assumed and the contracts that were transferred to the Company. The agreement also implemented the legal and structural separation between the 2 companies. The Company also entered into additional ancillary agreements that govern the relationship between it and its former parent after the completion of the separation and distribution, and allocate between the Company and its former parent various assets, liabilities and obligations, including, among other things, employee benefits, environmental liabilities, intellectual property, and tax-related assets and liabilities. These additional agreements included a tax matters agreement (“TMA”), employee matters agreement, transition services agreement (“TSA”) and certain agreements related to intellectual property.Act (as defined below).
The following table disaggregates CONSOL Energy's revenue from contracts with customers to depict how the nature, amount, timing and uncertainty of the Company's revenues and cash flows are affected by economic factors: | | For the Year Ended | | | For the Year Ended | | | For the Year Ended | | | | December 31, 2020 | | | December 31, 2019 | | | December 31, 2018 | | Coal Revenue | | $ | 772,662 | | | $ | 1,288,529 | | | $ | 1,364,292 | | Terminal Revenue | | | 66,810 | | | | 67,363 | | | | 64,926 | | Freight Revenue | | | 39,990 | | | | 19,667 | | | | 43,572 | | Total Revenue from Contracts with Customers | | $ | 879,462 | | | $ | 1,375,559 | | | $ | 1,472,790 | |
| | | | | | | | | | | | For the Year Ended | | For the Year Ended | | | December 31, 2019 | | December 31, 2018 | Coal Revenue | | $ | 1,288,529 |
| | $ | 1,364,292 |
| Terminal Revenue | | 67,363 |
| | 64,926 |
| Freight Revenue | | 19,667 |
| | 43,572 |
| Total Revenue from Contracts with Customers | | $ | 1,375,559 |
| | $ | 1,472,790 |
|
90
Coal Revenue CONSOL Energy's coal revenue is generally recognized when title passes to the customer and the price is fixed and determinable. Generally, title passes when coal is loaded at the central preparation facility and, on occasion, at terminal locations or other customer destinations. The CompanyCompany's coal contract revenue per ton is fixed and determinable and adjusted for nominal quality adjustments. Some coal contracts also contain positive electric power price-related adjustments, which represent market-driven price adjustments, wherein no additional value is exchanged, in addition to a fixed base price per ton. The Company’s coal contracts generally do not allow for retroactive adjustments to pricing after title to the coal has determined that each ton of coal represents a separate and distinct performance obligation.passed. The Company's coal supply contracts and other sales and operating revenue contracts vary in length from short-term to long-term contracts and do not typically have significant financing components.
The estimated transaction price from each of the Company's contracts is based on the total amount of consideration to which the Company expects to be entitled under the contract. Included in the transaction price for certain coal supply contracts is the impact of variable consideration, including quality price adjustments, handling services, per ton price fluctuations based on certain coal sales price indices and anticipated payments in lieu of shipments. The estimated transaction price for each contract is allocated to the Company's performance obligations based on relative stand-alone selling prices determined at contract inception.
Coal Revenue
Revenues are generally recognized when title passes to the customers The Company has determined that each ton of coal represents a separate and the price is fixed and determinable. Generally, title passes when coal is loaded at the central preparation facility and, on occasion, at terminal locations or other customer destinations. The Company's coal contract revenue per ton is fixed and determinable and adjusted for nominal quality adjustments. Some coal contracts also contain positive electric power price-related adjustments in addition to a fixed base price per ton. None of the Company’s coal contracts allow for retroactive adjustments to pricing after title to the coal has passed.
distinct performance obligation. Some of the Company's contracts span multiple years and have annual pricing modifications, based upon market-driven or inflationary adjustments, where no additional value is exchanged. Also, some of the Company's contracts contain favorable electric power price-related adjustments, which represent market-driven price adjustments, wherein no additional value is exchanged. Management believes that the invoice price is the most appropriate rate at which to recognize revenue.
While CONSOL Energy does, from time to time, experience costs of obtaining coal customer contracts with amortization periods greater than one year, those costs are generally immaterial to the Company's net (loss) income. At December 31, 2020, 2019 and 2018, the Company did not have any capitalized costs to obtain customer contracts on its Consolidated Balance Sheets. As of and for the years ended December 31, 2020, 2019 and 2018, the Company has not recognized any amortization of previously existing capitalized costs of obtaining customer contracts. Further, the Company has not recognized any coal revenue in the current period that is not a result of current period performance.
Terminal revenues are attributable to the Company's CONSOL Marine Terminal and include revenues earned from providing receipt and unloading of coal from rail cars, transporting coal from the receipt point to temporary storage or stockpile facilities located at the Terminal, stockpiling, blending, weighing, sampling, redelivery, and loading of coal onto vessels. Revenues for these services are generally earned on a rateable basis, and performance obligations are considered fulfilled as the services are performed.
The CONSOL Marine Terminal does not normally experience material costs of obtaining customer contracts with amortization periods greater than one year. At December 31, 2020, 2019 and 2018, the Company did not have any capitalized costs to obtain customer contracts on its Consolidated Balance Sheets. As of and for the years ended December 31, 2020, 2019 and 2018, the Company has not recognized any amortization of previously existing capitalized costs of obtaining Terminal customer contracts. Further, the Company has not recognized any revenue in the current period that is not a result of current period performance.
Some of CONSOL Energy's coal contracts require that the Company sell its coal at locations other than its central preparation plant. The cost to transport the Company's coal to the ultimate sales point is passed through to the Company's customers and CONSOL Energy recognizes the freight revenue equal to the transportation costs when title of the coal passes to the customer.
Contract assets are recorded separately from trade receivables in the Company's Consolidated Balance Sheets and are reclassified to trade receivables as title passes to the customer and the Company's right to consideration becomes unconditional. Payments for coal shipments are typically due within two to four weeks from the invoice date. CONSOL Energy typically does not have material contract assets that are stated separately from trade receivables since the Company's performance obligations are satisfied as control of the goods or services passes to the customer, thereby granting the Company an unconditional right to receive consideration. Contract liabilities relate to consideration received in advance of the satisfaction of the Company's performance obligations. Contract liabilities are recognized as revenue at the point in time when control of the good or service passes to the customer.
customer, or over time when services are provided.
NOTE 4—4—MISCELLANEOUS OTHER INCOME: | | For the Years Ended December 31, | | | | 2020 | | | 2019 | | | 2018 | | Contract Buyout | | $ | 44,703 | | | $ | 9,959 | | | $ | 350 | | Sale of Certain Mining Rights | | | 39,437 | | | | 0 | | | | 0 | | Sale of Certain Coal Lease Contracts | | | 17,847 | | | | 0 | | | | 0 | | Royalty Income - Non-Operated Coal | | | 12,032 | | | | 22,208 | | | | 24,722 | | Litigation Proceeds | | | 8,624 | | | | 0 | | | | 0 | | Rental Income | | | 1,314 | | | | 2,517 | | | | 3,804 | | Interest Income | | | 1,230 | | | | 2,937 | | | | 2,146 | | Property Easements and Option Income | | | 907 | | | | 1,631 | | | | 5,644 | | Purchased Coal Sales | | | 0 | | | | 12,385 | | | | 19,152 | | Other | | | 792 | | | | 1,712 | | | | 2,842 | | Miscellaneous Other Income | | $ | 126,886 | | | $ | 53,349 | | | $ | 58,660 | |
Contract buyout income was primarily the result of partial contract buyouts that involved negotiations to reduce coal quantities several customers were otherwise obligated to purchase under contracts in exchange for payment of certain fees to the Company, and do not impact forward contract terms. The sale of certain mining rights was a transaction in connection with future coal reserves completed in the year ended December 31, 2020. The sale of certain coal lease contracts was in connection with one of several transactions completed in the year ended December 31, 2020 related to the Company's non-operating surface and mineral assets outside of the Pennsylvania Mining Complex. Royalty income represents earned revenue related to overriding royalty agreements or coal reserve leases between the Company and third-party operators. Litigation proceeds were received during the year ended December 31, 2020 as a result of positive developments in legal matters in which the Company is the plaintiff. Purchased coal sales include earned revenue related to coal purchased externally by the Company to blend and resell in order to fulfill various contracts. | | | | | | | | | | | | | | | | For the Years Ended December 31, | | | 2019 | | 2018 | | 2017 | Royalty Income - Non-Operated Coal | | $ | 22,208 |
| | $ | 24,722 |
| | $ | 28,089 |
| Purchased Coal Sales | | 12,385 |
| | 19,152 |
| | 13,161 |
| Contract Buyout | | 9,959 |
| | 350 |
| | 9,912 |
| Interest Income | | 2,937 |
| | 2,146 |
| | 2,619 |
| Rental Income | | 2,517 |
| | 3,804 |
| | 14,114 |
| Property Easements and Option Income | | 1,631 |
| | 5,644 |
| | 2,436 |
| Other | | 1,712 |
| | 2,842 |
| | 2,948 |
| Miscellaneous Other Income | | $ | 53,349 |
|
| $ | 58,660 |
|
| $ | 73,279 |
|
NOTE 5— 5— STOCK, UNIT AND DEBT REPURCHASES:
In December 2017, CONSOL Energy’s Board of Directors approved a program to repurchase, from time to time, the Company's outstanding shares of common stock or its 11.00% Senior Secured Second Lien Notes due 2025, in an aggregate amount of up to $50 million through the period ending June 30, 2019. The program was subsequently amended by CONSOL Energy’s Board of Directors in July 2018 to allow up to $100 million of repurchases of the Company’s common stock or its 11.00% Senior Secured Second Lien Notes due 2025, subject to certain limitations in the Company’s current credit agreement and the TMA. The Company’s Board of Directors also authorized the Company to use up to $25 million of the program to purchase CONSOL Coal Resources LP’s outstanding common units in the open market. In May 2019, CONSOL Energy's Board of Directors approved an expansion of the program in the amount of $75 million, bringing the aggregate limit of the program to $175 million. The May 2019 expansion also increased the aggregate limit of the amount of CCR's common units that cancould be purchased under the program to $50 million, which iswas consistent with the Company's credit facility covenants that prohibitprohibited the Company from using more than $50$50 million for the purchase of CCR's outstanding common units. The Company's Board of Directors also approved extending the termination date of the program from June 30, 2019 to June 30, 2020. In July 2019, CONSOL Energy's Board of Directors approved an expansion of the program in the amount of $25 million, bringing the aggregate limit of the Company's stock, unit and debt repurchase program to $200 million.
In May 2020, CONSOL Energy's Board of Directors approved an expansion of the program in the amount of $70 million, bringing the aggregate limit of the Company's stock, unit and debt repurchase program to $270 million. The Company's Board of Directors also approved extending the termination date of the program from June 30, 2020 to June 30, 2022. As a result of the Merger, CCR's common units are no longer publicly traded. See Note 2 - Major Transactions for additional information regarding the CCR Merger.Under the terms of the program, CONSOL Energy is permitted to make repurchases in the open market, in privately negotiated transactions, accelerated repurchase programs or in structured share repurchase programs. CONSOL Energy is also authorized to enter into one or more 10b5-110b5-1 plans with respect to any of the repurchases. Any repurchases of common stock notes or unitsnotes are to be funded from available cash on hand or short-term borrowings. The program does not obligate CONSOL Energy to acquire any particular amount of its common stock and notes, or units, and can be modified or suspended at any time at the Company’s discretion. The program is conducted in compliance with applicable legal requirements and within the limits imposed by any credit agreement, receivables purchase agreement, indenture, or the TMA, and is subject to market conditions and other factors.
During the years ended December 31, 2020, 2019 and 2018, the Company repurchased approximately $54,481, $52,648 and $25,724 of its 11.00% Senior Secured Second Lien Notes due 2025, respectively. NaN common shares were repurchased and 0 common Partnership units were purchased under this program during the year ended December 31, 2020. During the years ended December 31, 2019 and 2018, the Company repurchased and retired 1,717,497 and 708,245 shares of the Company's common stock were repurchased and retired at an average price of $19.06 and $36.48 per share, respectively. During the years ended December 31, 2019 and 2018, 26,297 and 167,958 of the Partnership's common units were purchased at an average price of $14.05 and $18.33 per unit, respectively. Additionally, the Company repurchased approximately $52,648 and $25,724 of its 11.00% Senior Secured Second Lien Notes due 2025 during the years ended December 31, 2019 and 2018, respectively.
The components of income tax expense (benefit) were as follows: | | | | | | | | | | | | | | For The Years Ended December 31, | | 2019 | | 2018 | | 2017 | Current: | | | | | | U.S. Federal | $ | 15,905 |
| | $ | 20,634 |
| | $ | 65,856 |
| U.S. State | 4,717 |
| | 3,240 |
| | 2,732 |
| Non-U.S. | 1,336 |
| | 1,436 |
| | 2,030 |
| | 21,958 |
| | 25,310 |
| | 70,618 |
| Deferred: | | | | | | U.S. Federal | (9,386 | ) | | (7,509 | ) | | 17,397 |
| U.S. State | (8,033 | ) | | (8,973 | ) | | (787 | ) | | (17,419 | ) | | (16,482 | ) | | 16,610 |
| | | | | | | Total Income Tax Expense | $ | 4,539 |
| | $ | 8,828 |
| | $ | 87,228 |
|
| | For The Years Ended December 31, | | | | 2020 | | | 2019 | | | 2018 | | Current: | | | | | | | | | | | | | U.S. Federal | | $ | (5,933 | ) | | $ | 15,905 | | | $ | 20,634 | | U.S. State | | | (2,294 | ) | | | 4,717 | | | | 3,240 | | Non-U.S. | | | 514 | | | | 1,336 | | | | 1,436 | | | | | (7,713 | ) | | | 21,958 | | | | 25,310 | | Deferred: | | | | | | | | | | | | | U.S. Federal | | | 10,936 | | | | (9,386 | ) | | | (7,509 | ) | U.S. State | | | 749 | | | | (8,033 | ) | | | (8,973 | ) | | | | 11,685 | | | | (17,419 | ) | | | (16,482 | ) | | | | | | | | | | | | | | Total Income Tax Expense | | $ | 3,972 | | | $ | 4,539 | | | $ | 8,828 | |
A reconciliation of income tax expense (benefit) and the amount computed by applying the statutory federal income tax rate of 21% to (loss) income from operations before income tax is: | | For the Years Ended December 31, | | | | 2020 | | | 2019 | | | 2018 | | | | Amount | | | Percent | | | Amount | | | Percent | | | Amount | | | Percent | | Statutory U.S. federal income tax rate | | $ | (1,941 | ) | | | 21.0 | % | | $ | 20,600 | | | | 21.0 | % | | $ | 39,399 | | | | 21.0 | % | State income taxes, net of federal tax benefit | | | (1,109 | ) | | | 12.0 | | | | 3,125 | | | | 3.2 | | | | 3,240 | | | | 1.7 | | Effect of foreign income taxes | | | 406 | | | | (4.4 | ) | | | 1,336 | | | | 1.4 | | | | 28 | | | | 0 | | Excess tax depletion | | | 0 | | | | 0 | | | | (13,141 | ) | | | (13.4 | ) | | | (20,873 | ) | | | (11.1 | ) | Effect of change in U.S. tax law | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 2,777 | | | | 1.5 | | Compensation | | | 1,310 | | | | (14.2 | ) | | | 1,799 | | | | 1.8 | | | | 935 | | | | 0.5 | | Valuation allowance | | | 1,479 | | | | (16.0 | ) | | | 1,400 | | | | 1.4 | | | | (1,379 | ) | | | (0.7 | ) | Tax credits | | | 1,150 | | | | (12.4 | ) | | | (2,536 | ) | | | (2.6 | ) | | | (980 | ) | | | (0.5 | ) | Non-controlling interest | | | 726 | | | | (7.9 | ) | | | (3,687 | ) | | | (3.8 | ) | | | (5,420 | ) | | | (2.9 | ) | State rate change and prior period adjustments | | | 1,797 | | | | (19.4 | ) | | | (4,565 | ) | | | (4.6 | ) | | | (9,448 | ) | | | (5.0 | ) | Other | | | 154 | | | | (1.6 | ) | | | 208 | | | | 0.2 | | | | 549 | | | | 0.3 | | Income Tax Expense / Effective Rate | | $ | 3,972 | | | | (42.9 | )% | | $ | 4,539 | | | | 4.6 | % | | $ | 8,828 | | | | 4.8 | % |
| | | | | | | | | | | | | | | | | | | | | | | For the Years Ended December 31, | | 2019 | | 2018 | | 2017 | | Amount | | Percent | | Amount | | Percent | | Amount | | Percent | Statutory U.S. federal income tax rate | $ | 20,600 |
| | 21.0 | % | | $ | 39,399 |
| | 21.0 | % | | $ | 59,429 |
| | 35.0 | % | State income taxes, net of federal tax benefit | 3,125 |
| | 3.2 |
| | 3,240 |
| | 1.7 |
| | 1,264 |
| | 0.7 |
| Foreign income taxes | 1,336 |
| | 1.4 |
| | 1,436 |
| | 0.8 |
| | — |
| | — |
| Excess tax depletion | (13,141 | ) | | (13.4 | ) | | (20,873 | ) | | (11.1 | ) | | (24,216 | ) | | (14.3 | ) | Effect of domestic production activities | — |
| | — |
| | — |
| | — |
| | (6,493 | ) | | (3.8 | ) | Effect of change in U.S. tax law | — |
| | — |
| | 2,777 |
| | 1.5 |
| | 58,558 |
| | 34.5 |
| Excess compensation | 1,849 |
| | 1.9 |
| | 974 |
| | 0.5 |
| | — |
| | — |
| Effect of valuation allowance | 1,400 |
| | 1.4 |
| | (1,379 | ) | | (0.7 | ) | | 1,379 |
| | 0.8 |
| Tax credits | (2,536 | ) | | (2.6 | ) | | (980 | ) | | (0.5 | ) | | — |
| | — |
| Non-controlling interest | (3,687 | ) | | (3.8 | ) | | (5,420 | ) | | (2.9 | ) | | — |
| | — |
| State rate change and prior period adjustments | (5,745 | ) | | (5.9 | ) | | (8,223 | ) | | (4.4 | ) | | — |
| | — |
| Other | 1,338 |
| | 1.4 |
| | (2,123 | ) | | (1.1 | ) | | (2,693 | ) | | (1.6 | ) | Income Tax Expense / Effective Rate | $ | 4,539 |
| | 4.6 | % | | $ | 8,828 |
| | 4.8 | % | | $ | 87,228 |
| | 51.3 | % |
93
Significant components of deferred tax assets and liabilities were as follows: | | | | | | | | | | December 31, | | 2019 | | 2018 | Deferred Tax Asset: | | | | Postretirement benefits other than pensions | $ | 110,504 |
| | $ | 108,603 |
| Asset retirement obligations | 60,260 |
| | 57,956 |
| Pneumoconiosis benefits | 52,521 |
| | 41,632 |
| Mine subsidence | 17,110 |
| | 15,097 |
| Financing | 16,806 |
| | 9,387 |
| Workers' compensation | 16,750 |
| | 16,016 |
| Salary retirement | 14,761 |
| | 15,855 |
| Operating lease liabilities | 14,757 |
| | — |
| State bonus, net of Federal | 7,042 |
| | 6,042 |
| Long-term disability | 3,031 |
| | 2,798 |
| Foreign tax credits | 1,400 |
| | — |
| Other | 6,297 |
| | 6,669 |
| Total Deferred Tax Asset | 321,239 |
| | 280,055 |
| Valuation Allowance | (1,400 | ) | | — |
| Net Deferred Tax Asset | 319,839 |
| | 280,055 |
| | | | | Deferred Tax Liability: | | | | Property, plant and equipment | (173,849 | ) | | (175,558 | ) | Equity Partnerships | (17,028 | ) | | (16,638 | ) | Right of use assets | (14,757 | ) | | — |
| Advance mining royalties | (10,700 | ) | | (10,314 | ) | Total Deferred Tax Liability | (216,334 | ) | | (202,510 | ) | | | | | Net Deferred Tax Asset | $ | 103,505 |
| | $ | 77,545 |
|
| | December 31, | | | | 2020 | | | 2019 | | Deferred Tax Asset: | | | | | | | | | Postretirement benefits other than pensions | | $ | 101,673 | | | $ | 110,504 | | Pneumoconiosis benefits | | | 60,284 | | | | 52,521 | | Asset retirement obligations | | | 56,779 | | | | 60,260 | | Workers' compensation | | | 17,493 | | | | 16,750 | | Mine subsidence | | | 17,271 | | | | 17,110 | | Operating lease liability | | | 11,377 | | | | 14,757 | | Salary retirement | | | 9,446 | | | | 14,761 | | State bonus, net of Federal | | | 6,918 | | | | 7,042 | | Net operating loss | | | 6,134 | | | | 0 | | Compensation | | | 5,158 | | | | 3,841 | | Long-term disability | | | 2,757 | | | | 3,031 | | Financing | | | 2,077 | | | | 16,806 | | Foreign tax credits | | | 0 | | | | 1,400 | | Other | | | 4,175 | | | | 2,456 | | Total Deferred Tax Asset | | | 301,542 | | | | 321,239 | | Valuation Allowance | | | (2,879 | ) | | | (1,400 | ) | Net Deferred Tax Asset | | | 298,663 | | | | 319,839 | | | | | | | | | | | Deferred Tax Liability: | | | | | | | | | Property, plant and equipment | | | (172,026 | ) | | | (173,849 | ) | Equity Partnerships | | | (35,570 | ) | | | (17,028 | ) | Right of use assets | | | (11,338 | ) | | | (14,757 | ) | Advance mining royalties | | | (10,908 | ) | | | (10,700 | ) | Total Deferred Tax Liability | | | (229,842 | ) | | | (216,334 | ) | | | | | | | | | | Net Deferred Tax Asset | | $ | 68,821 | | | $ | 103,505 | |
Certain provisions of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which was signed into law by the President of the United States in March 2020, impact the Company and are therefore contemplated in the 2020 income tax provision computations. The CARES Act contained modifications on the limitation of business interest such that the Company anticipates full utilization of all interest expense for federal income tax purposes. At December 31, 2020, the Company has net operating loss carryforwards of approximately $15,135 and $40,032 for federal and state income tax purposes, respectively, which will be available to offset future taxable income. Approximately $25,180 will not expire and the remaining amount, if unused, will expire between 2030 and 2040. As required by U.S. GAAP, a valuation allowance is required when it is more likely than not that all or a portion of a deferred tax asset will not be realized. Management must review all available evidence, both positive and negative, in determining the need for a valuation allowance. For the years ended December 31, 2019 and 2018, positive evidence considered included pretax cumulative income over the past three years, utilization of previous period net operating losses, financial forecasts of future earnings, reversals of financial to tax temporary differences, and the implementation of and/or ability to employ various tax planning strategies. Negative evidence included the tax loss generated in the year ended December 31, 2017 and the ability to fully utilize certain tax assets as a result of the enactment of Public Law 115-97, commonly known as the Tax Cuts and Jobs Act. Management assessed both the federal and deferred state tax attributes for all subsidiaries during the period. After considering all available evidence, both positive and negative, management has determined that a valuation allowance in the amount of $1,400$2,879 is appropriate to fully value the amount of the foreignestablish for certain state tax credit carryforwards that were generated in the current year. It isattributes not anticipated that these foreign tax credit carryforwards will expireto be utilized before being utilized.
On December 22, 2017, the President of the United States signed Public Law 115-97 “An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018,” commonly referred to as the Tax Cuts and Jobs Act (“Tax Bill”). Under U.S. GAAP, the effects of new legislation are recognized upon enactment, which, for federal legislation, is the date the President signs a bill into law. Accordingly, recognition of the tax effects of the Tax Bill were required in the interim and annual periods that included December 22, 2017. The SEC also released Staff Accounting Bulletin 118 on December 22, 2017. This bulletin clarified certain aspects of Accounting Standards Codification (“ASC”) 740 and provided a three-step process for applying ASC 740. The Company has evaluated the impact of the Tax Bill and has recorded the following impacts in its financial statements. On December 22, 2017, the Company recorded tax expense of $58,558, and reduced the net deferred tax asset on its balance sheet by the same amount, primarily because the federal corporate income tax rate was reduced from 35% to 21% for all periods after December 31, 2017. During the year ended December 31, 2018, the Company completed its review of the applicable provisions of the Tax Bill and recognized an additional expense of $2,777, primarily related to return to provision adjustments.
expiration.The Company utilizes the “more likely than not” standard in recognizing a tax benefit in its financial statements. For the years ended December 31, 2019 2020 and 2018,2019, the Company did not have any unrecognized tax benefits. If accrual for interest or penalties is required, it is the Company’s policy to include these as a component of income tax expense. The Company is subject to taxation in the United States and its various states, as well as various states,Canada and Canada, as well asits various provinces. Under the provisions of the TMA,Tax Matters Agreement between the Company and its former parent, certain subsidiaries of the Company are subject to examination for tax years for the period January 1, 2016 through beginning December 31, 2019 for certain state and foreign returns. Further,2016 through November 28, 2017. Furthermore, the Company is subject to examination for the period November 28, 2017 through December 31, 2019 2020 for federal and certain state returns.
NOTE 7—7—CREDIT LOSSES: Effective January 1, 2020, the Company adopted ASU 2016-013,Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments using a modified retrospective approach. This ASU replaces the incurred loss impairment model with an expected credit loss impairment model for financial instruments, including trade and other receivables. The amendment requires entities to consider forward-looking information to estimate expected credit losses, resulting in earlier recognition of losses for receivables that are current or not yet due, which were not considered under previous accounting guidance. The Company recorded a cumulative-effect adjustment to retained earnings in the amount of $3,298, net of $1,109 of income taxes, for expected credit losses on financial assets at the adoption date. The following table illustrates the impact of ASC 326. | | January 1, 2020 | | | | As Reported Under ASC 326 | | | Pre-ASC 326 Adoption | | | Impact of ASC 326 Adoption | | | | | | | | | | | | | | | Trade Receivables | | $ | 3,051 | | | $ | 2,100 | | | $ | 951 | | Other Receivables | | | 3,372 | | | | 711 | | | | 2,661 | | Other Assets | | | 795 | | | | 0 | | | | 795 | | Allowance for Credit Losses on Receivables | | $ | 7,218 | | | $ | 2,811 | | | $ | 4,407 | |
The Company is exposed to credit losses primarily through sales of products and services. The Company's expected loss allowance methodology for accounts receivable is developed using historical collection experience, current and future economic and market conditions and a review of the current status of customers' trade and other accounts receivables. Due to the short-term nature of such receivables, the estimate of the amount of accounts receivable that may not be collected is based on an aging of the accounts receivable balances and the financial condition of customers. Additionally, specific allowance amounts are established to record the appropriate provision for customers that have a higher probability of default. The Company's monitoring activities include timely account reconciliations, dispute resolution, payment confirmation, consideration of customers' financial condition and macroeconomic conditions. Balances are written off when determined to be uncollectible. The Company considered the current and expected future economic and market conditions surrounding the novel coronavirus (COVID-19) pandemic and determined that the estimate of credit losses was not significantly impacted. Management estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for changes to the assessment of anticipated payment, changes in economic conditions, current industry trends in the markets the Company serves, and changes in the financial health of the Company's counterparties. The following table provides a roll-forward of the allowance for credit losses by portfolio segment that is deducted from the amortized cost basis of accounts receivable to present the net amount expected to be collected. | | Trade Receivables | | | Other Receivables | | | Other Assets | | | | | | | | | | | | | | | Beginning Balance, January 1, 2020 | | $ | 2,100 | | | $ | 711 | | | $ | 0 | | Adoption of ASU 2016-13, cumulative-effect adjustment to retained earnings | | | 951 | | | | 2,661 | | | | 795 | | Provision for expected credit losses | | | 1,375 | | | | 1,338 | | | | 866 | | Ending Balance, December 31, 2020 | | $ | 4,426 | | | $ | 4,710 | | | $ | 1,661 | |
NOTE 8—ASSET RETIREMENT OBLIGATIONS: CONSOL Energy accrues for mine closing costs, perpetual water care costs, and costs associated with the plugging of degasification wells using the accounting treatment prescribed by the Asset Retirement and Environmental Obligations Topic of the FASB Accounting Standards Codification. CONSOL Energy recognizes capitalized asset retirement obligations by increasing the carrying amount of related long-lived assets. The reconciliation of changes in the Company's asset retirement obligations at December 31, 2019 2020 and 20182019 is as follows: | | As of December 31, | | | | 2020 | | | 2019 | | Balance at Beginning of Period | | $ | 271,952 | | | $ | 267,001 | | Accretion Expense | | | 17,905 | | | | 20,116 | | Payments | | | (13,529 | ) | | | (13,030 | ) | Revisions in Estimated Cash Flows | | | (9,248 | ) | | | (2,135 | ) | Other | | | (18,311 | ) | | | 0 | | Balance at End of Period | | $ | 248,769 | | | $ | 271,952 | |
For the year ended December 31, 2020, Other includes $(18,311) related to the disposition of degasification wells. | | | | | | | | | | | | As of December 31, | | | 2019 | | 2018 | Balance at Beginning of Period | | $ | 267,001 |
| | $ | 258,823 |
| Accretion Expense | | 20,116 |
| | 19,468 |
| Payments | | (13,030 | ) | | (8,976 | ) | Revisions in Estimated Cash Flows | | (2,135 | ) | | (2,314 | ) | Balance at End of Period | | $ | 271,952 |
| | $ | 267,001 |
|
95
Inventory components consist of the following: | | | | | | | | | | December 31, | | 2019 | | 2018 | Coal | $ | 2,484 |
| | $ | 4,642 |
| Supplies | 51,647 |
| | 44,004 |
| Total Inventories | $ | 54,131 |
| | $ | 48,646 |
|
| | December 31, | | | | 2020 | | | 2019 | | Coal | | $ | 7,163 | | | $ | 2,484 | | Supplies | | | 49,037 | | | | 51,647 | | Total Inventories | | $ | 56,200 | | | $ | 54,131 | |
NOTE 9—10—PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment consists of the following: | | | | | | | | | | December 31, | | 2019 | | 2018 | Plant and Equipment | $ | 3,028,514 |
| | $ | 2,890,970 |
| Coal Properties and Surface Lands | 872,909 |
| | 858,153 |
| Airshafts | 437,003 |
| | 419,100 |
| Mine Development | 342,706 |
| | 342,405 |
| Advance Mining Royalties | 327,048 |
| | 327,543 |
| Total Property, Plant and Equipment | 5,008,180 |
| | 4,838,171 |
| Less: Accumulated Depreciation, Depletion and Amortization | 2,916,015 |
| | 2,731,643 |
| Total Property, Plant and Equipment, Net | $ | 2,092,165 |
| | $ | 2,106,528 |
|
Coal reserves are controlled either through fee ownership or by lease. The duration of the leases vary; however, the lease terms are generally extended automatically to the exhaustion of economically recoverable reserves, as long as active mining continues. Coal interests held by lease provide the same rights as fee ownership for mineral extraction and are legally considered real property interests.
| | December 31, | | | | 2020 | | | 2019 | | Plant and Equipment | | $ | 3,134,149 | | | $ | 3,028,514 | | Coal Properties and Surface Lands | | | 874,567 | | | | 872,909 | | Airshafts | | | 452,976 | | | | 437,003 | | Mine Development | | | 354,691 | | | | 342,706 | | Advance Mining Royalties | | | 327,313 | | | | 327,048 | | Total Property, Plant and Equipment | | | 5,143,696 | | | | 5,008,180 | | Less: Accumulated Depreciation, Depletion and Amortization | | | 3,094,634 | | | | 2,916,015 | | Total Property, Plant and Equipment - Net | | $ | 2,049,062 | | | $ | 2,092,165 | |
As of December 31, 2019 2020 and 2018,2019, property, plant and equipment includes gross assets under finance leases of $52,729$112,334 and $49,775,$52,729, respectively. Accumulated amortization for finance leases was $56,761 and $31,373 and $15,973 at December 31, 2019 2020 and 2018,2019, respectively. Amortization expense for assets under finance leases approximated $24,066, $15,691 $13,148 and $424$13,148 for the years ended December 31, 2020, 2019 2018 and 2017,2018, respectively, and is included in Depreciation, Depletion and Amortization in the accompanying Consolidated Statements of Income. See Note 13–14 - Leases for further discussion of finance leases.
NOTE 10—11—ACCOUNTS RECEIVABLE SECURITIZATION:
CONSOL Energy and certain of its U.S. subsidiaries are parties to a trade accounts receivable securitization facility with financial institutions for the sale on a continuous basis of eligible trade accounts receivable. In August 2018, March 2020, the securitization facility was amended to, among other things, extend the term of the securitization facility for three years ending maturity date from August 30, 2021.
2021 to March 27, 2023.Pursuant to the securitization facility, CONSOL Thermal Holdings LLC sells current and future trade receivables to CONSOL Pennsylvania Coal Company LLC. CONSOL Marine Terminals LLC and CONSOL Pennsylvania Coal Company LLC sell and/or contribute current and future trade receivables (including receivables sold to CONSOL Pennsylvania Coal Company LLC by CONSOL Thermal Holdings LLC) to CONSOL Funding LLC (the “SPV”). The SPV, in turn, pledges its interests in the receivables to PNC Bank, which either makes loans or issues letters of credit on behalf of the SPV. The maximum amount of advances and letters of credit outstanding under the securitization facility may not exceed $100 million.
Loans under the securitization facility accrue interest at a reserve-adjusted LIBOR market index rate equal to the one-monthone-month Eurodollar rate. Loans and letters of credit under the securitization facility also accrue a program fee and a letter of credit participation fee, respectively, ranging from 2.00% to 2.50% per annum depending on the total net leverage ratio of CONSOL Energy. In addition, the SPV paid certain structuring fees to PNC Capital Markets LLC and will paypays other customary fees to the lenders, including a fee on unused commitments equal to 0.60% per annum.
At December 31, 2020, the Company's eligible accounts receivable yielded $31,868 of borrowing capacity. At December 31, 2020, the facility had 0 outstanding borrowings and $31,218 of letters of credit outstanding, leaving available borrowing capacity of $650. At December 31, 2019, the Company's eligible accounts receivable yielded $41,282 of borrowing capacity. At December 31, 2019, the facility had 0 outstanding borrowings and $41,211 of letters of credit outstanding, leaving available borrowing capacity of $71. At December 31, 2018, the Company's eligible accounts receivable yielded $37,869 of borrowing capacity. At December 31, 2018, the facility had 0 outstanding borrowings and $52,536 of letters of credit outstanding, leaving 0 unused capacity. CONSOL Energy posted $14,667 of cash collateral to secure the difference in the outstanding letters of credit and the eligible accounts receivable. Cash collateral of $14,667 is included in Restricted Cash in the Consolidated Balance Sheets. Costs associated with the receivables facility totaled $1,156, $1,441 $2,593 and $171$2,593 for the years ended December 31, 2020, 2019 2018 and 2017,2018, respectively. These costs have been recorded as financing fees which are included in Operating and Other Costs in the Consolidated Statements of Income. The Company has not derecognized any receivables due to its continued involvement in the collections efforts.
NOTE 11—12—OTHER ACCRUED LIABILITIES: | | December 31, | | | | 2020 | | | 2019 | | Subsidence Liability | | $ | 89,554 | | | $ | 90,645 | | Accrued Payroll and Benefits | | | 21,179 | | | | 21,102 | | Accrued Other Taxes | | | 7,126 | | | | 4,753 | | Accrued Equipment Obligations | | | 6,698 | | | | 0 | | Accrued Interest | | | 6,236 | | | | 6,281 | | Other | | | 23,845 | | | | 16,281 | | Current Portion of Long-Term Liabilities: | | | | | | | | | Postretirement Benefits Other than Pensions | | | 26,073 | | | | 31,833 | | Asset Retirement Obligations | | | 20,587 | | | | 21,741 | | Operating Lease Liability | | | 20,241 | | | | 19,479 | | Pneumoconiosis Benefits | | | 12,203 | | | | 12,331 | | Workers' Compensation | | | 9,653 | | | | 11,323 | | Total Other Accrued Liabilities | | $ | 243,395 | | | $ | 235,769 | |
| | | | | | | | | | | | December 31, | | | 2019 | | 2018 | Subsidence Liability | | $ | 90,645 |
| | $ | 83,532 |
| Accrued Payroll and Benefits | | 21,102 |
| | 12,978 |
| Accrued Interest | | 6,281 |
| | 6,850 |
| Accrued Other Taxes | | 4,753 |
| | 5,050 |
| Short-Term Incentive Compensation | | 3,997 |
| | 6,024 |
| Litigation | | 2,565 |
| | 8,235 |
| Other | | 9,719 |
| | 15,588 |
| Current Portion of Long-Term Liabilities: | | | | | Postretirement Benefits Other than Pensions | | 31,833 |
| | 32,345 |
| Asset Retirement Obligations | | 21,741 |
| | 31,017 |
| Operating Lease Liability | | 19,479 |
| | — |
| Pneumoconiosis Benefits | | 12,331 |
| | 12,187 |
| Workers' Compensation | | 11,323 |
| | 12,628 |
| Total Other Accrued Liabilities | | $ | 235,769 |
| | $ | 226,434 |
|
| | | | | | | | | | December 31, | | 2019 | | 2018 | Debt: | | | | Term Loan B due in September 2024 (Principal of $272,938 and $396,000 less Unamortized Discount of $1,187 and $6,253, respectively, 6.30% and 8.53% Weighted Average Interest Rate, respectively) | $ | 271,751 |
| | $ | 389,747 |
| 11.00% Senior Secured Second Lien Notes due November 2025 | 221,628 |
| | 274,276 |
| MEDCO Revenue Bonds in Series due September 2025 at 5.75% | 102,865 |
| | 102,865 |
| Term Loan A due in March 2023 (5.55% and 6.78% Weighted Average Interest Rate, respectively) | 88,750 |
| | 73,750 |
| Other Asset-Backed Financing Arrangements | 9,289 |
| | — |
| Advance Royalty Commitments (10.78% and 8.57% Weighted Average Interest Rate, respectively) | 1,895 |
| | 2,261 |
| Less: Unamortized Debt Issuance Costs | 10,323 |
| | 16,409 |
| | 685,855 |
| | 826,490 |
| Less: Amounts Due in One Year* | 32,053 |
| | 117,954 |
| Long-Term Debt | $ | 653,802 |
| | $ | 708,536 |
|
| | December 31, | | | | 2020 | | | 2019 | | Debt: | | | | | | | | | Term Loan B due in September 2024 (Principal of $270,188 and $272,938 less Unamortized Discount of $938 and $1,187, respectively, 4.65% and 6.30% Weighted Average Interest Rate, respectively) | | $ | 269,250 | | | $ | 271,751 | | 11.00% Senior Secured Second Lien Notes due November 2025 | | | 167,147 | | | | 221,628 | | MEDCO Revenue Bonds in Series due September 2025 at 5.75% | | | 102,865 | | | | 102,865 | | Term Loan A due in March 2023 (5.50% and 5.55% Weighted Average Interest Rate, respectively) | | | 66,250 | | | | 88,750 | | Other Asset-Backed Financing Arrangements | | | 2,813 | | | | 9,289 | | Advance Royalty Commitments (13.68% and 10.78% Weighted Average Interest Rate, respectively) | | | 2,185 | | | | 1,895 | | Less: Unamortized Debt Issuance Costs | | | 9,921 | | | | 10,323 | | | | | 600,589 | | | | 685,855 | | Less: Amounts Due in One Year* | | | 33,731 | | | | 32,053 | | Long-Term Debt | | $ | 566,858 | | | $ | 653,802 | |
*Excludes current portion of Finance Lease Obligations of $20,115 and $18,219 and $16,858 at December 31, 2019 2020 and 2018,2019, respectively.
Annual undiscounted maturities on long-term debt during the next five years and thereafter are as follows: Year ended December 31, | | Amount | | 2021 | | $ | 33,731 | | 2022 | | | 36,348 | | 2023 | | | 12,526 | | 2024 | | | 257,891 | | 2025 | | | 270,184 | | Thereafter | | | 768 | | Total Long-Term Debt Maturities | | $ | 611,448 | |
| | | | | Year ended December 31, | Amount | 2020 | $ | 32,053 |
| 2021 | 28,826 |
| 2022 | 36,258 |
| 2023 | 12,456 |
| 2024 | 262,683 |
| Thereafter | 325,089 |
| Total Long-Term Debt Maturities | $ | 697,365 |
|
97
In November 2017, CONSOL Energy entered into a revolving credit facility with commitments up to $300 million (the “Revolving Credit Facility”), a Term Loan A Facility of up to $100 million (the “TLA Facility”) and a Term Loan B Facility of up to $400 million (the “TLB Facility”, and together with the Revolving Credit Facility and the TLA Facility, the “Senior Secured Credit Facilities”). On March 28, 2019, the Company amended the Senior Secured Credit Facilities (the “amendment”) to increase the borrowing commitment of the Revolving Credit Facility to $400 million and reallocate the principal amounts outstanding under the TLA Facility and TLB Facility. As a result, On June 5, 2020, the principal amount outstandingCompany amended the Senior Secured Credit Facilities (the “amendment”) to provide eight quarters of financial covenant relaxation, effect an increase in the rate at which borrowings under the Revolving Credit Facility and the TLA Facility was $100 millionbear interest, and the principal amount outstanding under the TLB Facility was $275 million.add an anti-cash hoarding provision. Borrowings under the Company's Senior Secured Credit Facilities bear interest at a floating rate which can be, at the Company's option, either (i) LIBOR plus an applicable margin or (ii) an alternate base rate plus an applicable margin. The applicable margin for the Revolving Credit Facility and TLA Facility depends on the total net leverage ratio, whereas the applicable margin for the TLB Facility is fixed. The amendment reducedincreased the applicable margin by 50 basis points on both the Revolving Credit Facility and the TLA Facility, and by 150 basis points on the TLB Facility. The amendment also extended the maturity dates of the Senior Secured Credit Facilities. The maturity date of the Revolving Credit and TLA Facilities was extended from November 28, 2021 to is March 28, 2023. The TLB Facility's maturity date was extended from November 28, 2022 to is September 28, 2024. Obligations under the Senior Secured Credit Facilities (Term Loan B and Term Loan A, together with the Revolving Credit Facility, on which there were 0 outstanding borrowings at December 31, 2020) are guaranteed by (i) all owners of the 75% undivided economic interest in the PAMC held by the Company, (ii) any other members of the Company’s group that own any portion of the collateral securing the Revolving Credit Facility, and (iii) subject to certain customary exceptions and agreed materiality thresholds, all other existing or future direct or indirect wholly-owned restricted subsidiaries of the Company (excludingCompany. The obligations are secured by, subject to certain exceptions (including a limitation of pledges of equity interests in certain subsidiaries and certain thresholds with respect to real property), a first-priority lien on (i) the Company’s interest in the PAMC, (ii) the limited partner units of the Partnership held by the Company, (iii) the equity interests in CONSOL Coal Resources GP LLC held by the Company, (iv) the CONSOL Marine Terminal and its wholly-owned subsidiaries).
(v) the 1.5 billion tons of Greenfield Reserves.The Senior Secured Credit Facilities contain a number of customary affirmative covenants. In addition, the Senior Secured Credit Facilities contain a number of negative covenants, including (subject to certain exceptions) limitations on (among other things): indebtedness, liens, investments, acquisitions, dispositions, restricted payments and prepayments of junior indebtedness. The amendment added additional conditions to be met for the covenants relating to investments in joint ventures, general investments, share repurchases, dividends and repurchases of Second Lien Notes. The additional conditions require no outstanding borrowings and 0 more than $200 million of outstanding letters of credit on the Revolving Credit Facility. Further restrictions apply to investments in joint ventures, share repurchases and dividends that require the total net leverage ratio shall not be greater than 2.00 to 1.00. The Revolving Credit Facility and TLA Facility also include financial covenants includingrelating to (i) a maximum first lien gross leverage ratio, (ii) a maximum total net leverage ratio, and (iii) a minimum fixed charge coverage ratio. CONSOL Energy must maintain a maximum first lien gross leverage ratio covenant of no more than 2.00 to 1.00, measured quarterly, stepping down to 1.75 to 1.00 in March 2020. The maximum first lien gross leverage ratio is calculated as the ratio of Consolidated First Lien Debt to Consolidated EBITDA, excluding the Partnership. The maximum first lien gross leverage ratio was 1.19 to 1.00 at December 31, 2019. CONSOL Energy must maintain a maximum total net leverage ratio covenant of no more than 3.00 to 1.00, measured quarterly, stepping down to 2.75 to 1.00 in March 2020. The maximum total net leverage ratio is calculated as the ratio of Consolidated Indebtedness, minus Cash on Hand, to Consolidated EBITDA, excluding the Partnership. The maximum total net leverage ratio was 1.93 to 1.00 at December 31, 2019.EBITDA. Consolidated EBITDA, as used in the covenant calculation, excludes non-cash compensation expenses, non-recurring transaction expenses, extraordinary gains and losses, gains and losses on discontinued operations, non-cash charges related to legacy employee liabilities and gains and losses on debt extinguishment, and includes cash distributions received from the Partnership and subtracts cash payments related to legacy employee liabilities. The facilities also include a minimum fixed charge coverage covenantmaximum total net leverage ratio is calculated as the ratio of no less than 1.10Consolidated Indebtedness, minus Cash on Hand, to 1.00, measured quarterly.Consolidated EBITDA. The minimum fixed charge coverage ratio is calculated as the ratio of Consolidated EBITDA to Consolidated Fixed Charges, excluding the Partnership.Charges. Consolidated Fixed Charges, as used in the covenant calculation, include cash interest payments, cash payments for income taxes, scheduled debt repayments, dividends paid and Maintenance Capital Expenditures. The amendment revised the financial covenants applicable to the Revolving Credit Facility and TLA Facility relating to the maximum first lien gross leverage ratio, maximum total net leverage ratio and minimum fixed charge coverage ratio, so that for the fiscal quarters ending June 30, 2020 through March 31, 2021, the maximum first lien gross leverage ratio shall be 2.50 to 1.00, the maximum total net leverage ratio shall be 3.75 to 1.00 and the minimum fixed charge coverage ratio shall be 1.00 to 1.00; for the fiscal quarters ending June 30, 2021 through September 30, 2021, the maximum first lien gross leverage ratio shall be 2.25 to 1.00 and the maximum total net leverage ratio shall be 3.50 to 1.00; for the fiscal quarters ending June 30, 2021 through March 31, 2022, the minimum fixed charge coverage ratio shall be 1.05 to 1.00; for the fiscal quarters ending December 31, 2021 through March 31, 2022, the maximum first lien gross leverage ratio shall be 2.00 to 1.00 and the maximum total net leverage ratio shall be 3.25 to 1.00; and for the fiscal quarters ending on or after June 30, 2022, the maximum first lien gross leverage ratio shall be 1.75 to 1.00, the maximum total net leverage ratio shall be 2.75 to 1.00 and the minimum fixed charge coverage ratio shall be 1.10 to 1.00. The maximum first lien gross leverage ratio was 1.64 to 1.00 at December 31, 2020. The maximum total net leverage ratio was 2.54 to 1.00 at December 31, 2020. The minimum fixed charge coverage ratio was 1.361.56 to 1.00 at December 31, 2019.2020. The Company was in compliance with all of its debtfinancial covenants under the Senior Secured Credit Facilities as of December 31, 2019.
2020. The Company is continuing to actively monitor the effects of the ongoing COVID-19 pandemic on its liquidity.The TLB Facility also includes a financial covenant that requires the Company to repay a certain amount of its borrowings under the TLB Facility within ten business days after the date it files its Form 10-K10-K with the Securities and Exchange Commission if the Company has excess cash flow (as defined in the credit agreement for the Senior Secured Credit Facilities) during the year covered by the applicable Form 10-K.10-K. As of December 31, 2020, the required repayment of approximately $5 million has been classified as Current Portion of Long-Term Debt in the Consolidated Balance Sheets. During the year ended December 31, 2019, CONSOL Energy made the required repayment of approximately $110 million based on the amount of the Company's excess cash flow as of December 31, 2018. For fiscal year 2018, such repayment was equal to 75% of the Company’s excess cash flow less any voluntary prepayments of its borrowings under the TLB Facility made by the Company during 2018. For all subsequent fiscal years, the required repayment is equal to a certain percentage of the Company’s excess cash flow for such year, ranging from 0% to 75% depending on the Company’s total net leverage ratio, less the amount of certain voluntary prepayments made by the Company, if any, under the TLB Facility during such fiscal year. The amendment reduced the maximum amount of the mandatory annual excess cash flow sweep under the TLB Facility by 25%. Based on the Company's excess cash flow calculation, no repayment iswas required with respect to the year ended December 31, 2019. As such, as At December 31, 2020, the Revolving Credit Facility had 0 borrowings outstanding and $125,938 of letters of credit outstanding, leaving $274,062 of unused capacity. At December 31, 2019 no amount related to the prepayment of the TLB Facility in connection with the excess cash flow requirement has been classified as Current Portion of Long-Term Debt in the Consolidated Balance Sheets.
At December 31, 2019,, the Revolving Credit Facility had 0 borrowings outstanding and $69,588 of letters of credit outstanding, leaving $330,412 of unused capacity. At December 31, 2018, the Revolving Credit Facility had 0 borrowings outstanding and $54,065 of letters of credit outstanding, leaving $245,935 of unused capacity. From time to time, CONSOL Energy is required to post financial assurances to satisfy contractual and other requirements generated in the normal course of business. Some of these assurances are posted to comply with federal, state or other government agencies' statutes and regulations. CONSOL Energy sometimes uses letters of credit to satisfy these requirements and these letters of credit reduce the Company's borrowing facility capacity.
In November 2017, CONSOL Energy issued $300 million in aggregate principal amount of 11.00% Senior Secured Second Lien Notes due 2025 (the “Second Lien Notes”) pursuant to an indenture (the “Indenture”) dated as of November 13,2017, by and between the Company and UMB Bank, N.A., a national banking association, as trustee and collateral trustee (the “Trustee”). On November 28, 2017, certain subsidiaries of the Company executed a supplement to the Indenture and became party to the Indenture as a guarantor (the “Guarantors”). The Second Lien Notes are secured by second priority liens on substantially all of the assets of the Company and the Guarantors that are pledged and on a first-priorityfirst-priority basis as collateral securing the Company’s obligations under the Senior Secured Credit Facilities (described above), subject to certain exceptions under the Indenture.
The Indenture contains covenants that will limit the ability of the Company and the Guarantors, to (i) incur, assume or guarantee additional indebtedness or issue preferred stock; (ii) create liens to secure indebtedness; (iii) declare or pay dividends on the Company’s common stock, redeem stock or make other distributions to the Company’s stockholders; (iv) make investments; (v) restrict dividends, loans or other asset transfers from the Company’s restricted subsidiaries; (vi) merge or consolidate, or sell, transfer, lease or dispose of substantially all of the Company’s assets; (vii) sell or otherwise dispose of certain assets, including equity interests in subsidiaries; (viii) enter into transactions with affiliates; and (ix) create unrestricted subsidiaries. These covenants are subject to important exceptions and qualifications. If the Second Lien Notes achieve an investment grade rating from both Standard & Poor’s Ratings Services and Moody’s Investors Service, Inc. and no default under the Indenture exists, many of the foregoing covenants will terminate and cease to apply.The only non-guarantor subsidiary of the Senior Secured Credit Facilities is CONSOL Funding LLC (the “SPV”) which holds the assets pledged to the Accounts Receivable Securitization Facility. CONSOL Funding LLC had total assets of $123,468 and $135,629, comprising mainly of $122,639 and $134,766 trade receivables, as of December 31, 2020 and 2019, respectively. For the years ended December 31, 2020, 2019 and 2018, net income attributable to the SPV was $2,854, $4,841 and $4,212, respectively, which primarily reflected intercompany fees related to purchasing the receivables, which are eliminated in the Consolidated Financial Statements contained within this Form 10-K. During the years ended December 31, 2020, 2019 and 2018, there were no borrowings or payments under the Accounts Receivable Securitization Facility. See Note 11 - Accounts Receivable Securitization in the Notes to the Consolidated Financial Statements in Item 8 of this Form 10-K for additional information. All other subsidiaries are guarantors of the Senior Secured Credit Facilities. During the year ended December 31, 2020, the Company repurchased $54,481 of its outstanding 11.00% Senior Secured Second Lien Notes due in 2025. During the year ended December 31, 2019, the Company made a required repayment of approximately $110 million on the TLB Facility (discussed above) and amended the Senior Secured Credit Facilities. The Company also repurchased $52,648 of its outstanding 11.00% Senior Secured Second Lien Notes due in 2025 during the year ended December 31, 2019. As part of these transactions, $21,352 was included in Gain on Debt Extinguishment on the Consolidated Statements of Income for the year ended December 31, 2020, and $24,455 was included in Loss on Debt Extinguishment on the Consolidated Statements of Income for the year ended December 31, 2019.
During the year ended December 31, 2018, the Company made accelerated payments of $11,250 on its outstanding TLA Facility and repurchased $25,724 of its outstanding 11.00% Senior Secured Second Lien Notes due in 2025. As part of these transactions, $3,922 was included in Loss on Debt Extinguishment on the Consolidated Statements of Income for the year ended December 31, 2018.
During the year ended December 31, 2019, the Company entered into 2 asset-backed financing arrangements related to certain equipment. The equipment, which hashad an approximate value of $2,813 and $9,289 at December 31, 2020 and 2019, respectively, fully collateralizes the loans. AAs of December 31, 2020, the total outstanding loan of $5,772$2,813 matures in December 2020 atSeptember 2024. The loans had a weighted average interest rate of 5.96%,3.61% and $3,517 matures in September 20245.07% at an interest rate of 3.61%.
December 31, 2020 and 2019, respectively. During the year ended December 31, 2019, the Company entered into interest rate swaps, which effectively converted $150,000 of the TLB Facility's floating interest rate to a fixed interest rate for the twelve months ending December 31, 2020 and 2021, and $50,000 of the TLB Facility's floating interest rate to a fixed interest rate for the twelve months ending December 31, 2022. The interest rate swaps qualify for cash flow hedge accounting treatment and as such, the change in the fair value of the interest rate swaps is recorded on the Company's Consolidated Balance Sheets as an asset or liability. The effective portion of the gains or losses is reported as a component of accumulated other comprehensive loss and the ineffective portion is reported in earnings. At December 31, 2020 and 2019, the interest rate swap contracts were reflected in the Consolidated Balance Sheets at their fair value of $2,834 and $154, respectively, which is recorded in Other Accrued Liabilities and Other Liabilities. The fair value of the interest rate swaps reflected an unrealized loss of $2,004 (net of $674 tax) and $117 (net of $(37)$37 tax) at December 31, 2019.2020 and 2019, respectively. The unrealized loss is included on the Consolidated Statements of Stockholders' Equity as part of accumulated other comprehensive loss, as well as on the Consolidated Statements of Comprehensive Income as unrealized loss on cash flow hedges. Some of the Company's interest rate swaps reached their effective date in the year ended December 31, 2020. As such, a loss of $1,587 was recognized in interest expense in the Consolidated Statements of Income for the year ended December 31, 2020. No gains or losses were recognized in interest expense in the Consolidated Statements of Income as no interest rate swaps have reached their effective date. in the year ended December 31, 2019. During 2020,2021, notional amounts of $150,000 will become effective. InBased on the next 12 months, fair value of the Company's cash flow hedges at December 31, 2020, the Company expects a gainexpense of approximately $64$2,067 to be reclassified into earnings.earnings in the next 12 months.
On January 1, 2019, the Company adopted ASC Topic 842 using the transition option, “Comparatives Under 840 Option,” established by ASU 2018-11,2018-11, Leases (Topic 842)842), Targeted Improvements. As allowed under this guidance, the Company elected not to recast the comparative periods presented when transitioning to ASC 842. As most of the Company's leases do not provide an implicit rate, CONSOL Energy has taken a portfolio approach of applying its incremental borrowing rate based on the information available at the adoption date to calculate the present value of lease payments over the lease term. CONSOL Energy has elected the package of practical expedients permitted under the transition guidance within the standard, which allows the Company (1)(1) to not reassess whether any expired or existing contracts are or contain leases, (2)(2) to not reassess the lease classification for any expired or existing leases, and (3)(3) to not reassess initial direct costs for any existing leases. CONSOL Energy has also elected the practical expedient to not evaluate land easements that existed or expired before the Company’s adoption of Topic 842 and the practical expedient to not separate lease and non-lease components; that is, to account for lease and non-lease components in a contract as a single lease component for all classes of underlying assets. Further, the Company made an accounting policy election to keep leases with an initial term of twelve months or less off the balance sheet. CONSOL Energy will recognize those lease payments in the Consolidated Statements of Income over the lease term. For the yearyears ended December 31, 2020 and 2019, these short-term lease expenses were not material to the Company's financial statements.
Based on the Company's lease portfolio, the standard had a material impact on the Company’s Consolidated Balance Sheet but did not have a significant impact on the Company’s consolidated net earnings and cash flows. The most significant impact was the recognition of Right of Use (“ROU”) assets and lease liabilities for operating leases, while the accounting for finance leases remained substantially unchanged. The Company's bank covenants were not affected by this update. The Company recorded operating lease ROU assets and operating lease liabilities of approximately $92 million as of January 1, 2019, primarily related to mining equipment, based on the present value of the future lease payments on the date of adoption.
The Company determines if an arrangement is an operating or finance lease at inception of the applicable lease. For leases where the Company is the lessee, ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent an obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit interest rate, the Company uses its incremental borrowing rate based on the information available on the commencement date in determining the present value of lease payments. The ROU asset also consists of any prepaid lease payments, lease incentives received, and costs which will be incurred in exiting a lease. The lease terms used to calculate the ROU asset and related lease liability include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for operating leases is recognized on a straight-line basis over the lease term as an operating expense while the expense for finance leases is recognized as depreciation expense and interest expense using the interest method of recognition.
The Company has operating leases for mining and other equipment used in operations and office space. Many leases include one or more options to renew, some of which include options to extend, the leases, and some leases include options to terminate or buy out the leases within a set period of time. In certain of the Company’s lease agreements, the rental payments are adjusted periodically to reflect actual charges incurred for inflation and/or changes in other indexes. Many of the Company's operating lease payments for mining equipment contain a variable component which is calculated based upon production metrics such as feet of advance or raw tonnage mined. While most of the Company's leases contain clauses regarding the general condition of the equipment upon lease termination, they do not contain residual value guarantees.
For the yearyears ended December 31, 2020 and 2019, the components of operating lease expense were as follows: | | | | | Fixed operating lease expense | $ | 25,875 |
| Variable operating lease expense | 11,445 |
| Total operating lease expense | $ | 37,320 |
|
| | December 31, | | | | 2020 | | | 2019 | | Fixed operating lease expense | | $ | 24,359 | | | $ | 25,875 | | Variable operating lease expense | | | 3,835 | | | | 11,445 | | Total operating lease expense | | $ | 28,194 | | | $ | 37,320 | |
Supplemental cash flow information related to the Company's operating leases for the yearyears ended December 31, 2020 and 2019 was as follows: | | | | | Cash paid for amounts included in the measurement of operating lease liabilities | $ | 25,675 |
| ROU assets obtained in exchange for operating lease obligations | — |
|
| | December 31, | | | | 2020 | | | 2019 | | Cash paid for amounts included in the measurement of operating lease liabilities | | $ | 24,293 | | | $ | 25,675 | | ROU assets obtained in exchange for operating lease obligations | | | 0 | | | | 0 | |
The following table presents the lease balances within the Consolidated Balance Sheet,Sheets, weighted average lease term, and the weighted average discount rate related to the Company's operating leases at December 31, 2020 and 2019: | | | December 31, | | Lease Assets and Liabilities | Classification | | 2020 | | | 2019 | | Assets: | | | | | | | | | | Operating Lease ROU Assets | Other Assets | | $ | 53,436 | | | $ | 72,632 | | | | | | | | | | | | Liabilities: | | | | | | | | | | Current: | | | | | | | | | | Operating Lease Liabilities | Other Accrued Liabilities | | $ | 20,241 | | | $ | 19,479 | | Long-Term: | | | | | | | | | | Operating Lease Liabilities | Operating Lease Liabilities | | $ | 35,655 | | | $ | 55,413 | | Total Operating Lease Liabilities | | $ | 55,896 | | | $ | 74,892 | | | | | | | | | | | | Weighted average remaining lease term (in years) | | | 4.65 | | | | 5.02 | | Weighted average discount rate | | | 6.84 | % | | | 6.79 | % |
| | | | | | Lease Assets and Liabilities | Classification | | Assets: | | | Operating Lease ROU Assets | Other Assets | $ | 72,632 |
| | | | Liabilities: | | | Current: | | | Operating Lease Liabilities | Other Accrued Liabilities | $ | 19,479 |
| Long-Term: | | | Operating Lease Liabilities | Operating Lease Liabilities | $ | 55,413 |
| Total Operating Lease Liabilities | | $ | 74,892 |
| | | | Weighted average remaining lease term (in years) | | 5.02 |
| Weighted average discount rate | | 6.79 | % |
100
CONSOL Energy leases certain owned mining equipment to a third-party under operating leases. At December 31, 2019, the amount of owned equipment included in gross property, plant and equipment was $6,966 and the associated amount of accumulated depreciation was $6,966. At December 31, 2019, scheduled minimum rental payments for operating leases related to this equipment were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | 2020 | 2021 | 2022 | 2023 | 2024 | Thereafter | Total | $ | 627 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 627 |
|
The Company also enters into finance leases for mining equipment and automobiles. Assets arising from finance leases are included in property, plant and equipment-net and the liabilities are included in current portion of long-term debt and long-term debt in the accompanying Consolidated Balance Sheet.
Sheets.For the yearyears ended December 31, 2020 and 2019, the components of finance lease expense were as follows: | | | | | Amortization of right of use assets | $ | 15,691 |
| Interest expense | 1,878 |
| Total finance lease expense | $ | 17,569 |
|
| | December 31, | | | | 2020 | | | 2019 | | Amortization of right of use assets | | $ | 24,066 | | | $ | 15,691 | | Interest expense | | | 2,375 | | | | 1,878 | | Total finance lease expense | | $ | 26,441 | | | $ | 17,569 | |
The following table presents the weighted average lease term and weighted average discount rate related to the Company's finance leases as of December 31, 2020 and 2019: | | | | | Weighted average remaining lease term (in years) | | 1.69 |
| Weighted average discount rate | | 5.20 | % |
At December 31, 2019, certain finance leases for mining equipment are subleased to a third-party. The following table represents the minimum payments, including interest, for those finance subleases:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | 2020 | 2021 | 2022 | 2023 | 2024 | Thereafter | Total | $ | 3,699 |
| | $ | 2,157 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 5,856 |
|
| | December 31, | | | | 2020 | | | 2019 | | Weighted average remaining lease term (in years) | | | 2.68 | | | | 1.69 | | Weighted average discount rate | | | 5.79 | % | | | 5.20 | % |
The following table presents the future maturities of the Company's operating and finance lease liabilities, together with the present value of the net minimum lease payments, at December 31, 2019: | | | | | | | | | | | | Finance | | Operating | | | Leases | | Leases | 2020 | | $ | 19,120 |
| | $ | 24,065 |
| 2021 | | 7,196 |
| | 23,132 |
| 2022 | | 783 |
| | 13,341 |
| 2023 | | 803 |
| | 6,504 |
| 2024 | | 575 |
| | 6,115 |
| Thereafter | | — |
| | 15,958 |
| Total minimum lease payments | | 28,477 |
| | 89,115 |
| Less amount representing interest | | 1,222 |
| | 14,223 |
| Present value of minimum lease payments | | $ | 27,255 |
| | $ | 74,892 |
|
2020: | | Finance | | | Operating | | | | Leases | | | Leases | | 2021 | | $ | 22,557 | | | $ | 23,358 | | 2022 | | | 18,074 | | | | 13,450 | | 2023 | | | 16,623 | | | | 6,395 | | 2024 | | | 3,595 | | | | 6,115 | | 2025 | | | 320 | | | | 4,619 | | Thereafter | | | 0 | | | | 11,339 | | Total minimum lease payments | | | 61,169 | | | | 65,276 | | Less amount representing interest | | | 4,851 | | | | 9,380 | | Present value of minimum lease payments | | $ | 56,318 | | | $ | 55,896 | |
As of December 31, 2019,2020, the Company had no additional significant operating or finance leases that had not yet commenced.
NOTE 14—15—PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS:
CONSOL Energy has non-contributory defined benefit retirement plans. The benefits for these plans are based primarily on years of service and employees' pay. CONSOL Energy's qualified pension plan (the “Pension Plan”) allows for lump-sum distributions of benefits earned up until December 31, 2005, at the employees' election. Pursuant to the SDASeparation and Distribution Agreement that provided for the separation and distribution (the “SDA”) and related ancillary agreements, the sponsorship of the qualified pension plan was transferred to the Company.
According to the Defined Benefit Plans Topic of the FASB Accounting Standards Codification, if the lump sum distributions made during a plan year, which for CONSOL Energy is January 1 to December 31, exceed the total of the projected service cost and interest cost for the plan year, settlement accounting is required. Lump sum payments did not exceed this threshold during the years ended December 31, 2020, 2019 and 2018. However, lump sum payments did exceed this threshold during the year ended December 31, 2017. Accordingly, CONSOL Energy recognized settlement expense of $10,153 for the year ended December 31, 2017 in Operating and Other Costs in the Consolidated Statements of Income.
2018.Other Postretirement Benefit Plan
Certain subsidiaries of CONSOL Energy provide medical and prescription drug benefits to retired employees covered by either the Coal Industry Retiree Health Benefit Act of 1992 (the Coal Act). Represented hourly employees are eligible to participate based upon the terms of or the National Bituminous Coal Wage Agreement of 2011.
The reconciliation of changes in the benefit obligation, plan assets and funded status of these plans at December 31, 2019 2020 and 20182019 is as follows: | | Pension Benefits | | | Other Postretirement Benefits | | | | at December 31, 2020 | | | at December 31, 2019 | | | | 2020 | | | 2019 | | | 2020 | | | 2019 | | Change in benefit obligation: | | | | | | | | | | | | | | | | | Benefit obligation at beginning of period | | $ | 720,098 | | | $ | 644,142 | | | $ | 464,329 | | | $ | 473,591 | | Service cost | | | 1,183 | | | | 3,950 | | | | 0 | | | | 0 | | Interest cost | | | 20,176 | | | | 25,101 | | | | 12,795 | | | | 18,320 | | Actuarial loss (gain) | | | 84,663 | | | | 95,078 | | | | (38,455 | ) | | | 4,761 | | Benefits and other payments | | | (47,252 | ) | | | (48,173 | ) | | | (24,959 | ) | | | (32,343 | ) | Benefit obligation at end of period | | $ | 778,868 | | | $ | 720,098 | | | $ | 413,710 | | | $ | 464,329 | | | | | | | | | | | | | | | | | | | Change in plan assets: | | | | | | | | | | | | | | | | | Fair value of plan assets at beginning of period | | $ | 668,481 | | | $ | 578,347 | | | $ | 0 | | | $ | 0 | | Actual return on plan assets | | | 118,403 | | | | 136,976 | | | | 0 | | | | 0 | | Company contributions | | | 1,346 | | | | 1,331 | | | | 24,959 | | | | 32,343 | | Benefits and other payments | | | (47,252 | ) | | | (48,173 | ) | | | (24,959 | ) | | | (32,343 | ) | Fair value of plan assets at end of period | | $ | 740,978 | | | $ | 668,481 | | | $ | 0 | | | $ | 0 | | | | | | | | | | | | | | | | | | | Funded status: | | | | | | | | | | | | | | | | | Current liabilities | | $ | (2,531 | ) | | $ | (1,687 | ) | | $ | (26,073 | ) | | $ | (31,833 | ) | Noncurrent liabilities | | | (35,359 | ) | | | (49,930 | ) | | | (387,637 | ) | | | (432,496 | ) | Net obligation recognized | | $ | (37,890 | ) | | $ | (51,617 | ) | | $ | (413,710 | ) | | $ | (464,329 | ) | | | | | | | | | | | | | | | | | | Amounts recognized in accumulated other comprehensive loss consist of: | | | | | | | | | | | | | | | | | Net actuarial loss | | $ | 256,988 | | | $ | 255,830 | | | $ | 132,203 | | | $ | 179,937 | | Prior service credit | | | 0 | | | | 0 | | | | (18,544 | ) | | | (20,949 | ) | Net amount recognized (before tax effect) | | $ | 256,988 | | | $ | 255,830 | | | $ | 113,659 | | | $ | 158,988 | |
| | | | | | | | | | | | | | | | | | | | Pension Benefits | | Other Postretirement Benefits | | | at December 31, | | at December 31, | | | 2019 | | 2018 | | 2019 | | 2018 | Change in benefit obligation: | | | | | | | | | Benefit obligation at beginning of period | | $ | 644,142 |
| | $ | 733,990 |
| | $ | 473,591 |
| | $ | 591,563 |
| Service cost | | 3,950 |
| | 1,150 |
| | — |
| | — |
| Interest cost | | 25,101 |
| | 23,505 |
| | 18,320 |
| | 18,706 |
| Actuarial loss (gain) | | 95,078 |
| | (60,351 | ) | | 4,761 |
| | (101,259 | ) | Benefits and other payments | | (48,173 | ) | | (54,152 | ) | | (32,343 | ) | | (35,419 | ) | Benefit obligation at end of period | | $ | 720,098 |
| | $ | 644,142 |
| | $ | 464,329 |
| | $ | 473,591 |
| | | | | | | | | | Change in plan assets: | | | | | | | | | Fair value of plan assets at beginning of period | | $ | 578,347 |
| | $ | 679,245 |
| | $ | — |
| | $ | — |
| Actual return on plan assets | | 136,976 |
| | (48,470 | ) | | — |
| | — |
| Company contributions | | 1,331 |
| | 1,724 |
| | 32,343 |
| | 35,419 |
| Benefits and other payments | | (48,173 | ) | | (54,152 | ) | | (32,343 | ) | | (35,419 | ) | Fair value of plan assets at end of period | | $ | 668,481 |
| | $ | 578,347 |
| | $ | — |
| | $ | — |
| | | | | | | | | | Funded status: | | | | | | | | | Current liabilities | | $ | (1,687 | ) | | $ | (1,623 | ) | | $ | (31,833 | ) | | $ | (32,345 | ) | Noncurrent liabilities | | (49,930 | ) | | (64,172 | ) | | (432,496 | ) | | (441,246 | ) | Net obligation recognized | | $ | (51,617 | ) | | $ | (65,795 | ) | | $ | (464,329 | ) | | $ | (473,591 | ) | | | | | | | | | | Amounts recognized in accumulated other comprehensive loss consist of: | | | | | | | | | Net actuarial loss | | $ | 255,830 |
| | $ | 263,229 |
| | $ | 179,937 |
| | $ | 184,438 |
| Prior service credit | | — |
| | (367 | ) | | (20,949 | ) | | (23,354 | ) | Net amount recognized (before tax effect) | | $ | 255,830 |
| | $ | 262,862 |
| | $ | 158,988 |
| | $ | 161,084 |
|
102
The components of net periodic benefit (credit) cost are as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | Pension Benefits | | Other Postretirement Benefits | | For the Years Ended December 31, | | For the Years Ended December 31, | | 2019 | | 2018 | | 2017 | | 2019 | | 2018 | | 2017 | Components of net periodic benefit (credit) cost: | | | | | | | | | | | | Service cost | $ | 3,950 |
| | $ | 1,150 |
| | $ | 2,948 |
| | $ | — |
| | $ | — |
| | $ | — |
| Interest cost | 25,101 |
| | 23,505 |
| | 25,265 |
| | 18,320 |
| | 18,706 |
| | 23,945 |
| Expected return on plan assets | (40,457 | ) | | (40,370 | ) | | (42,383 | ) | | — |
| | — |
| | — |
| Amortization of prior service credits | (367 | ) | | (502 | ) | | (502 | ) | | (2,405 | ) | | (2,405 | ) | | (2,405 | ) | Recognized net actuarial loss | 5,958 |
| | 8,715 |
| | 8,896 |
| | 9,262 |
| | 16,205 |
| | 23,112 |
| Settlement loss | — |
| | — |
| | 10,153 |
| | — |
| | — |
| | — |
| Net periodic benefit (credit) cost | $ | (5,815 | ) | | $ | (7,502 | ) | | $ | 4,377 |
| | $ | 25,177 |
| | $ | 32,506 |
| | $ | 44,652 |
|
Amounts included in accumulated other comprehensive loss which are expected to be recognized in 2020 net periodic benefit costs:
| | | | | | | | | | | | | | Other | | | Pension | | Postretirement | | | Benefits | | Benefits | Prior service credit recognition | | $ | — |
| | $ | (2,405 | ) | Actuarial loss recognition | | $ | 6,922 |
| | $ | 9,278 |
|
| | Pension Benefits | | | Other Postretirement Benefits | | | | For the Years Ended December 31, | | | For the Years Ended December 31, | | | | 2020 | | | 2019 | | | 2018 | | | 2020 | | | 2019 | | | 2018 | | Components of net periodic benefit (credit) cost: | | | | | | | | | | | | | | | | | | | | | | | | | Service cost | | $ | 1,183 | | | $ | 3,950 | | | $ | 1,150 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | Interest cost | | | 20,176 | | | | 25,101 | | | | 23,505 | | | | 12,795 | | | | 18,320 | | | | 18,706 | | Expected return on plan assets | | | (41,821 | ) | | | (40,457 | ) | | | (40,370 | ) | | | 0 | | | | 0 | | | | 0 | | Amortization of prior service credits | | | 0 | | | | (367 | ) | | | (502 | ) | | | (2,405 | ) | | | (2,405 | ) | | | (2,405 | ) | Recognized net actuarial loss | | | 6,922 | | | | 5,958 | | | | 8,715 | | | | 9,277 | | | | 9,262 | | | | 16,205 | | Net periodic benefit (credit) cost | | $ | (13,540 | ) | | $ | (5,815 | ) | | $ | (7,502 | ) | | $ | 19,667 | | | $ | 25,177 | | | $ | 32,506 | |
CONSOL Energy utilizes a corridor approach to amortize actuarial gains and losses that have been accumulated under the Pension Plan. Cumulative gains and losses that are in excess of 10% of the greater of either the projected benefit obligation (PBO) or the market-related value of plan assets are amortized over the expected remaining future lifetime of all plan participants for the Pension Plan.
CONSOL Energy also utilizes a corridor approach to amortize actuarial gains and losses that have been accumulated under the OPEB Plan. Cumulative gains and losses that are in excess of 10% of the greater of either the accumulated postretirement benefit obligation (APBO) or the market-related value of plan assets are amortized over the average future remaining lifetime of the current inactive population for the OPEB Plan.
The following table provides information related to pension plans with an accumulated benefit obligation in excess of plan assets: | | | | | | | | | | | | As of December 31, | | | 2019 | | 2018 | Projected benefit obligation | | $ | 720,098 |
| | $ | 644,142 |
| Accumulated benefit obligation | | $ | 719,985 |
| | $ | 644,069 |
| Fair value of plan assets | | $ | 668,481 |
| | $ | 578,347 |
|
| | As of December 31, | | | | 2020 | | | 2019 | | Projected benefit obligation | | $ | 778,868 | | | $ | 720,098 | | Accumulated benefit obligation | | $ | 778,618 | | | $ | 719,985 | | Fair value of plan assets | | $ | 740,978 | | | $ | 668,481 | |
Assumptions:
The weighted-average assumptions used to determine benefit obligations are as follows: | | Pension Obligations | | | Other Postretirement Obligations | | | | at December 31, | | | at December 31, | | | | 2020 | | | 2019 | | | 2020 | | | 2019 | | Discount rate | | | 2.36 | % | | | 3.28 | % | | | 2.39 | % | | | 3.27 | % | Rate of compensation increase | | | 3.76 | % | | | 3.68 | % | | | 0 | | | | 0 | |
| | | | | | | | | | | | | | | | Pension Obligations | | Other Postretirement Obligations | | | at December 31, | | at December 31, | | | 2019 | | 2018 | | 2019 | | 2018 | Discount rate | | 3.28 | % | | 4.34 | % | | 3.27 | % | | 4.34 | % | Rate of compensation increase | | 3.68 | % | | 3.73 | % | | — |
| | — |
|
103
The discount rates are determined using a Company-specific yield curve model (above-mean) developed with the assistance of an external actuary. The Company-specific yield curve models (above-mean) use a subset of the expanded bond universe to determine the Company-specific discount rate. Bonds used in the yield curve are rated AA by Moody's or Standard & Poor's as of the measurement date. The yield curve models parallel the plans' projected cash flows, and the underlying cash flows of the bonds included in the models exceed the cash flows needed to satisfy the Company's plans.
The weighted-average assumptions used to determine net periodic benefit costs are as follows: | | | | | | | | | | | | | | | | | | | | | | Pension Benefits | | Other Postretirement Benefits | | | For the Years Ended | | For the Years Ended | | | December 31, | | December 31, | | | 2019 | | 2018 | | 2017 | | 2019 | | 2018 | | 2017 | Discount rate | | 4.37 | % | | 3.69 | % | | 4.27 | % | | 4.34 | % | | 3.65 | % | | 4.22 | % | Expected long-term return on plan assets | | 6.90 | % | | 6.90 | % | | 6.90 | % | | — |
| | — |
| | — |
| Rate of compensation increase | | 3.73 | % | | 3.73 | % | | 3.90 | % | | — |
| | — |
| | — |
|
| | Pension Benefits | | | Other Postretirement Benefits | | | | For the Years Ended | | | For the Years Ended | | | | December 31, | | | December 31, | | | | 2020 | | | 2019 | | | 2018 | | | 2020 | | | 2019 | | | 2018 | | Discount rate | | | 3.35 | % | | | 4.37 | % | | | 3.69 | % | | | 3.27 | % | | | 4.34 | % | | | 3.65 | % | Expected long-term return on plan assets | | | 6.48 | % | | | 6.90 | % | | | 6.90 | % | | | 0 | | | | 0 | | | | 0 | | Rate of compensation increase | | | 3.68 | % | | | 3.73 | % | | | 3.73 | % | | | 0 | | | | 0 | | | | 0 | |
The long-term rate of return is the sum of the portion of total assets in each asset class held multiplied by the expected return for that class, adjusted for expected expenses to be paid from the assets. The expected return for each class is determined using the plan asset allocation at the measurement date and a distribution of compound average returns over a twenty year time horizon. The model uses asset class returns, variances and correlation assumptions to produce the expected return for each portfolio. The return assumptions used forward-looking gross returns influenced by the current Treasury yield curve. These returns recognize current bond yields, corporate bond spreads and equity risk premiums based on current market conditions. The assumed health care cost trend rates are as follows: | | | | | | | | | | At December 31, | | | 2019 | | 2018 | Health care cost trend rate for next year | | 5.65 | % | | 5.83 | % | Rate to which the cost trend is assumed to decline (ultimate trend rate) | | 4.50 | % | | 4.50 | % | Year that the rate reaches ultimate trend rate | | 2038 |
| | 2038 |
|
Assumed health care cost trend rates have a significant effect on the amounts reported for the medical plans. A one-percentage point change in assumed health care cost trend rates would have the following effects:
| | | | | | | | | | | | 1 Percentage | | 1 Percentage | | | Point Increase | | Point Decrease | Effect on total of service and interest cost components | | $ | 2,023 |
| | $ | (1,725 | ) | Effect on accumulated postretirement benefit obligation | | $ | 48,891 |
| | $ | (41,917 | ) |
| | At December 31, | | | | 2020 | | | 2019 | | Health care cost trend rate for next year | | | 5.43 | % | | | 5.65 | % | Rate to which the cost trend is assumed to decline (ultimate trend rate) | | | 4.50 | % | | | 4.50 | % | Year that the rate reaches ultimate trend rate | | 2038 | | | 2038 | |
Plan Assets:
The Company’s overall investment strategy is to meet current and future benefit payment needs through diversification across asset classes, fund strategies and fund managers to achieve an optimal balance between risk and return and between income and growth of assets through capital appreciation. Consistent with the objectives of the pension trust (the “Trust”) and in consideration of the Trust’s current funded status and the current level of market interest rates, the Retirement Board, as appointed by the CONSOL Energy Board of Directors (the “Retirement Board”) has approved an asset allocation strategy that will change over time in response to future improvements in the Trust’s funded status and/or changes in market interest rates. Such changes in asset allocation strategy are intended to allocate additional assets to the fixed income asset class should the Trust’s funded status improve. In this framework, the current target allocation for plan assets is 23.5%21% U.S. equity securities, 15%13% non-U.S. equity securities, 6.5%6% global equity securities and 55%60% fixed income. Both the equity and fixed income portfolios are comprised of both active and passive investment strategies. The Trust is primarily invested in Mercer Common Collective Trusts. Equity securities consist of investments in large and mid/small cap companies; non-U.S. equities are derived from both developed and emerging markets. Fixed income securities consist primarily of U.S. long duration fixed income corporate and U.S. Treasury instruments. The average quality of the fixed income portfolio must be rated at least “investment grade” by nationally recognized rating agencies. Within the fixed income asset class, investments are invested primarily across various strategies such that the overall profile strongly
correlates with the interest rate sensitivity of the Trust’s liabilities in order to reduce the volatility resulting from the risk of changes in interest rates and the impact of such changes on the Trust’s overall financial status. Derivatives, interest rate swaps, options and futures are permitted investments for the purpose of reducing risk and to extend the duration of the overall fixed income portfolio; however, they may not be used for speculative purposes. All or a portion of the assets may be invested in mutual funds or other commingled vehicles so long as the pooled investment funds have an adequate asset base relative to their asset class; are invested in a diversified manner; and have management and/or oversight by an Investment Advisor registered with the SEC. The Retirement Board reviews the investment program on an ongoing basis including asset performance, current trends and developments in capital markets, changes in Trust liabilities and ongoing appropriateness of the overall investment policy.
The fair values of plan assets at December 31, 2019 2020 and 20182019 by asset category are as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fair Value Measurements at December 31, 2019 | | Fair Value Measurements at December 31, 2018 | | | | | Quoted | | | | | | | | Quoted | | | | | | | | | Prices in | | | | | | | | Prices in | | | | | | | | | Active | | | | | | | | Active | | | | | | | | | Markets for | | Significant | | Significant | | | | Markets for | | Significant | | Significant | | | | | Identical | | Observable | | Unobservable | | | | Identical | | Observable | | Unobservable | | | | | Assets | | Inputs | | Inputs | | | | Assets | | Inputs | | Inputs | | | Total | | (Level 1) | | (Level 2) | | (Level 3) | | Total | | (Level 1) | | (Level 2) | | (Level 3) | Asset Category | | | | | | | | | | | | | | | | | Cash/Accrued Income | | $ | 97 |
| | $ | 97 |
| | $ | — |
| | $ | — |
| | $ | 101 |
| | $ | 101 |
| | $ | — |
| | $ | — |
| Mercer Common Collective Trusts (a) | | 668,384 |
| | — |
| | — |
| | — |
| | 578,246 |
| | — |
| | — |
| | — |
| Total | | $ | 668,481 |
| | $ | 97 |
| | $ | — |
| | $ | — |
| | $ | 578,347 |
| | $ | 101 |
| | $ | — |
| | $ | — |
|
__________
| | Fair Value Measurements at December 31, 2020 | | | Fair Value Measurements at December 31, 2019 | | | | | | | | Quoted | | | | | | | | | | | | | | | Quoted | | | | | | | | | | | | | | | | Prices in | | | | | | | | | | | | | | | Prices in | | | | | | | | | | | | | | | | Active | | | | | | | | | | | | | | | Active | | | | | | | | | | | | | | | | Markets for | | | Significant | | | Significant | | | | | | | Markets for | | | Significant | | | Significant | | | | | | | | Identical | | | Observable | | | Unobservable | | | | | | | Identical | | | Observable | | | Unobservable | | | | | | | | Assets | | | Inputs | | | Inputs | | | | | | | Assets | | | Inputs | | | Inputs | | | | Total | | | (Level 1) | | | (Level 2) | | | (Level 3) | | | Total | | | (Level 1) | | | (Level 2) | | | (Level 3) | | Asset Category | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash/Accrued Income | | $ | 100 | | | $ | 100 | | | $ | 0 | | | $ | 0 | | | $ | 97 | | | $ | 97 | | | $ | 0 | | | $ | 0 | | Mercer Common Collective Trusts (a) | | | 740,878 | | | | 0 | | | | 0 | | | | 0 | | | | 668,384 | | | | 0 | | | | 0 | | | | 0 | | Total | | $ | 740,978 | | | $ | 100 | | | $ | 0 | | | $ | 0 | | | $ | 668,481 | | | $ | 97 | | | $ | 0 | | | $ | 0 | |
| | (a) | Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy but are included in the total. |
There are 0no investments in CONSOL Energy stock held by these plans at December 31, 2019 2020 or 2018. 2019.There are 0no assets in the other postretirement benefit plan at December 31, 2019 2020 or 2018.
If necessary, CONSOL Energy intends to contribute to the pension trust using prudent funding methods. However, the Company does not expect to contribute to the pension plan trust in 2020.2021. Pension benefit payments are primarily funded from the Trust. CONSOL Energy expects to pay benefits of $1,687$2,531 from the non-qualified pension plan in 2020.2021. CONSOL Energy does not expect to contribute to the other postretirement benefit plan in 20202021 and intends to pay benefit claims as they become due. The following benefit payments, reflecting expected future service, are expected to be paid: | | | | | | Other | | | | Pension | | | Postretirement | | | | Benefits | | | Benefits | | 2021 | | $ | 44,391 | | | $ | 26,073 | | 2022 | | $ | 43,639 | | | $ | 25,250 | | 2023 | | $ | 43,112 | | | $ | 24,455 | | 2024 | | $ | 42,755 | | | $ | 23,581 | | 2025 | | $ | 41,291 | | | $ | 23,249 | | Year 2026-2030 | | $ | 196,850 | | | $ | 110,456 | |
| | | | | | | | | | | | | | Other | | | Pension | | Postretirement | | | Benefits | | Benefits | 2020 | | $ | 44,619 |
| | $ | 31,833 |
| 2021 | | $ | 43,297 |
| | $ | 29,935 |
| 2022 | | $ | 43,438 |
| | $ | 29,302 |
| 2023 | | $ | 42,905 |
| | $ | 28,664 |
| 2024 | | $ | 42,837 |
| | $ | 27,881 |
| Year 2025-2029 | | $ | 200,271 |
| | $ | 134,541 |
|
105
NOTE 15—16—COAL WORKERS’WORKERS’ PNEUMOCONIOSIS AND WORKERS’WORKERS’ COMPENSATION: Coal Workers' Pneumoconiosis
Under the Federal Coal Mine Health and Safety Act of 1969, as amended, CONSOL Energy is responsible for medical and disability benefits to employees and their dependents resulting from occurrences of coal workers' pneumoconiosis (CWP) disease. CONSOL Energy is also responsible under various state statutes for pneumoconiosis benefits. CONSOL Energy primarily provides for these claims through a self-insurance program. The calculation of the actuarial present value of the estimated pneumoconiosis obligation is based on an annual actuarial study by independent actuaries and uses assumptions regarding disability incidence, medical costs, indemnity levels, mortality, death benefits, dependents and interest rates which are derived from actual company experience and outside sources. Actuarial gains or losses can result from discount rate changes, differences in incident rates and severity of claims filed as compared to original assumptions. Recent legislative changes have not been favorable for CWP. Based upon the law change that contained a 15-year15-year presumption and permitted that chronic obstructive pulmonary disease (COPD) is a symptom of coal workers’ pneumoconiosis, there has been a surge in entitled claims for CONSOL, both from new applicants and previously denied applicants over the past years.
Former miners and their family members asserting claims for pneumoconiosis benefits have generally been more successful asserting such claims in recent years as a result of the presumption within the PPACA that a coal miner with fifteen or more years of underground coal mining experience (or the equivalent) who develops a respiratory condition and meets the requirements for total disability under the Federal Act is presumed to be disabled due to coal dust exposure, thereby shifting the burden of proof from the employee to the employer/insurer to establish that this disability is not due to coal dust.
CONSOL Energy must also compensate individuals who sustain employment-related physical injuries or some types of occupational diseases and, on some occasions, for costs of their rehabilitation. Workers' compensation programs will also compensate survivors of workers who suffer employment-related deaths. Workers' compensation laws are administered by state agencies, and each state has its own set of rules and regulations regarding compensation owed to an employee that is injured in the course of employment. CONSOL Energy primarily provides for these claims through a self-insurance program. CONSOL Energy recognizes an actuarial present value of the estimated workers' compensation obligation calculated by independent actuaries. The calculation is based on claims filed and an estimate of claims incurred but not yet reported as well as various assumptions, including discount rate, future healthcare trend rate, benefit duration and recurrence of injuries. Actuarial gains or losses associated with workers' compensation have resulted from discount rate changes and differences in claims experience and incident rates as compared to prior assumptions.
The reconciliation of changes in the benefit obligation and funded status of these plans at December 31, 2019 2020 and 20182019 is as follows: | | CWP | | | Workers' Compensation | | | | at December 31, | | | at December 31, | | | | 2020 | | | 2019 | | | 2020 | | | 2019 | | Change in benefit obligation: | | | | | | | | | | | | | | | | | Benefit obligation at beginning of period | | $ | 214,473 | | | $ | 177,188 | | | $ | 71,480 | | | $ | 70,986 | | State administrative fees and insurance bond premiums | | | 0 | | | | 0 | | | | 1,996 | | | | 2,157 | | Service cost | | | 4,603 | | | | 3,791 | | | | 6,276 | | | | 5,685 | | Interest cost | | | 6,206 | | | | 7,001 | | | | 1,844 | | | | 2,585 | | Actuarial loss | | | 29,510 | | | | 39,827 | | | | 1,897 | | | | 1,536 | | Benefits paid | | | (12,869 | ) | | | (13,334 | ) | | | (10,052 | ) | | | (11,469 | ) | Benefit obligation at end of period | | $ | 241,923 | | | $ | 214,473 | | | $ | 73,441 | | | $ | 71,480 | | | | | | | | | | | | | | | | | | | Funded status: | | | | | | | | | | | | | | | | | Current assets | | $ | 0 | | | $ | 0 | | | $ | 602 | | | $ | 1,037 | | Current liabilities | | | (12,203 | ) | | | (12,331 | ) | | | (9,653 | ) | | | (11,323 | ) | Noncurrent liabilities | | | (229,720 | ) | | | (202,142 | ) | | | (64,390 | ) | | | (61,194 | ) | Net obligation recognized | | $ | (241,923 | ) | | $ | (214,473 | ) | | $ | (73,441 | ) | | $ | (71,480 | ) | | | | | | | | | | | | | | | | | | Amounts recognized in accumulated other comprehensive loss consist of: | | | | | | | | | | | | | | | | | Net actuarial loss (gain) | | $ | 71,259 | | | $ | 47,352 | | | $ | (8,866 | ) | | $ | (11,250 | ) | Net amount recognized (before tax effect) | | $ | 71,259 | | | $ | 47,352 | | | $ | (8,866 | ) | | $ | (11,250 | ) |
| | | | | | | | | | | | | | | | | | | | CWP | | Workers' Compensation | | | at December 31, | | at December 31, | | | 2019 | | 2018 | | 2019 | | 2018 | Change in benefit obligation: | | | | | | | | | Benefit obligation at beginning of period | | $ | 177,188 |
| | $ | 162,840 |
| | $ | 70,986 |
| | $ | 78,528 |
| State administrative fees and insurance bond premiums | | — |
| | — |
| | 2,157 |
| | 2,671 |
| Service cost | | 3,791 |
| | 6,650 |
| | 5,685 |
| | 6,230 |
| Interest cost | | 7,001 |
| | 5,245 |
| | 2,585 |
| | 2,283 |
| Actuarial loss (gain) | | 39,827 |
| | 14,832 |
| | 1,536 |
| | (5,134 | ) | Benefits paid | | (13,334 | ) | | (12,379 | ) | | (11,469 | ) | | (13,592 | ) | Benefit obligation at end of period | | $ | 214,473 |
| | $ | 177,188 |
| | $ | 71,480 |
| | $ | 70,986 |
| | | | | | | | | | Funded status: | | | | | | | | | Current assets | | $ | — |
| | $ | — |
| | $ | 1,037 |
| | $ | 1,384 |
| Current liabilities | | (12,331 | ) | | (12,187 | ) | | (11,323 | ) | | (12,628 | ) | Noncurrent liabilities | | (202,142 | ) | | (165,001 | ) | | (61,194 | ) | | (59,742 | ) | Net obligation recognized | | $ | (214,473 | ) | | $ | (177,188 | ) | | $ | (71,480 | ) | | $ | (70,986 | ) | | | | | | | | | | Amounts recognized in accumulated other comprehensive loss consist of: | | | | | | | | | Net actuarial loss (gain) | | $ | 47,352 |
| | $ | 8,542 |
| | $ | (11,250 | ) | | $ | (13,561 | ) | Net amount recognized (before tax effect) | | $ | 47,352 |
| | $ | 8,542 |
| | $ | (11,250 | ) | | $ | (13,561 | ) |
106
The components of net periodic benefit cost are as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | CWP | | Workers’ Compensation | | For the Years Ended | | For the Years Ended | | December 31, | | December 31, | | 2019 | | 2018 | | 2017 | | 2019 | | 2018 | | 2017 | Service cost | $ | 3,791 |
| | $ | 6,650 |
| | $ | 5,122 |
| | $ | 5,685 |
| | $ | 6,230 |
| | $ | 5,734 |
| Interest cost | 7,001 |
| | 5,245 |
| | 4,050 |
| | 2,585 |
| | 2,283 |
| | 2,321 |
| Recognized net actuarial loss (gain) | 1,016 |
| | (853 | ) | | (7,631 | ) | | (774 | ) | | (79 | ) | | (598 | ) | State administrative fees and insurance bond premiums | — |
| | — |
| | — |
| | 2,157 |
| | 2,671 |
| | 3,198 |
| Net periodic benefit cost | $ | 11,808 |
| | $ | 11,042 |
| | $ | 1,541 |
| | $ | 9,653 |
| | $ | 11,105 |
| | $ | 10,655 |
|
The following are amounts included in accumulated other comprehensive loss that are expected to be recognized in 2020 net periodic benefit costs:
| | | | | | | | | | | | | | Workers' | | | CWP | | Compensation | | | Benefits | | Benefits | Actuarial loss (gain) recognition | | $ | 5,604 |
| | $ | (487 | ) |
| | CWP | | | Workers’ Compensation | | | | For the Years Ended | | | For the Years Ended | | | | December 31, | | | December 31, | | | | 2020 | | | 2019 | | | 2018 | | | 2020 | | | 2019 | | | 2018 | | Service cost | | $ | 4,603 | | | $ | 3,791 | | | $ | 6,650 | | | $ | 6,276 | | | $ | 5,685 | | | $ | 6,230 | | Interest cost | | | 6,206 | | | | 7,001 | | | | 5,245 | | | | 1,844 | | | | 2,585 | | | | 2,283 | | Recognized net actuarial loss (gain) | | | 5,604 | | | | 1,016 | | | | (853 | ) | | | (488 | ) | | | (774 | ) | | | (79 | ) | State administrative fees and insurance bond premiums | | | 0 | | | | 0 | | | | 0 | | | | 1,996 | | | | 2,157 | | | | 2,671 | | Net periodic benefit cost | | $ | 16,413 | | | $ | 11,808 | | | $ | 11,042 | | | $ | 9,628 | | | $ | 9,653 | | | $ | 11,105 | |
CONSOL Energy utilizes a corridor approach to amortize actuarial gains and losses that have been accumulated under the Workers’ Compensation and CWP plans. Cumulative gains and losses that are in excess of 10% of the greater of either the estimated liability or the market-related value of plan assets are amortized over the expected average remaining future service of the current active membership of the Workers’ Compensation and CWP plans.
The weighted-average discount rates used to determine benefit obligations and net periodic benefit costs are as follows: | | | | | | | | | | | | | | | | | | | | | | CWP | | Workers' Compensation | | | For the Years Ended | | For the Years Ended | | | December 31, | | December 31, | | | 2019 |
| | 2018 |
| | 2017 |
| | 2019 |
| | 2018 |
| | 2017 |
| Benefit obligations | | 3.41 | % | | 4.42 | % | | 3.75 | % | | 3.25 | % | | 4.26 | % | | 3.57 | % | Net periodic benefit costs | | 4.42 | % | | 3.75 | % | | 4.40 | % | | 4.26 | % | | 3.57 | % | | 4.05 | % |
| | CWP | | | Workers' Compensation | | | | For the Years Ended | | | For the Years Ended | | | | December 31, | | | December 31, | | | | 2020 | | | 2019 | | | 2018 | | | 2020 | | | 2019 | | | 2018 | | Benefit obligations | | | 2.53 | % | | | 3.41 | % | | | 4.42 | % | | | 2.35 | % | | | 3.25 | % | | | 4.26 | % | Net periodic benefit costs | | | 3.41 | % | | | 4.42 | % | �� | | 3.75 | % | | | 3.25 | % | | | 4.26 | % | | | 3.57 | % |
Discount rates are determined using a Company-specific yield curve model (above-mean) developed with the assistance of an external actuary. The Company-specific yield curve models (above-mean) use a subset of the expanded bond universe to determine the Company-specific discount rate. Bonds used in the yield curve are rated AA by Moody's or Standard & Poor's as of the measurement date. The yield curve models parallel the plans' projected cash flows, and the underlying cash flows of the bonds included in the models exceed the cash flows needed to satisfy the Company's plans.
CONSOL Energy does not intend to make contributions to the CWP or Workers' Compensation plans in 2020,2021, but it intends to pay benefit claims as they become due.
The following benefit payments, which reflect expected future claims as appropriate, are expected to be paid: | | | | | | Workers' Compensation | | | | CWP | | | Total | | | Actuarial | | | Other | | | | Benefits | | | Benefits | | | Benefits | | | Benefits | | 2021 | | $ | 12,203 | | | $ | 10,580 | | | $ | 9,051 | | | $ | 1,529 | | 2022 | | $ | 11,923 | | | $ | 10,392 | | | $ | 8,824 | | | $ | 1,568 | | 2023 | | $ | 11,762 | | | $ | 10,212 | | | $ | 8,605 | | | $ | 1,607 | | 2024 | | $ | 11,439 | | | $ | 10,151 | | | $ | 8,504 | | | $ | 1,647 | | 2025 | | $ | 11,304 | | | $ | 10,015 | | | $ | 8,327 | | | $ | 1,688 | | Year 2026-2030 | | $ | 57,386 | | | $ | 50,445 | | | $ | 41,350 | | | $ | 9,095 | |
| | | | | | | | | | | | | | | | | | | | | | Workers' Compensation | | | CWP | | Total | | Actuarial | | Other | | | Benefits | | Benefits | | Benefits | | Benefits | 2020 | | $ | 12,331 |
| | $ | 12,235 |
| | $ | 10,286 |
| | $ | 1,949 |
| 2021 | | $ | 12,013 |
| | $ | 12,427 |
| | $ | 10,430 |
| | $ | 1,997 |
| 2022 | | $ | 11,893 |
| | $ | 12,680 |
| | $ | 10,633 |
| | $ | 2,047 |
| 2023 | | $ | 11,545 |
| | $ | 12,741 |
| | $ | 10,643 |
| | $ | 2,098 |
| 2024 | | $ | 11,351 |
| | $ | 12,808 |
| | $ | 10,657 |
| | $ | 2,151 |
| Year 2025-2029 | | $ | 57,446 |
| | $ | 66,260 |
| | $ | 54,672 |
| | $ | 11,588 |
|
107
NOTE 16—17—OTHER EMPLOYEE BENEFIT PLANS:
The Coal Act created two multi-employer benefit plans: (1)(1) the United Mine Workers of America Combined Benefit Fund (the “Combined Fund”) into which the former UMWA Benefit Trusts were merged, and (2)(2) the United Mine Workers of America 1992 Benefit Plan (the “1992“1992 Benefit Plan”). CONSOL Energy accounts for required contributions to these multi-employer trusts as expense when incurred. The Combined Fund provides medical and death benefits for all beneficiaries of the former UMWA Benefit Trusts who were actually receiving benefits as of July 20,1992. The 1992 Benefit Plan provides medical and death benefits to orphan UMWA-represented members eligible for retirement on February 1,1993 and for those who retired between July 20,1992 and September 30,1994. The Coal Act provides for the assignment of beneficiaries to former employers and the allocation of unassigned beneficiaries (referred to as orphans) to companies using a formula set forth in the Coal Act. The Coal Act requires that responsibility for funding the benefits to be paid to beneficiaries be assigned to their former signatory employers or related companies. This cost is recognized when contributions are assessed. CONSOL Energy's total contributions under the Coal Act were $5,383, $6,042 $6,829 and $7,647$6,829 for the years ended December 31, 2020, 2019 2018 and 2017,2018, respectively. Based on available information at December 31, 2019,2020, CONSOL Energy's gross obligation for the Combined Fund and 1992 Benefit Plan is estimated to be approximately $62,295.
$56,039.Pursuant to the provisions of the Tax Relief and Healthcare Act of 2006 (the “2006“2006 Act”) and the 1992 Benefit Plan, CONSOL Energy is required to provide security in an amount based on the annual cost of providing health care benefits for all individuals receiving benefits from the 1992 Benefit Plan who are attributable to CONSOL Energy, plus all individuals receiving benefits from an individual employer plan maintained by CONSOL Energy who are entitled to receive such benefits. In accordance with the terms of the 2006 Act and the 1992 Benefit Plan, CONSOL Energy must secure its obligations by posting letters of credit, which were $17,421, $18,669 and $19,860 and $20,983 at December 31, 2020, 2019 2018 and 2017,2018, respectively. The 2020, 2019 2018 and 20172018 security amounts were based on the annual cost of providing health care benefits and included a reduction in the number of eligible employees.
CONSOL Energy has an investment plan available to most non-represented employees. Eligible employees of CONSOL Pennsylvania Coal Company began participation in the CONSOL Pennsylvania Coal Company Investment Plan (the “CPCC 401(k)401(k) Plan”) on September 1, 2017, the CPCC 401(k)401(k) Plan's inception date. Remaining eligible employees of CONSOL Energy began participation in the CPCC 401(k)401(k) Plan on November 1, 2017. Prior to participating in the CPCC 401(k)401(k) Plan, eligible employees participated in the Company's former parent's 401(k)401(k) plan. Effective December 31, 2019, the CPCC 401(k)401(k) Plan was amended to change its sponsor from CONSOL Pennsylvania Coal Company to CONSOL Energy Inc., and the plan's name was changed from the CONSOL Pennsylvania Coal Company Investment Plan to the CONSOL Energy Inc. Investment Plan (the “CEIX 401(k)401(k) Plan”). The CEIX 401(k)401(k) Plan and the Company's former parent's 401(k)401(k) plan both include company matching of 6% of eligible compensation contributed by eligible CONSOL Energy employees. The Company may also make discretionary contributions to the CEIX 401(k)401(k) Plan ranging from 1% to 6% of eligible compensation for eligible employees (as defined by the CEIX 401(k)401(k) Plan). Discretionary contributions of $10,445 were accrued for at December 31, 2018, and were paid into employees' accounts in the first quarter of 2019. There were 0no such discretionary contributions accrued for or made by the Company in the years ended December 31, 2019 2020 and 2017.2019. Total payments and costs were $8,114, $10,737 $20,655 and $9,888$20,655 for the years ended December 31, 2020, 2019 2018 and 2017,2018, respectively.
CONSOL Energy has a Long-Term Disability Plan available to all eligible full-time salaried employees. The benefits for this plan are based on a percentage of monthly earnings, offset by all other income benefits available to the disabled. | | | | | | | | | | | | | | | | For the Years Ended | | | December 31, | | | 2019 | | 2018 | | 2017 | Net periodic benefit costs | | $ | 1,483 |
| | $ | 2,088 |
| | $ | 2,058 |
| Discount rate assumption used to determine net periodic benefit costs | | 3.97 | % | | 3.22 | % | | 3.43 | % |
| | For the Years Ended | | | | December 31, | | | | 2020 | | | 2019 | | | 2018 | | Net periodic benefit costs | | $ | 1,700 | | | $ | 1,483 | | | $ | 2,088 | | Discount rate assumption used to determine net periodic benefit costs | | | 2.86 | % | | | 3.97 | % | | | 3.22 | % |
Liabilities incurred under the Long-Term Disability Plan are included in Other Accrued Liabilities and Deferred Credits and Other Liabilities–Other in the Consolidated Balance Sheets and amounted to a combined total of $12,749$11,374 and $12,022$12,749 at December 31, 2019 2020 and 2018,2019, respectively.
NOTE 17—18—STOCK-BASED COMPENSATION: CONSOL Energy adopted the CONSOL Energy Inc. Omnibus Performance Incentive Plan (the “Performance Incentive Plan”) on November 22, 2017. The Performance Incentive Plan provides for grants of stock-based awards to employees, including any officer or employee-director of the Company, who is not a member of the Compensation Committee. These awards are intended to compensate the recipients thereof based on the performance of the Company's stock and the recipients' continued services during the vesting period, as well as align the recipients' long-term interests with those of the Company's shareholders. CONSOL Energy is responsible for the cost of awards granted under the Performance Incentive Plan, and all determinations with respect to awards to be made under the Performance Incentive Plan will be made by the board of directors or a committee as delegated by the board of directors.
The Performance Incentive Plan limits the number of units that may be delivered pursuant to vested awards to 2,600,000 shares, subject to proportionate adjustment in the event of stock splits, stock dividends, recapitalizations, and other similar transactions or events. Shares subject to awards that are canceled, forfeited, withheld to satisfy exercise prices or tax withholding obligations or otherwise terminate without delivery will be available for delivery pursuant to other awards.
Due to the separation of the Company and its former parent as described in Note 2 - Separation from the Company's Former Parent, the terms of the agreement between the Company and its former parent provide for the automatic adjustment and conversion of awards originally granted under the Company's former parent's equity incentive plan into awards of the Performance Incentive Plan, effective as of November 28, 2017. By calculating a conversion ratio based on the share price immediately prior to the separation for both CONSOL Energy and its former parent, the intrinsic value of the outstanding awards immediately following the separation remains the same as the intrinsic value immediately prior to the separation. At the date of conversion, employees of CONSOL Energy who were grades 14 or lower vested immediately in any non-vested restricted stock units, whereas employees above grade 14 converted their shares at the separation date. All performance share units of the Company's former parent owned by CONSOL Energy employees converted on the date of the separation. For every unvested share of the Company's former parent to be converted, a CONSOL Energy employee received 0.7189 shares of an unvested award in the Performance Incentive Plan. The fair value of each award was adjusted to preserve the intrinsic value of the award. Any unvested option award of the Company's former parent owned by a CONSOL Energy employee remained an option award of the stock of the Company's former parent and CONSOL Energy recognized stock-based compensation expense for the remaining unamortized period of the award. For the year ended December 31, 2017, $1,436 relates to the immediate expense of the unamortized portion of options granted by the Company's former parent for CONSOL Energy employees.While the board of directors may amend certain provisions of these awards, subject to limitations imposed by applicable law or the Performance Incentive Plan, these converted awards shall be governed by the provisions of the original award agreement applicable to the award.
For only those shares expected to vest, CONSOL Energy recognizes stock-based compensation costs on a straight-line basis over the requisite service period of the award as specified in the award agreement, which is generally the vesting term. The vesting of all awards will accelerate in the event of death and disability and may accelerate upon a change in control of CONSOL Energy. Some awards may accelerate based on retirement age. The Company accounts for forfeitures of stock-based compensation as they occur. The total stock-based compensation expense recognized during the years ended December 31, 2020, 2019 2018 and 20172018 was $11,161, $11,351, $8,392 and $16,212,$8,392, respectively, and was included in Selling, General and Administrative Costs on the Consolidated Statements of Income. This includes expense specifically related to the Performance Incentive Plan and also expense charged by the Company's former parent prior to the separation.Plan. The related deferred tax benefit relating to converted sharestotaled $2,871, $2,856 and new grants totaled $2,856, $1,911 and $1,439 for the years ended December 31, 2020, 2019 2018 and 2017,2018, respectively.
As of December 31, 2019,2020, CONSOL Energy has $8,800$6,537 of unrecognized compensation cost related to all nonvested stock-based compensation awards, which is expected to be recognized over a weighted-average period of 1.561.63 years. When restricted stock and performance share unit awards become vested, the issuances are made from CONSOL Energy's common stock shares.
In March 2016, the FASB issued an ASU on stock compensation that was intended to simplify and improve the accounting and statement of cash flow presentation for income taxes at settlement, forfeitures, and net settlements for withholding tax. The guidance was effective for public entities for fiscal years beginning after December 31, 2016. In accordance with this Update, $384 of additional income tax expense was recognized in the Consolidated Statements of Income for the year ended December 31, 2017. Also in accordance with this Update, the value of shares withheld for employee tax withholding purposes of $2,156 for the year ended December 31, 2017 was reclassified between Net Cash Provided by Operating Activities and Net Cash Used in Financing Activities on the Consolidated Statements of Cash Flows. As permitted by this Update, the Company has elected to account for forfeitures of stock-based compensation as they occur. The cumulative effect of the policy election to recognize forfeitures as they occur was nominal.
CONSOL Energy grants certain employees and non-employee directors restricted stock units, which entitle the holder to shares of common stock as the award vests. Compensation expense is recognized on a straight-line basis over the requisite service period of the award. The total fair value of restricted stock units vested during the years ended December 31, 2020, 2019 and 2018 was $6,913, $4,407 and $3,734, respectively. The following table represents the nonvested restricted stock units and their corresponding fair value (based upon the closing share price) at the date of grant: | | | | | | | | | Number of | | Weighted Average | | | Shares | | Grant Date Fair Value | Nonvested at December 31, 2018 | | 424,496 |
| | $33.60 | Granted | | 262,507 |
| | $33.96 | Vested | | (154,147 | ) | | $32.59 | Forfeited | | (79,520 | ) | | $31.05 | Nonvested at December 31, 2019 | | 453,336 |
| | $34.60 |
| | Number of | | | Weighted Average | | | | Shares | | | Grant Date Fair Value | | Nonvested at December 31, 2019 | | | 453,336 | | | $ | 34.60 | | Granted | | | 1,257,152 | | | $ | 7.81 | | Vested | | | (172,429 | ) | | $ | 31.86 | | Forfeited | | | (49,098 | ) | | $ | 12.42 | | Nonvested at December 31, 2020 | | | 1,488,961 | | | $ | 13.07 | |
Performance Share Units
CONSOL Energy grants certain employees performance share unit awards, which entitle the holder to shares of common stock subject to the achievement of certain market and performance goals. Compensation expense is recognized over the service period of awards and adjusted for the probability of achievement of performance-based goals. The total fair value of performance share units vested during the years ended December 31, 2020, 2019 and 2018 was and$1,042, $6,323 and $4,910, respectively. The following table represents the nonvested performance share units and their corresponding fair value (based upon the closing share price and/or Monte Carlo simulation) on the date of grant: | | Number of | | | Weighted Average | | | | Shares | | | Grant Date Fair Value | | Nonvested at December 31, 2019 | | | 193,265 | | | $ | 33.55 | | Granted | | | 229,440 | | | $ | 8.60 | | Vested | | | (33,665 | ) | | $ | 30.95 | | Forfeited | | | (52,195 | ) | | $ | 38.66 | | Nonvested at December 31, 2020 | | | 336,845 | | | $ | 17.81 | |
| | | | | | | | | Number of | | Weighted Average | | | Shares | | Grant Date Fair Value | Nonvested at December 31, 2018 | | 263,244 |
| | $34.51 | Granted | | 266,556 |
| | $34.49 | Vested | | (179,934 | ) | | $34.66 | Forfeited | | (156,601 | ) | | $35.49 | Nonvested at December 31, 2019 | | 193,265 |
| | $33.55 |
109
NOTE 18—19—SUPPLEMENTAL CASH FLOW INFORMATION: The following are non-cash transactions that impact the investing and financing activities of CONSOL Energy. CONSOL Energy entered into non-cash finance lease arrangements of $42,200, $4,424 and $1,301 for the years ended December 31, 2020, 2019 and 2018, respectively. Additionally, during the year ended December 31, 2018, the Company terminated two operating leases on its longwall shields, and refinanced these as finance leases in the amount of $45,979. CONSOL Energy did not enter into any non-cash finance lease arrangements during the year ended As of December 31, 2017.
As of December 31, 2020, 2019 2018 and 2017,2018, CONSOL Energy purchased goods and services related to capital projects in the amount of $1,671, $3,785 $2,311 and $27,358,$2,311, respectively, which are included in accounts payable, current portion of long-term debt and other accrued liabilities on the Consolidated Balance Sheets.
As part of the separation and distribution, certain assets and liabilities were contributed to the Company. As a result, the liabilities assumed by, and the assets contributed to, the Company in the year ended December 31, 2017 were $17,613 and $32,893, respectively.
The following table shows cash paid for interest and income taxes for the periods indicated. | | For the Years Ended December 31, | | | | 2020 | | | 2019 | | | 2018 | | Cash Paid For: | | | | | | | | | | | | | Interest (net of amounts capitalized) | | $ | 62,997 | | | $ | 73,574 | | | $ | 92,926 | | Income taxes | | $ | 1,476 | | | $ | 40,139 | | | $ | 12,834 | |
| | | | | | | | | | | | | | | | For the Years Ended December 31, | | | 2019 | | 2018 | | 2017 | Cash Paid For: | | | | | | | Interest (net of amounts capitalized) | | $ | 73,574 |
| | $ | 92,926 |
| | $ | 18,151 |
| Income taxes * | | $ | 40,139 |
| | $ | 12,834 |
| | $ | — |
|
* The Company's operations were historically included in the income tax filings of its former parent. All tax payments prior to the separation and distribution were made by the Company's former parent. The Company made no income tax payments from the date of the separation and distribution through December 31, 2017.
NOTE 19—20—CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS: CONSOL Energy primarily markets its thermal coal principally to electric utilitiespower producers in the eastern United States. Substantially all revenues wereRevenues generated from sales basedelectric power producers in the eastern United States were 65%, 65% and 71% for the years ended December 31, 2020, 2019 2018 and 2017. Less than 2% of the Company's revenues were generated from sales based in Canada for the year ended December 31, 2019. During the years ended December 31, 2019 and 2018 three customers each comprised over 10% of the Company's total coal sales revenue, aggregating approximately 70% and 57%, respectively, of the Company's sales. During the year ended December 31, 2017, two customers each comprised over 10% of the Company's total coal sales revenue, aggregating approximately 31% of the Company's sales. Additionally, two of the Company's customers had outstanding balances each in excess of 10% of the total trade receivable balance as of December 31, 2019 and 2018.
respectively. The Company has contractual relationships with certain coal exporters who distribute coal to international markets. For the years ended December 31, 2020, 2019 2018 and 2017,2018, approximately 35%, 29%35% and 31%29%, respectively, of the Company's coal revenues were derived from these exporters, in whichexporters. The Company uses the end usage point as the basis for attributing tons to individual countries. Because title to the Company's export shipments typically transfers to brokerage customers at a point that does not necessarily reflect the end usage point, the Company attributes export tons to the country with the end usage point, if known. No individual country outside of the United States was attributed greater than 10% of total tons sold during the years ended December 31, 2020, 2019 and 2018.During the years ended December 31, 2020, 2019 and 2018, three customers each comprised over 10% of the Company's total coal was intended to be shipped to Europe, Asia, South America,sales revenue, aggregating approximately 55%, 70% and Africa.
57%, respectively, of the Company's sales. Additionally, three of the Company's customers each had outstanding balances in excess of 10% of the total trade receivable balance as of December 31, 2020, and two of the Company's customers each had outstanding balances in excess of 10% of the total trade receivable balance as of December 31, 2019.Concentration of credit risk is summarized below: | | December 31, | | | | 2020 | | | 2019 | | Thermal coal utilities | | $ | 32,343 | | | $ | 58,557 | | Coal exporters and distributors | | | 82,948 | | | | 73,416 | | Steel and coke producers | | | 5,302 | | | | 0 | | Other | | | 2,122 | | | | 1,815 | | Total Trade Receivables | | | 122,715 | | | | 133,788 | | Less: Allowance for credit losses | | | 4,426 | | | | 2,100 | | Total Trade Receivables, net | | $ | 118,289 | | | $ | 131,688 | |
| | | | | | | | | | | | December 31, | | | 2019 | | 2018 | Thermal coal utilities | | $ | 58,557 |
| | $ | 61,218 |
| Coal exporters and distributors | | 73,416 |
| | 22,972 |
| Steel and coke producers | | — |
| | 661 |
| Other | | 1,815 |
| | 2,738 |
| Total Trade Receivables | | 133,788 |
| | 87,589 |
| Less: Allowance for doubtful accounts | | 2,100 |
| | — |
| Total Trade Receivables, net of Allowance | | $ | 131,688 |
| | $ | 87,589 |
|
110
NOTE 20—21—FAIR VALUE OF FINANCIAL INSTRUMENTS: CONSOL Energy determines the fair value of assets and liabilities based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. The fair values are based on assumptions that market participants would use when pricing an asset or liability, including assumptions about risk and the risks inherent in valuation techniques and the inputs to valuations. The fair value hierarchy is based on whether the inputs to valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources (including LIBOR-based discount rates), while unobservable inputs reflect the Company's own assumptions of what market participants would use. The fair value hierarchy includes three levels of inputs that may be used to measure fair value as described below. Level One - Quoted prices for identical instruments in active markets. Level Two - The fair value of the assets and liabilities included in Level 2 are based on standard industry income approach models that use significant observable inputs, including LIBOR-based discount rates. Level Three - Unobservable inputs significant to the fair value measurement supported by little or no market activity. The significant unobservable inputs used in the fair value measurement of the Company's third party-party guarantees are the credit risk of the third party-party and the third party-party surety bond markets. A significant increase or decrease in these values, in isolation, would have a directionally similar effect resulting in a higher or lower fair value measurement of the Company's Level 3 guarantees. In those cases when the inputs used to measure fair value meet the definition of more than one level of the fair value hierarchy, the lowest level input that is significant to the fair value measurement in its totality determines the applicable level in the fair value hierarchy.
The financial instruments measured at fair value on a recurring basis are summarized below: | | | | | | | | | | | | | | | | | | | | | | | | | | Fair Value Measurements at December 31, 2019 | | Fair Value Measurements at December 31, 2018 | Description | Level 1 | | Level 2 | | Level 3 | | Level 1 | | Level 2 | | Level 3 | Lease Guarantees | $ | — |
| | $ | — |
| | $ | (482 | ) | | $ | — |
| | $ | — |
| | $ | (734 | ) | Derivatives (1) | $ | — |
| | $ | (154 | ) | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
(1) | | Fair Value Measurements at | | | Fair Value Measurements at | | | | December 31, 2020 | | | December 31, 2019 | | Description | | Level 1 | | | Level 2 | | | Level 3 | | | Level 1 | | | Level 2 | | | Level 3 | | Lease Guarantees | | $ | 0 | | | $ | 0 | | | $ | (168 | ) | | $ | 0 | | | $ | 0 | | | $ | (482 | ) | Derivatives (1) | | $ | 0 | | | $ | (2,834 | ) | | $ | 0 | | | $ | 0 | | | $ | (154 | ) | | $ | 0 | |
(1) Interest rate swaps are valued based on observable market swap rates and are classified within Level 2 of the fair value hierarchy.
The following methods and assumptions were used to estimate the fair value for which the fair value option was not elected:
Long-term debt: The fair value of long-term debt is measured using unadjusted quoted market prices or estimated using discounted cash flow analyses. The discounted cash flow analyses are based on current market rates for instruments with similar cash flows.
The carrying amounts and fair values of financial instruments for which the fair value option was not elected are as follows: | | | | | | | | | | | | | | | | | | December 31, 2019 | | December 31, 2018 | | Carrying Amount | | Fair Value | | Carrying Amount | | Fair Value | Long-Term Debt | $ | 696,178 |
| | $ | 642,018 |
| | $ | 842,899 |
| | $ | 881,711 |
|
| | December 31, 2020 | | | December 31, 2019 | | | | Carrying | | | Fair | | | Carrying | | | Fair | | | | Amount | | | Value | | | Amount | | | Value | | Long-Term Debt | | $ | 610,510 | | | $ | 517,862 | | | $ | 696,178 | | | $ | 642,018 | |
Certain of the Company’s debt is actively traded on a public market and, as a result, constitutes Level 1 fair value measurements. The portion of the Company’s debt obligations that is not actively traded is valued through reference to the applicable underlying benchmark rate and, as a result, constitutes Level 2 fair value measurements.
NOTE 21—22—COMMITMENTS AND CONTINGENT LIABILITIES:
The SDA implemented the legal and structural separation of the Company from its former parent and identified the assets of the Coal Business that were transferred to the Company and the liabilities and contracts related to the Coal Business that were assumed by the Company as part of the separation and distribution. The SDA also provides post-closing indemnification obligations and procedures between the Company and its former parent relating to the liabilities of the Coal Business that the Company assumed.
The Company is subject to various lawsuits and claims with respect to such matters as personal injury, wrongful death, damage to property, exposure to hazardous substances, governmental regulations including environmental remediation, employment and contract disputes and other claims and actions arising out of the normal course of business. The Company accrues the estimated loss for these lawsuits and claims when the loss is probable and reasonably estimable. The Company's estimated accruals relating to these pending claims, individually and in the aggregate, are immaterial to the financial position, results of operations or cash flows of the Company as of December 31, 2019.2020. It is possible that the aggregate loss in the future with respect to these lawsuits and claims could ultimately be material to the Company's financial position, results of operations or cash flows; however, such amounts cannot be reasonably estimated. The amount claimed against the Company as of December 31, 20192020 is disclosed below when an amount is expressly stated in the lawsuit or claim, which is not often the case.
Fitzwater Litigation:Three NaN nonunion retired coal miners have sued Fola Coal Company LLC, Consolidation Coal Company (“CCC”) and CONSOL of Kentucky Inc. (“COK”) (as well as the Company's former parent) in West Virginia Federal Court alleging ERISA violations in the termination of retiree health care benefits. The Plaintiffs contend they relied to their detriment on oral statements and promises of “lifetime health benefits” allegedly made by various members of management during Plaintiffs’ employment and that they were allegedly denied access to Summary Plan Documents that clearly reserved the right to modify or terminate the Retiree Health and Welfare Plan subject to Plaintiffs' claims. Pursuant to Plaintiffs' amended complaint filed on April 24,2017, Plaintiffs request that retiree health benefits be reinstated and seek to represent a class of all nonunion retirees who were associated with AMVEST and COK areas of operation. On October 15, 2019, Plaintiffs' supplemental motion for class certification was denied on all counts and a scheduling order forcounts. On July 15, 2020, Plaintiffs filed an interlocutory appeal with the remaining individual claims was setFourth Circuit Court of Appeals on October 16, 2019.the Order denying class certification. The Fourth Circuit denied Plaintiffs' appeal on August 14, 2020. Trial is currently scheduled to take place in the first quarter of 2021. The Company believes it has a meritorious defense and intends to vigorously defend this suit.
Casey Litigation: A class action lawsuit was filed on August 23, 2017 on behalf of 2two nonunion retired coal miners against CCC, COK, CONSOL Buchanan Mining Co., LLC and Kurt Salvatori in West Virginia Federal Court alleging ERISA violations in the termination of retiree health care benefits. Filed by the same lawyers who filed the Fitzwater litigation, and raising nearly identical claims, the Plaintiffs contend they relied to their detriment on oral promises of “lifetime health benefits” allegedly made by various members of management during Plaintiffs’ employment and that they were not provided with copies of Summary Plan Documents clearly reserving to the Company the right to modify or terminate the Retiree Health and Welfare Plan. Plaintiffs request that retiree health benefits be reinstated for them and their dependents and seek to represent a class of all nonunion retirees of any subsidiary of the Company's former parent that operated or employed individuals in McDowell or Mercer Counties, West Virginia, or Buchanan or Tazewell Counties, Virginia whose retiree welfare benefits were terminated. On December 1, 2017, the trial court judge in Fitzwater signed an order to consolidate Fitzwater with Casey. The Casey complaint was amended on March 1, 2018 to add new plaintiffs, add defendant CONSOL Pennsylvania Coal Company, LLC and eliminate defendant CONSOL Buchanan Mining Co., LLC in an attempt to expand the class of retirees. On October 15, 2019, Plaintiffs' supplemental motion for class certification was denied on all counts and a scheduling order forcounts. On July 15, 2020, Plaintiffs filed an interlocutory appeal with the remaining individual claims was setFourth Circuit Court of Appeals on October 16, 2019.the Order denying class certification. The Fourth Circuit denied Plaintiffs' appeal on August 14, 2020. Trial is currently scheduled to take place in the first quarter of 2021. The Company believes it has a meritorious defense and intends to vigorously defend this suit.
United Mine Workers of America 1992 Benefit Plan Litigation: In 2013, Murray Energy and its subsidiaries (“Murray”) entered into a stock purchase agreement (the “Murray sale agreement”) with the Company's former parent pursuant to which Murray acquired the stock of CCC and certain subsidiaries and certain other assets and liabilities. At the time of sale, the liabilities included certain retiree medical liabilities under the Coal Act and certain federal black lung liabilities under the Black Lung Benefits Act (“BLBA”). Based upon information available, the Company estimates that the annual servicing costs of these liabilities are approximately $10 million to $20 million per year for the next ten years. The annual servicing cost would decline each year since the beneficiaries of the Coal Act consist principally of miners who retired prior to 1994. Murray filed for Chapter 11 bankruptcy in October 2019. As part of the ongoing bankruptcy proceedings, Murray entered into a settlement with the 1992 Plan to transfer retirees in the Murray Energy Section 9711 Plan into the 1992 Plan, which the bankruptcy court approved on April 30, 2020. The 1992 Plan recently filed an action in the United States District Court for the District of Columbia asking the court to make a determination whether the Company's former parent or the Company has any continuing retiree medical liabilities under the Coal Act. The Murray sale agreement includes indemnification by Murray with respect to the Coal Act and BLBA liabilities. In addition, the Company had agreed to indemnify its former parent relative to certain pre-separation liabilities. As of September 16, 2020, the Company has entered into a settlement agreement with Murray, and has withdrawn its claims in bankruptcy. See Note 2 - Major Transactions for a discussion of this settlement agreement. The Company will continue to vigorously defend any claims that attempt to transfer any of such liabilities directly or indirectly to the Company, including raising all applicable defenses against the 1992 Plan’s suit and those of any other party. Other Matters: Various Company subsidiaries are defendants in certain other legal proceedings arising out of the conduct of the Coal Business prior to the separation and distribution, and the Company is also a defendant in other legal proceedings following the separation and distribution. In the opinion of management, based upon an investigation of these matters and discussion with legal counsel, the ultimate outcome of such other legal proceedings, individually and in the aggregate, is not expected to have a material adverse effect on the Company’s financial position, results of operations or liquidity.
As part of the separation and distribution, the Company assumed various financial obligations relating to the Coal Business and agreed to reimburse its former parent for certain financial guarantees relating to the Coal Business that its former parent retained following the separation and distribution. Employee-related financial guarantees have primarily been provided to support the United Mine Workers’ of America’s 1992 Benefit Plan and federal black lung and various state workers’ compensation self-insurance programs. Environmental financial guarantees have primarily been provided to support various performance bonds related to reclamation and other environmental issues. Other financial guarantees have been extended to support sales contracts, insurance policies, legal matters, full and timely payments of mining equipment leases, and various other items necessary in the normal course of business.
The following is a summary, as of December 31, 2019,2020, of the financial guarantees, unconditional purchase obligations and letters of credit to certain third parties. These amounts represent the maximum potential of total future payments that the Company could be required to make under these instruments, or under the SDA to the extent retained by the Company's former parent on behalf of the Coal Business. Certain letters of credit included in the table below were issued against other commitments included in this table. These amounts have not been reduced for potential recoveries under recourse or collateralization provisions. Generally, recoveries under reclamation bonds would be limited to the extent of the work performed at the time of the default. No amounts related to these financial guarantees and letters of credit are recorded as liabilities in the financial statements. The Company's management believes that these guarantees will expire without being funded, and therefore, the commitments will not have a material adverse effect on the Company's financial condition. | | | | | | | | | | | | | | | | | | | | | | Amount of Commitment Expiration Per Period | | Total Amounts Committed | | Less Than 1 Year | | 1-3 Years | | 3-5 Years | | Beyond 5 Years | Letters of Credit: | | | | | | | | | | Employee-Related | $ | 64,558 |
| | $ | 50,416 |
| | $ | 14,142 |
| | $ | — |
| | $ | — |
| Environmental | 398 |
| | — |
| | 398 |
| | — |
| | — |
| Other | 45,843 |
| | 11,143 |
| | 34,700 |
| | — |
| | — |
| Total Letters of Credit | 110,799 |
| | 61,559 |
| | 49,240 |
| | — |
| | — |
| Surety Bonds: | | | | | | | | | | Employee-Related | 87,424 |
| | 86,124 |
| | 1,300 |
| | — |
| | — |
| Environmental | 526,838 |
| | 492,696 |
| | 34,142 |
| | — |
| | — |
| Other | 3,989 |
| | 3,830 |
| | 159 |
| | — |
| | — |
| Total Surety Bonds | 618,251 |
| | 582,650 |
| | 35,601 |
| | — |
| | — |
| Guarantees: | | | | | | | | | | Other | 15,535 |
| | 6,862 |
| | 7,893 |
| | 398 |
| | 382 |
| Total Guarantees | 15,535 |
| | 6,862 |
| | 7,893 |
| | 398 |
| | 382 |
| Total Commitments | $ | 744,585 |
| | $ | 651,071 |
| | $ | 92,734 |
| | $ | 398 |
| | $ | 382 |
|
| | Amount of Commitment Expiration Per Period | | | | Total | | | | | | | | | | | | | | | | | | | | Amounts | | | Less Than | | | | | | | | | | | Beyond | | | | Committed | | | 1 Year | | | 1-3 Years | | | 3-5 Years | | | 5 Years | | Letters of Credit: | | | | | | | | | | | | | | | | | | | | | Employee-Related | | $ | 75,776 | | | $ | 54,134 | | | $ | 21,642 | | | $ | 0 | | | $ | 0 | | Environmental | | | 398 | | | | 0 | | | | 398 | | | | 0 | | | | 0 | | Other | | | 80,982 | | | | 33,282 | | | | 47,700 | | | | 0 | | | | 0 | | Total Letters of Credit | | $ | 157,156 | | | $ | 87,416 | | | $ | 69,740 | | | $ | 0 | | | $ | 0 | | Surety Bonds: | | | | | | | | | | | | | | | | | | | | | Employee-Related | | $ | 83,524 | | | $ | 83,524 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | Environmental | | | 563,705 | | | | 559,155 | | | | 4,550 | | | | 0 | | | | 0 | | Other | | | 4,379 | | | | 4,379 | | | | 0 | | | | 0 | | | | 0 | | Total Surety Bonds | | $ | 651,608 | | | $ | 647,058 | | | $ | 4,550 | | | $ | 0 | | | $ | 0 | | Guarantees: | | | | | | | | | | | | | | | | | | | | | Other | | $ | 8,673 | | | $ | 6,538 | | | $ | 1,554 | | | $ | 398 | | | $ | 183 | |
Included in the above table are commitments and guarantees entered into in conjunction with the sale of Consolidation Coal Company and certain of its subsidiaries, which contain all five of its longwall coal mines in West Virginia and its river operations, to a third party. As part of the separation and distribution, the Company's former parent agreed to indemnify the Company and the Company agreed to indemnify its former parent in each case with respect to guarantees of certain equipment lease obligations that were assumed by the third party. In the event that the third party would default on the obligations defined in the agreements, the Company would be required to perform under the guarantees. If the Company would be required to perform, the stock purchase agreement provides various recourse actions. As of December 31, 2019,2020, the Company has not been required to perform under these guarantees. The equipment lease obligations are collateralized by the underlying assets. The current maximum estimated exposure under these guarantees as of December 31, 2019 2020 and 20182019 is believed to be approximately $20,000$8,000 and $28,000,$20,000, respectively. At December 31, 2019 2020 and 2018,2019, the fair value of these guarantees was $482$168 and $734,$482, respectively, and is included in Other Accrued Liabilities on the Consolidated Balance Sheets. The fair value of certain of the guarantees was determined using the Company’s risk-adjusted interest rate. Significant increases or decreases in the risk-adjusted interest rates may result in a significantly higher or lower fair value measurement. No other amounts related to financial guarantees and letters of credit are recorded as liabilities in the financial statements. Significant judgment is required in determining the fair value of these guarantees. The guarantees of the leases are classified within Level 3 of the fair value hierarchy.
The Company regularly evaluates the likelihood of default for all guarantees based on an expected loss analysis and records the fair value, if any, of its guarantees as an obligation in the consolidated financial statements.
NOTE 22—23—SEGMENT INFORMATION:
The Company reports segment information based on the “management” approach. The management approach designates the internal reporting used by management to make decisions on and assess performance of the Company’s reportable segments. CONSOL Energy Inc. consists of 12 reportable segment: the Pennsylvania Mining Complex, whichsegments. The PAMC includes the Bailey Mine, the Enlow Fork Mine, the Harvey Mine and the Central Preparation Plant.a centralized preparation plant. The PAMC segment’s principal activities ofinclude the PAMC are mining, preparation and marketing of thermal coal. The CONSOL Marine Terminal provides coal sold primarily to power generators. It also includes selling,export terminal services through the Port of Baltimore. Selling, general and administrative activities, as well as various other activities assignedcosts are allocated to the PAMC. Company’s segments based on a percentage of resources utilized, a percentage of total revenue and a percentage of total projected capital expenditures. CONSOL Energy’s Other divisionsegment includes revenue and expenses from various corporate and diversified business activities that are not allocated to the PAMC division.or the CONSOL Marine Terminal segments. The diversified business activities include the CONSOL Marine Terminal, development of the Itmann Mine, the Greenfield Reserves, closed and idle mine activities, selling, generalother income, gain on asset sales related to non-core assets, and administrative activities,gain/loss on debt extinguishment. Additionally, interest expense and income taxes, as well as various other non-operated activities, none of which are individually significant to the Company. IndustryCompany, are also reflected in CONSOL Energy's Other segment results forand are not allocated to the year ended PAMC and CONSOL Marine Terminal segments.The Company evaluates the performance of its segments utilizing Adjusted EBITDA and various sales and production metrics. Adjusted EBITDA is not a measure of financial performance in accordance with GAAP, and items excluded from Adjusted EBITDA are significant in understanding and assessing the Company's financial condition. Therefore, Adjusted EBITDA should not be considered in isolation, nor as an alternative to net income, income from operations, or cash flows from operations, or as a measure of the Company's profitability, liquidity, or performance under GAAP. The Company uses Adjusted EBITDA to measure the operating performance of its segments and to allocate resources to its segments. Investors should be aware that the Company's presentation of Adjusted EBITDA may not be comparable to similarly titled measures used by other companies. The CONSOL Marine Terminal has been disclosed in CONSOL Energy’s Other segment during prior years due to its relative contribution to the Company’s Adjusted EBITDA. The recent COVID-19 pandemic has negatively impacted the Company’s 2020 financial performance and has influenced its outlook with respect to the importance of coal exports. Effective December 31, 2019 are:
| | | | | | | | | | | | | | | | | | | PAMC | | Other | | Adjustments and Eliminations | | Consolidated | | Coal Revenue | $ | 1,288,529 |
| | $ | — |
| | $ | — |
| | $ | 1,288,529 |
| (A) | Terminal Revenue | — |
| | 67,363 |
| | — |
| | 67,363 |
| | Freight Revenue | 19,667 |
| | — |
| | — |
| | 19,667 |
| | Total Revenue and Freight | $ | 1,308,196 |
| | $ | 67,363 |
| | $ | — |
| | $ | 1,375,559 |
| | Earnings (Loss) Before Income Tax | $ | 197,112 |
| | $ | (99,015 | ) | �� | $ | — |
| | $ | 98,097 |
| | Segment Assets | $ | 1,981,721 |
| | $ | 712,081 |
| | $ | — |
| | $ | 2,693,802 |
| | Depreciation, Depletion and Amortization | $ | 185,616 |
| | $ | 21,481 |
| | $ | — |
| | $ | 207,097 |
| | Capital Expenditures | $ | 148,709 |
| | $ | 21,030 |
| | $ | — |
| | $ | 169,739 |
| |
Industry2020, the Company disclosed the CONSOL Marine Terminal in a separate reportable segment resultsdue to its increased contribution to Adjusted EBITDA as well as the increased reliance on coal exports serviced by the CONSOL Marine Terminal in accordance with how the Company's chief operating decision maker receives and reviews financial information. The Company has revised the consolidated segment information for the year ended December 31, 2018 are:
| | | | | | | | | | | | | | | | | | | PAMC | | Other | | Adjustments and Eliminations | | Consolidated | | Coal Revenue | $ | 1,364,292 |
| | $ | — |
| | $ | — |
| | $ | 1,364,292 |
| (A) | Terminal Revenue | — |
| | 64,926 |
| | — |
| | 64,926 |
| | Freight Revenue | 43,572 |
| | — |
| | — |
| | 43,572 |
| | Total Revenue and Freight | $ | 1,407,864 |
| | $ | 64,926 |
| | $ | — |
| | $ | 1,472,790 |
| | Earnings (Loss) Before Income Tax | $ | 291,418 |
| | $ | (103,805 | ) | | $ | — |
| | $ | 187,613 |
| | Segment Assets | $ | 1,894,209 |
| | $ | 866,518 |
| | $ | — |
| | $ | 2,760,727 |
| | Depreciation, Depletion and Amortization | $ | 178,969 |
| | $ | 22,295 |
| | $ | — |
| | $ | 201,264 |
| | Capital Expenditures | $ | 124,570 |
| | $ | 21,179 |
| | $ | — |
| | $ | 145,749 |
| |
all periods presented in this Annual Report on Form 10-K to reflect this reclassification.Industry segment results for the year ended December 31, 20172020 are: | | | | | | CONSOL | | | | | | | Adjustments | | | | | | | | | | | | | Marine | | | | | | | and | | | | | | | | | PAMC | | | Terminal | | | Other | | | Eliminations | | | Consolidated | | | Coal Revenue | | $ | 771,363 | | | $ | 0 | | | $ | 1,299 | | | $ | 0 | | | $ | 772,662 | | (A) | Terminal Revenue | | | 0 | | | | 66,810 | | | | 0 | | | | 0 | | | | 66,810 | | | Freight Revenue | | | 39,990 | | | | 0 | | | | 0 | | | | 0 | | | | 39,990 | | | Total Revenue and Freight | | $ | 811,353 | | | $ | 66,810 | | | $ | 1,299 | | | $ | 0 | | | $ | 879,462 | | | Adjusted EBITDA | | $ | 228,211 | | | $ | 44,356 | | | $ | (11,044 | ) | | $ | 0 | | | $ | 261,523 | | | Segment Assets | | $ | 1,864,514 | | | $ | 108,711 | | | $ | 550,141 | | | $ | 0 | | | $ | 2,523,366 | | | Depreciation, Depletion and Amortization | | $ | 198,272 | | | $ | 5,095 | | | $ | 7,393 | | | $ | 0 | | | $ | 210,760 | | | Capital Expenditures | | $ | 70,195 | | | $ | 1,455 | | | $ | 14,354 | | | $ | 0 | | | $ | 86,004 | | |
Industry segment results for the year ended December 31, 2019 are: | | | | | | CONSOL | | | | | | | Adjustments | | | | | | | | | | | | | Marine | | | | | | | and | | | | | | | | | PAMC | | | Terminal | | | Other | | | Eliminations | | | Consolidated | | | Coal Revenue | | $ | 1,288,529 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 1,288,529 | | (A) | Terminal Revenue | | | 0 | | | | 67,363 | | | | 0 | | | | 0 | | | | 67,363 | | | Freight Revenue | | | 19,667 | | | | 0 | | | | 0 | | | | 0 | | | | 19,667 | | | Total Revenue and Freight | | $ | 1,308,196 | | | $ | 67,363 | | | $ | 0 | | | $ | 0 | | | $ | 1,375,559 | | | Adjusted EBITDA | | $ | 394,354 | | | $ | 44,491 | | | $ | (32,909 | ) | | $ | 0 | | | $ | 405,936 | | | Segment Assets | | $ | 1,981,721 | | | $ | 87,558 | | | $ | 624,523 | | | $ | 0 | | | $ | 2,693,802 | | | Depreciation, Depletion and Amortization | | $ | 185,616 | | | $ | 4,078 | | | $ | 17,403 | | | $ | 0 | | | $ | 207,097 | | | Capital Expenditures | | $ | 148,709 | | | $ | 6,675 | | | $ | 14,355 | | | $ | 0 | | | $ | 169,739 | | |
Industry segment results for the year ended December 31, 2018 are: | | | | | | CONSOL | | | | | | | Adjustments | | | | | | | | | | | | | Marine | | | | | | | and | | | | | | | | | PAMC | | | Terminal | | | Other | | | Eliminations | | | Consolidated | | | Coal Revenue | | $ | 1,364,292 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 1,364,292 | | (A) | Terminal Revenue | | | 0 | | | | 64,926 | | | | 0 | | | | 0 | | | | 64,926 | | | Freight Revenue | | | 43,572 | | | | 0 | | | | 0 | | | | 0 | | | | 43,572 | | | Total Revenue and Freight | | $ | 1,407,864 | | | $ | 64,926 | | | $ | 0 | | | $ | 0 | | | $ | 1,472,790 | | | Adjusted EBITDA | | $ | 479,969 | | | $ | 40,901 | | | $ | (36,134 | ) | | $ | 0 | | | $ | 484,736 | | | Segment Assets | | $ | 1,894,209 | | | $ | 84,929 | | | $ | 781,589 | | | $ | 0 | | | $ | 2,760,727 | | | Depreciation, Depletion and Amortization | | $ | 178,969 | | | $ | 3,782 | | | $ | 18,513 | | | $ | 0 | | | $ | 201,264 | | | Capital Expenditures | | $ | 124,570 | | | $ | 5,475 | | | $ | 15,704 | | | $ | 0 | | | $ | 145,749 | | |
| | | | | | | | | | | | | | | | | | | PAMC | | Other | | Adjustments and Eliminations | | Consolidated | | Coal Revenue | $ | 1,187,654 |
| | $ | — |
| | $ | — |
| | $ | 1,187,654 |
| (A) | Terminal Revenue | — |
| | 60,066 |
| | — |
| | 60,066 |
| | Freight Revenue | 73,692 |
| | — |
| | — |
| | 73,692 |
| | Total Revenue and Freight | $ | 1,261,346 |
| | $ | 60,066 |
| | $ | — |
| | $ | 1,321,412 |
| | Earnings (Loss) Before Income Tax | $ | 189,162 |
| | $ | (19,365 | ) | | $ | — |
| | $ | 169,797 |
| | Segment Assets | $ | 1,971,268 |
| | $ | 735,831 |
| | $ | — |
| | $ | 2,707,099 |
| | Depreciation, Depletion and Amortization | $ | 166,628 |
| | $ | 5,374 |
| | $ | — |
| | $ | 172,002 |
| | Capital Expenditures | $ | 77,981 |
| | $ | 3,432 |
| | $ | — |
| | $ | 81,413 |
| |
(A) For the years ended December 31, 2020, 2019 2018 and 2017,2018, the PAMC segment had revenues from the following customers, each comprising over 10% of the Company's total sales: | | | | | | | | | | | | | | | | For the Years Ended December 31, | | | 2019 | | 2018 | | 2017 | Customer A | | $ | 242,703 |
| | $ | 283,703 |
| | * | Customer B | | $ | 446,403 |
| | $ | 274,755 |
| | $ | 145,248 |
| Customer C | | $ | 215,099 |
| | $ | 214,152 |
| | $ | 222,354 |
|
* Revenues from this customer during the year ended December 31, 2017 were less than 10% of the Company's total sales.
| | For the Years Ended December 31, | | | | 2020 | | | 2019 | | | 2018 | | Customer A | | $ | 134,354 | | | $ | 242,703 | | | $ | 283,703 | | Customer B | | $ | 173,461 | | | $ | 446,403 | | | $ | 274,755 | | Customer C | | $ | 116,536 | | | $ | 215,099 | | | $ | 214,152 | |
Reconciliation of Segment Information to Consolidated Amounts:
Revenue and Other Income: | | | | | | | | | | | | | | | | For the Years Ended December 31, | | | 2019 | | 2018 | | 2017 | Total Segment Revenue and Freight from External Customers | | $ | 1,375,559 |
| | $ | 1,472,790 |
| | $ | 1,321,412 |
| Other Income not Allocated to Segments (Note 4) | | 53,349 |
| | 58,660 |
| | 73,279 |
| Gain on Sale of Assets | | 1,995 |
| | 565 |
| | 17,212 |
| Total Consolidated Revenue and Other Income | | $ | 1,430,903 |
| | $ | 1,532,015 |
| | $ | 1,411,903 |
|
| | For the Years Ended December 31, | | | | 2020 | | | 2019 | | | 2018 | | Total Segment Revenue and Freight from External Customers | | $ | 879,462 | | | $ | 1,375,559 | | | $ | 1,472,790 | | Other Income not Allocated to Segments (Note 4) | | | 126,886 | | | | 53,349 | | | | 58,660 | | Gain on Sale of Assets | | | 15,295 | | | | 1,995 | | | | 565 | | Total Consolidated Revenue and Other Income | | $ | 1,021,643 | | | $ | 1,430,903 | | | $ | 1,532,015 | |
Adjusted EBITDA: | | For the Years Ended December 31, | | | | 2020 | | | 2019 | | | 2018 | | (Loss) Earnings Before Income Tax | | $ | (9,242 | ) | | $ | 98,097 | | | $ | 187,613 | | Interest Expense, net | | | 61,186 | | | | 66,464 | | | | 83,848 | | (Gain) Loss on Debt Extinguishment | | | (21,352 | ) | | | 24,455 | | | | 3,922 | | Interest Income | | | (1,230 | ) | | | (2,937 | ) | | | (2,146 | ) | Depreciation, Depletion and Amortization | | | 210,760 | | | | 207,097 | | | | 201,264 | | CCR Merger Fees | | | 9,822 | | | | 0 | | | | 0 | | Stock/Unit-Based Compensation | | | 11,579 | | | | 12,760 | | | | 10,235 | | Adjusted EBITDA | | $ | 261,523 | | | $ | 405,936 | | | $ | 484,736 | |
Total Assets: | | | | | | | | | | | | December 31, | | 2019 | | 2018 | Segment Assets for Total Reportable Business Segments | | $ | 1,981,721 |
| | $ | 1,894,209 |
| Segment Assets for All Other Business Segments | | 515,334 |
| | 554,315 |
| Items Excluded from Segment Assets: | | | | | Cash and Other Investments | | 93,242 |
| | 234,658 |
| Deferred Tax Assets | | 103,505 |
| | 77,545 |
| Total Consolidated Assets | | $ | 2,693,802 |
| | $ | 2,760,727 |
|
| | December 31, | | | | 2020 | | | 2019 | | Segment Assets for Total Reportable Business Segments | | $ | 1,973,225 | | | $ | 2,069,279 | | Segment Assets for All Other Business Segments | | | 437,307 | | | | 427,782 | | Items Excluded from Segment Assets: | | | | | | | | | Cash and Other Investments | | | 44,013 | | | | 93,236 | | Deferred Tax Assets | | | 68,821 | | | | 103,505 | | Total Consolidated Assets | | $ | 2,523,366 | | | $ | 2,693,802 | |
Enterprise-Wide Disclosures:
For the years ended December 31, 2020, 2019 2018 and 2017,2018, CONSOL Energy revenue was predominantly attributable to customers locatedbased in the United States of America. LessNo individual country outside of the United States was attributed greater than 2%10% of total tons sold during the years ended December 31, 2020, 2019 and 2018. CONSOL Energy's property, plant and equipment is predominantly located in the United States. At December 31, 2020 and 2019, less than 1% of the Company's revenues were generated from sales basednet property, plant and equipment was located in Canada for the year ended December 31, 2019.
CONSOL Energy's Property, Plant and Equipment by geographical location: Canada. | | | | | | | | | | | | December 31, | | | 2019 | | 2018 | United States | | $ | 2,081,141 |
| | $ | 2,095,504 |
| Canada | | 11,024 |
| | 11,024 |
| Total Property, Plant and Equipment, net | | $ | 2,092,165 |
| | $ | 2,106,528 |
|
115
NOTE 23—GUARANTOR SUBSIDIARIES FINANCIAL INFORMATION: The payment obligations under the $275,000, Term Loan B due in September 2024, the $300,000, 11.000% per annum senior notes due November 2025, and the $100,000, Term Loan A due in March 2023 issued by CONSOL Energy are jointly and severally, and also fully and unconditionally, guaranteed by certain subsidiaries of CONSOL Energy. In accordance with positions established by the SEC, the following financial information sets forth separate financial information with respect to the parent, guarantor subsidiaries, CCR, a non-guarantor subsidiary, and the remaining non-guarantor subsidiaries. The principal elimination entries include investments in subsidiaries and certain intercompany balances and transactions. CONSOL Energy, the parent, and a guarantor subsidiary manage several assets and liabilities of all other wholly-owned subsidiaries. These include, for example, deferred tax assets, cash and other post-employment liabilities. These assets and liabilities are reflected as parent company or guarantor company amounts for purposes of this presentation.
Income Statement for the Year Ended December 31, 2019:
| | | | | | | | | | | | | | | | | | | | | | | | | | Parent Issuer | |
Guarantor | | CCR Non-Guarantor | | Non-Guarantor | | Elimination | | Consolidated | Revenue and Other Income: | | | | | | | | | | | | Coal Revenue | $ | — |
| | $ | 966,397 |
| | $ | 322,132 |
| | $ | — |
| | $ | — |
| | $ | 1,288,529 |
| Terminal Revenue | — |
| | 67,363 |
| | — |
| | — |
| | — |
| | 67,363 |
| Freight Revenue | — |
| | 14,750 |
| | 4,917 |
| | — |
| | — |
| | 19,667 |
| Miscellaneous Other Income | 160,441 |
| | (11,418 | ) | | 5,928 |
| | 38,401 |
| | (140,003 | ) | | 53,349 |
| Gain (Loss) on Sale of Assets | 2,188 |
| | (144 | ) | | (49 | ) | | — |
| | — |
| | 1,995 |
| Total Revenue and Other Income | 162,629 |
| | 1,036,948 |
| | 332,928 |
| | 38,401 |
| | (140,003 | ) | | 1,430,903 |
| Costs and Expenses: | | | | | | | | | | | | Operating and Other Costs | — |
| | 729,232 |
| | 217,175 |
| | 1,605 |
| | — |
| | 948,012 |
| Depreciation, Depletion and Amortization | — |
| | 161,290 |
| | 45,807 |
| | — |
| | — |
| | 207,097 |
| Freight Expense | — |
| | 14,750 |
| | 4,917 |
| | — |
| | — |
| | 19,667 |
| Selling, General and Administrative Costs | — |
| | 54,237 |
| | 12,874 |
| | — |
| | — |
| | 67,111 |
| Loss on Debt Extinguishment | 24,455 |
| | — |
| | — |
| | — |
| | — |
| | 24,455 |
| Interest Expense, net | 57,634 |
| | 2,226 |
| | 6,604 |
| | — |
| | — |
| | 66,464 |
| Total Costs and Expenses | 82,089 |
| | 961,735 |
| | 287,377 |
| | 1,605 |
| | — |
| | 1,332,806 |
| Earnings (Loss) Before Income Tax | 80,540 |
| | 75,213 |
| | 45,551 |
| | 36,796 |
| | (140,003 | ) | | 98,097 |
| Income Tax Expense | 4,539 |
| | — |
| | — |
| | — |
| | — |
| | 4,539 |
| Net Income (Loss) | 76,001 |
| | 75,213 |
| | 45,551 |
| | 36,796 |
| | (140,003 | ) | | 93,558 |
| Less: Net Income Attributable to Noncontrolling Interest | — |
| | — |
| | — |
| | — |
| | 17,557 |
| | 17,557 |
| Net Income (Loss) Attributable to CONSOL Energy Inc. Shareholders | $ | 76,001 |
| | $ | 75,213 |
| | $ | 45,551 |
| | $ | 36,796 |
| | $ | (157,560 | ) | | $ | 76,001 |
|
Balance Sheet at December 31, 2019: | | | | | | | | | | | | | | | | | | | | | | | | | | Parent Issuer | |
Guarantor | | CCR Non-Guarantor | | Non-Guarantor | | Elimination | | Consolidated | Assets: | | | | | | | | | | | | Current Assets: | | | | | | | | | | | | Cash and Cash Equivalents | $ | 79,569 |
| | $ | 148 |
| | $ | 543 |
| | $ | 33 |
| | $ | — |
| | $ | 80,293 |
| Accounts and Notes Receivable: | | | | | | | | | | | | Trade Receivables, net of Allowance | — |
| | — |
| | — |
| | 131,688 |
| | — |
| | 131,688 |
| Other Receivables | 28,147 |
| | 11,265 |
| | 1,572 |
| | — |
| | — |
| | 40,984 |
| Inventories | — |
| | 41,478 |
| | 12,653 |
| | — |
| | — |
| | 54,131 |
| Prepaid Expenses and Other Assets | 8,657 |
| | 16,524 |
| | 5,746 |
| | 6 |
| | — |
| | 30,933 |
| Total Current Assets | 116,373 |
| | 69,415 |
| | 20,514 |
| | 131,727 |
| | — |
| | 338,029 |
| Property, Plant and Equipment: | | | | | | | | | | | | Property, Plant and Equipment | — |
| | 4,023,282 |
| | 984,898 |
| | — |
| | — |
| | 5,008,180 |
| Less-Accumulated Depreciation, Depletion and Amortization | — |
| | 2,344,777 |
| | 571,238 |
| | — |
| | — |
| | 2,916,015 |
| Total Property, Plant and Equipment-Net | — |
| | 1,678,505 |
| | 413,660 |
| | — |
| | — |
| | 2,092,165 |
| Other Assets: | | | | | | | | | | | | Deferred Income Taxes | 103,505 |
| | — |
| | — |
| | — |
| | — |
| | 103,505 |
| Right of Use Asset - Operating Leases | — |
| | 56,937 |
| | 15,695 |
| | — |
| | — |
| | 72,632 |
| Affiliated Credit Facility | 148,156 |
| | — |
| | — |
| | — |
| | (148,156 | ) | | — |
| Investment in Affiliates | 822,102 |
| | — |
| | — |
| | — |
| | (822,102 | ) | | — |
| Other | 30,973 |
| | 43,042 |
| | 13,456 |
| | — |
| | — |
| | 87,471 |
| Total Other Assets | 1,104,736 |
| | 99,979 |
| | 29,151 |
| | — |
| | (970,258 | ) | | 263,608 |
| Total Assets | $ | 1,221,109 |
| | $ | 1,847,899 |
| | $ | 463,325 |
| | $ | 131,727 |
| | $ | (970,258 | ) | | $ | 2,693,802 |
| Liabilities and Equity: | | | | | | | | | | | | Current Liabilities: | | | | | | | | | | | | Accounts Payable | $ | 71,153 |
| | $ | 7,987 |
| | $ | 22,805 |
| | $ | 4,278 |
| | $ | — |
| | $ | 106,223 |
| Accounts Payable (Recoverable)-Related Parties | — |
| | — |
| | 1,419 |
| | — |
| | (1,419 | ) | | — |
| Current Portion of Long-Term Debt | 28,225 |
| | 16,795 |
| | 5,252 |
| | — |
| | — |
| | 50,272 |
| Other Accrued Liabilities | 82,452 |
| | 116,403 |
| | 39,455 |
| | — |
| | (2,541 | ) | | 235,769 |
| Total Current Liabilities | 181,830 |
| | 141,185 |
| | 68,931 |
| | 4,278 |
| | (3,960 | ) | | 392,264 |
| Long-Term Debt | 554,150 |
| | 107,043 |
| | 149,801 |
| | — |
| | (148,156 | ) | | 662,838 |
| Deferred Credits and Other Liabilities: | | | | | | | | | | | | Postretirement Benefits Other Than Pensions | — |
| | 432,496 |
| | — |
| | — |
| | — |
| | 432,496 |
| Pneumoconiosis Benefits | — |
| | 196,114 |
| | 6,028 |
| | — |
| | — |
| | 202,142 |
| Asset Retirement Obligations | — |
| | 239,410 |
| | 10,801 |
| | — |
| | — |
| | 250,211 |
| Workers’ Compensation | — |
| | 57,583 |
| | 3,611 |
| | — |
| | — |
| | 61,194 |
| Salary Retirement | 49,930 |
| | — |
| | — |
| | — |
| | — |
| | 49,930 |
| Operating Lease Liability | — |
| | 43,906 |
| | 11,507 |
| | — |
| | — |
| | 55,413 |
| Other | — |
| | 14,134 |
| | 785 |
| | — |
| | — |
| | 14,919 |
| Total Deferred Credits and Other Liabilities | 49,930 |
| | 983,643 |
| | 32,732 |
| | — |
| | — |
| | 1,066,305 |
| Total CONSOL Energy Inc. Stockholders’ Equity | 435,199 |
| | 616,028 |
| | 211,861 |
| | 127,449 |
| | (955,338 | ) | | 435,199 |
| Noncontrolling Interest | — |
| | — |
| | — |
| | — |
| | 137,196 |
| | 137,196 |
| Total Liabilities and Equity | $ | 1,221,109 |
| | $ | 1,847,899 |
| | $ | 463,325 |
| | $ | 131,727 |
| | $ | (970,258 | ) | | $ | 2,693,802 |
|
Condensed Statement of Cash Flows for the Year Ended December 31, 2019: | | | | | | | | | | | | | | | | | | | | | | | | | | Parent Issuer | |
Guarantor | | CCR Non-Guarantor | | Non-Guarantor | | Elimination | | Consolidated | Net Cash Provided by (Used In) Operating Activities | $ | 253,112 |
| | $ | (89,671 | ) | | $ | 81,125 |
| | $ | — |
| | $ | — |
| | $ | 244,566 |
| Cash Flows from Investing Activities: | | | | | | | | | | | | Capital Expenditures | — |
| | (132,562 | ) | | (37,177 | ) | | — |
| | — |
| | (169,739 | ) | (Investments in), net of Distributions from, Subsidiaries | (206,658 | ) | | 242,056 |
| | — |
| | — |
| | (35,398 | ) | | — |
| Proceeds from Sales of Assets | — |
| | 2,195 |
| | 6 |
| | — |
| | — |
| | 2,201 |
| Other Investing Activity | (5,003 | ) | | — |
| | — |
| | — |
| | — |
| | (5,003 | ) | Net Cash (Used in) Provided by Investing Activities | (211,661 | ) | | 111,689 |
| | (37,171 | ) | | — |
| | (35,398 | ) | | (172,541 | ) | Cash Flows from Financing Activities: | | | | | | | | | | | | Payments on Finance Lease Obligations | — |
| | (14,708 | ) | | (3,841 | ) | | — |
| | — |
| | (18,549 | ) | Affiliated Credit Facility | (17,925 | ) | | — |
| | 17,925 |
| | — |
| | — |
| | — |
| Proceeds from Term Loan A | 26,250 |
| | — |
| | — |
| | — |
| | — |
| | 26,250 |
| Payments on Term Loan A | (11,250 | ) | | — |
| | — |
| | — |
| | — |
| | (11,250 | ) | Payments on Term Loan B | (124,437 | ) | | — |
| | — |
| | — |
| | — |
| | (124,437 | ) | Payments on Second Lien Notes
| (52,648 | ) | | — |
| | — |
| | — |
| | — |
| | (52,648 | ) | Proceeds from Asset-Backed Financing | 3,757 |
| | — |
| | — |
| | — |
| | — |
| | 3,757 |
| Payments on Asset-Backed Financing | (240 | ) | | — |
| | — |
| | — |
| | — |
| | (240 | ) | Distributions to Noncontrolling Interest | — |
| | — |
| | (57,618 | ) | | — |
| | 35,398 |
| | (22,220 | ) | Shares/Units Withheld for Taxes
| — |
| | (4,083 | ) | | (880 | ) | | — |
| | — |
| | (4,963 | ) | Repurchases of Common Stock | (32,733 | ) | | — |
| | — |
| | — |
| | — |
| | (32,733 | ) | Purchases of CCR Units | (369 | ) | | — |
| | — |
| | — |
| | — |
| | (369 | ) | Premium Paid on Extinguishment of Debt | (6,773 | ) | | — |
| | — |
| | — |
| | — |
| | (6,773 | ) | Debt Issuance and Financing Fees | (12,492 | ) | | — |
| | — |
| | — |
| | — |
| | (12,492 | ) | Net Cash (Used in) Provided by Financing Activities | $ | (228,860 | ) | | $ | (18,791 | ) | | $ | (44,414 | ) | | $ | — |
| | $ | 35,398 |
| | $ | (256,667 | ) |
Condensed Statement of Comprehensive Income for the Year Ended December 31, 2019: | | | | | | | | | | | | | | | | | | | | | | | | | | Parent Issuer | |
Guarantor | | CCR Non-Guarantor | | Non- Guarantor | | Elimination | | Consolidated | Net Income (Loss) | $ | 76,001 |
| | $ | 75,213 |
| | $ | 45,551 |
| | $ | 36,796 |
| | $ | (140,003 | ) | | $ | 93,558 |
| Other Comprehensive Income (Loss): | | | | | | | | | | | | Net Actuarial (Loss) Gain | (25,132 | ) | | — |
| | (1,341 | ) | | — |
| | 1,341 |
| | (25,132 | ) | Unrecognized Loss on Derivatives | (117 | ) | | — |
| | — |
| | — |
| | — |
| | (117 | ) | Other Comprehensive (Loss) Income | (25,249 | ) | | — |
| | (1,341 | ) | | — |
| | 1,341 |
| | (25,249 | ) | Comprehensive Income (Loss) | 50,752 |
| | 75,213 |
| | 44,210 |
| | 36,796 |
| | (138,662 | ) | | 68,309 |
| Less: Comprehensive Income Attributable to Noncontrolling Interest | — |
| | — |
| | — |
| | — |
| | 17,551 |
| | 17,551 |
| Comprehensive Income (Loss) Attributable to CONSOL Energy Inc. Shareholders | $ | 50,752 |
| | $ | 75,213 |
| | $ | 44,210 |
| | $ | 36,796 |
| | $ | (156,213 | ) | | $ | 50,758 |
|
Income Statement for the Year Ended December 31, 2018: | | | | | | | | | | | | | | | | | | | | | | | | | | Parent Issuer | |
Guarantor | | CCR Non-Guarantor | | Non-Guarantor | | Elimination | | Consolidated | Revenue and Other Income: | | | | | | | | | | | | Coal Revenue | $ | — |
| | $ | 1,023,219 |
| | $ | 341,073 |
| | $ | — |
| | $ | — |
| | $ | 1,364,292 |
| Terminal Revenue | — |
| | 64,926 |
| | — |
| | — |
| | — |
| | 64,926 |
| Freight Revenue | — |
| | 32,679 |
| | 10,893 |
| | — |
| | — |
| | 43,572 |
| Miscellaneous Other Income | 247,711 |
| | 27,013 |
| | 5,243 |
| | — |
| | (221,307 | ) | | 58,660 |
| Gain (Loss) on Sale of Assets | — |
| | 599 |
| | (34 | ) | | — |
| | — |
| | 565 |
| Total Revenue and Other Income | 247,711 |
| | 1,148,436 |
| | 357,175 |
| | — |
| | (221,307 | ) | | 1,532,015 |
| Costs and Expenses: | | | | | | | | | | | | Operating and Other Costs | — |
| | 729,593 |
| | 214,376 |
| | 2,481 |
| | — |
| | 946,450 |
| Depreciation, Depletion and Amortization | — |
| | 156,522 |
| | 44,742 |
| | — |
| | — |
| | 201,264 |
| Freight Expense | — |
| | 32,679 |
| | 10,893 |
| | — |
| | — |
| | 43,572 |
| Selling, General and Administrative Costs | — |
| | 51,415 |
| | 13,931 |
| | — |
| | — |
| | 65,346 |
| Loss on Debt Extinguishment | 3,922 |
| | — |
| | — |
| | — |
| | — |
| | 3,922 |
| Interest Expense, net | 81,985 |
| | 2,905 |
| | 6,667 |
| | — |
| | (7,709 | ) | | 83,848 |
| Total Costs and Expenses | 85,907 |
| | 973,114 |
| | 290,609 |
| | 2,481 |
| | (7,709 | ) | | 1,344,402 |
| Earnings (Loss) Before Income Tax | 161,804 |
| | 175,322 |
| | 66,566 |
| | (2,481 | ) | | (213,598 | ) | | 187,613 |
| Income Tax Expense | 8,828 |
| | — |
| | — |
| | — |
| | — |
| | 8,828 |
| Net Income (Loss) | 152,976 |
| | 175,322 |
| | 66,566 |
| | (2,481 | ) | | (213,598 | ) | | 178,785 |
| Less: Net Income Attributable to Noncontrolling Interest | — |
| | — |
| | — |
| | — |
| | 25,809 |
| | 25,809 |
| Net Income (Loss) Attributable to CONSOL Energy Inc. Shareholders | $ | 152,976 |
| | $ | 175,322 |
| | $ | 66,566 |
| | $ | (2,481 | ) | | $ | (239,407 | ) | | $ | 152,976 |
|
Balance Sheet at December 31, 2018: | | | | | | | | | | | | | | | | | | | | | | | | | | Parent Issuer | |
Guarantor | | CCR Non-Guarantor | | Non-Guarantor | | Elimination | | Consolidated | Assets: | | | | | | | | | | | | Current Assets: | | | | | | | | | | | | Cash and Cash Equivalents | $ | 234,536 |
| | $ | 138 |
| | $ | 1,003 |
| | $ | — |
| | $ | — |
| | $ | 235,677 |
| Restricted Cash | 14,557 |
| | — |
| | — |
| | 14,701 |
| | — |
| | 29,258 |
| Accounts and Notes Receivable: | | | | | | | | | | | | Trade Receivables, net of Allowance | — |
| | — |
| | — |
| | 87,589 |
| | — |
| | 87,589 |
| Other Receivables | 24,352 |
| | 15,935 |
| | 1,068 |
| | — |
| | — |
| | 41,355 |
| Inventories | — |
| | 37,580 |
| | 11,066 |
| | — |
| | — |
| | 48,646 |
| Prepaid Expenses and Other Assets | 10,883 |
| | 15,451 |
| | 5,096 |
| | — |
| | — |
| | 31,430 |
| Total Current Assets | 284,328 |
| | 69,104 |
| | 18,233 |
| | 102,290 |
| | — |
| | 473,955 |
| Property, Plant and Equipment: | | | | | | | | | | | | Property, Plant and Equipment | — |
| | 3,891,873 |
| | 946,298 |
| | — |
| | — |
| | 4,838,171 |
| Less-Accumulated Depreciation, Depletion and Amortization | — |
| | 2,204,896 |
| | 526,747 |
| | — |
| | — |
| | 2,731,643 |
| Total Property, Plant and Equipment-Net | — |
| | 1,686,977 |
| | 419,551 |
| | — |
| | — |
| | 2,106,528 |
| Other Assets: | | | | | | | | | | | | Deferred Income Taxes | 77,545 |
| | — |
| | — |
| | — |
| | — |
| | 77,545 |
| Affiliated Credit Facility | 141,129 |
| | — |
| | — |
| | — |
| | (141,129 | ) | | — |
| Investment in Affiliates | 605,981 |
| | — |
| | — |
| | — |
| | (605,981 | ) | | — |
| Other | 40,760 |
| | 47,031 |
| | 14,908 |
| | — |
| | — |
| | 102,699 |
| Total Other Assets | 865,415 |
| | 47,031 |
| | 14,908 |
| | — |
| | (747,110 | ) | | 180,244 |
| Total Assets | $ | 1,149,743 |
| | $ | 1,803,112 |
| | $ | 452,692 |
| | $ | 102,290 |
| | $ | (747,110 | ) | | $ | 2,760,727 |
| Liabilities and Equity: | | | | | | | | | | | | Current Liabilities: | | | | | | | | | | | | Accounts Payable | $ | (721 | ) | | $ | 102,995 |
| | $ | 24,834 |
| | $ | — |
| | $ | 3,822 |
| | $ | 130,930 |
| Accounts (Recoverable) Payable-Related Parties | (2,291 | ) | | 36,220 |
| | 3,831 |
| | 87,593 |
| | (125,353 | ) | | — |
| Current Portion of Long-Term Debt | 8,157 |
| | 11,139 |
| | 3,503 |
| | — |
| | 112,013 |
| | 134,812 |
| Other Accrued Liabilities | 92,534 |
| | 105,806 |
| | 31,916 |
| | — |
| | (3,822 | ) | | 226,434 |
| Total Current Liabilities | 97,679 |
| | 256,160 |
| | 64,084 |
| | 87,593 |
| | (13,340 | ) | | 492,176 |
| Long-Term Debt | 577,957 |
| | 151,202 |
| | 146,196 |
| | — |
| | (141,129 | ) | | 734,226 |
| Deferred Credits and Other Liabilities: | | | | | | | | | | | | Postretirement Benefits Other Than Pensions | — |
| | 441,246 |
| | — |
| | — |
| | — |
| | 441,246 |
| Pneumoconiosis Benefits | — |
| | 160,741 |
| | 4,260 |
| | — |
| | — |
| | 165,001 |
| Asset Retirement Obligations | — |
| | 226,209 |
| | 9,775 |
| | — |
| | — |
| | 235,984 |
| Workers’ Compensation | — |
| | 56,623 |
| | 3,119 |
| | — |
| | — |
| | 59,742 |
| Salary Retirement | 64,172 |
| | — |
| | — |
| | — |
| | — |
| | 64,172 |
| Other | — |
| | 16,051 |
| | 518 |
| | — |
| | — |
| | 16,569 |
| Total Deferred Credits and Other Liabilities | 64,172 |
| | 900,870 |
| | 17,672 |
| | — |
| | — |
| | 982,714 |
| Total CONSOL Energy Inc. Stockholders’ Equity | 409,935 |
| | 494,880 |
| | 224,740 |
| | 14,697 |
| | (734,317 | ) | | 409,935 |
| Noncontrolling Interest | — |
| | — |
| | — |
| | — |
| | 141,676 |
| | 141,676 |
| Total Liabilities and Equity | $ | 1,149,743 |
| | $ | 1,803,112 |
| | $ | 452,692 |
| | $ | 102,290 |
| | $ | (747,110 | ) | | $ | 2,760,727 |
|
Condensed Statement of Cash Flows for the Year Ended December 31, 2018:
| | | | | | | | | | | | | | | | | | | | | | | | | | Parent Issuer | |
Guarantor | | CCR Non-Guarantor | | Non-Guarantor | | Elimination | | Consolidated | Net Cash Provided by Operating Activities | $ | 231,522 |
| | $ | 56,624 |
| | $ | 125,379 |
| | $ | — |
| | $ | — |
| | $ | 413,525 |
| Cash Flows from Investing Activities: | | | | | | | | | | | | Capital Expenditures | — |
| | (114,606 | ) | | (31,143 | ) | | — |
| | — |
| | (145,749 | ) | (Investments in), net of Distributions from, Subsidiaries | (2,908 | ) | | 38,032 |
| | — |
| | — |
| | (35,124 | ) | | — |
| Proceeds from Sales of Assets | — |
| | 1,933 |
| | 170 |
| | — |
| | — |
| | 2,103 |
| Other Investing Activity | (10,000 | ) | | — |
| | — |
| | — |
| | — |
| | (10,000 | ) | Net Cash Used in Investing Activities | (12,908 | ) | | (74,641 | ) | | (30,973 | ) | | — |
| | (35,124 | ) | | (153,646 | ) | Cash Flows from Financing Activities: | | | | | | | | | | | | Payments on Finance Lease Obligations | (2,905 | ) | | (9,527 | ) | | (3,052 | ) | | — |
| | — |
| | (15,484 | ) | Affiliated Credit Facility | 33,583 |
| | — |
| | (33,583 | ) | | — |
| | — |
| | — |
| Payments on Term Loan A | (26,250 | ) | | — |
| | — |
| | — |
| | — |
| | (26,250 | ) | Payments on Term Loan B | (4,000 | ) | | — |
| | — |
| | — |
| | — |
| | (4,000 | ) | Payments on Second Lien Notes | (25,724 | ) | | — |
| | — |
| | — |
| | — |
| | (25,724 | ) | Distributions to Noncontrolling Interest | — |
| | — |
| | (57,389 | ) | | — |
| | 35,124 |
| | (22,265 | ) | Shares/Units Withheld for Taxes | — |
| | (2,512 | ) | | (912 | ) | | — |
| | — |
| | (3,424 | ) | Repurchases of Common Stock | (25,839 | ) | | — |
| | — |
| | — |
| | — |
| | (25,839 | ) | Purchases of CCR Units | (3,079 | ) | | — |
| | — |
| | — |
| | — |
| | (3,079 | ) | Spin Distribution to CNX Resources Corporation | (18,234 | ) | | — |
| | — |
| | — |
| | — |
| | (18,234 | ) | Premium Paid on Extinguishment of Debt | (2,458 | ) | | — |
| | — |
| | — |
| | — |
| | (2,458 | ) | Debt Issuance and Financing Fees | (2,166 | ) | | — |
| | — |
| | — |
| | — |
| | (2,166 | ) | Net Cash (Used in) Provided by Financing Activities | $ | (77,072 | ) | | $ | (12,039 | ) | | $ | (94,936 | ) | | $ | — |
| | $ | 35,124 |
| | $ | (148,923 | ) |
Condensed Statement of Comprehensive Income for the Year Ended December 31, 2018: | | | | | | | | | | | | | | | | | | | | | | | | | | Parent Issuer | |
Guarantor | | CCR Non-Guarantor | | Non- Guarantor | | Elimination | | Consolidated | Net Income (Loss) | $ | 152,976 |
| | $ | 175,322 |
| | $ | 66,566 |
| | $ | (2,481 | ) | | $ | (213,598 | ) | | $ | 178,785 |
| Other Comprehensive Income (Loss): | | | | | | | | | | | | Net Actuarial Gain (Loss) | 66,341 |
| | — |
| | (1,477 | ) | | — |
| | 1,477 |
| | 66,341 |
| Other Comprehensive Income (Loss) | 66,341 |
| | — |
| | (1,477 | ) | | — |
| | 1,477 |
| | 66,341 |
| Comprehensive Income (Loss) | 219,317 |
| | 175,322 |
| | 65,089 |
| | (2,481 | ) | | (212,121 | ) | | 245,126 |
| Less: Comprehensive Income Attributable to Noncontrolling Interest | — |
| | — |
| | — |
| | — |
| | 25,803 |
| | 25,803 |
| Comprehensive Income (Loss) Attributable to CONSOL Energy Inc. Shareholders | $ | 219,317 |
| | $ | 175,322 |
| | $ | 65,089 |
| | $ | (2,481 | ) | | $ | (237,924 | ) | | $ | 219,323 |
|
Income Statement for the Year Ended December 31, 2017:
| | | | | | | | | | | | | | | | | | | | | | | | | | Parent Issuer | |
Guarantor | | CCR Non-Guarantors | | Non-Guarantor | | Elimination | | Consolidated | Revenue and Other Income: | | | | | | | | | | | | Coal Revenue | $ | — |
| | $ | 890,741 |
| | $ | 296,913 |
| | $ | — |
| | $ | — |
| | $ | 1,187,654 |
| Terminal Revenue | — |
| | 60,066 |
| | — |
| | — |
| | — |
| | 60,066 |
| Freight Revenue | — |
| | 55,269 |
| | 18,423 |
| | — |
| | — |
| | 73,692 |
| Miscellaneous Other Income | 238,818 |
| | 67,230 |
| | 6,049 |
| | — |
| | (238,818 | ) | | 73,279 |
| Gain on Sale of Assets | — |
| | 15,813 |
| | 1,399 |
| | — |
| | — |
| | 17,212 |
| Total Revenue and Other Income | 238,818 |
| | 1,089,119 |
| | 322,784 |
| | — |
| | (238,818 | ) | | 1,411,903 |
| Costs and Expenses: | | | | | | | | | | | | Operating and Other Costs | — |
| | 691,451 |
| | 194,986 |
| | 272 |
| | — |
| | 886,709 |
| Depreciation, Depletion and Amortization | — |
| | 130,565 |
| | 41,437 |
| | — |
| | — |
| | 172,002 |
| Freight Expense | — |
| | 55,269 |
| | 18,423 |
| | — |
| | — |
| | 73,692 |
| Selling, General and Administrative Costs | — |
| | 67,908 |
| | 15,697 |
| | — |
| | — |
| | 83,605 |
| Loss on Debt Extinguishment | — |
| | — |
| | 2,468 |
| | — |
| | (2,468 | ) | | — |
| Interest Expense, net | 10,064 |
| | 355,059 |
| | 9,309 |
| | 1,723 |
| | (350,057 | ) | | 26,098 |
| Total Costs and Expenses | 10,064 |
| | 1,300,252 |
| | 282,320 |
| | 1,995 |
| | (352,525 | ) | | 1,242,106 |
| Earnings (Loss) Before Income Tax | 228,754 |
| | (211,133 | ) | | 40,464 |
| | (1,995 | ) | | 113,707 |
| | 169,797 |
| Income Tax Expense (Benefit) | 161,125 |
| | (73,897 | ) | | — |
| | — |
| | — |
| | 87,228 |
| Net Income (Loss) | 67,629 |
| | (137,236 | ) | | 40,464 |
| | (1,995 | ) | | 113,707 |
| | 82,569 |
| Less: Net Income Attributable to Noncontrolling Interest | — |
| | — |
| | — |
| | — |
| | 14,940 |
| | 14,940 |
| Net Income (Loss) Attributable to CONSOL Energy Inc. Shareholders | $ | 67,629 |
| | $ | (137,236 | ) | | $ | 40,464 |
| | $ | (1,995 | ) | | $ | 98,767 |
| | $ | 67,629 |
|
Condensed Statement of Cash Flows for the Year Ended December 31, 2017:
| | | | | | | | | | | | | | | | | | | | | | | | | | Parent Issuer | |
Guarantor | | CCR Non-Guarantors | | Non-Guarantor | | Elimination | | Consolidated | Net Cash (Used in) Provided by Operating Activities | $ | (17,032 | ) | | $ | 192,423 |
| | $ | 72,644 |
| | $ | 75 |
| | $ | — |
| | $ | 248,110 |
| Cash Flows from Investing Activities: | | | | | | | | | | | | Capital Expenditures | — |
| | (61,917 | ) | | (19,496 | ) | | — |
| | — |
| | (81,413 | ) | Proceeds from Sales of Assets | — |
| | 23,082 |
| | 1,500 |
| | — |
| | — |
| | 24,582 |
| Net Cash Used in Investing Activities | — |
| | (38,835 | ) | | (17,996 | ) | | — |
| | — |
| | (56,831 | ) | Cash Flows from Financing Activities: | | | | | | | | | | | | Payments on Finance Lease Obligations | (3,503 | ) | | (305 | ) | | (96 | ) | | — |
| | — |
| | (3,904 | ) | Affiliated Credit Facility | — |
| | — |
| | 196,583 |
| | — |
| | (196,583 | ) | | — |
| Proceeds from Term Loan A | 100,000 |
| | — |
| | — |
| | — |
| | — |
| | 100,000 |
| Proceeds from Term Loan B | 392,147 |
| | — |
| | — |
| | — |
| | — |
| | 392,147 |
| Proceeds from Second Lien Notes | 300,000 |
| | — |
| | — |
| | — |
| | — |
| | 300,000 |
| Net Payments on Revolver - MLP | — |
| | — |
| | (201,000 | ) | | — |
| | — |
| | (201,000 | ) | Distributions to Noncontrolling Interest | — |
| | — |
| | (56,400 | ) | | — |
| | 34,508 |
| | (21,892 | ) | Shares/Units Withheld for Taxes | — |
| | (171 | ) | | (1,985 | ) | | — |
| | — |
| | (2,156 | ) | Spin Distribution to CNX Resources Corporation | (425,000 | ) | | — |
| | — |
| | — |
| | — |
| | (425,000 | ) | Intercompany (Distributions) Contributions | (5,573 | ) | | (156,502 | ) | | — |
| | — |
| | 162,075 |
| | — |
| Other Parent Net Distributions | (156,502 | ) | | — |
| | — |
| | — |
| | — |
| | (156,502 | ) | Debt Issuance and Financing Fees | (32,304 | ) | | — |
| | — |
| | — |
| | — |
| | (32,304 | ) | Net Cash Provided by (Used in) Financing Activities | $ | 169,265 |
| | $ | (156,978 | ) | | $ | (62,898 | ) | | $ | — |
| | $ | — |
| | $ | (50,611 | ) |
Condensed Statement of Comprehensive Income for the Year Ended December 31, 2017: | | | | | | | | | | | | | | | | | | | | | | | | | | Parent Issuer | |
Guarantor | | CCR Non-Guarantors | | Non- Guarantor | | Elimination | | Consolidated | Net Income (Loss) | $ | 67,629 |
| | $ | (137,236 | ) | | $ | 40,464 |
| | $ | (1,995 | ) | | $ | 113,707 |
| | $ | 82,569 |
| Other Comprehensive Income (Loss): | | | | | | | | | | | | Net Actuarial Gain (Loss) | 94,919 |
| | — |
| | 1,366 |
| | — |
| | (1,366 | ) | | 94,919 |
| Other Comprehensive Income (Loss) | 94,919 |
| | — |
| | 1,366 |
| | — |
| | (1,366 | ) | | 94,919 |
| Comprehensive Income (Loss) | 162,548 |
| | (137,236 | ) | | 41,830 |
| | (1,995 | ) | | 112,341 |
| | 177,488 |
| Less: Comprehensive Income Attributable to Noncontrolling Interest | — |
| | — |
| | — |
| | — |
| | 14,896 |
| | 14,896 |
| Comprehensive Income (Loss) Attributable to CONSOL Energy Inc. Shareholders | $ | 162,548 |
| | $ | (137,236 | ) | | $ | 41,830 |
| | $ | (1,995 | ) | | $ | 97,445 |
| | $ | 162,592 |
|
NOTE 24—RELATED PARTY TRANSACTIONS
Transactions with the Company's Former Parent (2017)
(2017)Transition Services Agreements
The Company entered into the TSAa transition services agreement (“TSA”) and certain other agreements in connection with the SDAseparation and distribution agreement with its former parent to cover certain continued corporate services provided by the Company and its former parent to each other following the completion of the separation and distribution. In connection with the separation and distribution, the Company began to set up its own corporate functions, and pursuant to the TSA, the Company's former parent provided various corporate support services, including certain accounting, human resources, information technology, office and building, risk, security, tax and treasury, building security and tax services, as well as certain regulatory compliance services required during the period in which the Company remained a majority-owned subsidiary of its former parent. The TSA expired in February 2019. The charges associated with these services were not material during the years ended December 31, 2019 2018 and 2017,2018, and arewere consistent with expenses that the Company's former parent hashad historically allocated or incurred with respect to such services. The TSA expired in February 2019.
Former Parent Receivables and Payables
The Company had a receivable from its former parent of $6,791 and $11,788 at December 31, 2019, and 2018, respectively. At December 31, 2019, $6,791which was recorded in Other Receivables on the Consolidated Balance Sheets. At The balance of this receivable was collected during the year ended December 31, 2018, $5,500 was recorded in Other Receivables and $6,288 was included in Other Assets on the Consolidated Balance Sheets. These items relate2020. This receivable relates to reimbursements per the terms of the SDA.
separation and distribution agreement.During the year ended December 31, 2018, the Company paid its former parent $18,234 related to the final settlement of shared, spin-relatedseparation-related fees. Per the SDA,separation and distribution agreement, these costs were split equally by the 2 companies. These costs consisted of consulting and professional fees associated with preparing for and executing the separation and distribution, as well as various other items.
On December 30, 2020, CONSOL Energy completed the acquisition of all of the outstanding common units of CONSOL Coal Resources, and CONSOL Coal Resources became the Company's indirect wholly-owned subsidiary (see Note 2 - Major Transactions in the Notes to the Audited Consolidated Financial Statements in Item 8 of this Form 10-K for additional information). In connection with the closing of the CCR Merger, CONSOL Energy issued 7,967,690 shares of its common stock to acquire the 10,912,138 common units of CCR held by third-party CCR investors at a fixed exchange ratio of 0.73 shares of CEIX common stock for each CCR unit, for total implied consideration of $51,710. CONSOL Energy, certain of its subsidiaries and the Partnership are party to an Omnibus Agreement, dated September 30, 2016, as amended on November 28, 2017 (the(the “Omnibus Agreement”). Under the Omnibus Agreement, CONSOL Energy provides the Partnership with certain services in exchange for payments by the Partnership for those services.
On November 28, 2017, the Company entered into an Affiliated Company Credit Agreement with the Partnership and certain of its subsidiaries (the Partnership“Partnership Credit Parties)Parties”), as amended on March 28, 2019 (asJune 5, 2020 (as amended, the “Affiliated Company Credit Agreement”), under which the Company provides as lender a revolving credit facility in an aggregate principal amount of up to $275 million to the Partnership Credit Parties. In connection with the completion of the separation, the Partnership drew an initial $201 million, the net proceeds of which were used to repay outstanding amounts under CCR's $400 million senior secured revolving credit facility with certain lenders and PNC Bank, National Association, as administrative agent (the “Original CCR Credit Facility”), and to provide working capital for the Partnership following the separation and for other general corporate purposes. The Original CCR Credit Facility was then terminated.
On June 5, 2020, the Company amended the Affiliated Company Credit Agreement to provide eight quarters of financial covenant relaxation, effected a 50 basis points increase in the rate at which borrowings under the Affiliated Company Credit Agreement bore interest, and added additional conditions to be met for the covenants relating to general investments, investments in unrestricted subsidiaries, and distributions to equity holders of the Partnership. The Affiliated Company Credit Agreement matures on had a maturity date of December 28, 2024. Interest accruesaccrued at a rate ranging from 3.75%4.25% to 4.75%5.25%, subject to the Partnership's net leverage ratio. For the years ended December 31, 2020, 2019 2018 and 2017,2018, $9,155, $7,892 $7,709 and $746$7,709 of interest expense is included inwas incurred under the Consolidated Statements of Income,Affiliated Company Credit Agreement, respectively. The collateral obligations under the Affiliated Company Credit Agreement generally mirrormirrored the Original CCR Credit Facility, as doesdid the list of entities that will actacted as guarantors thereunder. The Affiliated Company Credit Agreement iswas subject to financial covenants relating to a maximum first lien gross leverage ratio and a maximum total net leverage ratio, which willwere to be calculated on a consolidated basis for the Partnership and its restricted subsidiaries at the end of each fiscal quarter. The Partnership was in compliance with each of these financial covenants at December 31, 2019 and 2018. The Affiliated Company Credit Agreement also containscontained a number of customary affirmative covenants and negative covenants, including limitations on the ability of the Partnership to incur additional indebtedness, grant liens, and make investments, acquisitions, dispositions, restricted payments, and prepayments of junior indebtedness (subject to certain limited exceptions).
In connection with the closing of the CCR is a partyMerger, the Affiliated Company Credit Agreement was terminated, all obligations and guarantees thereunder repaid and discharged and all liens granted in connection therewith released. In connection with the termination of the Affiliated Company Credit Agreement and in exchange for, and in satisfaction of, payment of the outstanding balance of approximately $176,535 thereunder, CCR issued 37,322,410 CCR common units to a number of other agreements with CONSOL Energy, or its subsidiaries, that are described in detail in the section titled “Agreements with Affiliates” in Item 13 of CCR's Form 10-K filed on February 14, 2020.
Company.In August 2019, upon payment of the cash distribution with respect to the quarter ended June 30, 2019, the financial requirements for the conversion of all CCR subordinated units were satisfied. As a result, all 11,611,067 of the CCR subordinated units owned entirely by CONSOL Energy Inc. were converted into CCR common units on a 1-for-oneone-for-one basis. The conversion did not impact the amount of the cash distribution paid or the total number of CCR's outstanding units representing limited partner interests.
Charges for services from the Company to CCR include the following: | | | | | | | | | | | | | | For the Years Ended December 31, | | 2019 | | 2018 | | 2017 | Operating and Other Costs | $ | 3,219 |
| | $ | 2,918 |
| | $ | 3,503 |
| Selling, General and Administrative Costs | 8,309 |
| | 8,300 |
| | 3,109 |
| Total Services from CONSOL Energy | $ | 11,528 |
| | $ | 11,218 |
| | $ | 6,612 |
|
| | For the Years Ended December 31, | | | | 2020 | | | 2019 | | | 2018 | | Operating and Other Costs | | $ | 3,820 | | | $ | 3,219 | | | $ | 2,918 | | Selling, General and Administrative Costs | | | 9,604 | | | | 8,309 | | | | 8,300 | | Total Services from CONSOL Energy | | $ | 13,424 | | | $ | 11,528 | | | $ | 11,218 | |
Operating and Other Costs include pension service costs and insurance expenses. Selling, General and Administrative Costs include charges for incentive compensation, an annual administrative support fee and reimbursement for the provision of certain management and operating services provided by the Company's former parent prior to the separation and by CONSOL Energy following the separation. As of November 28, 2017, certain administrative services historically incurred by the Partnership are now incurred by CONSOL Energy and the Partnership's portion is reimbursed to CONSOL Energy.
Company.At December 31, 2019 and 2018,, CCR had a net payable to the Company in the amount of $1,419 and $3,831, respectively.$1,419. This payable includes reimbursements for business expenses, executive fees, stock-based compensation and other items under the Omnibus Agreement.
In May 2019, CONSOL Energy Inc.'s Board of Directors approved an expansion of the stock, unit and debt repurchase program (See Note 5 - Stock, Unit and Debt Repurchases). The program expansion allows the Company to use up to $50 million of the program to purchase CCR's outstanding common units in the open market. None of the Partnership's common units were purchased under this program during the year ended December 31, 2020. During the yearsyear ended December 31, 2019 and 2018,, 26,297 and 167,958 of the Partnership's common units were purchased under this program at an average price of $14.05 and $18.33 per unit, respectively.unit.
NOTE 25 —SUBSEQUENT EVENTS
The Company has evaluated all subsequent events through the date the financial statements were issued. On January 24, 2020, the Board of Directors of CCR's general partner declared a cash distribution of $0.5125 per unit to CCR's limited partner unitholders and the holder of the general partner interest. The cash distribution will be paid on February 14, 2020 to the unitholders of record at the close of business on February 10, 2020. No other material recognized or non-recognizable subsequent events were identified.
Supplemental Coal Data (unaudited)
| | | | | | | | | | | | | | | | | | | Millions of Tons | | | For the Year Ended December 31, | | | 2019 | | 2018 | | 2017 | | 2016 | | 2015 | Consolidated recoverable coal reserves at beginning of period | | 2,261 |
| | 2,298 |
| | 2,361 |
| | 3,047 |
| | 3,238 |
| Purchased reserves | | — |
| | — |
| | — |
| | — |
| | 24 |
| Reserves sold in place | | — |
| | — |
| | (16 | ) | | (601 | ) | | (43 | ) | Production | | (27 | ) | | (28 | ) | | (26 | ) | | (26 | ) | | (29 | ) | Revisions and other changes | | (8 | ) | | (9 | ) | | (21 | ) | | (59 | ) | | (143 | ) | Consolidated recoverable coal reserves at end of period* (1) | | 2,226 |
| | 2,261 |
| | 2,298 |
| | 2,361 |
| | 3,047 |
|
______________
* Recoverable coal reserves are the equivalent of “demonstrated reserves” under the coal resource classification system of the U.S. Geological Survey. Generally, these reserves would be commercially mineable at year-end prices and cost levels, using current technology and mining practices.
(1) 143.3 million tons of the Northern Appalachia product are controlled by CCC, a former subsidiary of the Company's former parent that was sold in December 2013. As of this filing, these tons are still controlled by CCC but are shown in CONSOL Energy's reserves due to a binding agreement that these tons will be released to CONSOL Energy upon the assignment of the underlying lease to CONSOL Energy.
CONSOL Energy's coal reserves are located in several major coal-producing regions in North America. Our estimate of recoverable coal reserves has been determined by CONSOL Energy. At December 31, 2019, 191 million tons were assigned to mines either in production or temporarily idled. The recoverable coal reserves at December 31, 2019 include 2,145 million tons of thermal coal reserves, of which approximately 2 percent has a sulfur content equivalent to less than 1.2 pounds sulfur dioxide per million British thermal unit (Btu), 9 percent has a sulfur content equivalent to between 1.2 and 2.5 pounds sulfur dioxide per million Btu, and 89 percent has a sulfur content equivalent to greater than 2.5 pounds sulfur dioxide per million Btu. The reserves also include 81 million tons of metallurgical coal in consolidated reserves, of which approximately 26 percent has a sulfur content equivalent to less than 1.2 pounds sulfur dioxide per million Btu and 74 percent has a sulfur content equivalent to between 1.2 and 2.5 pounds sulfur dioxide per million Btu.
ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES |
None.
Supplemental Quarterly Information (unaudited):
(Dollars in thousands, except per share data)
| | | | | | | | | | | | | | | | | | | | Three Months Ended | | | March 31, | | June 30, | | September 30, | | December 31, | | | 2019 | | 2019 | | 2019 | | 2019 | Revenue and Other Income: | | | | | | | | | Coal Revenue | | $ | 332,502 |
| | $ | 350,620 |
| | $ | 301,542 |
| | $ | 303,865 |
| Terminal Revenue | | 17,818 |
| | 16,708 |
| | 16,303 |
| | 16,534 |
| Freight Revenue | | 6,662 |
| | 3,854 |
| | 3,599 |
| | 5,552 |
| Miscellaneous Other Income | | 13,292 |
| | 12,194 |
| | 11,188 |
| | 16,675 |
| Gain on Sale of Assets | | 339 |
| | 933 |
| | 714 |
| | 9 |
| Total Revenue and Other Income | | 370,613 |
| | 384,309 |
| | 333,346 |
| | 342,635 |
| Costs and Expenses: | | | | | | | | | Operating and Other Costs | | 230,112 |
| | 253,448 |
| | 234,849 |
| | 229,603 |
| Depreciation, Depletion and Amortization | | 50,724 |
| | 46,151 |
| | 54,370 |
| | 55,852 |
| Freight Expense | | 6,662 |
| | 3,854 |
| | 3,599 |
| | 5,552 |
| Selling, General and Administrative Costs | | 21,923 |
| | 16,288 |
| | 14,690 |
| | 14,210 |
| Loss (Gain) on Debt Extinguishment | | 23,143 |
| | 1,500 |
| | 801 |
| | (989 | ) | Interest Expense, net | | 18,596 |
| | 16,046 |
| | 15,598 |
| | 16,224 |
| Total Costs and Expenses | | 351,160 |
| | 337,287 |
| | 323,907 |
| | 320,452 |
| Earnings Before Income Tax | | 19,453 |
| | 47,022 |
| | 9,439 |
| | 22,183 |
| Income Tax (Benefit) Expense | | (850 | ) | | (1,808 | ) | | 2,415 |
| | 4,782 |
| Net Income | | 20,303 |
| | 48,830 |
| | 7,024 |
| | 17,401 |
| Less: Net Income Attributable to Noncontrolling Interest | | 5,868 |
| | 5,550 |
| | 2,684 |
| | 3,455 |
| Net Income Attributable to CONSOL Energy Inc. Shareholders | | $ | 14,435 |
| | $ | 43,280 |
| | $ | 4,340 |
| | $ | 13,946 |
| Earnings Per Share: | | | | | | | | | Basic | | $ | 0.52 |
| | $ | 1.57 |
| | $ | 0.16 |
| | $ | 0.54 |
| Dilutive | | $ | 0.52 |
| | $ | 1.56 |
| | $ | 0.16 |
| | $ | 0.54 |
|
| | | | | | | | | | | | | | | | | | | | Three Months Ended | | | March 31, | | June 30, | | September 30, | | December 31, | | | 2018 | | 2018 | | 2018 | | 2018 | Revenue and Other Income: | | | | | | | | | Coal Revenue | | $ | 351,009 |
| | $ | 370,697 |
| | $ | 294,797 |
| | $ | 347,789 |
| Terminal Revenue | | 15,221 |
| | 16,659 |
| | 16,115 |
| | 16,931 |
| Freight Revenue | | 17,887 |
| | 17,444 |
| | 2,443 |
| | 5,798 |
| Miscellaneous Other Income | | 25,887 |
| | 10,369 |
| | 10,978 |
| | 11,426 |
| Gain (Loss) on Sale of Assets | | 254 |
| | 104 |
| | (85 | ) | | 292 |
| Total Revenue and Other Income | | 410,258 |
| | 415,273 |
| | 324,248 |
| | 382,236 |
| Costs and Expenses: | | | | | | | | | Operating and Other Costs | | 229,802 |
| | 248,195 |
| | 222,781 |
| | 245,672 |
| Depreciation, Depletion and Amortization | | 49,471 |
| | 54,961 |
| | 51,242 |
| | 45,590 |
| Freight Expense | | 17,887 |
| | 17,444 |
| | 2,443 |
| | 5,798 |
| Selling, General and Administrative Costs | | 13,484 |
| | 15,705 |
| | 18,526 |
| | 17,631 |
| Loss on Debt Extinguishment | | 1,426 |
| | 1,723 |
| | — |
| | 773 |
| Interest Expense, net | | 21,045 |
| | 21,504 |
| | 20,862 |
| | 20,437 |
| Total Costs and Expenses | | 333,115 |
| | 359,532 |
| | 315,854 |
| | 335,901 |
| Earnings Before Income Tax | | 77,143 |
| | 55,741 |
| | 8,394 |
| | 46,335 |
| Income Tax Expense (Benefit) | | 6,185 |
| | 3,032 |
| | (690 | ) | | 301 |
| Net Income | | 70,958 |
| | 52,709 |
| | 9,084 |
| | 46,034 |
| Less: Net Income Attributable to Noncontrolling Interest | | 8,550 |
| | 7,547 |
| | 3,350 |
| | 6,362 |
| Net Income Attributable to CONSOL Energy Inc. Shareholders | | $ | 62,408 |
| | $ | 45,162 |
| | $ | 5,734 |
| | $ | 39,672 |
| Earnings Per Share: | | | | | | | | | Basic | | $ | 2.23 |
| | $ | 1.61 |
| | $ | 0.20 |
| | $ | 1.43 |
| Dilutive | | $ | 2.20 |
| | $ | 1.58 |
| | $ | 0.20 |
| | $ | 1.41 |
|
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
None.
| | ITEM 9A. | CONTROLS AND PROCEDURES |
Disclosure controls and procedures. CONSOL Energy, under the supervision and with the participation of its management, including CONSOL Energy’s principal executive officer and principal financial officer, evaluated the effectiveness of the Company’s “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Exchange Act, as of the end of the period covered by this Annual Report on Form 10-K. Based on that evaluation, CONSOL Energy’s principal executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures are effective as of December 31, 20192020 to ensure that information required to be disclosed by CONSOL Energy in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and includes controls and procedures designed to ensure that information required to be disclosed by CONSOL Energy in such reports is accumulated and communicated to CONSOL Energy’s management, including CONSOL Energy’s principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Management's Annual Report on Internal Control Over Financial Reporting. CONSOL Energy's management is responsible for establishing and maintaining adequate internal control over financial reporting. CONSOL Energy's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.CONSOL Energy's internal control over financial reporting includes policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets;assets of the Company; (2) provide reasonable assurances that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and the directors of CONSOL Energy; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of CONSOL Energy's assets that could have a material effect on our financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Accordingly, even effective controls can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of CONSOL Energy's internal control over financial reporting as of December 31, 2019.2020. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (COSO) in Internal Control-Integrated Framework. Based on our assessment and those criteria, management has concluded that CONSOL Energy maintained effective internal control over financial reporting as of December 31, 2019.
2020.Ernst & Young, LLP, our independent registered public accounting firm that has audited the financial statements contained in this annual report on Form 10-K, has issued an attestation report on the Company's internal control over financial reporting, which is on page 135119 of this annual report on Form 10-K.
Changes in internal controls over financial reporting . There was no change in the Company's internal controls over financial reporting, as such term is defined in Rule 13a-15(f) of the Exchange Act, that materially affected, or is reasonably likely to materially affect, the Company’s internal controls over financial reporting.
During the first half of fiscal year 2019, the Company completed the implementation of an enterprise resource planning (“ERP”) system and certain processes, and revised and updated the related controls. These changes did not materially affect the Company's internal control over financial reporting.
It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system will be met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events.
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of CONSOL Energy Inc. and Subsidiaries
Opinion on Internal Control over Financial Reporting
We have audited CONSOL Energy Inc. and Subsidiaries’ internal control over financial reporting as of December 31, 2019,2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, CONSOL Energy Inc. and Subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019,2020, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of CONSOL Energy Inc. and Subsidiaries as of December 31, 20192020 and 2018,2019, the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2019,2020, and the related notes and our report dated February 14, 202012, 2021 expressed an unqualified opinion thereon.
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
12, 2021
| | ITEM 9B. | OTHER INFORMATION |
LetterAmendment to CEO Employment Agreement by and Between the Company and James J. McCaffrey, Senior Vice President - Coal Marketing
The Company and James J. McCaffrey (the “Executive”) previously entered into a letter agreement dated as ofOn February 7, 2019 (“2019 Letter Agreement”) pursuant to which the Executive agreed to continue his employment with the Company through March 31, 2020 in exchange for certain changes in the terms and conditions associated with his outstanding equity awards. While those terms remain unchanged, effective as of February 5, 2020,3, 2021, the Board of Directors of the Company approved an amendment to the 2019 Letterexisting Employment Agreement under whichbetween the Company and its Chief Executive agreedOfficer, James A. Brock, dated as of February 15, 2018 (the “Employment Agreement”). The purpose of the Amendment, dated as of February 10, 2021 (the “Amendment”), is to extendprovide for additional compensation to Mr. Brock in the form of retention payments to ensure his continued employment with the Company through March 1,December 31, 2023. Under the terms of the Employment Agreement, Mr. Brock's initial three (3) year term expires on February 18, 2021 and will automatically be extended for one (1) additional year unless not later than sixty (60) days immediately preceding such anniversary, the Company or Mr. Brock has given written notice to the other that it does not wish to extend the Employment Agreement. The Amendment provides for a lump sum retention payment based on the Executive's continued employment as follows: | • | if Mr. Brock continues his employment with the Company through December 31, 2021, the Company will pay him a cash lump sum retention payment in the amount of $1,000,000 no later than thirty (30) days following December 31, 2021; and | | • | if Mr. Brock continues his employment with the Company through December 31, 2022, the Company will pay him a cash lump sum retention payment in the amount of $1,000,000 no later than thirty (30) days following December 31, 2022. |
In the event of Mr. Brock's involuntary termination of employment absent Cause (as defined in exchange forthe Employment Agreement), death or Permanent Disability (as defined in the Employment Agreement) prior to either December 31, 2021 or December 31, 2022, then the Company will accelerate payment of the $1,000,000 retention payment to him. The Amendment also (1) updates the Employment Agreement to include Mr. Brock's current base salary, which is $1,000,000, (2) provides that upon his involuntary termination absent Cause, whether or not in connection with a Change in Control (as defined in the Employment Agreement), he will receive a lump sum cash payment reflecting the cost of the Company's commitment to provide the Executive with (1) an increasecontinued health care coverage in lieu of continued participation in the Company's plans, and (3) revises the severance amount due Mr. Brock in the event of $150,000 inan involuntary termination of employment absent Cause to include a severance multiple of two times his long-term(x) base salary and (y) target annual incentive award target, and (2) a fixed value for his 2021 long-termunder the Company's short-term incentive targetplan. The terms of $150,000.
the Amendment are effective as of February 10, 2021.PART III
| | ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |
The information required by this Item is incorporated by reference from the information under the captions “Proposal No. 1 - Election of Class I and III Directors,” “Executive Officers,” “Beneficial Ownership of Securities” and “Board of Directors and Compensation Information - Board of Directors and its Committees” in the Proxy Statement. CONSOL Energy has a written Code of Business Conduct and Ethics that applies to CONSOL Energy's Chief Executive Officer (Principal Executive Officer), Chief Financial Officer (Principal Financial Officer), Chief Accounting Officer (Principal Accounting Officer) and others. The Code of Business Conduct and Ethics is available on CONSOL Energy's website at www.consolenergy.com. Any amendments to, or waivers from, a provision of our Code of Business Conduct and Ethics that applies to our principal executive officer, principal financial officer and principal accounting officer and that relates to any element of the code of ethics enumerated in paragraph (b) of Item 406 of Regulation S-K shall be disclosed by posting such information on our website at www.consolenergy.com.
| | ITEM 11. | EXECUTIVE COMPENSATION |
The information required by this Item is incorporated by reference from the information under the captions “Board of Directors and Compensation Information - Director Compensation Table - 2019,2020,” “Board of Directors and Compensation Information - Understanding Our Director Compensation Table” and “Executive Compensation Information” in the Proxy Statement.
| | ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
The information required by this Item is incorporated by reference from the information under the captions “Beneficial Ownership of Securities” and “Securities Authorized for Issuance Under the CONSOL Energy Inc. Equity Compensation Plan” in the Proxy Statement.
| | ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE |
The information requested by this Item is incorporated by reference from the information under the captions “Related Person Transaction Policy and Procedures and Related Person Transactions” and “Board of Directors and Compensation Information - Board of Directors and its Committees - Determination of Director Independence” in the Proxy Statement.
| | ITEM 14. | PRINCIPAL ACCOUNTING FEES AND SERVICES |
The information required by this Item is incorporated by reference from the information under the caption “Audit Committee and Audit Fees - Independent Registered Public Accounting Firm” in the Proxy Statement.
In reviewing any agreements incorporated by reference in this Form 10-K or filed with this 10-K, please remember that such agreements are included to provide information regarding their terms. They are not intended to be a source of financial, business or operational information about the Company or any of its subsidiaries or affiliates. The representations, warranties and covenants contained in these agreements are made solely for purposes of the agreements and are made as of specific dates; are solely for the benefit of the parties; may be subject to qualifications and limitations agreed upon by the parties in connection with negotiating the terms of the agreements, including being made for the purpose of allocating contractual risk between the parties instead of establishing matters as facts; and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors or security holders. Investors and security holders should not rely on the representations, warranties and covenants or any description thereof as characterizations of the actual state of facts or condition of the Company or any of its subsidiaries or affiliates or, in connection with acquisition agreements, of the assets to be acquired. Moreover, information concerning the subject matter of the representations, warranties and covenants may change after the date of the agreements. Accordingly, these representations and warranties alone may not describe the actual state of affairs as of the date they were made or at another time. The following documents are filed as part of this report: (1) Financial Statements:
Report of Independent Registered Public Accounting Firm Consolidated Statements of Income for the Years Ended December 31, 2020, 2019 2018 and 2017 2018Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2020, 2019 2018 and 2017 2018Consolidated Balance Sheets at December 31, 20192020 and 2018 2019Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 2020, 2019 2018 and 2017 2018Consolidated Statements of Cash Flows for the Years Ended December 31, 2020, 2019 2018 and 2017 2018Notes to the Audited Consolidated Financial Statements
| Exhibits | Description | | Exhibits | Description | Method of Filing | | Separation and Distribution Agreement, dated as of November 28, 2017, by and between the Company and CNX | | Filed as Exhibit 2.1 to Form 8-K (File No. 001-38147) filed on December 4, 2017 | | Tax Matters Agreement, dated as of November 28, 2017, by and between the Company and CNX | | Filed as Exhibit 2.2 to Form 8-K (File No. 001-38147) filed on December 4, 2017 | | Employee Matters Agreement, dated as of November 28, 2017, by and between the Company and CNX | | Filed as Exhibit 2.3 to Form 8-K (File No. 001-38147) filed on December 4, 2017 | | Intellectual Property Matters Agreement, dated as of November 28, 2017, by and between the Company and CNX | | Filed as Exhibit 2.4 to Form 8-K (File No. 001-38147) filed on December 4, 2017 | *** | Agreement and Plan of Merger, dated as of October 22, 2020, by and among CONSOL Energy Inc., Transformer LP Holdings Inc., Transformer Merger Sub LLC, CONSOL Coal Resources LP and CONSOL Coal Resources GP LLC | | Filed as Exhibit 2.1 to Form 8-K (File No. 001-38147) filed on October 23, 2020 | 3.1 | Amended and Restated Certificate of Incorporation of the Company | | Filed as Exhibit 3.1 to Form 8-K (File No. 001-38147) filed on December 4, 2017 | | Certificate of Amendment to Amended and Restated Certificate of Incorporation of the Company | | Filed as Exhibit 3.1 to Form 8-K (File No. 001-38147) filed on May 8, 2020 | 3.3 | Second Amended and Restated Bylaws of the Company | | Filed as Exhibit 3.2 to Form 8-K (File No. 001-38147) filed on December 4, 2017May 8, 2020 | | Indenture dated as of November 13, 2017 by and between CONSOL Energy Inc. (formerly known as CONSOL Mining Corporation) and UMB Bank, N.A., as Trustee and Collateral Trustee (including form of supplemental indenture on subsidiary guarantors). | | Filed as Exhibit 4.1 to Form 8-K (File No. 001-38147) filed on November 15, 2017 | | Description of Capital Stock | | Filed herewith |
| 10.1 | | | | Transition Services Agreement, dated as of November 28, 2017, by and between the Company and CNX | | Filed as Exhibit 10.1 to Form 8-K (File No. 001-38147) filed on December 4, 2017 | | CNX Resources Corporation to CONSOL Energy Inc. Trademark License Agreement dated as of November 28, 2017, by and between the Company and CNX | | Filed as Exhibit 10.2 to Form 8-K (File No. 001-38147) filed on December 4, 2017 | | CONSOL Energy Inc. to CNX Resources Corporation Trademark License Agreement, dated as of November 28, 2017, by and between the Company and CNX | | Filed as Exhibit 10.3 to Form 8-K (File No. 001-38147) filed on December 4, 2017 | | First Amendment to the First Amended and Restated Omnibus Agreement, dated as of November 28, 2017, by and among the Company, CNX, CONSOL Coal Resources GP LLC, the Partnership and the other parties listed on Exhibit A attached thereto | | Filed as Exhibit 10.4 to Form 8-K (File No. 001-38147) filed on December 4, 2017 | | First Amendment to Contract Agency Agreement, dated as of November 28, 2017, by and among CONSOL Energy Sales Company, CONSOL Thermal Holdings LLC (formerly known as CNX Thermal Holdings LLC) and the other parties thereto | | Filed as Exhibit 10.5 to Form 8-K (File No. 001-38147) filed on December 4, 2017 | | First Amendment to Water Supply and Services Agreement, dated as of November 28, 2017 by and between CNX Water Assets LLC and CONSOL Thermal Holdings LLC (formerly known as CNX Thermal Holdings LLC) | | Filed as Exhibit 10.6 to Form 8-K (File No. 001-38147) filed on December 4, 2017 | | Second Amendment to the Pennsylvania Mine Complex Operating Agreement, dated as of November 28, 2017, by and among CONSOL Pennsylvania Coal Company LLC, Conrhein Coal Company, CONSOL Thermal Holdings LLC and CONSOL Coal Resources LP | | Filed as Exhibit 10.7 to Form 8-K (File No. 001-38147) filed on December 4, 2017 | | Credit Agreement, dated as of November 28, 2017, by and among the Company, the various financial institutions from time to time party thereto, PNC Bank, N.A., as administrative agent for the Revolving Lenders and Term A Lenders, Citibank, N.A., as administrative agent for the Term B Lenders and PNC Bank, N.A., as collateral agent for the Lenders and the other Secured Parties referred to therein | | Filed as Exhibit 10.8 to Form 8-K (File No. 001-38147) filed on December 4, 2017 | | Affiliated Company Credit Agreement, dated as of November 28, 2017, by and among CONSOL Coal Resources LP, certain of its affiliates party thereto, CONSOL Energy Inc. and PNC Bank, N.A. | Filed as Exhibit 10.9 to Form 8-K (File No. 001-38147) filed on December 4, 2017 | | CONSOL Energy Inc. Omnibus Performance Incentive Plan* | | Filed as Exhibit 4.3 to Form S-8 (File No. 333-221727) filed on November 22, 2017 | | Purchase and Sale Agreement, dated as of November 30, 2017, by and among CONSOL Marine Terminals LLC, CONSOL Pennsylvania Coal Company LLC and CONSOL Funding LLC | | Filed as Exhibit 10.11 to Form 8-K (File No. 001-38147) filed on December 4, 2017 | | Sub-Originator Sale Agreement, dated as of November 30, 2017, by and between CONSOL Thermal Holdings LLC and CONSOL Pennsylvania Coal Company LLC | | Filed as Exhibit 10.12 to Form 8-K (File No. 001-38147) filed on December 4, 2017 | | Receivables Financing Agreement, dated as of November 30, 2017, by and among CONSOL Funding LLC, CONSOL Pennsylvania Coal Company LLC, PNC Bank, N.A., PNC Capital Markets, LLC and certain lenders from time to time party thereto | | Filed as Exhibit 10.13 to Form 8-K (File No. 001-38147) filed on December 4, 2017 | | First Amendment to Receivables Financing Agreement dated as of May 29, 2018 | | Filed herewith | 10.14 | Second Amendment to Receivables Financing Agreement dated as of June 26, 2018 | | Filed herewith | 10.15 | Third Amendment to Receivables Financing Agreement dated as of July 19, 2018 | | Filed herewith | 10.16 | Fourth Amendment to Receivables Financing Agreement dated as of August 30, 2018 | | Filed herewith | 10.17 | Fifth Amendment to Receivables Financing Agreement dated as of March 27, 2020** | | Filed as Exhibit 10.2 to Form 10-Q (File No. 001-38147) filed on May 11, 2020 | 10.18 | Second Amendment and Restatement of Master Cooperation and Safety Agreement by and among CONSOL Energy Inc., CNX Gas Company LLC, CNX Resources Holdings LLC and certain other parties thereto | | Filed as Exhibit 10.5 to Form 10-12B/A (File No. 001-38147) filed on October 27, 2017 | | CONSOL Energy Inc. Deferred Compensation Plan for Non-Employee Directors* | | Filed as Exhibit 10.2 to Form 10-Q (File No. 001-38147) filed on November 1, 2018 | | Omnibus Amendment, dated as of August 30, 2018, by and among CONSOL Funding LLC, CONSOL Pennsylvania Coal Company LLC, CONSOL Thermal Holdings LLC, CONSOL Energy Inc., CONSOL Marine Terminals LLC and PNC Bank, N.A. | | Filed as Exhibit 10.1 to Form 8-K (File No. 001-38147) filed on September 6, 2018 | | Employment Agreement of James A. Brock* | | Filed as Exhibit 10.1 to Form 10-Q (File No. 001-38147) filed on May 3, 2018 |
| Change in Control Severance Agreement for David M. Khani* | Filed as Exhibit 10.2 to Form 10-Q (File No. 001-38147) filed on May 3, 2018 |
| | | | | Change in Control Severance Agreement for James J. McCaffrey* | Filed as Exhibit 10.3 to Form 10-Q (File No. 001-38147) filed on May 3, 2018 | | Change in Control Severance Agreement for Martha A. Wiegand* | | Filed as Exhibit 10.4 to Form 10-Q (File No. 001-38147) filed on May 3, 2018 | | Change in Control Severance Agreement for Kurt Salvatori* | | Filed as Exhibit 10.5 to Form 10-Q (File No. 001-38147) filed on May 3, 2018 | | Change in Control Severance Agreement for John Rothka* | | Filed as Exhibit 10.6 to Form 10-Q (File No. 001-38147) filed on May 3, 2018 | | Form Notice of Restricted Stock Unit Award and Terms and Conditions* | | Filed as Exhibit 10.7 to Form 10-Q (File No. 001-38147) filed on May 3, 2018 | | Form Notice of Performance-based Restricted Stock Unit Award and Terms and Conditions* | | Filed as Exhibit 10.8 to Form 10-Q (File No. 001-38147) filed on May 3, 2018 | | Form Notice of Restricted Stock Unit Award and Terms and Conditions for Spin Recognition (Non-Employee Director)* | | Filed as Exhibit 10.9 to Form 10-Q (File No. 001-38147) filed on May 3, 2018 | | Form Notice of Restricted Stock Unit Award and Terms and Conditions for Spin Recognition* | | Filed as Exhibit 10.10 to Form 10-Q (File No. 001-38147) filed on May 3, 2018 | | Amendment No. 1, dated as of March 28, 2019, to Credit Agreement, dated as of November 28, 2017, among the Company, the various financial institutions from time to time party thereto, PNC Bank, N.A., as administrative agent for the Revolving Lenders and Term A Lenders, Citibank, N.A., as administrative agent for the Term B Lenders and PNC Bank, N.A., as collateral agent for the Lenders and the Other Secured Parties referred to therein | | Filed as Exhibit 10.1 to Form 8-K (File No. 001-38147) filed on April 3, 2019 | | Amendment No. 1, dated as of March 28, 2019, to Affiliated Company Credit Agreement, dated November 28, 2017, by and among CONSOL Coal Resources LP, certain of its affiliates party thereto, CONSOL Energy Inc. and PNC Bank, National Association | | Filed as Exhibit 10.2 to Form 8-K (File No. 001-38147) filed on April 3, 2019 | | Letter Agreement by and between CONSOL Energy Inc. and James J. McCaffrey dated as of February 7, 2019* | | Filed as Exhibit 10.3 to Form 10-Q (File No. 001-38147) filed on May 8, 2019 | | Form Notice of Restricted Stock Unit Award and Terms and Conditions* | | Filed as Exhibit 10.4 to Form 10-Q (File No. 001-38147) filed on May 8, 2019 | | Form Notice of Performance-based Restricted Stock Unit Award and Terms and Conditions* | | Filed as Exhibit 10.5 to Form 10-Q (File No. 001-38147) filed on May 8, 2019 | | Change in Control Severance Agreement for Mitesh Thakkar* | | Filed as Exhibit 10.6 to Form 10-Q (File No. 001-38147) filed on May 11, 2020 | 10.35 | Form of Notice of Restricted Stock Unit Award Terms and Conditions* | | Filed as Exhibit 10.3 to Form 10-Q (File No. 001-38147) filed on May 11, 2020 | 10.36 | Form of Notice of Performance-Based Restricted Stock Unit Award Terms and Conditions for James A. Brock*# | | Filed as Exhibit 10.4 to Form 10-Q (File No. 001-38147) filed on May 11, 2020 | 10.37 | Form of Notice of Performance-Based Cash Award*# | | Filed as Exhibit 10.5 to Form 10-Q (File No. 001-38147) filed on May 11, 2020 | 10.38 | Amendment to Letter Agreement by and between CONSOL Energy Inc. and James J. McCaffrey dated as of February 13, 2020* | | Filed as Exhibit 10.1 to Form 10-Q (File No. 001-38147) filed on May 11, 2020 | 10.39 | Amendment No. 2, dated as of June 5, 2020, to Credit Agreement, dated as of November 28, 2017, among the Company, the various financial institutions from time to time party thereto, PNC Bank, N.A., as administrative agent for the Revolving Lenders and Term Loan A Lenders, Citibank, N.A., as administrative agent for the Term Loan B Lenders and PNC Bank, N.A., as collateral agent for the Lenders and the other Secured Parties referred to therein | | Filed as Exhibit 10.1 to Form 8-K (File No. 001-38147) filed on June 11, 2020 | 10.40 | CONSOL Energy Inc. 2020 Amended and Restated Omnibus Performance Incentive Plan* | | Filed as Exhibit 4.4 to Registration Statement on Form S-8 (file No. 333-238173) filed on May 11, 2020 | 10.41 | Letter Agreement between James J. McCaffrey and CONSOL Mining Company LLC* | | Filed as Exhibit 10.4 to Form 10-Q (File No. 001-38147) filed on August 10, 2020 | 10.42 | Form of Notice of Restricted Stock Unit Award Terms and Conditions for Non-Employee Directors* | | File as Exhibit 10.5 to Form 10-Q (File No. 001-38147) filed on August 10, 2020 | 10.43 | Support Agreement, dated as of October 22, 2020, by and among CONSOL Energy Inc. and CONSOL Coal Resources LP | | Filed as Exhibit 10.1 to Form 8-K (File No. 001-38147) filed on October 23, 2020 | 10.44 | Amendment to CONSOL Energy Inc. 2020 Amended and Restated Omnibus Performance Incentive Plan, effective as of December 30, 2020 (incorporated by reference to Exhibit 4.5 to CEIX's Registration Statement on Form S-8 filed on December 31, 2020) | | Filed as Exhibit 4.5 to Form S-8 (File No. 001-38147) filed on December 31, 2020 | 10.45 | First Amendment to Employment Agreement of James A. Brock* | | Filed herewith | 21 | Subsidiaries of CONSOL Energy Inc. | | Filed herewith | | Consent of Ernst & Young LLP | | Filed herewith | | Certification of Chief Executive Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002 | | Filed herewith | | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | | Filed herewith | | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | | Filed herewith | | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | | Filed herewith | | Mine Safety and Health Administration Safety Data | | Filed herewith | 101 | Interactive Data File (Form 10-K for the year ended December 31, 20192020, furnished in Inline XBRL) | | Filed herewith | 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | | Filed herewith |
*Indicates management contract or compensatory plan or arrangement. ** Information in this exhibit identified by brackets is confidential and has been excluded pursuant to Item 601(b)(10)(iv) of Regulation S-K because it (i) is not material and (ii) would likely cause competitive harm to the Company if publicly disclosed. *** The schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K and will be provided to the Securities and Exchange Commission upon request. # Schedules and attachments to this Exhibit have been omitted pursuant to Item 601(a)(5) of Regulation S-K. Supplemental Information No annual report or proxy material has been sent to shareholders of CONSOL Energy at the time of filing of this Form 10-K. An annual report will be sent to shareholders and to the commission subsequent to the filing of this Form 10-K. In accordance with SEC Release 33-8238, Exhibits 32.1 and 32.2 are being furnished and not filed.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, as of the 14th12th day of February, 2020. 2021. | | | | | | CONSOL ENERGY INC. | | | | | | By: | | /s/ JAMES A. BROCK | | | | James A. Brock | | | | Director, Chief Executive Officer and President | | | | (Principal Executive Officer) | | | | | | By: | | /s//s/ MITESHKUMAR B. THAKKAR | | | | Miteshkumar B. Thakkar | | | | Interim Chief Financial Officer | | | | (Principal Financial Officer) |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed as of the 14th12th day of February, 2020,2021, by the following persons on behalf of the registrant in the capacities indicated: Signature | | Title | | | | Signature | | Title | | | | /s/ JAMES A. BROCK | | Director, Chief Executive Officer and President | James A. Brock | | (Principal Executive Officer) | | | | /s/ MITESHKUMAR B. THAKKAR | | Interim Chief Financial Officer | Miteshkumar B. Thakkar | | (Principal Financial Officer) | | | | /s/ JOHN M. ROTHKA | | Chief Accounting Officer | John M. Rothka | | (Principal Accounting Officer) | | | | /s/ WILLIAMWILLIAM P. POWELL | | Director and Chairman of the Board | William P. Powell | | | | | | /s/ SOPHIE BERGERON | | Director | Sophie Bergeron | | | | | | /s/ JOHN T. MILLS | | Director | John T. Mills | | | | | | /s/ JOSEPH P. PLATT | | Director | Joseph P. Platt | | | | | | /s/ EDWIN S. ROBERSON | | Director | Edwin S. Roberson | | | | | |
|
|
|
|
|
|
|
|
|
|
|
|
|