(Mark One)
FORMFORM 10-Qx
For the quarterly period ended June 30, 2019
OR
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Coronado Global Resources Inc.
| 83-1780608 | |
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100 Bill Baker Way
Beckley, West Virginia 25801
(681) 207-7263
Securities registered pursuant to Section 12(b) of the Act:
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Yes x No o
Indicate by check mark whether the registrant
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Yeso
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Assets |
| Note |
| (Unaudited) |
| December 31, |
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Current assets: |
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Cash and restricted cash |
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| $ | 46,251 |
| $ | 124,881 |
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Trade receivables |
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| 204,248 |
| 206,127 |
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Related party receivables |
| 18 |
| 59,665 |
| 36,716 |
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Income tax receivable |
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| — |
| 12,017 |
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Inventories |
| 6 |
| 129,424 |
| 95,103 |
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Other current assets |
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| 40,722 |
| 40,914 |
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Total current assets |
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| 480,310 |
| 515,758 |
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Non-current assets: |
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Property, plant and equipment, net |
| 7 |
| 1,603,087 |
| 1,618,558 |
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Right of use asset — operating leases, net |
| 10 |
| 64,343 |
| — |
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Goodwill |
| 8 |
| 28,008 |
| 28,008 |
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Intangible assets, net |
| 8 |
| 5,221 |
| 5,402 |
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Deposits and reclamation bonds |
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| 12,541 |
| 11,635 |
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Deferred income tax assets |
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| 7,779 |
| 11,848 |
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Other non-current assets |
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| 17,194 |
| 18,355 |
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Total assets |
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| $ | 2,218,483 |
| $ | 2,209,564 |
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Liabilities and Stockholders’ Equity/Members’ Capital |
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Current liabilities: |
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Accounts payable |
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| $ | 41,084 |
| $ | 42,962 |
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Accrued expenses and other current liabilities |
| 9 |
| 252,351 |
| 243,496 |
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Income tax payable |
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| 33,024 |
| 9,241 |
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Asset retirement obligations |
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| 7,719 |
| 7,719 |
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Contingent royalty consideration |
| 16 |
| 7,293 |
| 26,832 |
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Contract obligations |
| 13 |
| 35,066 |
| 39,116 |
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Lease liabilities |
| 10 |
| 28,128 |
| 1,308 |
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Other current financial liabilities |
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| 13,126 |
| 7,727 |
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Total current liabilities |
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| 417,791 |
| 378,401 |
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Non-current liabilities: |
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Asset retirement obligations |
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| 122,864 |
| 118,072 |
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Contract obligations |
| 13 |
| 224,433 |
| 253,578 |
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Deferred consideration liability |
| 14 |
| 164,148 |
| 155,332 |
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Other financial liabilities |
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| 2,697 |
| 4,073 |
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Lease liabilities |
| 10 |
| 52,902 |
| 2,481 |
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Contingent royalty consideration |
| 16 |
| 3,131 |
| 3,371 |
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Deferred income tax liabilities |
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| 54,885 |
| 38,838 |
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Other non-current liabilities |
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| 1,680 |
| 1,610 |
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Total liabilities |
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| 1,044,531 |
| 955,756 |
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Common stock $0.01 par value; 1,000,000,000 shares authorized, 96,651,692 shares are issued and outstanding as of June 30, 2019 and December 31, 2018 |
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| 967 |
| 967 |
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Series A Preferred stock $0.01 par value; 100,000,000 shares authorized, 1 Share issued and outstanding as of June 30, 2019 and December 31, 2018 |
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| — |
| — |
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Additional paid-in capital |
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| 1,108,041 |
| 1,107,948 |
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Accumulated other comprehensive loss |
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| (44,202 | ) | (49,609 | ) | ||
Retained earnings |
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| 108,868 |
| 194,220 |
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Noncontrolling interest |
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| 278 |
| 282 |
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Total stockholders’ equity |
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| 1,173,952 |
| 1,253,808 |
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Total liabilities and stockholders’ equity |
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| $ | 2,218,483 |
| $ | 2,209,564 |
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| Three Months Ended |
| Six Months Ended |
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| Note |
| 2019 |
| 2018 |
| 2019 |
| 2018 |
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Revenues: |
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Coal revenues |
| 4 |
| $ | 495,385 |
| $ | 479,021 |
| $ | 919,329 |
| $ | 571,343 |
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Coal revenues from related parties |
| 4, 18 |
| 135,305 |
| 98,489 |
| 293,158 |
| 213,003 |
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Other revenues |
| 4 |
| 11,767 |
| 14,020 |
| 21,848 |
| 15,337 |
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Total revenues |
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| 642,457 |
| 591,530 |
| 1,234,335 |
| 799,683 |
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Costs and expenses: |
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Cost of coal revenues (exclusive of items shown separately below) |
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| 264,137 |
| 305,309 |
| 533,696 |
| 424,620 |
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Depreciation, depletion and amortization |
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| 45,508 |
| 42,594 |
| 85,279 |
| 64,402 |
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Freight expenses |
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| 52,035 |
| 40,912 |
| 89,362 |
| 45,155 |
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Stanwell rebate |
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| 45,847 |
| 32,812 |
| 94,674 |
| 32,812 |
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Other royalties |
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| 49,073 |
| 67,695 |
| 93,422 |
| 82,987 |
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Selling, general, and administrative expenses |
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| 9,242 |
| 8,513 |
| 18,311 |
| 52,283 |
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Total costs and expenses |
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| 465,842 |
| 497,835 |
| 914,744 |
| 702,259 |
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Operating income |
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| 176,615 |
| 93,695 |
| 319,591 |
| 97,424 |
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Other income (expenses): |
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Interest expense, net |
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| (9,087 | ) | (18,987 | ) | (17,264 | ) | (25,488 | ) | ||||
Loss on debt extinguishment |
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| — |
| — |
| — |
| (3,905 | ) | ||||
Other, net |
| 5 |
| (2,989 | ) | (2,391 | ) | 1,042 |
| (26,846 | ) | ||||
Total other income (expense), net |
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| (12,076 | ) | (21,378 | ) | (16,222 | ) | (56,239 | ) | ||||
Income before tax |
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| 164,539 |
| 72,317 |
| 303,369 |
| 41,185 |
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Income tax expense |
| 11 |
| (47,033 | ) | (12,995 | ) | (89,043 | ) | (5,534 | ) | ||||
Net income |
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| 117,506 |
| 59,322 |
| 214,326 |
| 35,651 |
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Less: Net loss attributable to noncontrolling interest |
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| (4 | ) | (2 | ) | (4 | ) | (4 | ) | ||||
Net income attributable to Coronado Global Resources Inc. |
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| $ | 117,510 |
| 59,324 |
| $ | 214,330 |
| $ | 35,655 |
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Other comprehensive income, net of income taxes: |
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Foreign currency translation adjustment |
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| (508 | ) | (18,695 | ) | (1,066 | ) | (18,695 | ) | ||||
Net gain on cash flow hedges, net of tax |
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| 894 |
| — |
| 6,473 |
| — |
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Total comprehensive income |
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| $ | 117,892 |
| 40,627 |
| 219,733 |
| $ | 16,956 |
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Less: Net loss attributable to noncontrolling interest |
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| (4 | ) | (2 | ) | (4 | ) | (4 | ) | ||||
Total comprehensive income attributable to Coronado Global Resources Inc. |
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| $ | 117,896 |
| $ | 40,629 |
| $ | 219,737 |
| $ | 16,960 |
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Earnings per share of common stock |
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Basic |
| 15 |
| 1.22 |
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| 2.22 |
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Diluted |
| 15 |
| 1.22 |
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| 2.22 |
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| Accumulated |
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| Additional |
| Other |
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| Non- |
| Total |
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| Members’ |
| Common Stock |
| Preferred Stock |
| Paid in |
| Comprehensive |
| Retained |
| controlling |
| Stockholders’ |
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| Capital |
| Shares |
| Amount |
| Series A |
| Amount |
| Capital |
| Income / (Loss) |
| Earnings |
| Interest |
| Equity |
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Balance December 31, 2018 |
| $ | — |
| 96,651,692 |
| 967 |
| 1 |
| — |
| 1,107,948 |
| (49,609 | ) | 194,220 |
| 282 |
| 1,253,808 |
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Net income |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| 96,820 |
| — |
| 96,820 |
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Other comprehensive income (net of $ 2,391 tax) |
| — |
| — |
| — |
| — |
| — |
| — |
| 5,021 |
| — |
| — |
| 5,021 |
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Total comprehensive income |
| $ | — |
| — |
| — |
| — |
| — |
| — |
| 5,021 |
| 96,820 |
| — |
| 101,841 |
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Dividends paid |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| (299,682 | ) | — |
| (299,682 | ) | |
Balance March 31, 2019 |
| $ | — |
| 96,651,692 |
| 967 |
| 1 |
| — |
| 1,107,948 |
| (44,588 | ) | (8,642 | ) | 282 |
| 1,055,967 |
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Net income |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| 117,510 |
| (4 | ) | 117,506 |
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Other comprehensive income (net of $ 383 tax) |
| — |
| — |
| — |
| — |
| — |
| — |
| 386 |
| — |
| — |
| 386 |
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Total comprehensive income |
| $ | — |
| — |
| — |
| — |
| — |
| — |
| 386 |
| 117,510 |
| (4 | ) | 117,892 |
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Share-based compensation for equity classified awards |
| — |
| — |
| — |
| — |
| — |
| 93 |
| — |
| — |
| — |
| 93 |
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Dividends paid |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
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Balance June 30, 2019 |
| $ | — |
| 96,651,692 |
| 967 |
| 1 |
| — |
| 1,108,041 |
| (44,202 | ) | 108,868 |
| 278 |
| 1,173,952 |
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| Accumulated |
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| Additional |
| Other |
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| Non- |
| Total |
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| Members’ |
| Common Stock |
| Preferred Stock |
| Paid in |
| Comprehensive |
| Retained |
| controlling |
| Members’ |
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| Capital |
| Shares |
| Amount |
| Series A |
| Amount |
| Capital |
| Income / (Loss) |
| Earnings |
| Interest |
| Capital |
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Balance December 31, 2017 |
| $ | 553,524 |
| — |
| — |
| — |
| — |
| — |
| — |
| 79,539 |
| 237 |
| 633,300 |
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Net (loss) |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| (23,669 | ) | (2 | ) | (23,671 | ) | |
Other comprehensive income |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
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Total comprehensive income |
| $ | — |
| — |
| — |
| — |
| — |
| — |
| — |
| (23,669 | ) | (2 | ) | (23,671 | ) |
Members’ contributions |
| 181,610 |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| 62 |
| 181,672 |
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Balance March 31, 2018 |
| 735,134 |
| — |
| — |
| — |
| — |
| — |
| — |
| 55,870 |
| 297 |
| 791,301 |
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Net income |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| 59,324 |
| (2 | ) | 59,322 |
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Other comprehensive income |
| — |
| — |
| — |
| — |
| — |
| — |
| (18,695 | ) | — |
| — |
| (18,695 | ) | |
Total comprehensive income |
| $ | — |
| — |
| — |
| — |
| — |
| — |
| (18,695 | ) | 59,324 |
| (2 | ) | 40,627 |
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Members’ distributions |
| (30,274 | ) | — |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| (30,274 | ) | |
Balance June 30, 2018 |
| 704,860 |
| — |
| — |
| — |
| — |
| — |
| (18,695 | ) | 115,194 |
| 295 |
| 801,654 |
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| Six Months Ended |
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| 2019 |
| 2018 |
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Cash Flows From Operating Activities: |
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Net income |
| 214,326 |
| 35,651 |
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Adjustments to reconcile net income to cash and restricted cash provided by operating activities: |
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Depreciation, depletion and amortization |
| 85,404 |
| 64,354 |
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Amortization of right of use asset - operating leases |
| 10,394 |
| — |
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Amortization of deferred financing costs |
| 2,060 |
| 2,406 |
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Non-cash interest expense |
| 9,711 |
| 1,886 |
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Amortization of contract obligations |
| (17,550 | ) | (14,390 | ) |
Loss on disposal of property, plant and equipment |
| 39 |
| — |
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Increase (decrease) in contingent royalty consideration |
| (7,143 | ) | 10,973 |
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Loss on interest rate swap |
| — |
| 4,871 |
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Equity-based compensation expense |
| 93 |
| — |
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Deferred income taxes |
| 17,026 |
| 5,448 |
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Reclamation of asset retirement obligations |
| (2,552 | ) | (1,415 | ) |
Change in estimate of asset retirement obligation |
| (125 | ) | 48 |
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Changes in operating assets and liabilities: |
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Accounts receivable - including related party receivables |
| (23,105 | ) | (32,097 | ) |
Inventories |
| (34,562 | ) | 1,287 |
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Other current assets |
| (2,287 | ) | (8,154 | ) |
Accounts payable |
| (1,832 | ) | 10,736 |
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Accrued expenses and other current liabilities |
| 15,585 |
| 60,106 |
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Operating lease liabilities |
| (11,073 | ) | — |
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Change in other liabilities |
| 46,807 |
| (98 | ) |
Net cash provided by operating activities |
| 301,216 |
| 141,612 |
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Cash Flows From Investing Activities: |
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Capital expenditures |
| (66,430 | ) | (46,776 | ) |
Purchase of deposits and reclamation bonds |
| (906 | ) | (523 | ) |
Redemption of deposits and reclamation bonds |
| — |
| 171 |
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Acquisition of Curragh, net of cash acquired |
| — |
| (537,207 | ) |
Net cash used in investing activities |
| (67,336 | ) | (584,335 | ) |
Cash Flows From Financing Activities: |
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Proceeds from interest bearing liabilities and other financial liabilities, net of debt discount |
| 109,008 |
| 720,083 |
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Proceeds from interest rate swap |
| — |
| 28,251 |
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Debt issuance costs and other financing costs |
| — |
| (41,951 | ) |
Principal payments on interest bearing liabilities and other financial liabilities |
| (108,073 | ) | (155,636 | ) |
Principal payments on finance and capital lease obligations |
| (686 | ) | (1,052 | ) |
Payment of contingent purchase consideration |
| (12,712 | ) | — |
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Dividends paid |
| (299,682 | ) | — |
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Members’ contributions (distributions), net |
| — |
| 151,336 |
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NCI member’s contributions |
| — |
| 62 |
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Net cash provided by (used in) financing activities |
| (312,145 | ) | 701,093 |
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Net increase (decrease) in cash and restricted cash |
| (78,265 | ) | 258,370 |
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Effect of exchange rate changes on cash and restricted cash |
| (365 | ) | (2,384 | ) |
Cash and restricted cash at beginning of period |
| 124,881 |
| 28,069 |
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Cash and restricted cash at end of period |
| 46,251 |
| 284,055 |
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Supplemental disclosure of cash flow information: |
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Cash payments for interest |
| 1,148 |
| 38,665 |
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Cash paid for taxes |
| 35,873 |
| 4,417 |
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United States, or U.S.
During the year ended December 31, 2018, Coronado Group LLC and Coronado Global Resources Inc. completed a common control reorganization, or the Reorganization Transaction, of their legal entity structure. Prior to the Reorganization Transaction February22, 2022.
The Reorganization Transaction was treated as a combination of entities under common control in line with Accounting Standards Codification, or ASC, 805, Business Combinations, whereby the receiving entity (the Company) recorded the contributed assets and liabilities at the carrying value of Coronado Group LLC. Prior to the Reorganization Transaction, the consolidated financial statements of the Company reflect the net assets and operations of Coronado Group LLC. The financial statements presented following the Reorganization Transaction are those of the receiving entity (the Company) and are retrospectively adjusted to present that entity as if it always held the net assets or equity interests previously held by the seller, Coronado Group LLC. As such, financial information (including comparatives) of the Company has been presented as a continuation of the pre-existing accounting values of assets and liabilities in Coronado Group LLC’s financial statements.
The interim unaudited condensed consolidated financial statements are presented in U.S.
2022.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
February22, 2022.
Leases. In February 2016,
On January 1, 2019, the Company adopted ASU No. 2016-02 using the modified retrospective transition approach and elected the package of practical expedients that allows it to forgo reassessment of lease classification for leases that have already commenced. The Company also elected the practical expedients to the new standard without restating comparative prior period financial information, to not recognize ROU assets and liabilities for operating leases with shorter than 12-month terms and to include both lease and non-lease components with lease payments.
In addition to existing finance leases and other financing obligations, the adoption of the new standard resulted in the recognition of ROU assets of $66.8 million and lease liabilities of $81.1 million related to operating leases. On adoption, the lease liability included reclassification of a terminal services contract liability of $14.3 million, which is classified as a lease under the newly adopted standard. There was no material impact to the Consolidated Statements of Operations and Comprehensive Income, the Consolidated Statements of Cash Flows, or the Company’s debt covenant calculations as a result of the adoption of ASU 2016-02.
ASU No. 2016-02 also requires entities to disclose certain qualitative and quantitative information regarding the amount, timing, and uncertainty of cash flows arising from leases. Such disclosures are included in Note 10 “Leases”.
(b)Accounting Standards Not Yet Implemented
Financial Instruments - Credit Losses. In June 2016, the FASB issued ASU 2016-13 related to the measurement of credit losses on financial instruments. The pronouncement replaces the incurred loss methodology to record credit losses with a methodology that reflects the expected credit losses for financial assets not accounted for at fair value with gains and losses recognized through net income. This standard is effective for fiscal years beginning after December 15, 2019 (January 1, 2020 for the Company) and interim periods therein. The Company expects to adopt ASU 2016-13 as of January 1, 2020 and is in the process of evaluating the impacts of adoption.
Fair Value Measurement. In August 2018, the FASB issued ASU 2018-13, which amended the fair value measurement guidance by removing and modifying certain disclosure requirements, while also adding new disclosure requirements. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. The amendments are effective for all companies for fiscal years, and interim periods within those years, beginning after December 15, 2019. The Company plans to adopt all disclosure requirements effective January 1, 2020.
(c)Reclassification
Certain amounts in the prior period Condensed Consolidated Balance Sheet have been reclassified to conform to the presentation of the current period financial statements. These related to the reclassification of capital lease liabilities included within “other financial liabilities and capital leases” and “other financial liabilities, excluding current instalments” as at December 31, 2018 to “Lease liabilities” current and non-current, respectively. These reclassifications had no effect on the previously reported net income.
3.Acquisition of Curragh Complex
On December 22, 2017, a Membership Interest and Asset Purchase Agreement, or the Agreement, was entered by Coronado Australia Holdings Pty Ltd and Coronado Group LLC in order to acquire Wesfarmers Curragh Pty Ltd from Wesfarmers Limited (since renamed Coronado Curragh Pty Ltd), which we refer to as the Curragh acquisition. The Agreement was executed on March 29, 2018.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The aggregate base purchase price for the Membership Interest in Curragh was A$700 million and was subject to adjustments pursuant to the terms of the Agreement. The Company acquired 100% of the Membership Interest. The operating results related to the Curragh acquisition have been included in the consolidated financial statements since March 29, 2018.
The aggregate consideration on the date of the Curragh acquisition totaled $563.8 million.
Contingent consideration recognized on the date of the Curragh acquisition, specifically the Value Share Mechanism, or VSM, of $26.6 million associated with the Curragh acquisition represents the fair value of a two-year, 25% royalty on sales from metallurgical coal mined at Curragh. The royalty only applies to the realized price on metallurgical coal sales above $145 per metric ton. The VSM liability is marked-to-market at each reporting date, with any fluctuations included as an operating expense in the Consolidated Statement of Operations. The payout structure of the royalty can be replicated through a probability weighted discounted cash flow approach using a Monte Carlo simulation over a 24-month period from acquisition date. As such, the Company developed a fair value of the royalty using a Monte Carlo simulation.
In connection with the acquisition, Coronado Australia Holdings Pty Ltd incurred acquisition related costs for the six months ended June 30, 2018 of $53.8 million, $38.5 million of which is recorded in selling, general, and administrative expenses. The remainder, relating to foreign currency swap losses, is recorded in the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income under “Other, net”.
The Curragh acquisition has been accounted for using the acquisition method of accounting which requires, among other things, that assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. The following table summarizes total consideration transferred and the allocation of the purchase price to the acquired assets and liabilities:
|
| Amount |
| |
|
| (US$ thousands) |
| |
Fair value of total consideration transferred: |
|
|
| |
Cash consideration |
| $ | 537,207 |
|
Contingent consideration (Value Share Mechanism) |
| 26,552 |
| |
Total consideration transferred |
| 563,759 |
| |
|
|
|
| |
Recognized amounts of identifiable assets acquired, and liabilities assumed: |
|
|
| |
Current assets |
| $ | 240,966 |
|
Property, plant and equipment |
| 851,981 |
| |
Deferred income tax assets |
| 24,432 |
| |
Other long-term assets |
| 1,831 |
| |
Current liabilities |
| (141,611 | ) | |
Contract obligations |
| (306,960 | ) | |
Asset retirement obligations |
| (104,305 | ) | |
Other long-term liabilities |
| (2,575 | ) | |
Total identifiable net assets acquired |
| $ | 563,759 |
|
No goodwill has been recorded in connection with this acquisition as the purchase consideration equaled the fair value of the net assets acquired.
The following pro forma summary reflects consolidated results of operation as if the Curragh acquisition had occurred on January 1, 2018 (unaudited).
| |||
| |||
|
| ||
|
|
The pro forma financial information was prepared based on historical financial information and has been adjusted to give effect to pro forma adjustments that are (i) directly attributable to the Curragh acquisition, (ii) factually supportable and (iii) expected to have a continuing impact on the combined results.
These pro forma results are based on estimates and assumptions, which the Company believes are reasonable. They are not the results that would have been realized had the acquisition actually occurred on January 1, 2018 and are not necessarily indicative of the Company’s
The pro forma results for the six months ended June 30, 2018 exclude non-recurring adjustments of $53.8 million of transaction costs.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4.financial statements.
The organization of the four reportable segments reflects how Coronado’s chief operating
Company’spresentation ofAdjusted EBITDA
may notbe comparableto similarlytitled financialfinancial statements.
|
| Curragh (1) |
| Buchanan |
| Logan |
| Greenbrier |
| Other and |
| Total |
|
|
| ($ thousands) |
| ||||||||||
Three months ended June 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
| 412,810 |
| 128,713 |
| 81,610 |
| 19,324 |
| — |
| 642,457 |
|
Adjusted EBITDA |
| 151,561 |
| 60,289 |
| 18,126 |
| 1,227 |
| (8,912 | ) | 222,291 |
|
Net income/(loss) |
| 91,024 |
| 34,600 |
| 7,968 |
| (1,959 | ) | (14,127 | ) | 117,506 |
|
Total assets |
| 1,182,652 |
| 511,095 |
| 315,252 |
| 145,846 |
| 63,638 |
| 2,218,483 |
|
Capital expenditures (2) |
| 9,341 |
| 13,476 |
| 12,671 |
| 1,279 |
| — |
| 36,767 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
| 387,379 |
| 126,292 |
| 59,230 |
| 18,294 |
| 335 |
| 591,530 |
|
Adjusted EBITDA |
| 99,979 |
| 35,257 |
| 10,710 |
| (188 | ) | (6,570 | ) | 139,188 |
|
Net income/(loss) |
| 54,217 |
| 24,755 |
| 3,989 |
| 3,845 |
| (27,484 | ) | 59,322 |
|
Total assets |
| 1,287,848 |
| 500,502 |
| 259,963 |
| 145,454 |
| 115,076 |
| 2,308,843 |
|
Capital expenditures (2) |
| 17,838 |
| 7,973 |
| 4,623 |
| 381 |
| 160 |
| 30,975 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
| 794,182 |
| 251,437 |
| 155,919 |
| 32,797 |
| — |
| 1,234,335 |
|
Adjusted EBITDA |
| 271,709 |
| 116,401 |
| 35,291 |
| (81 | ) | (17,965 | ) | 405,355 |
|
Net income/(loss) |
| 159,758 |
| 66,919 |
| 15,523 |
| (5,033 | ) | (22,841 | ) | 214,326 |
|
Total assets |
| 1,182,652 |
| 511,095 |
| 315,252 |
| 145,846 |
| 63,638 |
| 2,218,483 |
|
Capital expenditures (2) |
| 15,431 |
| 28,200 |
| 20,318 |
| 2,478 |
| 3 |
| 66,430 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
| 387,379 |
| 260,501 |
| 112,655 |
| 38,188 |
| 960 |
| 799,683 |
|
Adjusted EBITDA |
| 99,979 |
| 99,701 |
| 15,501 |
| 983 |
| (74,336 | ) | 141,828 |
|
Net income/(loss) |
| 54,217 |
| 76,843 |
| 2,748 |
| (6,176 | ) | (91,981 | ) | 35,651 |
|
Total assets |
| 1,287,848 |
| 500,502 |
| 259,963 |
| 145,454 |
| 115,076 |
| 2,308,843 |
|
Capital expenditures (2) |
| 17,838 |
| 15,628 |
| 13,191 |
| 559 |
| 430 |
| 47,646 |
|
(1) On March 29, 2018, Coronado acquired the Curragh Mining business from Wesfarmers Limited. Curragh is a separate reportable segment due to having separate management, location, revenues
(2)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The reconciliation of Adjusted EBITDA to net income attributable to the
|
| Three months ended |
| Six months ended |
| ||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||
|
| (US$ thousands) |
| (US$ thousands) |
| ||||||
Net income |
| $ | 117,506 |
| 59,322 |
| $ | 214,326 |
| 35,651 |
|
Depreciation, depletion and amortization |
| 45,508 |
| 42,594 |
| 85,279 |
| 64,402 |
| ||
Interest expense (net of income) |
| 9,087 |
| 18,987 |
| 17,264 |
| 25,488 |
| ||
Other foreign exchange (gains) losses |
| 3,157 |
| 5,290 |
| (557 | ) | 6,848 |
| ||
Loss on retirement of debt |
| — |
| — |
| — |
| 3,905 |
| ||
Income tax expense |
| 47,033 |
| 12,995 |
| 89,043 |
| 5,534 |
| ||
Consolidated Adjusted EBITDA |
| $ | 222,291 |
| 139,188 |
| $ | 405,355 |
| 141,828 |
|
|
| Three months ended June 30, 2019 |
| |||||||||||
|
| Curragh |
| Buchanan |
| Logan |
| Greenbrier |
| Other and |
| Total |
| |
|
| (US $ thousands) |
| |||||||||||
Product Groups |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Metallurgical coal |
| $ | 377,016 |
| 125,837 |
| 68,053 |
| 17,766 |
| — |
| 588,672 |
|
Thermal coal |
| 26,687 |
| 2,827 |
| 12,058 |
| 446 |
| — |
| 42,018 |
| |
Total coal revenue |
| 403,703 |
| 128,664 |
| 80,111 |
| 18,212 |
| — |
| 630,690 |
| |
Other(1) |
| 9,107 |
| 49 |
| 1,499 |
| 1,112 |
| — |
| 11,767 |
| |
Total |
| $ | 412,810 |
| 128,713 |
| 81,610 |
| 19,324 |
| — |
| 642,457 |
|
|
| Three months ended June 30, 2018 |
| |||||||||||
|
| Curragh |
| Buchanan |
| Logan |
| Greenbrier |
| Other and |
| Total |
| |
|
| (US$ thousands) |
| |||||||||||
Product Groups |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Metallurgical coal |
| $ | 349,486 |
| 122,771 |
| 47,443 |
| 17,427 |
| — |
| 537,127 |
|
Thermal coal |
| 25,048 |
| 3,521 |
| 11,787 |
| 27 |
| — |
| 40,383 |
| |
Total coal revenue |
| 374,534 |
| 126,292 |
| 59,230 |
| 17,454 |
| — |
| 577,510 |
| |
Other(1) |
| 12,845 |
| — |
| — |
| 840 |
| 335 |
| 14,020 |
| |
Total |
| $ | 387,379 |
| 126,292 |
| 59,230 |
| 18,294 |
| 335 |
| 591,530 |
|
|
| Six months ended June 30, 2019 |
| |||||||||||
|
| Curragh |
| Buchanan |
| Logan |
| Greenbrier |
| Other and |
| Total |
| |
|
| (US $ thousands) |
| |||||||||||
Product Groups |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Metallurgical coal |
| $ | 727,964 |
| 245,047 |
| 131,421 |
| 31,067 |
| — |
| 1,135,499 |
|
Thermal coal |
| 47,978 |
| 6,306 |
| 22,208 |
| 496 |
| — |
| 76,988 |
| |
Total coal revenue |
| 775,942 |
| 251,353 |
| 153,629 |
| 31,563 |
| — |
| 1,212,487 |
| |
Other(1) |
| 18,240 |
| 84 |
| 2,290 |
| 1,234 |
| — |
| 21,848 |
| |
Total |
| $ | 794,182 |
| 251,437 |
| 155,919 |
| 32,797 |
| — |
| 1,234,335 |
|
|
| Six months ended June 30, 2018 |
| |||||||||||
|
| Curragh |
| Buchanan |
| Logan |
| Greenbrier |
| Other and |
| Total |
| |
|
| (US$ thousands) |
| |||||||||||
Product Groups |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Metallurgical coal |
| $ | 349,486 |
| 253,335 |
| 93,201 |
| 35,982 |
| — |
| 732,004 |
|
Thermal coal |
| 25,048 |
| 7,127 |
| 19,454 |
| 713 |
| — |
| 52,342 |
| |
Total coal revenue |
| 374,534 |
| 260,462 |
| 112,655 |
| 36,695 |
| — |
| 784,346 |
| |
Other(1) |
| 12,845 |
| 39 |
| — |
| 1,493 |
| 960 |
| 15,337 |
| |
Total |
| $ | 387,379 |
| 260,501 |
| 112,655 |
| 38,188 |
| 960 |
| 799,683 |
|
5.Expenses
Other, net
|
| Three months ended |
| Six months ended |
| ||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||
|
| (US$ thousands) |
| (US$ thousands) |
| ||||||
Loss on foreign exchange swap |
| $ | — |
| — |
| $ | — |
| (15,695 | ) |
Other foreign exchange (losses) gains |
| (3,157 | ) | (5,290 | ) | 557 |
| (6,848 | ) | ||
Other (expenses) income |
| 168 |
| 2,899 |
| 485 |
| (4,303 | ) | ||
Total Other, net |
| $ | (2,989 | ) | (2,391 | ) | $ | 1,042 |
| (26,846 | ) |
(US$ thousands) |
| June 30, 2019 |
| December 31, |
| ||
Raw coal |
| $ | 54,407 |
| $ | 20,106 |
|
Saleable coal |
| 23,051 |
| 26,374 |
| ||
Total coal inventories |
| 77,458 |
| 46,480 |
| ||
Supplies inventory |
| 51,966 |
| 48,623 |
| ||
Total inventories |
| $ | 129,424 |
| $ | 95,103 |
|
7.Property, Plant andEquipment
(US$ thousands) |
| June 30, 2019 |
| December 31, |
| ||
Land |
| $ | 27,035 |
| $ | 26,845 |
|
Buildings and improvements |
| 83,831 |
| 89,027 |
| ||
Plant, machinery, mining equipment and transportation vehicles |
| 794,619 |
| 765,432 |
| ||
Mineral rights and reserves |
| 464,680 |
| 464,680 |
| ||
Office and computer equipment |
| 3,752 |
| 3,700 |
| ||
Mine development |
| 487,156 |
| 479,152 |
| ||
Asset retirement obligation asset |
| 83,894 |
| 80,993 |
| ||
Construction in process |
| 81,423 |
| 43,691 |
| ||
|
| 2,026,390 |
| 1,953,520 |
| ||
Less accumulated depreciation, depletion and amortization |
| 423,303 |
| 334,962 |
| ||
Net property, plant and equipment |
| $ | 1,603,087 |
| $ | 1,618,558 |
|
8.Goodwill
(a)Acquired Intangible Assets
|
| June 30, 2019 |
| |||||||
(US$ thousands) |
| Weighted average |
| Gross carrying |
| Accumulated |
| Net carrying |
| |
Intangible assets: |
|
|
|
|
|
|
|
|
| |
Amortizing intangible assets: |
|
|
|
|
|
|
|
|
| |
Mining permits - Greenbrier |
| 14 |
| $ | 1,500 |
| 800 |
| 700 |
|
Mining permits - Logan |
| 15 |
| 1,642 |
| 717 |
| 925 |
| |
Mining permits - Buchanan |
| 28 |
| 4,000 |
| 404 |
| 3,596 |
| |
Total intangible assets |
|
|
| $ | 7,142 |
| 1,921 |
| 5,221 |
|
|
| December 31, 2018 |
| |||||||
(US$ thousands) |
| Weighted average |
| Gross carrying |
| Accumulated |
| Net carrying |
| |
Intangible assets: |
|
|
|
|
|
|
|
|
| |
Amortizing intangible assets: |
|
|
|
|
|
|
|
|
| |
Mining permits - Greenbrier |
| 14 |
| $ | 1,500 |
| 760 |
| 740 |
|
Mining permits - Logan |
| 15 |
| 1,642 |
| 638 |
| 1,004 |
| |
Mining permits - Buchanan |
| 28 |
| 4,000 |
| 342 |
| 3,658 |
| |
Total intangible assets |
|
|
| $ | 7,142 |
| 1,740 |
| 5,402 |
|
Amortization expense is charged using the straight-line method over the useful lives of the respective intangible asset. The aggregate amount ofimprovements
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(b)Goodwill
In connection with the Buchanan acquisition on March 31, 2016, the Company recorded goodwill in the amount of $28.0 million. The balance of goodwill as at both June 30, 2019 and December 31, 2018 was $28.0 million.
9.equipment
(US$ thousands) |
| June 30, 2019 |
| December 31, |
| ||
Wages and employee benefits |
| $ | 64,520 |
| $ | 50,819 |
|
Taxes other than income taxes |
| 8,221 |
| 6,512 |
| ||
Accrued royalties |
| 50,648 |
| 49,129 |
| ||
Accrued freight costs |
| 29,118 |
| 26,509 |
| ||
Accrued mining fees |
| 52,187 |
| 45,615 |
| ||
Cash flow hedge derivative liability |
| — |
| 5,311 |
| ||
Acquisition related accruals |
| 30,186 |
| 30,349 |
| ||
Other liabilities |
| 17,471 |
| 29,252 |
| ||
Total accrued expenses and other current liabilities |
| $ | 252,351 |
| $ | 243,496 |
|
Included within acquisition
10.Leases
On January 1, 2019, the Company adopted ASC 842, Leases. Changes to the Company’s accounting policy as a result of adoption are discussed below.
From time to time, the Company enters into mining services contracts which may include embedded leases of mining equipment and other contractual agreements to lease mining equipment and facilities. Based upon the Company’s assessment establishment
(a)Finance Leases
ROU assets related to finance leases are presented in property, “Property, plant and equipment, net”ABL Facility has been included within
Finance lease ROU assets effective interest rate.
(b)Operating Leases
ROU assets related to operating leases are presented as “Right of use asset — operating leases, net”, on the unaudited Condensed Consolidated Balance Sheet. Lease liabilities related to operating leases that are subject to the ASC 842 measurement requirements such as operating leases with lease terms greater than twelve months are presented in “Lease Liabilities” (current) and “Lease Liabilities” (non-current) on the unaudited Condensed Consolidated Balance Sheet.
Operating lease ROU assets and lease liabilities are recognized at the commencement date based on the present value of the future lease payments over the lease term. The discount rate used to determine the present value of the lease payments is the rate implicit in the lease unless that rate cannot be readily determined, in which case, the Company utilizes its incremental borrowing rate in determining the present value of the future lease payments. The incremental borrowing rate is the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. Operating lease ROU assets may also include any cumulative prepaid or accrued rent when the lease payments are uneven throughout the lease term. The ROU assets and lease liabilities may also include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. The ROU asset includes any lease payments made and lease incentives received prior to the commencement date. The Company has lease arrangements with lease and non-lease components which are accounted for separately. Non-lease components of the lease payments are expensed as incurred and are not included in determining the present value. As at June 30, 2019 the unaudited Condensed Consolidated Balance Sheet included $41.5 million of operating lease liabilities relating to equipment embedded within mining service contracts.
Information related
(US$ thousands) |
| Three month ended |
| Six months ended |
| |
Operating lease costs |
| $ | 6,378 |
| 12,861 |
|
Cash paid for operating lease liabilities |
| 4,049 |
| 11,073 |
| |
|
|
|
|
|
| |
Finance lease costs: |
|
|
|
|
| |
Amortization of right of use assets |
| 628 |
| 1,221 |
| |
Interest on lease liabilities |
| 52 |
| 108 |
| |
Total finance lease costs |
| $ | 680 |
| 1,329 |
|
(US$ thousands) |
| June 30, |
| December 31, 2018 |
| |
Operating leases: |
|
|
|
|
| |
Operating lease right-of-use assets |
| $ | 64,343 |
| — |
|
|
|
|
|
|
| |
Finance leases: |
|
|
|
|
| |
Property and equipment |
| 7,881 |
| 7,074 |
| |
Accumulated depreciation |
| (4,135 | ) | (2,914 | ) | |
Property and equipment, net |
| 3,746 |
| 4,160 |
| |
|
|
|
|
|
| |
Current operating lease obligations |
| 26,863 |
| — |
| |
Operating lease liabilities, less current portion |
| 51,064 |
| — |
| |
Total operating lease liabilities |
| 77,927 |
| — |
| |
|
|
|
|
|
| |
Current finance lease obligations |
| 1,265 |
| 1,308 |
| |
Finance lease liabilities, less current portion |
| 1,838 |
| 2,481 |
| |
Total Finance lease liabilities |
| 3,103 |
| 3,789 |
| |
|
|
|
|
|
| |
Total Lease liability |
| $ | 81,030 |
| 3,789 |
|
| |||
| |||
|
| ||
|
| ||
| |||
|
|
| |
|
|
|
unpaid interest on the Notes to, but not
including, the date of redemption.(US$ thousands) |
| Operating lease |
| Finance lease |
| |
Year ending December 31, |
|
|
|
|
| |
2019 |
| $ | 16,013 |
| 712 |
|
2020 |
| 30,436 |
| 2,568 |
| |
2021 |
| 22,362 |
| — |
| |
2022 |
| 8,434 |
| — |
| |
2023 |
| 8,427 |
| — |
| |
Thereafter |
| 2,103 |
| — |
| |
Total lease payments |
| 87,775 |
| 3,280 |
| |
Less imputed interest |
| (9,848 | ) | (177 | ) | |
Total lease liability |
| $ | 77,927 |
| 3,103 |
|
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
11.Income Taxes
The Company is a corporation for U.S. federal and state income tax purposes. The Company’s accounting predecessor, Coronado Group LLC, was and is treated
Company
was incompliance withall applicablecovenants underthe ABLIncome tax expense of $13.0 million for the three months ended June 30, 2018 and $5.5 million for the six months ended June 30, 2018 related solely to the Company’s Australian Operations and
The Company’s U.S. entities had no income tax expense for the three and six months ended June 30, 2018 because prior to September 19, 2018 they were treated as partnerships for U.S. income tax purposes.
12.Interest Bearing Liabilities
period.
Duringneed for valuation allowances by evaluating future taxable income, available for tax
13.Contract Obligations
The following is a summary of the contract obligations as of June 30, 2019:
(US$ thousands) |
| Short-term |
| Long-term |
| Total |
| |
Coal leases contract liability |
| $ | 843 |
| 21,774 |
| 22,617 |
|
Stanwell below market coal supply agreement |
| 34,223 |
| 202,659 |
| 236,882 |
| |
|
| $ | 35,066 |
| 224,433 |
| 259,499 |
|
The following is a summary of the contract obligations as of December 31, 2018:
(US$ thousands) |
| Short-term |
| Long-term |
| Total |
| |
Terminal services contract liability |
| $ | 2,717 |
| 11,549 |
| 14,266 |
|
Coal leases contract liability |
| 844 |
| 22,354 |
| 23,198 |
| |
Stanwell below market coal supply agreement |
| 35,555 |
| 219,675 |
| 255,230 |
| |
|
| $ | 39,116 |
| 253,578 |
| 292,694 |
|
On adoption of ASC 842 — Leases the Terminal services contract liability was eliminated against the Terminal services Right of Use Asset on the unaudited Condensed Consolidated Balance Sheet.
14.Deferred Consideration Liability
On August 14, 2018
(US$ thousands) |
| June 30, 2019 |
| December 31, |
| |
Stanwell Reserved Area deferred consideration |
| $ | 164,148 |
| 155,332 |
|
|
| $ | 164,148 |
| 155,332 |
|
15.full valuation allowancehas been recognized.
(US$ thousands, except per share data) |
| Three months |
| Six months |
| ||
Numerator: |
|
|
|
|
| ||
Net Income |
| $ | 117,506 |
| $ | 214,326 |
|
Less: Net income attributable to Non-controlling interest |
| (4 | ) | (4 | ) | ||
Net Income attributable to Company stockholders |
| $ | 117,510 |
| $ | 214,330 |
|
Denominator: |
|
|
|
|
| ||
Weighted-average shares of common stock outstanding |
| 96,652 |
| 96,652 |
| ||
Effects of dilutive shares |
| 3 |
| 4 |
| ||
Weighted average diluted shares of common stock outstanding |
| 96,655 |
| 96,656 |
| ||
Earnings Per Share (US$): |
|
|
|
|
| ||
Basic |
| $ | 1.22 |
| $ | 2.22 |
|
Dilutive |
| $ | 1.22 |
| $ | 2.22 |
|
16.Derivatives and
(a)Derivatives
The Company may use derivative financial instruments to manage its risk in the normal course of operations, including foreign currency risks, price risk related to forecast purchase of raw materials (such as gas or diesel) and interest rate risk. Derivatives are exclusively used for cashflow hedges purposes and hedging for speculative purposes is strictly prohibited under the Treasury Risk Management Policy approved by our Board of Directors.
In 2018, the Company entered into forward derivative contracts with an aggregate notional amount of $44.6 million to hedge its exposure to diesel fuel prices for diesel fuel that is used in the operations at Curragh. The aggregated notional amount of these derivative contracts at June 30, 2019 was $24.0 million. During the three months ended June 30, 2019 the Company entered into additional derivative contracts, with a notional amount of $59.1 million, to hedge its exposure to diesel fuel prices in relation to Curragh consumption of diesel fuel in 2020. The aggregate notional amount for all outstanding derivative contracts was $83.1 million at June 30, 2019. The forward diesel fuel contracts were designated as cash flow hedges.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
|
| June 30, 2019 |
| December 31, 2018 |
| ||||
(US$ thousands) |
| Classification |
| Derivative |
| Derivative |
| Derivative |
| Derivative |
|
|
| Other current liabilities |
| — |
| — |
| — |
| 5,402 |
|
Forward fuel contracts |
| Other current asset |
| 2,317 |
| — |
| — |
| — |
|
|
| Other non-current assets |
| 1,308 |
| — |
| — |
| — |
|
|
|
|
| 3,625 |
| — |
| — |
| 5,402 |
|
The forward fuel contracts were designated as cash flow hedges. The following table presents our details of these outstanding hedge contracts:
|
| June 30, 2019 |
| December 31, 2018 |
| ||||||||
(in thousands) |
| Notional |
| Unit of |
| Varying |
| Notional |
| Unit of |
| Varying |
|
Designated forward fuel contracts |
| 176,342 |
| Liters |
| July 2019 — December 2020 |
| 93,420 |
| Liters |
| January 2019 — December 2019 |
|
Other derivatives
During the six months ended June 30, 2018 the Company entered into a foreign exchange swap contract to hedge against the exposure fluctuations in the Australian Dollar against the U.S. Dollar on the purchase price of Curragh between the Agreement date and the completion date. The Company elected not to formally designate the swaps as cash flow hedges. As such, the Company accounted for the foreign exchange swaps as an economic hedge and recorded at fair value at the end of each reporting period. Pursuant with ASC 815, the foreign exchange swaps were initially recorded at fair value and all subsequent changes were recorded to “Other, net” (see Note 5 — “Other, net”) within the unaudited Condensed Consolidated Statements of Operations. As of June 30, 2019, the Company did not have any foreign exchange swaps outstanding.
(b)Fair Value of Financial Instruments
The fair value of
· Forward commodity contracts: valued based on a valuation that is corroborated by the use of market-based pricing (Level 2)
· Contingent royalty: fair value is determined using the Black-Scholes option pricing formula (Level 3)
· VSM: fair value is determined using the projected cash flow analysis (Level 3)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
basis.
(US$ thousands) |
| Level 1 |
| Level 2 |
| Level 3 |
| Total |
| |
Forward commodity contracts |
| $ | — |
| 3,625 |
| — |
| 3,625 |
|
Contingent royalty |
| — |
| — |
| 10,073 |
| 10,073 |
| |
VSM |
| — |
| — |
| 351 |
| 351 |
| |
|
| $ | — |
| 3,625 |
| 10,424 |
| 14,049 |
|
The Company’s net financial liability positions for which fair value is measured on a recurring basis as of December 31, 2018 was as follows:
(US$ thousands) |
| Level 1 |
| Level 2 |
| Level 3 |
| Total |
| |
Forward commodity contracts |
| $ | — |
| 5,402 |
| — |
| 5,402 |
|
Contingent royalty |
| — |
| — |
| 17,216 |
| 17,216 |
| |
VSM |
| — |
| — |
| 12,987 |
| 12,987 |
| |
|
| $ | — |
| 5,402 |
| 30,203 |
| 35,605 |
|
Contingent Royalty Consideration
Key assumptions in the valuation include the gross sales price forecast, export volume forecast, volatility, the risk-free rate, and credit-spread of the Company.
|
| Quantitative Information about Level 3 Fair Value Measurements |
| |||||||
(US$ thousands) |
| Fair value at |
| Valuation |
| Unobservable input |
| Range (Weighted |
| |
Contingent Royalty Liability(1) |
| $ | 10,073 |
| Black-Scholes Options model |
| Gross sales price forecast per ton |
| $104.0 to $111.9 ($109.8) |
|
|
|
|
|
|
| Export volume forecast (000’s) |
| 5,221 tons over 21 months |
| |
|
|
|
|
|
| Volatility |
| 15.6% |
| |
|
|
|
|
|
| Risk-free rate |
| 2.11% to 2.37% (2.29)% |
| |
|
|
|
|
|
| Company credit spread |
| 0.072 |
| |
(1) $6.9 million of this amount is classified as a current liability with the remaining $3.1 million classified as a non-current liability.
Value Share Mechanism
Key assumptions in the valuation sales price forecast, expected volume forecast, tax rate and Foreign Exchange, or FX, rate.
|
| Quantitative Information about Level 3 Fair Value Measurements |
| |||||||
(US$ thousands) |
| Fair value at |
| Valuation |
| Unobservable input |
| Range (Weighted |
| |
Value Share Mechanism (VSM) |
| $ | 351 |
| Projected cash flows |
| Gross sales price forecast per ton |
| $131.3 to $146.8 $(137.8) |
|
|
|
|
|
|
| Tax rate |
| 30.00% |
| |
|
|
|
|
|
| FX rate |
| 0.7020 |
| |
Given the remaining period of the VSM obligation is short-term, the valuation technique has been changed from Monte Carlo simulation to a projected cash flow analysis.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following is a summary of all the activity related to the contingent royalty liability and value share mechanism:
|
| Six months ended June 30, 2019 activity |
| |||||||||
(US$ thousands) |
| Account |
| Contingent |
| VSM |
| Incurred |
| Total |
| |
Beginning balance at January 1, 2019: |
|
|
| $ | 17,216 |
| 12,987 |
| 8,295 |
| 38,498 |
|
Statement of Operation activity: |
|
|
|
|
|
|
|
|
|
|
| |
Contingent liability/VSM expense incurred |
| Other royalties |
|
|
|
|
| 15,105 |
| 15,105 |
| |
Decrease in VSM Liability value |
| Other royalties |
|
|
| (12,636 | ) |
|
| (12,636 | ) | |
Decrease in Contingent Royalty Liability value |
| Other royalties |
| (7,143 | ) |
|
|
|
| (7,143 | ) | |
Total Statement of Operations activity: |
|
|
| $ | (7,143 | ) | (12,636 | ) | 15,105 |
| (4,674 | ) |
Cash paid to CONSOL/Wesfarmers |
|
|
|
|
|
|
| (18,384 | ) | (18,384 | ) | |
Balance sheet: |
|
|
|
|
|
|
|
|
|
|
| |
Royalties payable to CONSOL/Wesfarmers |
| Accrued expenses and other liabilities |
|
|
|
|
| 5,016 |
| 5,016 |
| |
VSM Liability |
| Contingent royalty consideration—current |
|
|
| 351 |
|
|
| 351 |
| |
Contingent Royalty Liability |
| Contingent royalty consideration |
| 10,073 |
|
|
|
|
| 10,073 |
| |
Total liabilities |
|
|
| $ | 10,073 |
| 351 |
| 5,016 |
| 15,440 |
|
There are no other fair value measurements of assets and liabilities that are measured at fair value on a nonrecurring basis as of June 30, 20192022 and December 31, 2018.
Other Financial Instruments
2021:
· Cash and restricted cash, accounts receivable, accounts payable, accrued expenses, lease liabilities and other current financial liabilities: The carrying amounts reported in the
· Deposits
17.at December 31, 2021
(US$ thousands) |
| Amount |
|
Year ending December 31, |
|
|
|
2019 |
| 2,624 |
|
2020 |
| 5,313 |
|
2021 |
| 5,175 |
|
2022 |
| 5,010 |
|
2023 |
| 4,935 |
|
Thereafter |
| 25,884 |
|
Total |
| 48,941 |
|
(b)Other commitments
As
The Company has entered into fixed price contracts to purchase fuel for the U.S. Operations. As of June 30, 2019, the commitment for fuel purchases were $5.6 million, all of which is obligated within the six months to December 31, 2019.
18.Related-Party Transactions
X-Coal
Duringtwelve months.
19.Contingencies
In the normal course of business, the Company
Facility B
Curragh is a co-defendant to proceedings
2022.
The liabilities recorded in relation to
20.
On August 5, 2019,Notes
30, 202219
Statements
This consolidated interim
We A
Richmond, Virginia
August 5, 2019
Unless otherwise noted, references in this QuarterlyAnnual Report on Form 10-K
·
·
·
·
· our ability
·international mining and trading operations,
·
·
·
·
·
·
·
·
·
·
· the extensive forms of taxation that our mining operations are subjectreduced access to capital
· risks unique to international mining and trading operations;
·insurance;
· a decrease in the availability or increase in costs of key supplies, capital equipment or commodities, such as diesel fuel, steel, explosives and tires;
· unfavorable economic and financial market conditions;
·
·
· our indebtedness and ability to comply with the covenants under the agreements governing such indebtedness;
· our ability to generate sufficient cash to service all of our indebtedness or other obligations;
·
·
We make many
Our business profile primarily focuses on the production of Met coal for the North American and seaborne export markets.
2022 benefited from higher average realized Met
price perFactors Affecting Comparability of our Financial Statements
Due to several factors, our historical results of operations are not comparable from period to period and may not be comparable to our financial results of operations in future periods. Set forth below is a brief description of the key factors impacting the comparability of our results of operations.
Curragh Acquisition
On March 29, 2018, we acquired Curragh from Wesfarmers Ltd, or Wesfarmers, for aggregate consideration, on the date of the transaction, of $563.8 million. We refer to this transaction as the Curragh acquisition. The operating results of Curragh have been included in our consolidated financial statements since March 29, 2018.
Corporate Reorganization Transaction
During the year ended December 31, 2018, Coronado Group LLC and Coronado Global Resources Inc. completed a common control reorganization of their legal entity structure, which we refer to as the Reorganization Transaction. Prior to the Reorganization Transaction in August 2018, Coronado Group HoldCo LLC, the holding company of our Australian Operations, was a wholly-owned subsidiary of Coronado Group LLC.
The Company is a corporation for U.S. federal and state income tax purposes. The Company’s accounting predecessor, Coronado Group LLC, was and is treated as a flow-through entity for U.S. federal income tax purposes and as such, has generally not been subject to U.S. federal income tax at the entity level.
The Reorganization Transaction was treated as a combination of entities under common control in line with ASC 805, Business Combinations, whereby the receiving entity (the Company) recorded the contributed assets and liabilities at the carrying value of Coronado Group LLC. Prior to the Reorganization Transaction, the consolidated financial statements of the Company reflect the net assets and operations of Coronado Group LLC. The financial statements presented following the Reorganization Transaction are those of the receiving entity (the Company) and are retrospectively adjusted to present that entity as if it always held the net assets or equity interests previously held by the seller, Coronado Group LLC. As such, financial information (including comparatives) of the Company has been presented as a continuation of the pre-existing accounting values of assets and liabilities in Coronado Group LLC’s financial statements.
Australian IPO
On October 23, 2018, we completed an initial public offering on the ASX, pursuant to which the Company issued and sold the equivalent of 16,651,692 shares of common stock in the form of CHESS Depositary Interests, or CDIs, and the EMG Group sold the equivalent of 2,691,896.4 shares of common stock in the form of CDIs.
basis or annual fixed price
contracts.volumes for the respective segment.
performance.
Segment
2021
Our
· Tonnage 2022 include:
· Net income increased by $58.2 million, from $59.3 million for the three months ended June 30, 2018, to net income of $117.5 million for the three months ended June 30, 2019, reflecting increases in operating income and lower other expenses, partly offset by income tax expense.
· Coal markets remained positive during the three months ended June 30, 2019 as coal revenues averaged $5.8 per ton higher2022, compared to the three months ended June 30, 2018.
· Adjusted EBITDA for the three months ended June 30, 2019 totaled $222.3 million, an increase of $83.1 million, from Adjusted EBITDA of $139.2 million for the three months ended June 30, 2018, driven by very strong revenues and lower operating costs.
· As of June 30, 2019, we had cash of $46.0 million (excluding restricted cash) and $350.0 million of availability under the Multicurrency Revolving Syndicated Facility Agreement, dated September 15, 2018, which we refer 3.7 MMt in 2021,
|
| For Three Months Ended June 30, |
| ||||||
|
| ($ in thousands) |
| ||||||
|
| 2019 |
| 2018 |
| Change |
| % |
|
Revenues: |
|
|
|
|
|
|
|
|
|
Coal revenues |
| 630,690 |
| 577,510 |
| 53,180 |
| 9.2 | % |
Other revenues |
| 11,767 |
| 14,020 |
| (2,253 | ) | (16.1 | )% |
Total revenues |
| 642,457 |
| 591,530 |
| 50,927 |
| 8.6 | % |
Costs and expenses: |
|
|
|
|
|
|
|
|
|
Cost of coal revenues (exclusive of items shown separately below) |
| 264,137 |
| 305,309 |
| (41,172 | ) | (13.5 | )% |
Depreciation, depletion and amortization |
| 45,508 |
| 42,594 |
| 2,914 |
| 6.8 | % |
Freight expenses |
| 52,035 |
| 40,912 |
| 11,123 |
| 27.2 | % |
Stanwell rebate |
| 45,847 |
| 32,812 |
| 13,035 |
| 39.7 | % |
Other royalties |
| 49,073 |
| 67,695 |
| (18,622 | ) | (27.5 | )% |
Selling, general, and administrative expenses |
| 9,242 |
| 8,513 |
| 729 |
| 8.6 | % |
Total costs and expenses |
| 465,842 |
| 497,835 |
| (31,993 | ) | (6.4 | )% |
Operating income |
| 176,615 |
| 93,695 |
| 82,920 |
| 88.5 | % |
Other income (expenses): |
|
|
|
|
|
|
|
|
|
Interest expense, net |
| (9,087 | ) | (18,987 | ) | 9,900 |
| (52.1 | )% |
Loss on debt extinguishment |
| — |
| — |
| — |
| — |
|
Other, net |
| (2,989 | ) | (2,391 | ) | (598 | ) | 25.0 | % |
Total other expenses, net |
| (12,076 | ) | (21,378 | ) | 9,302 |
| (43.5 | )% |
Net income before tax |
| 164,539 |
| 72,317 |
| 92,222 |
| 127.5 | % |
Income tax expense |
| (47,033 | ) | (12,995 | ) | (34,038 | ) | 261.9 | % |
Net income |
| 117,506 |
| 59,322 |
| 58,184 |
| 98.1 | % |
Less: Net loss attributable to noncontrolling interest |
| (4 | ) | (2 | ) | (2 | ) | 100.0 | % |
Net income attributable to Coronado Global Resources Inc. |
| 117,510 |
| 59,324 |
| 58,186 |
| 98.1 | % |
Coal Revenues
Coal revenues were $630.7 million for the three months ended June 30, 2019, an increase of $53.2 million, as compared to $577.5 million for the three months ended June 30, 2018. The increase in coal revenues was attributable to higher Met coal sales volumes and higherabove average realized Met coal price per ton sold during the 2019 period. Improvements in rail conditionsrainfall impacting production at Curragh underpinned the increase in sales volumes whereas higher average realized Met coal pricing was primarily driven by committed (fixed and index priced) high volatile coal sales from the Logan segment, as well as an improved higher yielding Met coal sales mix.
Other Revenues
Other revenues were $11.8 million for the three months ended June 30, 2019, a decrease of $2.3 million, as compared to $14.0 million for the three months ended June 30, 2018. The decrease is predominantly related to Curragh, which recorded $12.6 million in other revenues relating to the amortization of the Stanwell non-market coal supply agreement, or CSA, liability for the three months ended June 30, 2018 compared to $8.5 million recognized for the three months ended June 30, 2019. This decrease was partially offset by an increase in freight revenues with respect to certain arrangements with customers at Logan and Greenbrier.
our AustralianOperations.
Depreciation, Depletion and Amortization
Depreciation, depletion and amortization was $45.5 million for the three months ended June 30, 2019, an increase of $2.9 million, as compared to $42.6 million for the three months ended June 30, 2018. The increase was largely associated with our operating segments in the United States (Buchanan, Logan and Greenbrier) for which depreciation expense increased by $2.1 million, predominantly due to the expiration of a credit that was previously recognized on amortization of sales contracts.
Freight Expenses
The amount of freight expenses was $52.0 million for the three months ended June 30, 2019, an increase of $11.1 million, as compared to $40.9 million for the three months ended June 30, 2018. Curragh’s freight costs contributed $4.4 million to this increase driven by higher sales volumes which in turn incurred higher railings and port charges. The remaining $6.7 million increase relates mainly to new sales contracts entered into at Logan and Greenbrier which include the rendering of rail and port services to certain customers.
Stanwell Rebate
The Stanwell rebate was $45.8 million for the three months ended June 30, 2019, an increase of $13.0 million, as compared to $32.8 million for the three months ended June 30, 2018. The increase is driven primarily from higher export sales volumes in the three months ended June 30, 2019 versus the three months ended June 30, 2018.
AustralianOperations.
Interest Expense
Interest2022 period.
Six Months Ended June 30, 2019 Compared to Six Months Ended June 30, 2018
Summary
Our financial and operational highlights for the sixnine months
· Tonnage sold totaled 10.4 MMt for the six months ended June 30, 2019, or 5.1 MMt higher than the six months ended June 30, 2018, predominantly due to the acquisition of Curragh on March 29, 2018.
·2022 include:
· Coal
·2021.
· Net cash of $301.2 million2021.
· During the six months ended June 30, 2019, we paid a dividend of $299.7 million, which was funded by available cash and borrowings. The monies borrowed were fully repaid by June 30, 2019.
· As of June 30, 2019, we had available cash of $46.0 million (excluding restricted cash) and $350.0 million of additional liquidity available under the Syndicated Facility Agreement.
|
| For Six Months Ended June 30, |
| ||||||
|
| ($ in thousands) |
| ||||||
|
| 2019 |
| 2018 |
| Change |
| % |
|
Revenues: |
|
|
|
|
|
|
|
|
|
Coal revenues |
| 1,212,487 |
| 784,346 |
| 428,141 |
| 54.6 | % |
Other revenues |
| 21,848 |
| 15,337 |
| 6,511 |
| 42.5 | % |
Total revenues |
| 1,234,335 |
| 799,683 |
| 434,652 |
| 54.4 | % |
Costs and expenses: |
|
|
|
|
|
|
|
|
|
Cost of coal revenues (exclusive of items shown separately below) |
| 533,696 |
| 424,620 |
| 109,076 |
| 25.7 | % |
Depreciation, depletion and amortization |
| 85,279 |
| 64,402 |
| 20,877 |
| 32.4 | % |
Freight expenses |
| 89,362 |
| 45,155 |
| 44,207 |
| 97.9 | % |
Stanwell rebate |
| 94,674 |
| 32,812 |
| 61,862 |
| 188.5 | % |
Other royalties |
| 93,422 |
| 82,987 |
| 10,435 |
| 12.6 | % |
Selling, general, and administrative expenses |
| 18,311 |
| 52,283 |
| (33,972 | ) | (65.0 | )% |
Total costs and expenses |
| 914,744 |
| 702,259 |
| 212,485 |
| 30.3 | % |
Operating income |
| 319,591 |
| 97,424 |
| 222,167 |
| 228.0 | % |
Other income (expenses): |
|
|
|
|
|
|
|
|
|
Interest expense, net |
| (17,264 | ) | (25,488 | ) | 8,224 |
| (32.3 | )% |
Loss on debt extinguishment |
| — |
| (3,905 | ) | 3,905 |
| (100.0 | )% |
Other, net |
| 1,042 |
| (26,846 | ) | 27,888 |
| (103.9 | )% |
Total other expenses, net |
| (16,222 | ) | (56,239 | ) | 40,017 |
| (71.2 | )% |
Net income (loss) before tax |
| 303,369 |
| 41,185 |
| 262,184 |
| 636.6 | % |
Income tax (expense) benefit |
| (89,043 | ) | (5,534 | ) | (83,509 | ) | 1,509.0 | % |
Net income (loss) |
| 214,326 |
| 35,651 |
| 178,675 |
| 501.2 | % |
Less: Net loss attributable to noncontrolling interest |
| (4 | ) | (4 | ) | — |
| — |
|
Net income (loss) attributable to Coronado Global Resources Inc. |
| 214,330 |
| 35,655 |
| 178,675 |
| 501.2 | % |
Coal Revenues
Coal revenues were $1,212.5 $945.4
Other Revenues
Other revenues were $21.8 millionprice per
2021.
Cost of coal revenues are comprised of costs related to produced tons sold, along with changes in both the volumes and carrying values of coal inventory. Cost of coal revenues include items such as direct operating costs, which includes employee-related costs, materials and supplies, contractor services, coal handling and preparation costs and production taxes.
Depreciation, Depletion and Amortization
Depreciation, depletion and amortization was $85.3 millionrevenues for the six months ended June 30, 2019, an increase of $20.9 million, as compared to $64.4 million for the six months ended June 30, 2018. The increase was primarily a result of the addition of Curragh, which contributed $37.9 million in depreciation, depletion and amortization for the six months ended June 30, 2019 compared to $21.9 from the date of acquisition, March 29, 2018, to June 30, 2018.
Freight Expenses
The amount of freight expenses was $89.4 million for the six months ended June 30, 2019, an increase of $44.2 million, as compared to $45.2 million for the six months ended June 30, 2018. The increase is primarily due to $79.2 million of Curragh related freight expenses for the six months ended June 30, 2019 compared to $38.2 million for the six months ended June 30, 2018 which included Curragh only for a partial period from acquisition date of March 29, 2018 to June 30, 3018. The freight expense for our operating segments in the United States (Buchanan, Logan and Greenbrier), which predominantly sells its coal on an F.O.R basis, were $11.2 million for the six months ended June 30, 2019, an increase of $4.4 million, as compared to $6.8 million for the six months ended June 30, 2018. The increase is primarily driven by new rail and port arrangements with certain customers that did not exist in 2018 period.
Stanwell Rebate
The Stanwell rebate was $94.7 million for the six months ended June 30, 2019, an increase of $61.9 million, as compared to $32.8 million for the six months ended June 30, 2018. Curragh contribution to the Company’s result during the six months ended June 30, 2018 was only for part of the period since March 29, 2018, being the date of acquisition.
Other Royalties
Other royalties were $93.4 million in the six months ended June 30, 2019, an increase of $10.4 million, as compared to $83.0 million in the six months ended June 30, 2018. Curragh contributed approximately $79.1 million in other royalty expense for the six months ended June 30, 2019 compared to $38.2 million for the six months ended June 30, 2019 which only included Curragh for part of the period from March 29, 2018, the date of acquisition. This increase was in part offset by a decrease in other royalties attributable to
Selling, General, and Administrative Expenses
Selling, general and administrative cost was $18.3 million for the six months ended June 30, 2019, a decrease of $34.0 million, as comparedadditional fleets mobilized to $52.3 million for the six months ended June 30, 2018. The decrease was due to specific one-off, non-recurring costs incurred in relation to the Curragh acquisition during March 2018 relating to stamp duty of $33.0 million and various professional service and legal fees of $4.7 million.
Interest Expense
Interest expense, net of interest income, was $17.3 million for the six months ended June 30, 2019, a decrease of $8.2 million, as compared to interest expense of $25.5 million for the six months ended June 30, 2018. Included within interest expense for the six months ended June 30, 2019 is $9.7 million relating to the accretion of the deferred consideration liability recognized accelerate overburden removal, inflationary pressure
Loss on Debt Extinguishment
For the six months ended June 30, 2018, the Company recognized a loss on debt extinguishment of $3.9 million relating to the extinguishment of a term loan that occurred in conjunction with the Curragh acquisition on March 29, 2018. There was no debt extinguishment cost for the six months ended June 30, 2019.
Other, Net
Other, net income was $1.0 million for the six months ended June 30, 2019, a decrease of $27.9 million, as compared to other, net expense $26.8 million for the six months ended June 30, 2018. This favorable variance is primarily comprised of non-recurring costs incurred for the six months ended June 30, 2018 relating to the $15.7 million loss on the settlement of a foreign exchange swaps recognized at the time of the Curragh acquisition and a fair value adjustment of $4.9 million on interest rate swaps that were in place during the six months ended June 30, 2018. The remaining difference mainly relates to foreign exchange gains or losses recognized in the translation of monetary items that were denominated in a currency different to the functional currency of operations of the Company.
Supplemental Segment Financial Data
Three Months Ended June 30, 2019 Compared to Three Months Ended June 30, 2018
Curragh
|
| For Three Months Ended June 30, |
| ||||||
|
| ($ in thousands) |
| ||||||
|
| 2019 |
| 2018 |
| Change |
| % |
|
Sales Volume (MMt) |
| 3.3 |
| 3.1 |
| 0.2 |
| 6.5 | % |
Total revenues ($) |
| 412,810 |
| 386,756 |
| 26,054 |
| 6.7 | % |
Coal revenues ($) |
| 403,703 |
| 374,534 |
| 29,169 |
| 7.8 | % |
Average realized price per Mt sold ($/Mt) |
| 121.3 |
| 121.0 |
| 0.3 |
| 0.2 | % |
Met Sales Volume (MMt) |
| 2.5 |
| 2.2 |
| 0.3 |
| 13.6 | % |
Met coal Revenues ($) |
| 377,016 |
| 348,871 |
| 28,145 |
| 8.1 | % |
Average realized met price per Mt sold ($/Mt) |
| 151.4 |
| 158.3 |
| (6.9 | ) | (4.4 | )% |
Mining costs ($) |
| 133,104 |
| 177,665 |
| (44,561 | ) | (25.1 | )% |
Mining cost per Mt sold ($/Mt) |
| 40.0 |
| 57.5 |
| (17.5 | ) | (30.4 | )% |
Operating costs ($) |
| 260,796 |
| 287,012 |
| (26,216 | ) | (9.1 | )% |
Operating costs per Mt sold ($/Mt) |
| 78.3 |
| 92.9 |
| (14.6 | ) | (15.7 | )% |
Segment Adjusted EBITDA ($) |
| 151,561 |
| 99,979 |
| 51,582 |
| 51.6 | % |
Coal revenues for Curragh for the three months ended June 30, 2019 were $403.7 million, an increase of $29.2 million or 7.8%, compared to $374.5 million for the three months ended June 30, 2018. This increase was driven largely by an increase in the export met sales volumes of 0.3Mt, partially offset by a decrease in average realized met price per Mt sold of $7.0 per ton.
Operating costs decreased by $26.2 million, or 9.1%, for the three months ended June 30, 2019 compared to the three months ended June 30, 2018. This decrease was driven primarily by mining costs which decreased by $44.6 million as a result of: (1) the three months to June 30, 2018 included the unwind of a $21.4 million fair value adjustment recognized to coal inventories on acquisition of Curragh, which was incurred as coal was sold during the period; and (2) favorable average foreign exchange rate on translation
2021.
Buchanan
|
| For Three Months Ended June 30, |
| ||||||
|
| ($ in thousands) |
| ||||||
|
| 2019 |
| 2018 |
| Change |
| % |
|
Sales Volume (MMt) |
| 1.2 |
| 1.2 |
| — |
| — |
|
Total revenues ($) |
| 128,713 |
| 126,292 |
| 2,421 |
| 1.9 | % |
Coal revenues ($) |
| 128,664 |
| 126,292 |
| 2,372 |
| 1.9 | % |
Average realized price per Mt sold ($/Mt) |
| 103.0 |
| 104.9 |
| (1.9 | ) | (1.8 | )% |
Met Sales Volume (MMt) |
| 1.2 |
| 1.1 |
| 0.1 |
| 9.1 | % |
Met coal Revenues ($) |
| 125,837 |
| 122,771 |
| 3,066 |
| 2.5 | % |
Average realized met price per Mt sold ($/Mt) |
| 104.8 |
| 107.3 |
| (2.5 | ) | (2.3 | )% |
Mining costs ($) |
| 64,605 |
| 66,469 |
| (1,864 | ) | (2.8 | )% |
Mining cost per Mt sold ($/Mt) |
| 51.7 |
| 55.2 |
| (3.5 | ) | (6.3 | )% |
Operating costs ($) |
| 68,472 |
| 91,049 |
| (22,577 | ) | (24.8 | )% |
Operating costs per Mt sold ($/Mt) |
| 54.8 |
| 75.7 |
| (20.9 | ) | (27.6 | )% |
Segment Adjusted EBITDA ($) |
| 60,289 |
| 35,257 |
| 25,032 |
| 71.0 | % |
($)
Operating costs decreased by $22.6 million, or 24.8%, for the three months ended June 30, 2019 compared to the three months ended June 30, 2018. This decrease was primarily driven by the CONSOL Energy contingent royalty of $19.4 million related to the mark-to-market adjustment and one less year remaining in the contingent payment period. Prior year reflects a significant adjustment for higher forecast export pricing related to the mark-to-market calculation. In addition, royalty expense was lower by $1.4 million related to a higher percentage of owned production (no royalty) mined in the second quarter 2019 compared to second quarter 2018. Additionally, mining costs decreased by $1.9 million. The decrease in operating costs resulted in a corresponding decrease of operating cost per ton of $20.9/t for the three months ended June 30, 2019 compared to the three months ended June 30, 2018, as there was no significant change to sales volumes when comparing the two periods.
For the three months ended June 30, 2019 adjusted EBITDA improved $25.0 million, or 71%, compared to the comparative quarter. The improvement was primarily generated by the favorable mark-to-market adjustments related to the CONSOL Energy contingent royalty and lower royalties related to mining a higher percentage of owned coal versus leased coal. In addition, higher Met sales and lower mine costs contributed to the improved performance. This was partially offset by lower average realized pricing related to import tariffs on U.S. coal imposed by China.
Logan
|
| For Three Months Ended June 30, |
| ||||||
|
| ($ in thousands) |
| ||||||
|
| 2019 |
| 2018 |
| Change |
| % |
|
Sales Volume (MMt) |
| 0.7 |
| 0.7 |
| — |
| — |
|
Total revenues ($) |
| 81,610 |
| 59,230 |
| 22,380 |
| 37.8 | % |
Coal revenues ($) |
| 80,111 |
| 59,230 |
| 20,881 |
| 35.3 | % |
Average realized price per Mt sold ($/Mt) |
| 119.7 |
| 84.6 |
| 35.1 |
| 41.5 | % |
Met Sales Volume (MMt) |
| 0.5 |
| 0.4 |
| 0.1 |
| 25.0 | % |
Met coal Revenues ($) |
| 68,053 |
| 47,443 |
| 20,610 |
| 43.4 | % |
Average realized met price per Mt sold ($/Mt) |
| 146.1 |
| 106.8 |
| 39.3 |
| 36.8 | % |
Mining costs ($) |
| 53,714 |
| 44,840 |
| 8,874 |
| 19.8 | % |
Mining cost per Mt sold ($/Mt) |
| 80.3 |
| 64.1 |
| 16.2 |
| 25.3 | % |
Operating costs ($) |
| 63,689 |
| 50,185 |
| 13,504 |
| 26.9 | % |
Operating costs per Mt sold ($/Mt) |
| 95.2 |
| 71.7 |
| 23.5 |
| 32.8 | % |
Segment Adjusted EBITDA ($) |
| 18,126 |
| 10,710 |
| 7,416 |
| 69.2 | % |
Coal revenues increased by $20.9 million, or 35.3%, to $80.1 million for the three months ended June 30, 2019 as compared to $59.2 million for the three months ended June 30, 2018. This improvement was driven by increased Met coal sales volume and a higher average realized price for high volatile coal, due to committed sales contracts and to improved sales mix.
Total operating costs increased $13.5 million, to $63.7 million for the three months ended June 30, 2019, compared to operating costs of $50.2 million for the three months ended June 30, 2018. The increase was primarily due to higher cost production at existing operations, driven by mining conditions, and production set-up costs related to three additional mines coming online in 2019. Additionally, freight expense increased due to new sales contracts, which includes the cost of rail and port services to certain customers. The increase in operating costs resulted in a corresponding increase of operating cost per ton of $19.3/t for the three months ended June 30, 2019 compared to the three months ended June 30, 2018, as there was no significant change to sales volumes when comparing the two periods.
Adjusted EBITDA for the three months ended June 30, 2019 increased $7.4 million, or 69.2%, to $18.1 million, compared to $10.7 million for the three months ended June 30, 2018. Improved performance relates to increased demand and higher prices for high volatile coal on committed contracts. Partially offsetting this is higher cost production and a change in the production mix, with the addition of the three new operations.
Greenbrier
|
| For Three Months Ended June 30, |
| ||||||
|
| ($ in thousands) |
| ||||||
|
| 2019 |
| 2018 |
| Change |
| % |
|
Sales Volume (MMt) |
| 0.1 |
| 0.2 |
| (0.1 | ) | (50.0 | )% |
Total revenues ($) |
| 19,324 |
| 18,292 |
| 1,032 |
| 5.6 | % |
Coal revenues ($) |
| 18,212 |
| 17,454 |
| 758 |
| 4.3 | % |
Average realized price per Mt sold ($/Mt) |
| 145.6 |
| 99.9 |
| 45.7 |
| 45.7 | % |
Met Sales Volume (MMt) |
| 0.1 |
| 0.2 |
| (0.1 | ) | (50.0 | )% |
Met coal Revenues ($) |
| 17,766 |
| 17,427 |
| 339 |
| 1.9 | % |
Average realized met price per Mt sold ($/Mt) |
| 155.7 |
| 100.0 |
| 55.7 |
| 55.7 | % |
Mining costs ($) |
| 12,714 |
| 16,335 |
| (3,621 | ) | (22.2 | )% |
Mining cost per Mt sold ($/Mt) |
| 101.6 |
| 93.5 |
| 8.1 |
| 8.7 | % |
Operating costs ($) |
| 18,135 |
| 18,482 |
| (347 | ) | (1.9 | )% |
Operating costs per Mt sold ($/Mt) |
| 145.0 |
| 105.8 |
| 39.2 |
| 37.1 | % |
Segment Adjusted EBITDA ($) |
| 1,227 |
| (188 | ) | 1,415 |
| (752.7 | )% |
Coal revenues increased by $0.8 million, or 4.3%, to $18.2 million for the three months ended June 30, 2019 as compared to $17.5 million for the three months ended June 30, 2018. This increase was driven by higher average realized pricing, partly offset by lower sales volumes. The lower sales volume is primarily related to the exhaustion of the Pollock Knob reserve, lack of purchased coal available for blending, and lower production volume due to adverse geological mining conditions and equipment downtime.
Total operating costs at Greenbrier for the three months ended June 30, 2019, were relatively in line with total operating costs for the three months ended June 30, 2018. However, operating costs per ton increased $39.2 per ton due to lower sales volumes and additional freight expenses driven by new rail and port arrangements with certain customers that did not exist in the comparative period.
Adjusted EBITDA improved $1.4 million, resulting in $1.2 million of EBITDA for the three months ended June 30, 2019, compared to EBITDA of ($0.2) million for the three months ended June 30, 2018. Improved performance was primarily related to increased demand for mid vol coal and higher average realized pricing.
costs.
202232
2021
|
| For Three Months Ended June 30, 2019 |
| ||||||||||
|
| ($ in thousands) |
| ||||||||||
|
| Curragh |
| Buchanan |
| Logan |
| Greenbrier |
| Other / |
| Total |
|
Total costs and expenses |
| 283,948 |
| 80,212 |
| 70,626 |
| 22,006 |
| 9,050 |
| 465,842 |
|
Less: Selling, general and administrative expense |
| (282 | ) | — |
| — |
| — |
| (8,960 | ) | (9,242 | ) |
Less: Depreciation, depletion and amortization |
| (22,870 | ) | (11,740 | ) | (6,937 | ) | (3,871 | ) | (90 | ) | (45,508 | ) |
Total operating costs |
| 260,796 |
| 68,472 |
| 63,689 |
| 18,135 |
| — |
| 411,092 |
|
Less: Other royalties |
| (39,209 | ) | (3,506 | ) | (5,302 | ) | (1,056 | ) | — |
| (49,073 | ) |
Less: Stanwell rebate |
| (45,847 | ) | — |
| — |
| — |
| — |
| (45,847 | ) |
Less: Freight expenses |
| (42,636 | ) | (361 | ) | (4,673 | ) | (4,365 | ) | — |
| (52,035 | ) |
Total mining costs |
| 133,104 |
| 64,605 |
| 53,714 |
| 12,714 |
| — |
| 264,137 |
|
|
| For Three Months Ended June 30, 2018 |
| ||||||||||
|
| ($ in thousands) |
| ||||||||||
|
| Curragh |
| Buchanan |
| Logan |
| Greenbrier |
| Other / |
| Total |
|
Total costs and expenses |
| 309,469 |
| 101,559 |
| 56,874 |
| 21,859 |
| 8,074 |
| 497,835 |
|
Less: Selling, general and administrative expense |
| (439 | ) | — |
| — |
| — |
| (8,074 | ) | (8,513 | ) |
Less: Depreciation, depletion and amortization |
| (22,018 | ) | (10,510 | ) | (6,689 | ) | (3,377 | ) | — |
| (42,594 | ) |
Total operating costs |
| 287,012 |
| 91,049 |
| 50,185 |
| 18,482 |
| — |
| 446,728 |
|
Less: Other royalties |
| (38,241 | ) | (24,279 | ) | (3,869 | ) | (1,306 | ) | — |
| (67,695 | ) |
Less: Stanwell rebate |
| (32,812 | ) | — |
| — |
| — |
| — |
| (32,812 | ) |
Less: Freight expenses |
| (38,294 | ) | (301 | ) | (1,476 | ) | (841 | ) | — |
| (40,912 | ) |
Total mining costs |
| 177,665 |
| 66,469 |
| 44,840 |
| 16,335 |
| — |
| 305,309 |
|
Six Months Ended June 30, 2019 Compared to Six Months Ended June 30, 2018
Curragh
The unaudited pro forma supplemental financial data of Curragh for the six
|
| For Six Months Ended June 30, |
| ||||||
|
| ($ in thousands) |
| ||||||
|
| 2019 |
| Pro |
| Change |
| % |
|
Sales Volume (MMt) |
| 6.4 |
| 5.8 |
| 0.6 |
| 10.3 | % |
Total revenues ($) |
| 794,182 |
| 703,879 |
| 90,303 |
| 12.8 | % |
Coal revenues ($) |
| 775,942 |
| 688,028 |
| 87,914 |
| 12.8 | % |
Average realized price per Mt sold ($/Mt) |
| 121.5 |
| 118.8 |
| 2.7 |
| 2.3 | % |
Met Sales Volume (MMt) |
| 4.8 |
| 4.1 |
| 0.7 |
| 17.1 | % |
Met coal Revenues ($) |
| 727,964 |
| 638,811 |
| 89,153 |
| 14.0 | % |
Average realized met price per Mt sold ($/Mt) |
| 152.3 |
| 154.7 |
| (2.4 | ) | (1.5 | )% |
Mining costs ($) |
| 272,201 |
| 323,171 |
| (50,970 | ) | (15.8 | )% |
Mining cost per Mt sold ($/Mt) |
| 42.6 |
| 55.8 |
| (13.2 | ) | (23.6 | )% |
Operating costs ($) |
| 522,169 |
| 541,710 |
| (19,541 | ) | (3.6 | )% |
Operating costs per Mt sold ($/Mt) |
| 81.8 |
| 93.6 |
| (11.8 | ) | (12.6 | )% |
Segment Adjusted EBITDA ($) |
| 271,709 |
| 164,764 |
| 106,945 |
| 64.9 | % |
A reconciliation of unaudited pro forma financial data is shown below:
|
| Historical Curragh |
| Post-Acquisition |
| For six months |
|
($ in thousands) |
| January 1, 2018 - |
| March 30, 2018 - |
| Total Pro forma |
|
Sales Volume (MMt) |
| 2.7 |
| 3.1 |
| 5.8 |
|
Total revenues ($) |
| 316,500 |
| 387,379 |
| 703,879 |
|
Coal revenues ($) |
| 313,494 |
| 374,534 |
| 688,028 |
|
Average realized price per Mt sold ($/Mt) |
| 114.3 |
| 121.2 |
| 118.8 |
|
Met Sales Volume (MMt) |
| 1.9 |
| 2.2 |
| 4.1 |
|
Met coal Revenues ($) |
| 289,325 |
| 349,486 |
| 638,811 |
|
Average realized met price per Mt sold ($/Mt) |
| 150.6 |
| 158.3 |
| 154.7 |
|
Mining costs ($) |
| 145,506 |
| 177,699 |
| 323,205 |
|
Mining cost per Mt sold ($/Mt) |
| 53.1 |
| 57.5 |
| 55.8 |
|
Operating costs ($) |
| 254,698 |
| 286,913 |
| 541,611 |
|
Operating costs per Mt sold ($/Mt) |
| 94.3 |
| 92.9 |
| 93.6 |
|
Segment Adjusted EBITDA ($) |
| 64,785 |
| 99,979 |
| 164,764 |
|
($ in thousands) |
| Historical Curragh |
| Post-Acquisition |
| For six months |
|
Curragh Segment Pro forma |
| January 1, 2018 - |
| March 30, 2018 - |
| Total Pro forma |
|
Net Income (loss) |
| (308,947 | ) | 54,217 |
| (254,730 | ) |
Add: Income tax expense (benefit) |
| 17,772 |
| 23,867 |
| 41,639 |
|
Add: Interest expense (net of income) |
| 341,703 |
| (124 | ) | 341,579 |
|
Add: Depreciation, depletion and amortization |
| 14,257 |
| 22,019 |
| 36,276 |
|
Adjusted EBITDA |
| 64,785 |
| 99,979 |
| 164,764 |
|
Pro forma coal revenues increased by $87.9 million, or 12.8%, to $775.9 million for the six months ended June 30, 2019 as compared to $688.0 million for the six months ended June 30, 2018. This increase was driven by higher Met coal sales volumes which increased 0.7 MMt or 17.1%, to 4.8MMt for the six months ended June 30, 2019 as compared to 4.1 MMt for the six months ended June 30, 2018.
Pro forma
Mt sold of $42.6 per ton as compared to $55.8 per ton for the six months ended June 30, 2018. Pro forma mining
($)
Buchanan
|
| For Six Months Ended June 30, |
| ||||||
|
| ($ in thousands) |
| ||||||
|
| 2019 |
| 2018 |
| Change |
| % |
|
Sales Volume (MMt) |
| 2.4 |
| 2.4 |
| — |
| — |
|
Total revenues ($) |
| 251,437 |
| 260,501 |
| (9,064 | ) | (3.5 | )% |
Coal revenues ($) |
| 251,353 |
| 260,462 |
| (9,109 | ) | (3.5 | )% |
Average realized price per Mt sold ($/Mt) |
| 103.9 |
| 109.3 |
| (5.4 | ) | (5.0 | )% |
Met Sales Volume (MMt) |
| 2.3 |
| 2.3 |
| — |
| — |
|
Met coal Revenues ($) |
| 245,047 |
| 253,335 |
| (8,288 | ) | (3.3 | )% |
Average realized met price per Mt sold ($/Mt) |
| 106.0 |
| 111.8 |
| (5.8 | ) | (5.2 | )% |
Mining costs ($) |
| 130,286 |
| 123,877 |
| 6,409 |
| 5.2 | % |
Mining cost per Mt sold ($/Mt) |
| 53.8 |
| 52.0 |
| 1.8 |
| 3.5 | % |
Operating costs ($) |
| 135,095 |
| 160,814 |
| (25,719 | ) | (16.0 | )% |
Operating costs per Mt sold ($/Mt) |
| 55.8 |
| 67.5 |
| (11.7 | ) | (17.3 | )% |
Segment Adjusted EBITDA ($) |
| 116,401 |
| 99,701 |
| 16,700 |
| 16.8 | % |
operating costs.
Total operating costs improved $25.7 million to $135.1 million for the six months ended June 30, 2019, compared to operating costs of $160.8 million for the six months ended June 30, 2018. The improvement was primarily related to the mark-to-market adjustment for the CONSOL Energy contingent royalty and mining a greater percentage of owned coal versus leased coal. This improvement was partially offset by increased mining costs of $6.4 million due to adverse mining conditions. The overall improvement in operating costs resulted in a corresponding improvement in operating costs per ton of $11.7/t for the six months ended June 30, 2019, compared to the six months ended June 30, 2018, as there was no significant change to sales volumes when comparing the two periods.
Adjusted EBITDA for the six months ended June 30, 2019 was $116.4 million, an improvement of $16.7 million (or 16.8%) over the six months ended June 20, 2018. Lower royalties related to the CONSOL Energy contingent royalty and mining a greater percentage of owned coal versus lease coal were partially offset by higher mine costs resulting from adverse mining conditions.
Logan
|
| For Six Months Ended June 30, |
| ||||||
|
| ($ in thousands) |
| ||||||
|
| 2019 |
| 2018 |
| Change |
| % |
|
Sales Volume (MMt) |
| 1.3 |
| 1.3 |
| — |
| — |
|
Total revenues ($) |
| 155,919 |
| 112,655 |
| 41,264 |
| 36.6 | % |
Coal revenues ($) |
| 153,629 |
| 112,655 |
| 40,974 |
| 36.4 | % |
Average realized price per Mt sold ($/Mt) |
| 114.4 |
| 84.8 |
| 29.6 |
| 34.9 | % |
Met Sales Volume (MMt) |
| 0.9 |
| 0.9 |
| — |
| — |
|
Met coal Revenues ($) |
| 131,421 |
| 93,201 |
| 38,220 |
| 41.0 | % |
Average realized met price per Mt sold ($/Mt) |
| 139.0 |
| 103.4 |
| 35.6 |
| 34.5 | % |
Mining costs ($) |
| 104,765 |
| 89,175 |
| 15,590 |
| 17.5 | % |
Mining cost per Mt sold ($/Mt) |
| 78.0 |
| 67.1 |
| 10.9 |
| 16.2 | % |
Operating costs ($) |
| 120,925 |
| 99,444 |
| 21,481 |
| 21.6 | % |
Operating costs per Mt sold ($/Mt) |
| 90.0 |
| 74.8 |
| 15.2 |
| 20.3 | % |
Segment Adjusted EBITDA ($) |
| 35,291 |
| 15,501 |
| 19,790 |
| 127.7 | % |
Coal revenue increased by $41.0 million, or 36.4%, to $153.6 million for the six months ended June 30, 2019 as compared to $112.7 million for the six months ended June 30, 2018. This increase was
For the six nine
Adjusted
EBITDAGreenbrier
|
| For Six Months Ended June 30, |
| ||||||
|
| ($ in thousands) |
| ||||||
|
| 2019 |
| 2018 |
| Change |
| % |
|
Sales Volume (MMt) |
| 0.2 |
| 0.4 |
| (0.2 | ) | (50.0 | )% |
Total revenues ($) |
| 32,797 |
| 38,188 |
| (5,391 | ) | (14.1 | )% |
Coal revenues ($) |
| 31,563 |
| 36,695 |
| (5,132 | ) | (14.0 | )% |
Average realized price per Mt sold ($/Mt) |
| 133.6 |
| 101.4 |
| 32.2 |
| 31.8 | % |
Met Sales Volume (MMt) |
| 0.2 |
| 0.3 |
| (0.1 | ) | (33.3 | )% |
Met coal Revenues ($) |
| 31,067 |
| 35,982 |
| (4,915 | ) | (13.7 | )% |
Average realized met price per Mt sold ($/Mt) |
| 138.3 |
| 104.1 |
| 34.2 |
| 32.9 | % |
Mining costs ($) |
| 26,445 |
| 33,905 |
| (7,460 | ) | (22.0 | )% |
Mining cost per Mt sold ($/Mt) |
| 111.9 |
| 93.7 |
| 18.2 |
| 19.4 | % |
Operating costs ($) |
| 32,965 |
| 38,305 |
| (5,340 | ) | (13.9 | )% |
Operating costs per Mt sold ($/Mt) |
| 139.5 |
| 105.9 |
| 33.6 |
| 31.7 | % |
Segment Adjusted EBITDA ($) |
| (81 | ) | 983 |
| (1,064 | ) | (108.2 | )% |
Coal revenue decreased by $5.1 million, or 14.0%, to $31.6 million for the six months ended June 30, 2019, as compared to $36.7 million for the six months ended June 30, 2018. This decrease
For the six months ended June 30, 2019, total operating costs improved by $5.3 million to $33.0 million, compared to costs of $38.3 million for the six months ended June 30, 2018. The improvement was primarily due to lower sales volumes, partially offset by an increase in freight expense driven by new rail and port arrangements with certain customers that did not exist in the comparative period. Operating cost per ton increased by $31.7 to $139.5, of which approximately $18/t was due the increased freight expenses. Additionally, lower production volumes related to the exhaustion of the Pollock Knob reserve and to adverse geological mining conditions and equipment downtime, impacted average cost per ton.
Adjusted EBITDA declined $1.1 million on lower sales volume to ($0.1) million for the six months ended June 30, 2019, compared to adjusted EBITDA of $1.0 million for the six months ended June 30, 2018.
costs.
|
| For Six Months Ended June 30, |
| ||||||
|
| ($ in thousands) |
| ||||||
|
| 2019 |
| 2018 |
| $ |
| % |
|
Salaries |
| 6,344 |
| 4,695 |
| 1,649 |
| 35.1 | % |
Professional and consultancy fees |
| 7,362 |
| 10,182 |
| (2,820 | ) | (27.7 | )% |
Office and operational fees |
| 1,045 |
| 1,191 |
| (146 | ) | (12.3 | )% |
Dues, registration fees and licenses |
| 107 |
| 33,103 |
| (32,996 | ) | (99.7 | )% |
Loss on foreign exchange swap |
| — |
| 15,695 |
| (15,695 | ) | (100.0 | )% |
Other |
| 3,107 |
| 9,470 |
| (6,363 | ) | (67.2 | )% |
Total Corporate and Other Adjusted EBITDA |
| 17,965 |
| 74,336 |
| (56,371 | ) | (75.8 | )% |
2021
|
| For Six Months Ended June 30, 2019 |
| ||||||||||
|
| ($ in thousands) |
| ||||||||||
|
| Curragh |
| Buchanan |
| Logan |
| Greenbrier |
| Other / |
| Total |
|
Total costs and expenses |
| 564,658 |
| 157,770 |
| 134,457 |
| 39,703 |
| 18,156 |
| 914,744 |
|
Less: Selling, general and administrative expense |
| (332 | ) | — |
| — |
| — |
| (17,979 | ) | (18,311 | ) |
Less: Depreciation, depletion and amortization |
| (42,157 | ) | (22,675 | ) | (13,532 | ) | (6,738 | ) | (177 | ) | (85,279 | ) |
Total operating costs |
| 522,169 |
| 135,095 |
| 120,925 |
| 32,965 |
| — |
| 811,154 |
|
Less: Other royalties |
| (77,100 | ) | (4,284 | ) | (9,996 | ) | (2,042 | ) | — |
| (93,422 | ) |
Less: Stanwell rebate |
| (94,674 | ) | — |
| — |
| — |
| — |
| (94,674 | ) |
Less: Freight expenses |
| (78,194 | ) | (526 | ) | (6,164 | ) | (4,478 | ) | — |
| (89,362 | ) |
Total mining costs |
| 272,201 |
| 130,285 |
| 104,765 |
| 26,445 |
| — |
| 533,696 |
|
|
| For Six Months Ended June 30, 2018 |
| ||||||||||
|
| ($ in thousands) |
| ||||||||||
|
| Curragh |
| Buchanan |
| Logan |
| Greenbrier |
| Other / |
| Total |
|
Total costs and expenses |
| 309,469 |
| 183,678 |
| 112,148 |
| 45,120 |
| 51,844 |
| 702,259 |
|
Less: Selling, general and administrative expense |
| (439 | ) | — |
| — |
| — |
| (51,844 | ) | (52,283 | ) |
Less: Depreciation, depletion and amortization |
| (22,019 | ) | (22,864 | ) | (12,704 | ) | (6,815 | ) | — |
| (64,402 | ) |
Total operating costs |
| 287,011 |
| 160,814 |
| 99,444 |
| 38,305 |
| — |
| 585,574 |
|
Less: Other royalties |
| (38,242 | ) | (35,132 | ) | (7,000 | ) | (2,613 | ) | — |
| (82,987 | ) |
Less: Stanwell rebate |
| (32,812 | ) | — |
| — |
| — |
| — |
| (32,812 | ) |
Less: Freight expenses |
| (38,294 | ) | (1,805 | ) | (3,269 | ) | (1,787 | ) | — |
| (45,155 | ) |
Total mining costs |
| 177,663 |
| 123,877 |
| 89,175 |
| 33,905 |
| — |
| 424,620 |
|
|
| For Three Months |
| For Six Months |
| ||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
|
|
| ($ in thousands) |
| ||||||
Reconciliation to Adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
Net Income |
| 117,506 |
| 59,322 |
| 214,326 |
| 35,651 |
|
Add: Depreciation, depletion and amortization |
| 45,508 |
| 42,594 |
| 85,279 |
| 64,402 |
|
Add: Interest expense (net of income) |
| 9,087 |
| 18,987 |
| 17,264 |
| 25,488 |
|
Add: Other foreign exchange losses (gains) |
| 3,157 |
| 5,290 |
| (557 | ) | 6,848 |
|
Add: Loss on retirement of debt |
| — |
| — |
| — |
| 3,905 |
|
Add: Income tax expense |
| 47,033 |
| 12,995 |
| 89,043 |
| 5,534 |
|
Adjusted EBITDA |
| 222,291 |
| 139,188 |
| 405,355 |
| 141,828 |
|
ABL
Facility.May 9, 2022 and August 8,
2022, respectively.
|
| June 30, 2019 |
| December 31, 2018 |
| ||
|
| ($ in thousands) |
| ||||
Cash, excluding restricted cash |
| $ | 46,001 |
| $ | 124,656 |
|
Availability under Revolving Syndicate Facility Agreement |
| 350,000 |
| 350,000 |
| ||
Total |
| $ | 396,001 |
| $ | 474,656 |
|
|
| June 30, 2019 |
| December 31, 2018 |
| ||
|
| ($ in thousands) |
| ||||
Finance/capital lease liabilities |
| $ | 3,103 |
| $ | 3,789 |
|
Other financial liabilities |
| 15,823 |
| 11,800 |
| ||
Total |
| $ | 18,926 |
| $ | 15,589 |
|
Liquidity
As
borrowings under our ABL Facility.
accounts or used to repayinterest bearing liabilities.
To assistNotes
· Facility A—$350 million multi-currency facility available for general working capital and corporate purposes; and
· Facility B—A$370 million bank guarantee facility.
The right to draw upon these facilities is conditional upon a number of provisions being satisfied at 30, 2022,
· no Event of Default is continuing or would result from the proposed loan;
· the representations, as defined dividends paid
·
At June
September 30, 2022, we were in compliance withall applicable covenants under the ABL Facility.
We are required to provide financial assurances and Surety Bonds
cash.
Secured Credit Facilities Terms
Interest Rate
Borrowings under our Syndicated Facility Agreement bear interest at a floating rate which is either (i) LIBOR plus an applicable margin for US$ loans and (ii) Bank Bill Swap Bid Rate, or BBSY, bid plus an applicable margin forNotes
Financial Covenants
Under the SFA we are required to comply with financial covenants, namely leverage ratio, interest coverage ratio, tangible net worth.
Each financial covenant is calculated with reference to the definitions contained in the SFA. As of June 30, 2019, which was the last applicable compliance date under the SFA, we were in compliance with all applicable financial covenants under the SFA.
Dividend
We paid an aggregate dividend of $299.7 million on March 29, 2019 in A$ to holders of CDIs on the ASX as of March 5, 2019, based on the exchange rate on March 5, 2019.
Note holders.
We intendto use cashto fund debtservice paymentson our Notes,the
|
| Six Months Ended June 30, |
| ||
|
| 2019 |
| 2018 |
|
|
| ($ in thousands) |
| ||
Net cash provided by operating activities |
| 301,216 |
| 141,612 |
|
Net cash (used in) investing activities |
| (67,336 | ) | (584,335 | ) |
Net cash (used in) provided by financing activities |
| (312,145 | ) | 701,093 |
|
Net change in cash and cash equivalents |
| (78,265 | ) | 258,370 |
|
Effect of exchange rate changes on cash and restricted cash |
| (365 | ) | (2,384 | ) |
Cash and restricted cash at beginning of period |
| 124,881 |
| 28,069 |
|
Cash and restricted cash at end of period |
| 46,251 |
| 284,055 |
|
Operating activities
Investing activities
business.
borrowings.
2021, filed with the SEC andASX on February 22, 2022.
Unaudited Pro Forma Combined Financial Information
The following February 22, 2022.
The unaudited consolidated pro forma statement of operations for the six months ended June 30, 2018 combine the historical consolidated statement of operations of Coronado and the historical combined statement of operations for Curragh, giving effect to the acquisition of Wesfarmers Curragh Pty Ltd by Coronado as if they had been consummated on January 1, 2018. This will facilitate a pro forma comparison between the six months ended June 30, 2019 and June 30, 2018 in Management’s Discussion and Analysis of Financial Condition and Results of Operations. We believe
The unaudited consolidated pro forma statements newly
The unaudited consolidated pro forma statements of operations are for informational purposes only and are not intended to represent or to be indicative of the actual results of operations or financial position that the combined business of Coronado and Curragh would have reported had the transactions been completed as of the dates set forth in the unaudited consolidated pro forma statements of operations and should not be taken as being indicative of Coronado’s future consolidated results of operation. The actual results may differ significantly from those reflected in the unaudited consolidated pro forma statements of operations for a number of reasons, including, but not limited to, differences between the assumptions used to prepare the unaudited consolidated pro forma statements of operations and actual amounts. As a result, the pro forma consolidated information does not purport to be indicative of what the results of operations would have been had the transaction been completed on the applicable dates of the unaudited consolidated pro forma statements of operations.
Unaudited Consolidated pro forma statement of operations
For the six months-ended JuneGlobal Resources Inc.
(U.S. dollars and AUD in thousands)
|
|
|
| Historical 1 January 2018 to 29 March 2018 |
|
|
|
|
|
|
| ||||||||||
|
| Historical |
|
|
| Note 2(a) |
| Note 2(b) |
|
|
| Note 2(c) |
| Pro Forma adjustments |
|
|
| ||||
|
| Coronado |
| Curragh |
| Reclassification |
| IFRS to US |
| Curragh in |
| Curragh in |
| Pro forma |
| Note 2 |
| Consolidated |
| ||
|
| USD |
| AUD |
| AUD |
| AUD |
| AUD |
| USD |
| USD |
|
|
| USD |
| ||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Coal revenues |
| 561,363 |
| 406,696 |
| — |
| — |
| 406,696 |
| 313,494 |
| — |
|
|
| 874,857 |
| ||
Coal revenues from related parties |
| 222,983 |
| — |
| — |
| — |
| — |
| — |
| — |
|
|
| 222,983 |
| ||
Other Revenues |
| 15,337 |
| — |
| — |
| — |
| — |
| — |
| 3,006 |
| (d | ) | 18,343 |
| ||
Total Revenues |
| 799,683 |
| 406,696 |
| — |
| — |
| 406,696 |
| 313,494 |
| 3,006 |
|
|
| 1,116,183 |
| ||
Cost and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Cost of coal revenues (exclusive of items shown separately below) |
| 424,620 |
| 204,132 |
| (15,367 | ) | — |
| 188,765 |
| 145,506 |
| — |
|
|
| 570,126 |
| ||
Depreciation, depletion and amortization |
| 64,402 |
| — |
| 16,971 |
| 1,525 |
| 18,496 |
| 14,257 |
| 7,977 |
| (e | ) | 86,636 |
| ||
Freight expense |
| 45,155 |
| — |
| 47,769 |
| — |
| 47,769 |
| 36,822 |
| — |
|
|
| 81,977 |
| ||
Stanwell rebate |
| 32,812 |
| — |
| 55,949 |
| — |
| 55,949 |
| 43,127 |
| — |
|
|
| 75,939 |
| ||
Other royalty expenses |
| 82,987 |
| 93,886 |
| (55,949 | ) | — |
| 37,937 |
| 29,243 |
| — |
|
|
| 112,230 |
| ||
Impairment |
| — |
| (263,097 | ) | — |
| 263,097 |
| — |
| — |
| — |
|
|
| — |
| ||
Selling, general, and administrative expenses |
| 52,283 |
| 50,098 |
| (47,769 | ) | — |
| 2,329 |
| 1,795 |
| (38,101 | ) | (f | ) | 15,977 |
| ||
Total costs and expenses |
| 702,259 |
| 85,019 |
| 1,604 |
| 264,622 |
| 351,245 |
| 270,750 |
| (30,124 | ) |
|
| 942,885 |
| ||
Operating income |
| 97,424 |
| 321,677 |
| (1,604 | ) | (264,622 | ) | 55,451 |
| 42,744 |
| 33,130 |
|
|
| 173,298 |
| ||
Other income (expenses): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Interest income |
| 585 |
| — |
| — |
| — |
| — |
| — |
| — |
|
|
| 585 |
| ||
Interest expense |
| (26,073 | ) | (444,895 | ) | 1,604 |
| — |
| (443,291 | ) | (341,703 | ) | 336,058 |
| (g | ) | (31,718 | ) | ||
Loss on debt extinguishment |
| (3,905 | ) | — |
| — |
| — |
| — |
| — |
| 3,905 |
| (h | ) | — |
| ||
Other, net |
| (26,846 | ) | 10,098 |
| — |
| — |
| 10,098 |
| 7,784 |
| 15,695 |
| (i | ) | (3,367 | ) | ||
Total other income (loss), net |
| (56,239 | ) | (434,797 | ) | 1,604 |
| — |
| (433,193 | ) | (333,919 | ) | 355,658 |
|
|
| (34,500 | ) | ||
Income before tax |
| 41,185 |
| (113,120 | ) | — |
| (264,622 | ) | (377,742 | ) | (291,175 | ) | 388,788 |
|
|
| 138,798 |
| ||
Income tax expense |
| (5,534 | ) | (102,443 | ) | — |
| 79,387 |
| (23,056 | ) | (17,772 | ) | (4,314 | ) | (j | ) | (27,620 | ) | ||
Net income |
| 35,651 |
| (215,563 | ) | — |
| (185,235 | ) | (400,798 | ) | (308,947 | ) | 384,474 |
|
|
| 111,178 |
| ||
Less: Net loss attributable to noncontrolling interest |
| (4 | ) | — |
| — |
| — |
| — |
| — |
| — |
|
|
| (4 | ) | ||
Net income (loss) attributable to Coronado Global Resources Inc. |
| 35,655 |
| (215,563 | ) | — |
| (185,235 | ) | (400,798 | ) | (308,947 | ) | 384,474 |
|
|
| 111,182 |
| ||
Earnings per share of common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Basic |
| 0.37 |
| — |
| — |
| — |
| — |
| — |
| — |
|
|
| $ | 1.15 |
| |
Diluted |
| 0.37 |
| — |
| — |
| — |
| — |
| — |
| — |
|
|
| $ | 1.15 |
| |
Average common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Basic |
| $ | 96,651,692 |
| — |
| — |
| — |
| — |
| — |
| — |
|
|
| 96,651,692 |
| |
Diluted |
| $ | 96,656,067 |
| — |
| — |
| — |
| — |
| — |
| — |
|
|
| 96,656,067 |
|
See accompanying notes to the unaudited pro forma consolidated statement of operations.
Note 1. Basis of Preparation
The accompanying unaudited consolidated pro forma statement of operations was prepared in accordance with Article 11 of Regulation S-X and presents the pro forma combined results of operations of Coronado based upon the historical financial statements of each of Coronado and Curragh, after giving effect to the Curragh acquisition and change in tax status, and are intended to reflect the impact of the Curragh acquisition and change in tax status on Coronado’s statement of operations. The accompanying unaudited consolidated pro forma statement of operations has been prepared using, and should be read in conjunction with the consolidated financial statements of Coronado for the three and six months ended June 30, 2019. Assumptions and estimates underlying the pro forma adjustments are described in these notes.
The accompanying unaudited consolidated pro forma statement of operations is presented for illustrative purposes only and does not purport to be indicative of the actual results that would have been achieved by Coronado if the Curragh acquisition had been consummated as of the beginning of the periods presented or that will be achieved in the future. The unaudited consolidated pro forma statement of operations does not reflect the costs of any integration activities or benefits that may result from realization of synergies expected to result from the Curragh acquisition. In addition, throughout the period presented in the unaudited consolidated pro forma statement of operations until the date of acquisition on March 29, 2018, the operations of Curragh were conducted and accounted for as part of the former shareholder. Curragh’s unaudited combined financial information has been derived from the former shareholder’s historical accounting records and reflect certain allocations of direct costs and expenses. All of the allocations and estimates in such financial information are based on assumptions that the management of the former shareholder believes are reasonable. In the opinion of management, the unaudited consolidated pro forma statement of operations includes all normal and recurring adjustments that are considered necessary for the fair presentation of the results for the period presented. Curragh’s financial information does not necessarily represent the financial position of Curragh had it been operated as a stand-alone company during the period.
The unaudited consolidated pro forma statement of operations combines the historical consolidated statement of operations of Coronado for the three and six months ended June 30, 2018 and the unaudited combined financial information of Wesfarmer’s Curragh Pty Ltd for the three months ended March 29, 2018, giving effect to the Curragh acquisition as if both had been consummated on January 1, 2018.
Note 2. Income Statement Adjustments
The unaudited consolidated pro forma statement of operations reflects the following adjustments ($ in thousands):
(A) Reclassifications
These adjustments represent reclassifications to conform the accounting presentation of Curragh’s financial statements to Coronado’s financial statements.
(B) International Financial Reporting Standards, or IFRS, to U.S. GAAP adjustments (in AUD)
Impairment was adjusted as follows:
| |||
|
| ||
|
|
(1) Represents the removal of the IFRS, impairment reversal consistent with pushing back the U.S. GAAP acquisition fair values to January 1, 2018 and the prohibition under U.S. GAAP of the reversal of impairment expense.
Depreciation, depletion and amortization was adjusted as follows:
| |||
|
| ||
|
|
(1) Under U.S. GAAP, a company-specific risk adjusted discount rate is used which is higher than the discount rate required by IFRS. The higher discount rate under U.S. GAAP reduces the asset retirement obligation, or ARO, booked initially and results in a higher accretion expense each period as the discounted ARO balance increases.
See Note J for discussion of the calculation of the income tax expense.
(C) USD translation rate
In order to translate the Curragh AUD results into USD, an exchange rate of .7708 was utilized. This represents the average exchange rate for the period from January 1, 2018 to June 30, 2018.
(D) Other revenues
Other revenues were adjusted as follows:
| |||
|
| ||
|
|
(1) Relates to the amortization of the Stanwell below market coal supply agreement, or CSA. The Stanwell below market CSA represents the fair value attributable to the Australian coal supply obligation arising from the Coronado Curragh business combination.
(E) Depreciation, depletion and amortization
Depreciation, depletion and amortization were adjusted as follows:
| |||
|
| ||
|
|
(1) Represents the adjustment to Curragh’s historical depreciation and amortization as a result of preliminary fair value adjustments to the acquired depreciable assets, mineral reserves and amortizable intangible assets.
(F) Selling, general and administrative
Selling, general and administrative expenses were adjusted as follows:
| |||
|
|
| |
|
|
|
(1) Relates to advisory and legal fees incurred in the year ended June 30, 2018, which are directly attributable to the Curragh acquisition, but which are not expected to have a continuing impact on results following the consummation of the Curragh acquisition.
(G) Interest expense
Interest expense was adjusted as follows:
| |||
|
| ||
|
| ||
|
|
| |
|
|
| |
|
|
(1) Represents the removal of the historical interest charge in relation to an intercompany loan Curragh had with its previous shareholder, which was assigned to Coronado upon acquisitions and is therefore eliminated in consolidation.
(2) Represents the reversal of interest expense related to the Bank of America Term Loan on Coronado’s Statement of Operations. This loan was extinguished on March 29, 2018 in conjunction with the acquisition of Curragh. In order to represent the financing in-place as if the acquisition occurred on January 1, 2018, the effects of this note have been removed.
(3) Represents additional interest expense related to the DB Term Loan. This $700 million loan, established on March 29, 2018, was used to partially finance the acquisition of Curragh and the additional interest charge reflects this loan as if it were in existence on January 1, 2018. The assumed interest rate for the three months to March 29, 2018 was 8.802%, representing LIBOR plus a 6.5% spread. This is the actual interest rate of the loan at origination. Due to the proximity of the assumed origination (January 1, 2018) and the actual origination (March 29, 2018) as well as the fact the loan was extinguished on October 24, 2018, the interest rate at March 29, 2018 was determined to be representative and more meaningful for the pro forma adjustment than utilizing the current rate.
(4) For each one-eighth of 1% change in estimated interest rate associated with the $700 million DB Term Loan, interest expense would increase or decrease by $0.4 million for the six months ended June 30, 2018.
(5) Represents the additional amortization of debt issuance costs and the debt discount associated with the DB Term Loan.
(H) Loss on debt extinguishment
Loss on debt extinguishment was adjusted as follows:
| |||
|
| ||
|
|
(1) Represents the reversal of the debt extinguishment expense related to the Bank of America Term Loan on Coronado’s Statement of Operations. This loan was extinguished on March 29, 2018 in conjunction with the acquisition of Curragh. In order to represent the financing in-place as if the acquisition occurred on January 1, 2018, the effects of this note have been removed.
(I) Other, net
Other, net was adjusted as follows:
| |||
|
| ||
|
|
(1) Relates to the loss on Foreign Exchange, or FX, swap incurred in the six months ended June 30, 2018, which is directly attributable to the Curragh acquisition as it locked in the USD exchange rate in advance of the purchase of Curragh. This loss on FX swap is not expected to have a continuing impact on results following the consummation of the Curragh acquisition.
(J) Income tax provisions
For purposes of the unaudited pro forma condensed combined financial statements, an Australian statutory tax rate of approximately 30% has been used for pro forma adjustments related to Curragh. A U.S. blended statutory tax rate (Federal and State) of approximately 27% has been used for pro forma adjustments related to the U.S. LLC’s. This does not reflect Coronado’s effective tax rate, which will include other tax items such as state and foreign taxes as well as other tax charges and benefits, and does not take into account any historical or possible future tax events that may impact Coronado following the consummation of the Curragh acquisition.
ITEM 3.QUANTITATIVEAND QUALITATIVEDISCLOSURES ABOUT MARKET RISK
February
ASX onFebruary 22, 2022.
In 2018, we entered into fixed price contracts with
In the same period, we have entered into forward derivative contracts to purchase 93.4 million liters
202242
fluctuations.
During 2018, we entered into a foreign exchange swap to hedge the exposure to fluctuations in the A$-US$ in connection with the acquisition of Curragh. At June 30, 2019, we did not have any foreign exchange contracts outstanding.
Liquidity Risk
Liquidity risk is the risk that we will not have sufficient liquid funds to meet our financial commitments as and when they fall due. Liquidity risk is managed centrally through short-term cash forecasting and longer-term strategic planning. Our objective is to ensure that we have sufficient liquid assets and funding to meet both our anticipated and unexpected financial obligations.
Access to capital is also an important feature of liquidity risk management. We manage this risk through proactive management of our funding profile by ensuring that we have access to diverse sources of funds and that we do not have material refinancing risk in any single reporting period.
Disclosure
The Company, under the supervision and with the participation of its
Internal Control over Financial Reporting
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 in accordance with U.S. GAAP. We are not currently required to comply with the SEC’s rules implementing Section 404 of the Sarbanes-Oxley Act of 2002, and are therefore not required to make a formal assessment of the effectiveness of our internal control over financial reporting for that purpose. We will not be required to submit a report of management’s assessment regarding internal control over financial reporting or an attestation report of the Company’s registered public accounting firm until our second annual report on 10-K due to a transition period established by the rules of the SEC for newly registered companies.
During the preparation of our financial statements for the year ended December 31, 2018, we and our auditors identified a material weakness in our internal control over financial reporting related to the recognition and presentation of the impact of the Reorganization Transaction, which occurred just prior to the Australian IPO. The presentation was corrected prior to the issuance of the financial statements and did not result in any material misstatement of our financial statements or disclosures.
In the period since December 31, 2018, management has remediated the identified material weakness. The remediation efforts implemented specifically focused on the identified item and have also aided in enhancing our overall financial control environment. Remediation efforts applied during the period included (a) the immediate posting of the identified one-off item to ensure no material misstatement in our financial statements; (b) the continued recognition of this position since December 31, 2018 in our financial statements for the period ending June 30, 2019; (c) the Company has employed additional qualified resources to prepare, review and provide guidance on technical matters of this nature; and (d) the Company continues to utilize the expertise of certain third party technical advisors to assist in the review of complex transactions.
Our Chief Executive Officer and Chief Financial Officer have concluded that the Consolidated Financial Statements included in this Quarterly Report on Form 10-Q, present fairly, in all material respects, the financial position of the Company at June 30, 2019 and the consolidated results of operations and cash flows for the period ended June 30, 2019 in conformity with U.S. generally accepted accounting principles.
effective.
As previously reported, we expect
We are involved in various legal proceedings from time to time in the normal course of business including proceedings related to employment matters. These liabilities do not include costs associated with legal representation, which are expensed as they are incurred. In management’s opinion, except for what is described below, we are not currently involved in any legal proceedings which, individually or in the aggregate and if determined adversely, could have a material effect on our financial condition, results of operations and/or liquidity or that would otherwise be required to be disclosed herein.
Curragh is a co-defendant to proceedings in the Queensland Supreme Court brought by Aurizon. Aurizon’s claim relates to costs relating to the co-defendants’ use of the WICET rail links, in particular, whether the “First Milestone Target Date”, which triggers certain “WIRP Fee” payments under the Wiggins Island Rail Project Deed, or WIRP Deed, has been achieved. On June 27, 2019, the Queensland Supreme Court delivered judgements in favor of Aurizon against Coronado Curragh Pty Ltd and the other co-defendants. The Company intends to continue to strongly contest the matter. The Company, together with the other co-defendants, lodged a notice of appeal of the Queensland Supreme Court judgement on July 25, 2019. It is currently expected that, were Aurizon successful in the ultimate result of the litigation and expert determinations, Coronado Curragh Pty Ltd would be required to pay approximately A$2.3 million per annum for the term of the WIRP Deed (which is 233 months). Resolution of this dispute would also result in the Company’s below rail access to WICET (of 1.5 MMtpa) becoming a firm contractual capacity entitlement (and the subject of a 20 year take-or-pay access agreement) instead of an ad hoc entitlement only. The Company’s unaudited Condensed Consolidated Balance Sheet includes an estimated loss contingency associated with these proceedings.
In February 2019, the Queensland Competition Authority, or QCA, issued its final decision in respect of Access Undertaking 5, or UT5. The final decision, consistent with the draft decision issued in December 2017, reduces the rate of return that can be charged by Aurizon on its network routes. The Queensland coal producers experienced material rail haulage underperformance because soon after the draft UT5 decision was handed down by the QCA, the rail track network was severely restricted due to Aurizon’s modification of its maintenance practices in order to lower costs. It is possible that Aurizon will modify its maintenance practices in the future to lower costs should similar decisions be issued by the QCA, resulting in constrained access to the rail network, making it more difficult for customers (including us) to arrange for the transportation of coal in excess of their contracted capacity entitlement and having the potential to increase demurrage costs.
In a constrained rail capacity and high demand environment, there is a risk that we and other users of the network will not be allocated additional access to rail above annual contracted entitlements. Should this occur, the potential impact on us is higher in the short term as our contracted access entitlement for 1.5 MMt per annum of below rail capacity to WICET is currently treated as an ad hoc entitlement. This means that, in the event of a scheduling contest with a contracted user (which could arise because of changes by Aurizon to maintenance practices or because of increased usage of the line by other customers), a path we request may not be able to be scheduled. This capacity is now expected to become the subject of a long-term access agreement as the judgment from the litigation concluded in September 2018 has been handed down and the dispute between Wiggins Island Rail Project customers and Aurizon regarding the “First Milestone Target Date” under the WIRP Deed has been finally resolved.
In June 2018, two holders of preference equity issued by WICET Holdings commenced legal proceedings in the Supreme Court of New South Wales against WICET Pty Ltd and WICET Holdings alleging unpaid dividends in respect of the shares held by them. Although we are not exposed directly to this litigation, an adverse finding may detrimentally impact the financial position of WICET Holdings and WICET Pty Ltd and could result in the senior lenders or a receiver appointed by them taking steps to seek to recover against the shippers (including us) whether through increased terminal handling charges or otherwise.
Our registration statement
Risks related to our investment in WICET may adversely affect our financial condition and results of operations .
We have a minority interest in WICET Holdings Pty Ltd, whose wholly owned subsidiary, WICET Pty Ltd, owns WICET. Other coal producers who export coal through WICET also hold shares in WICET Holdings Pty Ltd. In addition, we and the other coal producers (or shippers) have evergreen, ten year take-or-pay agreements with WICET Pty Ltd and pay a terminal handling charge to export coal through WICET, which is calculated case
Under our take-or-pay agreement with WICET Pty Ltd, or
Given the operation of the finance cap (agreed as part of WICET’s refinance) there is a limit to the recovery by WICET of its financing costs from shippers (subject to certain review event triggers). Accordingly, prior defaults referred to above have resulted in only minor increases to the terminal handling charges payable by the remaining shipper shareholders (including us). These increases have related to higher $/ton operating costs resulting from a lower contract base. If any of the four-remaining shipper shareholders liquidates and/or defaults under its take-or-pay agreement, a review of the finance cap would be triggered and the terminal handling charges for the remaining shipper shareholders, including us, will increase as each remaining shipper effectively would be proportionately liable to pay the defaulting shipper’s share of WICET’s operating and financing costs going forward.
In addition, if we default under our take-or-pay agreement with WICET Pty Ltd, we might be liable for a significant termination payment. The termination payment is approximately equal to our proportion of WICET Pty Ltd’s total external debt (which is based on the proportion that our contracted tonnage bears to the total contracted tonnage at WICET when the payment obligation is triggered). We have provided security to WICET Pty Ltd in the form of a bank guarantee, the amount of which is required to cover our estimated liabilities as a shipper under the WICET Take-or-Pay Agreement for the following 12 month period.
Any attempt by the senior lenders for WICET Pty Ltd’s external debt, or a receiver appointed by them, to take steps to seek to recover against the shipper-shareholders (whether through increased terminal handling charges or otherwise) could materially and adversely impact our business and results of operations. If an insolvency or other event ultimately resulted in a permanent cessation of operations at WICET, we may also be required to procure additional port capacity, as well as be liable for a termination payment under our take-or-pay agreement.
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** Portions of this exhibit have been omitted, which portions will be furnished to the SecuritiesCompany’s
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