UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
| | | | | |
| (Mark One) |
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2022March 31, 2023
OR
| | | | | |
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number 001-38735
ALPHA METALLURGICAL RESOURCES, INC.
(Exact name of registrant as specified in its charter)
| | | | | | | | |
| Delaware | | 81-3015061 |
| (State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification Number) |
| | |
| 340 Martin Luther King Jr. Blvd. |
| Bristol, Tennessee 37620 |
| (Address of principal executive offices, zip code) |
| (423) 573-0300 |
| (Registrant’s telephone number, including area code) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes ¨ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Sec.232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes ¨ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| | | | | | | | | | | | | | |
| Large accelerated filer | ☐☒ | | Accelerated filer | ☒☐ |
| Non-accelerated filer | ☐ | | Smaller reporting company | ☐ |
| | | Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) ☐ Yes x No
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | |
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| Common Stock | AMR | New York Stock Exchange |
Number of shares of the registrant’s Common Stock, $0.01 par value, outstanding as of October 31, 2022: 15,943,649April 30, 2023: 14,473,756
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report includes statements of our expectations, intentions, plans and beliefs that constitute “forward-looking statements.” These statements, which involve risks and uncertainties, relate to analyses and other information that are based on forecasts of future results and estimates of amounts not yet determinable and may also relate to our future prospects, developments and business strategies. We have used the words “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “should” and similar terms and phrases, including references to assumptions, in this report to identify forward-looking statements, but these terms and phrases are not the exclusive means of identifying such statements. These forward-looking statements are made based on expectations and beliefs concerning future events affecting us and are subject to uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control, that could cause our actual results to differ materially from those expressed in or implied by these forward-looking statements.
The following factors are among those that may cause actual results to differ materially from our forward-looking statements:
•the financial performance of the company;
•our liquidity, results of operations and financial condition;
•our ability to generate sufficient cash or obtain financing to fund our business operations;
•depressed levels or declines in coal prices;
•railroad, barge, truck and other transportation availability, performance and costs;
•changes in domestic or international environmental laws and regulations, and court decisions, including those directly affecting our coal mining and production and those affecting our customers’ coal usage, including potential climate change initiatives;
•our ability to obtain or renew surety bonds on acceptable terms or maintain our current bonding status;
•worldwide market demand for coal and steel, including demand for U.S. coal exports, and competition in coal markets;
•attracting and retaining key personnel and other employee workforce factors, such as labor relations;
•our ability to pay dividends on our common stock and execute our share repurchase program;
•our ability to obtain or renew surety bonds on acceptable terms or maintainself-insure certain of our current bonding status;black lung obligations without a significant increase in required collateral;
•our ability to meet collateral requirements and fund employee benefit obligations;
•inflationary pressures on supplies and labor and significant or rapid increases in commodity prices;
•disruptions in delivery or changes in pricing from third-party vendors of key equipment and materials that are necessary for our operations, such as diesel fuel, steel products, explosives, tires and purchased coal;
•our abilitycybersecurity attacks or failures, threats to meet collateral requirements;physical security, extreme weather conditions or other natural disasters;
•the imposition or continuation of barriers to trade, such as tariffs;
•our ability to consummate financing or refinancing transactions, and other services, and the form and degree of these services available to us, which may be significantly limited by the lending, investment and similar policies of financial institutions and insurance companies regarding carbon energy producers and the environmental impacts of coal combustion;
•increased market volatility and uncertainty on worldwide markets and our customers as a result of developments in and around Ukraine and the consequent export controls and financial and economic sanctions;
•railroad, barge, truckfailures in performance, or non-performance, of services by third-party contractors, including contract mining and other transportation availability, performance and costs;reclamation contractors;
•disruption in third-party coal supplies;
•reductions or increases in customer coal inventories and the timing of those changes;
•our production capabilities and costs;
•attractingour ability to obtain, maintain or renew any necessary permits or rights, and retaining key personnel and other employee workforce factors, such as labor relations;our ability to mine properties due to defects in title on leasehold interests;
•the effects of the COVID-19 pandemic on our operations and the world economy;
•inherent risks of coal mining, including those that are beyond our control;
•changes in, interpretations of, or implementations of domestic or international tax or other laws and regulations, including the Tax Cuts and JobsInflation Reduction Act of 2022 and its related regulations;
•our relationships with, and other conditions affecting, our customers, including the inability to collect payments from our customers if their creditworthiness declines;
•changes in, renewal or acquisition of, terms of and performance of customers under coal supply arrangements and the refusal by our customers to receive coal under agreed-upon contract terms;
•our ability to self-insure certain of our black lung obligations without a significant increase in required collateral;
•our ability to obtain, maintain or renew any necessary permits or rights, and our ability to mine properties due to defects in title on leasehold interests;
•our indebtedness and potential future indebtedness;
•our ability to consummate financing or refinancing transactions, and other services, and the form and degree of these services available to us, which may be significantly limited by the lending, investment and similar policies of financial institutions and insurance companies regarding carbon energy producers and the environmental impacts of coal combustion;
•funding for and changes in employee benefit obligations;
•cybersecurity attacks or failures, threats to physical security, extreme weather conditions or other natural disasters;
•reclamation and mine closure obligations;
•utilities switching to alternative energy sources such as natural gas, renewables and coal from basins where we do not operate;
•our assumptions concerning economically recoverable coal reserve estimates;
•failures in performance, or non-performance, of services by third-party contractors, including contract mining and reclamation contractors;
•disruption in third-party coal supplies; and
•other factors, including the other factors discussed in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” sectionssection included elsewhere in this Quarterly Report on Form 10-Q and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” sections contained in our Annual Report on Form 10-K for the year ended December 31, 2021.2022.
The list of factors identified above is not exhaustive. We caution readers not to place undue reliance on any forward-looking statements, which are based on information currently available to us and speak only as of the dates on which they are made. When considering these forward-looking statements, you should keep in mind the cautionary statements in this report. We do not undertake any responsibility to publicly revise these forward-looking statements to take into account events or circumstances that occur after the date of this report. Additionally, except as expressly required by federal securities laws, we do not undertake any responsibility to update you on the occurrence of any unanticipated events, which may cause actual results to differ from those expressed or implied by the forward-looking statements contained in this report.
Part I - Financial Information
Item 1. Financial Statements
ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Amounts in thousands, except share and per share data)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2022 | | 2021 | | 2022 | | 2021 |
| Revenues: | | | | | | | |
| Coal revenues | $ | 867,849 | | | $ | 647,129 | | | $ | 3,271,845 | | | $ | 1,426,039 | |
| Other revenues | 1,919 | | | 1,712 | | | 6,299 | | | 4,330 | |
| Total revenues | 869,768 | | | 648,841 | | | 3,278,144 | | | 1,430,369 | |
| Costs and expenses: | | | | | | | |
| Cost of coal sales (exclusive of items shown separately below) | 555,502 | | | 488,169 | | | 1,736,711 | | | 1,182,360 | |
| Depreciation, depletion and amortization | 27,925 | | | 24,519 | | | 83,690 | | | 80,261 | |
| Accretion on asset retirement obligations | 5,921 | | | 6,674 | | | 17,822 | | | 19,970 | |
| Amortization of acquired intangibles, net | 4,543 | | | 2,980 | | | 16,038 | | | 9,402 | |
| Asset impairment and restructuring | — | | | — | | | — | | | (561) | |
| Selling, general and administrative expenses (exclusive of depreciation, depletion and amortization shown separately above) | 15,095 | | | 15,264 | | | 48,339 | | | 44,891 | |
| Total other operating loss (income): | | | | | | | |
| Mark-to-market adjustment for acquisition-related obligations | (2,954) | | | 11,676 | | | 10,615 | | | 18,009 | |
| Other expense (income) | 2,713 | | | (457) | | | 569 | | | (5,290) | |
| Total costs and expenses | 608,745 | | | 548,825 | | | 1,913,784 | | | 1,349,042 | |
| Income from operations | 261,023 | | | 100,016 | | | 1,364,360 | | | 81,327 | |
| Other (expense) income: | | | | | | | |
| Interest expense | (1,695) | | | (17,338) | | | (19,996) | | | (53,290) | |
| Interest income | 1,064 | | | 54 | | | 1,412 | | | 322 | |
| Equity loss in affiliates | (4,821) | | | (643) | | | (8,318) | | | (1,161) | |
| Miscellaneous income, net | 1,702 | | | 1,812 | | | 4,884 | | | 5,425 | |
| Total other expense, net | (3,750) | | | (16,115) | | | (22,018) | | | (48,704) | |
| Income from continuing operations before income taxes | 257,273 | | | 83,901 | | | 1,342,342 | | | 32,623 | |
| Income tax expense | (5,437) | | | (208) | | | (114,073) | | | (211) | |
| Net income from continuing operations | 251,836 | | | 83,693 | | | 1,228,269 | | | 32,412 | |
| Discontinued operations: | | | | | | | |
| Income (loss) from discontinued operations before income taxes | 1,273 | | | (429) | | | (525) | | | (1,067) | |
| Income tax (expense) benefit from discontinued operations | (292) | | | — | | | 121 | | | — | |
| Income (loss) from discontinued operations | 981 | | | (429) | | | (404) | | | (1,067) | |
| Net income | $ | 252,817 | | | $ | 83,264 | | | $ | 1,227,865 | | | $ | 31,345 | |
| | | | | | | |
| Basic income per common share: | | | | | | | |
| Income from continuing operations | $ | 14.71 | | | $ | 4.54 | | | $ | 68.16 | | | $ | 1.76 | |
| Income (loss) from discontinued operations | 0.06 | | | (0.03) | | | (0.02) | | | (0.06) | |
| | | | Three Months Ended March 31, | |
| | | | 2023 | | 2022 | |
| Revenues: | | Revenues: | | | | |
| Coal revenues | | Coal revenues | $ | 906,698 | | | $ | 1,069,738 | | |
| Other revenues | | Other revenues | 4,537 | | | 2,226 | | |
| Total revenues | | Total revenues | 911,235 | | | 1,071,964 | | |
| Costs and expenses: | | Costs and expenses: | | | | |
| Cost of coal sales (exclusive of items shown separately below) | | Cost of coal sales (exclusive of items shown separately below) | 539,137 | | | 555,342 | | |
| Depreciation, depletion and amortization | | Depreciation, depletion and amortization | 29,423 | | | 28,035 | | |
| Accretion on asset retirement obligations | | Accretion on asset retirement obligations | 6,377 | | | 5,954 | | |
| Amortization of acquired intangibles, net | | Amortization of acquired intangibles, net | 2,197 | | | 5,748 | | |
| Selling, general and administrative expenses (exclusive of depreciation, depletion and amortization shown separately above) | | Selling, general and administrative expenses (exclusive of depreciation, depletion and amortization shown separately above) | 20,692 | | | 15,086 | | |
| Total other operating loss (income): | | Total other operating loss (income): | | |
| Mark-to-market adjustment for acquisition-related obligations | | Mark-to-market adjustment for acquisition-related obligations | — | | | 9,361 | | |
| Other income | | Other income | (1,092) | | | (628) | | |
| Total costs and expenses | | Total costs and expenses | 596,734 | | | 618,898 | | |
| Income from operations | | Income from operations | 314,501 | | | 453,066 | | |
| Other (expense) income: | | Other (expense) income: | | | | |
| Interest expense | | Interest expense | (1,720) | | | (13,083) | | |
| Interest income | | Interest income | 1,518 | | | 184 | | |
| Equity loss in affiliates | | Equity loss in affiliates | (1,748) | | | (1,361) | | |
| Miscellaneous income, net | | Miscellaneous income, net | 631 | | | 1,676 | | |
| Total other expense, net | | Total other expense, net | (1,319) | | | (12,584) | | |
| Income before income taxes | | Income before income taxes | 313,182 | | | 440,482 | | |
| Income tax expense | | Income tax expense | (42,411) | | | (39,591) | | |
| Net income | Net income | $ | 14.77 | | | $ | 4.51 | | | $ | 68.14 | | | $ | 1.70 | | Net income | $ | 270,771 | | | $ | 400,891 | | |
| | Diluted income per common share: | | |
| Income from continuing operations | $ | 14.21 | | | $ | 4.43 | | | $ | 65.33 | | | $ | 1.73 | | |
| Income (loss) from discontinued operations | 0.06 | | | (0.03) | | | (0.02) | | | (0.06) | | |
| Net income | $ | 14.27 | | | $ | 4.40 | | | $ | 65.31 | | | $ | 1.67 | | |
| Basic income per common share | | Basic income per common share | $ | 17.74 | | | $ | 21.58 | | |
| Diluted income per common share | | Diluted income per common share | $ | 17.01 | | | $ | 20.52 | | |
| | Weighted average shares – basic | Weighted average shares – basic | 17,119,328 | | | 18,445,709 | | | 18,019,161 | | | 18,426,639 | | Weighted average shares – basic | 15,266,895 | | | 18,574,026 | | |
| Weighted average shares – diluted | Weighted average shares – diluted | 17,718,517 | | | 18,913,352 | | | 18,800,674 | | | 18,783,643 | | Weighted average shares – diluted | 15,916,378 | | | 19,540,642 | | |
Refer to accompanying Notes to Condensed Consolidated Financial Statements.
ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
(Amounts in thousands)
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended March 31, | |
| | 2022 | | 2021 | | 2022 | | 2021 | | 2023 | | 2022 | |
| Net income | Net income | $ | 252,817 | | | $ | 83,264 | | | $ | 1,227,865 | | | $ | 31,345 | | Net income | $ | 270,771 | | | $ | 400,891 | | |
| Other comprehensive income, net of tax: | Other comprehensive income, net of tax: | | Other comprehensive income, net of tax: | | |
| Employee benefit plans: | Employee benefit plans: | | Employee benefit plans: | | |
| Amortization of and adjustments to employee benefit costs | Amortization of and adjustments to employee benefit costs | $ | 818 | | | $ | 1,413 | | | $ | (2,383) | | | $ | 13,077 | | Amortization of and adjustments to employee benefit costs | (627) | | | 775 | | |
| Income tax expense | Income tax expense | — | | | — | | | — | | | — | | Income tax expense | 139 | | | — | | |
| Total other comprehensive income (loss), net of tax | $ | 818 | | | $ | 1,413 | | | $ | (2,383) | | | $ | 13,077 | | |
| Total other comprehensive (loss) income, net of tax | | Total other comprehensive (loss) income, net of tax | (488) | | | 775 | | |
| Total comprehensive income | Total comprehensive income | $ | 253,635 | | | $ | 84,677 | | | $ | 1,225,482 | | | $ | 44,422 | | Total comprehensive income | $ | 270,283 | | | $ | 401,666 | | |
Refer to accompanying Notes to Condensed Consolidated Financial Statements.
ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(Amounts in thousands, except share and per share data)
| | | September 30, 2022 | | December 31, 2021 | | March 31, 2023 | | December 31, 2022 |
| Assets | Assets | | | | Assets | | | |
| Current assets: | Current assets: | | | | Current assets: | | | |
| Cash and cash equivalents | Cash and cash equivalents | $ | 404,430 | | | $ | 81,211 | | Cash and cash equivalents | $ | 222,507 | | | $ | 301,906 | |
| Trade accounts receivable, net of allowance for doubtful accounts of $375 and $393 as of September 30, 2022 and December 31, 2021, respectively | 487,352 | | | 489,241 | | |
| Short-term investments | | Short-term investments | — | | | 46,052 | |
| Trade accounts receivable, net of allowance for doubtful accounts of $369 and $239 as of March 31, 2023 and December 31, 2022, respectively | | Trade accounts receivable, net of allowance for doubtful accounts of $369 and $239 as of March 31, 2023 and December 31, 2022, respectively | 546,252 | | | 407,210 | |
| Inventories, net | Inventories, net | 178,559 | | | 129,382 | | Inventories, net | 266,678 | | | 200,574 | |
| Short-term deposits | | Short-term deposits | 6,602 | | | 84,748 | |
| Short-term restricted cash | | Short-term restricted cash | — | | | 24,547 | |
| Prepaid expenses and other current assets | Prepaid expenses and other current assets | 76,999 | | | 47,690 | | Prepaid expenses and other current assets | 50,448 | | | 49,384 | |
| Current assets - discontinued operations | 57 | | | 462 | | |
| Total current assets | Total current assets | 1,147,397 | | | 747,986 | | Total current assets | 1,092,487 | | | 1,114,421 | |
| Property, plant, and equipment, net of accumulated depreciation and amortization of $497,149 and $443,856 as of September 30, 2022 and December 31, 2021, respectively | 404,171 | | | 362,218 | | |
| Owned and leased mineral rights, net of accumulated depletion and amortization of $73,446 and $52,444 as of September 30, 2022 and December 31, 2021, respectively | 423,763 | | | 444,302 | | |
| Other acquired intangibles, net of accumulated amortization of $50,259 and $34,221 as of September 30, 2022 and December 31, 2021, respectively | 58,561 | | | 74,197 | | |
| Property, plant, and equipment, net of accumulated depreciation and amortization of $503,403 and $491,186 as of March 31, 2023 and December 31, 2022, respectively | | Property, plant, and equipment, net of accumulated depreciation and amortization of $503,403 and $491,186 as of March 31, 2023 and December 31, 2022, respectively | 486,721 | | | 442,645 | |
| Owned and leased mineral rights, net of accumulated depletion and amortization of $83,313 and $77,333 as of March 31, 2023 and December 31, 2022, respectively | | Owned and leased mineral rights, net of accumulated depletion and amortization of $83,313 and $77,333 as of March 31, 2023 and December 31, 2022, respectively | 458,191 | | | 451,062 | |
| Other acquired intangibles, net of accumulated amortization of $43,236 and $53,719 as of March 31, 2023 and December 31, 2022, respectively | | Other acquired intangibles, net of accumulated amortization of $43,236 and $53,719 as of March 31, 2023 and December 31, 2022, respectively | 52,905 | | | 55,102 | |
| Long-term restricted investments | Long-term restricted investments | 92,384 | | | 28,443 | | Long-term restricted investments | 90,428 | | | 105,735 | |
| Long-term restricted cash | Long-term restricted cash | 31,724 | | | 89,426 | | Long-term restricted cash | 50,931 | | | 28,941 | |
| | Deferred income taxes | | Deferred income taxes | 10,497 | | | 11,378 | |
| Other non-current assets | Other non-current assets | 93,332 | | | 102,614 | | Other non-current assets | 106,957 | | | 103,195 | |
| Non-current assets - discontinued operations | 8,521 | | | 8,526 | | |
| Total assets | Total assets | $ | 2,259,853 | | | $ | 1,857,712 | | Total assets | $ | 2,349,117 | | | $ | 2,312,479 | |
| Liabilities and Stockholders’ Equity | Liabilities and Stockholders’ Equity | | | | Liabilities and Stockholders’ Equity | | | |
| Current liabilities: | Current liabilities: | | | | Current liabilities: | | | |
| Current portion of long-term debt | Current portion of long-term debt | $ | 1,711 | | | $ | 2,989 | | Current portion of long-term debt | $ | 3,562 | | | $ | 3,078 | |
| Trade accounts payable | Trade accounts payable | 101,584 | | | 90,090 | | Trade accounts payable | 122,738 | | | 106,037 | |
Acquisition-related obligations – current | Acquisition-related obligations – current | 30,131 | | | 22,405 | | Acquisition-related obligations – current | 381 | | | 28,254 | |
| Accrued expenses and other current liabilities | Accrued expenses and other current liabilities | 203,902 | | | 174,607 | | Accrued expenses and other current liabilities | 189,927 | | | 265,256 | |
| Current liabilities - discontinued operations | 4,014 | | | 5,838 | | |
| Total current liabilities | Total current liabilities | 341,342 | | | 295,929 | | Total current liabilities | 316,608 | | | 402,625 | |
| Long-term debt | Long-term debt | 2,987 | | | 445,562 | | Long-term debt | 8,379 | | | 7,897 | |
| Acquisition-related obligations - long-term | — | | | 19,000 | | |
| Workers’ compensation and black lung obligations | Workers’ compensation and black lung obligations | 200,827 | | | 208,193 | | Workers’ compensation and black lung obligations | 185,204 | | | 188,247 | |
| Pension obligations | Pension obligations | 152,184 | | | 159,930 | | Pension obligations | 102,700 | | | 110,836 | |
| Asset retirement obligations | Asset retirement obligations | 135,082 | | | 132,013 | | Asset retirement obligations | 144,851 | | | 142,048 | |
| Deferred income taxes | Deferred income taxes | 11,723 | | | 317 | | Deferred income taxes | 24,286 | | | 10,874 | |
| Other non-current liabilities | Other non-current liabilities | 20,794 | | | 26,176 | | Other non-current liabilities | 18,514 | | | 20,197 | |
| Non-current liabilities - discontinued operations | 23,245 | | | 23,683 | | |
| Total liabilities | Total liabilities | 888,184 | | | 1,310,803 | | Total liabilities | 800,542 | | | 882,724 | |
| Commitments and Contingencies (Note 16) | | |
| Commitments and Contingencies (Note 15) | | Commitments and Contingencies (Note 15) | |
| Stockholders’ Equity | Stockholders’ Equity | | Stockholders’ Equity | |
| Preferred stock - par value $0.01, 5.0 million shares authorized, none issued | Preferred stock - par value $0.01, 5.0 million shares authorized, none issued | — | | | — | | Preferred stock - par value $0.01, 5.0 million shares authorized, none issued | — | | | — | |
| Common stock - par value $0.01, 50.0 million shares authorized, 21.6 million issued and 16.3 million outstanding at September 30, 2022 and 20.8 million issued and 18.4 million outstanding at December 31, 2021 | 217 | | | 208 | | |
| Common stock - par value $0.01, 50.0 million shares authorized, 21.8 million issued and 14.8 million outstanding at March 31, 2023 and 21.7 million issued and 15.5 million outstanding at December 31, 2022 | | Common stock - par value $0.01, 50.0 million shares authorized, 21.8 million issued and 14.8 million outstanding at March 31, 2023 and 21.7 million issued and 15.5 million outstanding at December 31, 2022 | 218 | | | 217 | |
| Additional paid-in capital | Additional paid-in capital | 811,012 | | | 784,743 | | Additional paid-in capital | 813,299 | | | 815,442 | |
| Accumulated other comprehensive loss | Accumulated other comprehensive loss | (60,886) | | | (58,503) | | Accumulated other comprehensive loss | (12,650) | | | (12,162) | |
| Treasury stock, at cost: 7.0 million shares at March 31, 2023 and 6.2 million shares at December 31, 2022 | | Treasury stock, at cost: 7.0 million shares at March 31, 2023 and 6.2 million shares at December 31, 2022 | (791,557) | | | (649,061) | |
| | Treasury stock, at cost: 5.3 million shares at September 30, 2022 and 2.4 million shares at December 31, 2021 | (521,094) | | | (107,800) | | |
| Retained earnings (accumulated deficit) | 1,142,420 | | | (71,739) | | |
| Retained earnings | | Retained earnings | 1,539,265 | | | 1,275,319 | |
| Total stockholders’ equity | Total stockholders’ equity | 1,371,669 | | | 546,909 | | Total stockholders’ equity | 1,548,575 | | | 1,429,755 | |
| Total liabilities and stockholders’ equity | Total liabilities and stockholders’ equity | $ | 2,259,853 | | | $ | 1,857,712 | | Total liabilities and stockholders’ equity | $ | 2,349,117 | | | $ | 2,312,479 | |
Refer to accompanying Notes to Condensed Consolidated Financial Statements.
ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Amounts in thousands)
| | | Nine Months Ended September 30, | | Three Months Ended March 31, |
| | 2022 | | 2021 | | 2023 | | 2022 |
| Operating activities: | Operating activities: | | | | Operating activities: | | | |
| Net income | Net income | $ | 1,227,865 | | | $ | 31,345 | | Net income | $ | 270,771 | | | $ | 400,891 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | Adjustments to reconcile net income to net cash provided by operating activities: | | Adjustments to reconcile net income to net cash provided by operating activities: | |
| Depreciation, depletion and amortization | Depreciation, depletion and amortization | 83,690 | | | 80,261 | | Depreciation, depletion and amortization | 29,423 | | | 28,035 | |
| Amortization of acquired intangibles, net | Amortization of acquired intangibles, net | 16,038 | | | 9,402 | | Amortization of acquired intangibles, net | 2,197 | | | 5,748 | |
| Amortization of debt issuance costs and accretion of debt discount | Amortization of debt issuance costs and accretion of debt discount | 7,757 | | | 9,351 | | Amortization of debt issuance costs and accretion of debt discount | 534 | | | 3,679 | |
| Mark-to-market adjustment for acquisition-related obligations | Mark-to-market adjustment for acquisition-related obligations | 10,615 | | | 18,009 | | Mark-to-market adjustment for acquisition-related obligations | — | | | 9,361 | |
| Gain on disposal of assets | Gain on disposal of assets | (2,607) | | | (5,342) | | Gain on disposal of assets | (2,363) | | | (636) | |
| Accretion on asset retirement obligations | Accretion on asset retirement obligations | 17,822 | | | 19,970 | | Accretion on asset retirement obligations | 6,377 | | | 5,954 | |
| Employee benefit plans, net | Employee benefit plans, net | 1,312 | | | 6,685 | | Employee benefit plans, net | 3,261 | | | (174) | |
| Deferred income taxes | Deferred income taxes | 11,406 | | | (1) | | Deferred income taxes | 14,432 | | | 4,676 | |
| Stock-based compensation | Stock-based compensation | 4,103 | | | 4,351 | | Stock-based compensation | 3,034 | | | 1,182 | |
| Equity loss in affiliates | Equity loss in affiliates | 8,318 | | | 1,161 | | Equity loss in affiliates | 1,748 | | | 1,361 | |
| Other, net | Other, net | 432 | | | (3,938) | | Other, net | 126 | | | 135 | |
| Changes in operating assets and liabilities | Changes in operating assets and liabilities | (87,714) | | | (100,681) | | Changes in operating assets and liabilities | (152,153) | | | (124,087) | |
| Net cash provided by operating activities | Net cash provided by operating activities | 1,299,037 | | | 70,573 | | Net cash provided by operating activities | 177,387 | | | 336,125 | |
| Investing activities: | Investing activities: | | | | Investing activities: | | | |
| Capital expenditures | Capital expenditures | (103,351) | | | (60,386) | | Capital expenditures | (74,248) | | | (28,146) | |
| Proceeds on disposal of assets | Proceeds on disposal of assets | 3,010 | | | 7,471 | | Proceeds on disposal of assets | 3,478 | | | 917 | |
| Cash paid for business acquired | | Cash paid for business acquired | (11,919) | | | — | |
| Purchases of investment securities | Purchases of investment securities | (181,539) | | | (15,474) | | Purchases of investment securities | (141,750) | | | (50) | |
| Maturity of investment securities | 117,380 | | | 10,508 | | |
| Sales and maturities of investment securities | | Sales and maturities of investment securities | 204,660 | | | 28,438 | |
| Capital contributions to equity affiliates | Capital contributions to equity affiliates | (13,832) | | | (4,473) | | Capital contributions to equity affiliates | (8,124) | | | (3,468) | |
| Other, net | Other, net | (4,232) | | | 52 | | Other, net | 12 | | | (1,243) | |
| Net cash used in investing activities | Net cash used in investing activities | (182,564) | | | (62,302) | | Net cash used in investing activities | (27,891) | | | (3,552) | |
| Financing activities: | Financing activities: | | | | Financing activities: | | | |
| | Repurchases of long-term debt | — | | | (18,415) | | |
| Principal repayments of long-term debt | Principal repayments of long-term debt | (450,484) | | | (61,869) | | Principal repayments of long-term debt | (438) | | | (200,461) | |
| Dividend and dividend equivalents paid | Dividend and dividend equivalents paid | (6,807) | | | — | | Dividend and dividend equivalents paid | (85,979) | | | — | |
| Common stock repurchases and related expenses | Common stock repurchases and related expenses | (391,166) | | | (786) | | Common stock repurchases and related expenses | (144,919) | | | (21,844) | |
| Proceeds from exercise of warrants | Proceeds from exercise of warrants | 4,771 | | | — | | Proceeds from exercise of warrants | 222 | | | 2,257 | |
| Other, net | Other, net | (447) | | | (1,846) | | Other, net | (338) | | | 348 | |
| Net cash used in financing activities | Net cash used in financing activities | (844,133) | | | (82,916) | | Net cash used in financing activities | (231,452) | | | (219,700) | |
| Net increase (decrease) in cash and cash equivalents and restricted cash | 272,340 | | | (74,645) | | |
| Net (decrease) increase in cash and cash equivalents and restricted cash | | Net (decrease) increase in cash and cash equivalents and restricted cash | (81,956) | | | 112,873 | |
| Cash and cash equivalents and restricted cash at beginning of period | Cash and cash equivalents and restricted cash at beginning of period | 182,614 | | | 244,571 | | Cash and cash equivalents and restricted cash at beginning of period | 355,394 | | | 182,614 | |
| Cash and cash equivalents and restricted cash at end of period | Cash and cash equivalents and restricted cash at end of period | $ | 454,954 | | | $ | 169,926 | | Cash and cash equivalents and restricted cash at end of period | $ | 273,438 | | | $ | 295,487 | |
| | Supplemental disclosure of noncash investing and financing activities: | | Supplemental disclosure of noncash investing and financing activities: | |
| Financing leases and capital financing - equipment | | Financing leases and capital financing - equipment | $ | 1,753 | | | $ | 736 | |
| Accrued capital expenditures | | Accrued capital expenditures | $ | 13,703 | | | $ | 9,529 | |
| Accrued common stock repurchases | | Accrued common stock repurchases | $ | 5,995 | | | $ | 1,996 | |
| Dividends declared | | Dividends declared | $ | 6,825 | | | $ | — | |
The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the Condensed Consolidated Balance Sheets that sum to the total of the same such amounts shown in the Condensed Consolidated Statements of Cash Flows.
| | | As of September 30, | | As of March 31, |
| | | 2022 | | 2021 | | 2023 | | 2022 |
| Cash and cash equivalents | Cash and cash equivalents | $ | 404,430 | | | $ | 78,283 | | Cash and cash equivalents | $ | 222,507 | | | $ | 159,455 | |
| Short-term restricted cash (included in Prepaid expenses and other current assets) | 18,800 | | | 7,642 | | |
| Short-term restricted cash | | Short-term restricted cash | — | | | 17,556 | |
| Long-term restricted cash | Long-term restricted cash | 31,724 | | | 84,001 | | Long-term restricted cash | 50,931 | | | 118,476 | |
| Total cash and cash equivalents and restricted cash shown in the Condensed Consolidated Statements of Cash Flows | Total cash and cash equivalents and restricted cash shown in the Condensed Consolidated Statements of Cash Flows | $ | 454,954 | | | $ | 169,926 | | Total cash and cash equivalents and restricted cash shown in the Condensed Consolidated Statements of Cash Flows | $ | 273,438 | | | $ | 295,487 | |
Refer to accompanying Notes to Condensed Consolidated Financial Statements.
ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited)
(Amounts in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stock | | Additional Paid-in Capital | | Accumulated Other Comprehensive Loss | | Treasury Stock at Cost | | (Accumulated Deficit) Retained Earnings | | Total Stockholders’ Equity |
| Balances, December 31, 2020 | $ | 206 | | | $ | 779,424 | | | $ | (111,985) | | | $ | (107,014) | | | $ | (360,529) | | | $ | 200,102 | |
| Net loss | — | | | — | | | — | | | — | | | (32,928) | | | (32,928) | |
| Other comprehensive income, net | — | | | — | | | 1,484 | | | — | | | — | | | 1,484 | |
| Stock-based compensation and issuance of common stock for share vesting | 1 | | | 2,182 | | | — | | | — | | | — | | | 2,183 | |
| Common stock repurchases and related expenses | — | | | — | | | — | | | (680) | | | — | | | (680) | |
| Balances, March 31, 2021 | $ | 207 | | | $ | 781,606 | | | $ | (110,501) | | | $ | (107,694) | | | $ | (393,457) | | | $ | 170,161 | |
| Net loss | — | | | — | | | — | | | — | | | (18,991) | | | (18,991) | |
| Other comprehensive income, net | — | | | — | | | 10,180 | | | — | | | — | | | 10,180 | |
| Stock-based compensation and issuance of common stock for share vesting | 1 | | | 980 | | | — | | | — | | | — | | | 981 | |
| Balances, June 30, 2021 | $ | 208 | | | $ | 782,586 | | | $ | (100,321) | | | $ | (107,694) | | | $ | (412,448) | | | $ | 162,331 | |
| Net income | — | | | — | | | — | | | — | | | 83,264 | | | 83,264 | |
| Other comprehensive income, net | — | | | — | | | 1,413 | | | — | | | — | | | 1,413 | |
| Stock-based compensation and issuance of common stock for share vesting | — | | | 1,189 | | | — | | | — | | | — | | | 1,189 | |
| Warrant exercises | — | | | 6 | | | — | | | — | | | — | | | 6 | |
| Common stock repurchases and related expenses | — | | | — | | | — | | | (106) | | | — | | | (106) | |
| Balances, September 30, 2021 | $ | 208 | | | $ | 783,781 | | | $ | (98,908) | | | $ | (107,800) | | | $ | (329,184) | | | $ | 248,097 | |
| | | | | | | | | | | |
| Balances, December 31, 2021 | $ | 208 | | | $ | 784,743 | | | $ | (58,503) | | | $ | (107,800) | | | $ | (71,739) | | | $ | 546,909 | |
| Net income | — | | | — | | | — | | | — | | | 400,891 | | | 400,891 | |
| Other comprehensive income, net | — | | | — | | | 775 | | | — | | | — | | | 775 | |
| Stock-based compensation, issuance of common stock for share vesting, and common stock reissuances | 1 | | | (391) | | | — | | | 1,572 | | | — | | | 1,182 | |
| Exercise of stock options | — | | | 891 | | | — | | | — | | | — | | | 891 | |
| Warrants exercises | 1 | | | 3,038 | | | — | | | — | | | — | | | 3,039 | |
| Common stock repurchases and related expenses | — | | | — | | | — | | | (23,840) | | | — | | | (23,840) | |
| Balances, March 31, 2022 | $ | 210 | | | $ | 788,281 | | | $ | (57,728) | | | $ | (130,068) | | | $ | 329,152 | | | $ | 929,847 | |
| Net income | — | | | — | | | — | | | — | | | 574,157 | | | 574,157 | |
| Other comprehensive loss, net | — | | | — | | | (3,976) | | | — | | | — | | | (3,976) | |
| Stock-based compensation, issuance of common stock for share vesting, and common stock reissuances | — | | | 1,249 | | | — | | | 152 | | | — | | | 1,401 | |
| Exercise of stock options | — | | | 11 | | | — | | | — | | | — | | | 11 | |
| Warrants exercises | 6 | | | 18,062 | | | — | | | — | | | — | | | 18,068 | |
| Common stock repurchases and related expenses | — | | | — | | | — | | | (192,958) | | | — | | | (192,958) | |
| Cash dividend and dividend equivalents declared ($0.375 per share) | — | | | — | | | — | | | — | | | (6,977) | | | (6,977) | |
| Balances, June 30, 2022 | $ | 216 | | | $ | 807,603 | | | $ | (61,704) | | | $ | (322,874) | | | $ | 896,332 | | | $ | 1,319,573 | |
| | | | Common Stock | | Additional Paid-in Capital | | Accumulated Other Comprehensive (Loss) Income | | Treasury Stock at Cost | | (Accumulated Deficit) Retained Earnings | | Total Stockholders’ Equity |
| Balances, December 31, 2021 | | Balances, December 31, 2021 | $ | 208 | | | $ | 784,743 | | | $ | (58,503) | | | $ | (107,800) | | | $ | (71,739) | | | $ | 546,909 | |
| Net income | Net income | — | | | — | | | — | | | — | | | 252,817 | | | 252,817 | | Net income | — | | | — | | | — | | | — | | | 400,891 | | | 400,891 | |
| Other comprehensive income, net | Other comprehensive income, net | — | | | — | | | 818 | | | — | | | — | | | 818 | | Other comprehensive income, net | — | | | — | | | 775 | | | — | | | — | | | 775 | |
| Stock-based compensation, issuance of common stock for share vesting, and common stock reissuances | Stock-based compensation, issuance of common stock for share vesting, and common stock reissuances | — | | | 1,176 | | | — | | | 344 | | | — | | | 1,520 | | Stock-based compensation, issuance of common stock for share vesting, and common stock reissuances | 1 | | | (391) | | | — | | | 1,572 | | | — | | | 1,182 | |
| Exercise of stock options | Exercise of stock options | — | | | 270 | | | — | | | — | | | — | | | 270 | | Exercise of stock options | — | | | 891 | | | — | | | — | | | — | | | 891 | |
| Common stock repurchases and related expenses | | Common stock repurchases and related expenses | — | | | — | | | — | | | (23,840) | | | — | | | (23,840) | |
| Warrants exercises | Warrants exercises | 1 | | | 1,963 | | | — | | | — | | | — | | | 1,964 | | Warrants exercises | 1 | | | 3,038 | | | — | | | — | | | — | | | 3,039 | |
| Balances, March 31, 2022 | | Balances, March 31, 2022 | $ | 210 | | | $ | 788,281 | | | $ | (57,728) | | | $ | (130,068) | | | $ | 329,152 | | | $ | 929,847 | |
| | | Balances, December 31, 2022 | | Balances, December 31, 2022 | $ | 217 | | | $ | 815,442 | | | $ | (12,162) | | | $ | (649,061) | | | $ | 1,275,319 | | | $ | 1,429,755 | |
| Net income | | Net income | — | | | — | | | — | | | — | | | 270,771 | | | 270,771 | |
| Other comprehensive loss, net | | Other comprehensive loss, net | — | | | — | | | (488) | | | — | | | — | | | (488) | |
| Stock-based compensation, issuance of common stock for share vesting, and common stock reissuances | | Stock-based compensation, issuance of common stock for share vesting, and common stock reissuances | 1 | | | (3,444) | | | — | | | 6,477 | | | — | | | 3,034 | |
| | Common stock repurchases and related expenses | Common stock repurchases and related expenses | — | | | — | | | — | | | (198,564) | | | — | | | (198,564) | | Common stock repurchases and related expenses | — | | | — | | | — | | | (148,973) | | | — | | | (148,973) | |
| Cash dividend and dividend equivalents declared ($0.392 per share) | — | | | — | | | — | | | — | | | (6,729) | | | (6,729) | | |
| Balances, September 30, 2022 | $ | 217 | | | $ | 811,012 | | | $ | (60,886) | | | $ | (521,094) | | | $ | 1,142,420 | | | $ | 1,371,669 | | |
| Warrants exercises | | Warrants exercises | — | | | 1,301 | | | — | | | — | | | — | | | 1,301 | |
| Cash dividend and dividend equivalents declared ($0.44 per share) | | Cash dividend and dividend equivalents declared ($0.44 per share) | — | | | — | | | — | | | — | | | (6,825) | | | (6,825) | |
| Balances, March 31, 2023 | | Balances, March 31, 2023 | $ | 218 | | | $ | 813,299 | | | $ | (12,650) | | | $ | (791,557) | | | $ | 1,539,265 | | | $ | 1,548,575 | |
|
Refer to accompanying Notes to Condensed Consolidated Financial Statements.
ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands except share and per share data)
(1) Business and Basis of Presentation
Business
Alpha Metallurgical Resources, Inc. (“Alpha” or the “Company”) is a Tennessee-based mining company with operations across Virginia and West Virginia. With customers across the globe, high-quality reserves and significant port capacity, Alpha is a leading U.S. supplier of metallurgical coal products for the steel industry.
Basis of Presentation
Together, the condensed consolidated statements of operations, comprehensive income, balance sheets, cash flows and stockholders’ equity for the Company are referred to as the “Condensed Consolidated Financial Statements.” The Condensed Consolidated Financial Statements are also referenced across periods as “Condensed Consolidated Statements of Operations,” “Condensed Consolidated Statements of Comprehensive Income,” “Condensed Consolidated Balance Sheets,” “Condensed Consolidated Statements of Cash Flows,” and “Condensed Consolidated Statements of Stockholders’ Equity.” The Company’s former Northern Appalachia (“NAPP”) operations results of operations and financial position are reported as discontinued operations in the Condensed Consolidated Financial Statements. Refer to Note 2 for further information on discontinued operations.
The Condensed Consolidated Financial Statements include all wholly-owned subsidiaries’ results of operations for the three and nine months ended September 30, 2022March 31, 2023 and 2021.2022. All significant intercompany transactions have been eliminated in consolidation.
The accompanying interim Condensed Consolidated Financial Statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and in accordance with the rules and regulations of the United States Securities and Exchange Commission (“SEC”) for Form 10-Q. Such rules and regulations allow the omission of certain information and footnote disclosures normally included in the financial statements prepared in accordance with U.S. GAAP as long as the financial statements are not misleading. In the opinion of management, these interim Condensed Consolidated Financial Statements reflect all normal and recurring adjustments necessary for a fair presentation of the results for the periods presented. Results of operations for the three and nine months ended September 30, 2022March 31, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 20222023 or any other period. These interim Condensed Consolidated Financial Statements should be read in conjunction with the Company’s Consolidated Financial Statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.2022.
COVID-19 PandemicReclassifications
Certain immaterial amounts for the three months ended March 31, 2022 in the Condensed Consolidated Financials Statements and notes to the Condensed Consolidated Financials Statements have been recast to reclassify discontinued operations and present the related amounts within continuing operations as part of the All Other category.
In the first quarter of 2020, the COVID-19 virus was declared a pandemic by the World Health Organization. The COVID-19 pandemic has had negative impacts on the Company’s business, results of operations, financial condition and cash flows. The Company experienced an increase in employee absences due to COVID-19. Indirectly, through some of the Company’s third-party vendors, the Company and the Company’s customers have experienced some supply chain disruptions due to the COVID-19 pandemic. The full extent of the impact of the COVID-19 pandemic on the Company’s operational and financial performance will depend on certain developments, including the duration of the virus, its impact on the Company’s customers and suppliers, and the range of governmental and community reactions to the pandemic, which cannot be fully predicted. Health and safety are core values of the Company and are the foundation for how the Company manages every aspect of its business. The Company continues to monitor developments closely and adjust as necessary, including with respect to the Company’s implemented policies, procedures, and prevention measures to protect the safety and health of its employees.
Recently AdoptedRecent Accounting Guidance
Liabilities: In September 2022, the Financial Accounting Standards Board (the “FASB”)There are no new pronouncements issued Accounting Standards Update (“ASU”) 2022-04, Liabilities - Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations (“ASU 2022-04”). This update enhances transparency about an entity’s use of supplier finance programs. The ASU requires entitiesbut not yet effective expected to disclose information about the key terms of the program, outstanding confirmed amounts as of the end of the period, a rollforward of such amounts during each annual period, and a description of where in the financial statements outstanding amounts are presented. The amendments are effective for fiscal years beginning after December 15, 2022, with
ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands except share and per share data)
early application permitted. The Company adopted ASU 2022-04 during the third quarter of 2022. The adoption of this ASU did not have a material impact on the Company’s Condensed Consolidated Financial Statements and related disclosures.
Fair Value Measurement: In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurementfinancial position, results of Equity Securities Subject to Contractual Sale Restrictions (“ASU 2022-03”). This update clarifies how the fair value of equity securities subject to contractual sale restrictions is determined. Per the update, a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and is not considered in measuring fair value. Additionally, the update requires entities with investments in equity securities subject to contractual sale restrictions to disclose certain qualitative and quantitative information about such securities. The amendments are effective for fiscal years beginning after December 15, 2023, with early application permitted. The Company adopted ASU 2022-03 during the second quarter of 2022. The adoption of this ASU did not have a material impact on the Company’s Condensed Consolidated Financial Statements and related disclosures.
Financial Instruments: In March 2022, the FASB issued ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”). This update eliminates the troubled debt restructuring model for creditors that have adopted Topic 326. All loan modifications will now be accounted for under general loan modification guidance and, on a prospective basis, entities will be subject to new disclosure requirements covering modifications of receivables to borrowers experiencing financial difficulty. In addition, entities will be required to prospectively disclose current-period gross write-off information by year of origination. The amendments are effective for fiscal years beginning after December 15, 2022, with early application permitted. The Company adopted ASU 2022-02 during the first quarter of 2022. The adoption of this ASU did not have a material impact on the Company’s Condensed Consolidated Financial Statements and related disclosures.operations, or liquidity.
(2) Discontinued Operations
Discontinued operations consist of activity related to the Company’s former NAPP operations.
Major Financial Statement Components of Discontinued Operations
The income (loss) from discontinued operations before income taxes for the three months ended September 30, 2022 and 2021 was $1,273 and ($429), respectively. The loss from discontinued operations before income taxes for the nine months ended September 30, 2022 and 2021 was $525 and $1,067, respectively. Refer to the Condensed Consolidated Statements of Operations and Note 5 for income (loss) per share information related to discontinued operations.
The major components of assets and liabilities that are classified as discontinued operations in the Condensed Consolidated Balance Sheets are as follows:
| | | | | | | | | | | |
| September 30, 2022 | | December 31, 2021 |
| Assets: | | | |
| Prepaid expenses and other current assets | $ | 57 | | | $ | 462 | |
Other non-current assets (1) | $ | 8,521 | | | $ | 8,526 | |
| | | |
| Liabilities: | | | |
| Trade accounts payable, accrued expenses and other current liabilities | $ | 4,014 | | | $ | 5,838 | |
| Workers’ compensation and black lung obligations, non-current | $ | 23,245 | | | $ | 23,683 | |
(1) Comprised of workers’ compensation insurance receivable and long-term restricted investments collateralizing workers’ compensation obligations.
(3) Revenue
Disaggregation of Revenue from Contracts with Customers
The Company earns revenues primarily through the sale of coal produced at Company operations and coal purchased from third parties. The Company extracts, processes and markets met and thermal coal from deep and surface mines for sale to steel and coke producers, industrial customers, and electric utilities.
ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands except share and per share data)
The Company has disaggregated revenue between met coal and thermal coal and export and domestic revenues which depicts the pricing and contract differences between the two. Export revenue generally is derived by spot or short termshort-term contracts with pricing determined at the time of shipment or based on a market index;index, whereas domestic revenue is characterized by contracts that typically have a term of one year or longer and typically the pricing is fixed. The following tables disaggregate the Company’s coal revenues by product category and by market to depict how the nature, amount, timing, and uncertainty of the Company’s coal revenues and cash flows are affected by economic factors:
| | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, 2022 |
| Met Coal | | Thermal Coal | | Total |
| Export coal revenues | $ | 602,314 | | | $ | 39,031 | | | $ | 641,345 | |
| Domestic coal revenues | 192,301 | | | 34,203 | | | 226,504 | |
| Total coal revenues | $ | 794,615 | | | $ | 73,234 | | | $ | 867,849 | |
| | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, 2021 |
| Met Coal | | Thermal Coal | | Total |
| Export coal revenues | $ | 503,566 | | | $ | 13,311 | | | $ | 516,877 | |
| Domestic coal revenues | 92,115 | | | 38,137 | | | 130,252 | |
| Total coal revenues | $ | 595,681 | | | $ | 51,448 | | | $ | 647,129 | |
| | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, 2022 |
| Met Coal | | Thermal Coal | | Total |
| Export coal revenues | $ | 2,626,077 | | | $ | 55,796 | | | $ | 2,681,873 | |
| Domestic coal revenues | 514,771 | | | 75,201 | | | 589,972 | |
| Total coal revenues | $ | 3,140,848 | | | $ | 130,997 | | | $ | 3,271,845 | |
| | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, 2021 |
| Met Coal | | Thermal Coal | | Total |
| Export coal revenues | $ | 996,642 | | | $ | 20,035 | | | $ | 1,016,677 | |
| Domestic coal revenues | 297,592 | | | 111,770 | | | 409,362 | |
| Total coal revenues | $ | 1,294,234 | | | $ | 131,805 | | | $ | 1,426,039 | |
Performance Obligations
The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied as of September 30, 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Remainder of 2022 | | 2023 | | 2024 | | 2025 | | 2026 | | Total |
| Estimated coal revenues | $ | 11,388 | | | $ | 32,919 | | | $ | 37,250 | | | $ | — | | | $ | — | | | $ | 81,557 | |
(4) Accumulated Other Comprehensive Loss
The following tables summarize the changes to accumulated other comprehensive loss during the nine months ended September 30, 2022 and 2021:
| | | | | | | | | | | | | | | | | | | | | | | |
| Balance January 1, 2022 | | Other comprehensive income (loss) before reclassifications | | Amounts reclassified from accumulated other comprehensive loss | | Balance September 30, 2022 |
| Employee benefit costs | $ | (58,503) | | | $ | (4,837) | | | $ | 2,454 | | | $ | (60,886) | |
ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands except share and per share data)
| | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2023 |
| Met Coal | | Thermal Coal | | Total |
| Export coal revenues | $ | 647,932 | | | $ | 30,199 | | | $ | 678,131 | |
| Domestic coal revenues | 210,047 | | | 18,520 | | | 228,567 | |
| Total coal revenues | $ | 857,979 | | | $ | 48,719 | | | $ | 906,698 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Balance January 1, 2021 | | Other comprehensive income (loss) before reclassifications | | Amounts reclassified from accumulated other comprehensive loss | | Balance September 30, 2021 |
| Employee benefit costs | $ | (111,985) | | | $ | 8,838 | | | $ | 4,239 | | | $ | (98,908) | |
| | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2022 |
| Met Coal | | Thermal Coal | | Total |
| Export coal revenues | $ | 888,006 | | | $ | 6,519 | | | $ | 894,525 | |
| Domestic coal revenues | 159,987 | | | 15,226 | | | 175,213 | |
| Total coal revenues | $ | 1,047,993 | | | $ | 21,745 | | | $ | 1,069,738 | |
Performance Obligations
The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied as of March 31, 2023:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Remainder of 2023 | | 2024 | | 2025 | | 2026 | | 2027 | | Total |
| Estimated coal revenues | $ | 110,624 | | | $ | 37,250 | | | $ | — | | | $ | — | | | $ | — | | | $ | 147,874 | |
(3) Accumulated Other Comprehensive Loss
The following tables summarize the changes to accumulated other comprehensive loss during the three months ended March 31, 2023 and 2022:
| | | | | | | | | | | | | | | | | | | | | | | |
| Balance January 1, 2023 | | Other comprehensive income (loss) before reclassifications | | Amounts reclassified from accumulated other comprehensive loss | | Balance March 31, 2023 |
| Employee benefit costs | $ | (12,162) | | | $ | — | | | $ | (488) | | | $ | (12,650) | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Balance January 1, 2022 | | Other comprehensive income (loss) before reclassifications | | Amounts reclassified from accumulated other comprehensive loss | | Balance March 31, 2022 |
| Employee benefit costs | $ | (58,503) | | | $ | — | | | $ | 775 | | | $ | (57,728) | |
The following table summarizes the amounts reclassified from accumulated other comprehensive loss and the Condensed Consolidated Statements of Operations line items affected by the reclassification during the three and nine months ended September 30, 2022March 31, 2023 and 2021:2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Details about accumulated other comprehensive loss components | Amounts reclassified from accumulated other comprehensive loss | Affected line item in the Condensed Consolidated Statements of Operations |
| Three Months Ended September 30, | | Nine Months Ended September 30, | | |
| 2022 | | 2021 | | 2022 | | 2021 | | | | |
| Employee benefit costs: | | | | | | | | | | | | |
Amortization of net actuarial loss (1) | $ | 828 | | | $ | 1,413 | | | $ | 2,483 | | | $ | 4,239 | | | | | | Miscellaneous income, net |
Settlement (1) | (10) | | | — | | | (29) | | | — | | | | | | Miscellaneous income, net |
| Total before income tax | $ | 818 | | | $ | 1,413 | | | $ | 2,454 | | | $ | 4,239 | | | | | | |
| Income tax | — | | | — | | | — | | | — | | | | | | Income tax expense |
| Total, net of income tax | $ | 818 | | | $ | 1,413 | | | $ | 2,454 | | | $ | 4,239 | | | | | | |
ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands except share and per share data)
| | | | | | | | | | | | | | | | | | | | | | |
| Details about accumulated other comprehensive loss components | Amounts reclassified from accumulated other comprehensive loss | | | | | | | | | Affected line item in the Condensed Consolidated Statements of Operations |
| Three Months Ended March 31, | | | | |
| 2023 | | 2022 | | | | | | | | |
| Employee benefit costs: | | | | | | | | | | | | |
Amortization of net actuarial (gain) loss (1) | $ | (627) | | | $ | 784 | | | | | | | | | | Miscellaneous income, net |
Settlement (1) | — | | | (9) | | | | | | | | | | Miscellaneous income, net |
| Total before income tax | $ | (627) | | | $ | 775 | | | | | | | | | | |
| Income tax | 139 | | | — | | | | | | | | | | Income tax expense |
| Total, net of income tax | $ | (488) | | | $ | 775 | | | | | | | | | | |
(1) These accumulated other comprehensive loss components are included in the computation of net periodic benefit costs for certain employee benefit plans. Refer to Note 14.13.
(5)(4) Net Income Per Share
The number of shares used to calculate basic net income per common share is based on the weighted average number of the Company’s outstanding common shares during the respective period. The number of shares used to calculate diluted net income per common share is based on the number of common shares used to calculate basic net income per common share plus the dilutive effect of stock options and other stock-based instruments held by the Company’s employees and directors during the period, and the Company’s outstanding warrants. The dilutive effect of outstanding stock-based instruments is determined by application of the treasury stock method. The stock options and warrants become dilutive for diluted net income per common share calculations when the market price of the Company’s common stock exceeds the exercise price. Anti-dilution also occurs in periods of a net loss, and the dilutive impact of all warrants and share-based compensation awards are excluded.
For the three months ended September 30,March 31, 2023 and 2022, and 2021, 0 and 942,408 warrants and stock options respectively, were excluded from the computation of dilutive net income per common share because they would have been anti-dilutive. For nine months ended September 30, 2022 and 2021, 0 and 948,351no warrants, stock options, andor other stock-based instruments respectively, were excluded from the computation of dilutive net income per common share because they would have been anti-dilutive. When applying the treasury stock method, anti-dilution generally occurs when the exercise prices or unrecognized compensation cost per share are higher than the Company’s average stock price during an applicable period.
The following table presents the net income per common share for the three and nine months ended September 30, 2022March 31, 2023 and 2021:2022:
| | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | | | |
| 2023 | | 2022 | | | | | | | | |
| Basic | | | | | | | | | | | |
| Net income | 270,771 | | | 400,891 | | | | | | | | | |
| Weighted average common shares outstanding - basic | 15,266,895 | | | 18,574,026 | | | | | | | | | |
| Net income per common share - basic | $ | 17.74 | | | $ | 21.58 | | | | | | | | | |
| | | | | | | | | | | |
| Diluted | | | | | | | | | | | |
| Weighted average common shares outstanding - basic | 15,266,895 | | | 18,574,026 | | | | | | | | | |
| Diluted effect of warrants | 158,304 | | | 443,273 | | | | | | | | | |
| Diluted effect of stock options | 1,999 | | | 7,119 | | | | | | | | | |
| Diluted effect of other stock-based instruments | 489,180 | | | 516,224 | | | | | | | | | |
| Weighted average common shares outstanding - diluted | 15,916,378 | | | 19,540,642 | | | | | | | | | |
| Net income per common share - diluted | $ | 17.01 | | | $ | 20.52 | | | | | | | | | |
ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands except share and per share data)
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, | | |
| 2022 | | 2021 | | 2022 | | 2021 | | | | |
| Net income | | | | | | | | | | | |
| Income from continuing operations | $ | 251,836 | | | $ | 83,693 | | | $ | 1,228,269 | | | $ | 32,412 | | | | | |
| Income (loss) from discontinued operations | 981 | | | (429) | | | (404) | | | (1,067) | | | | | |
| Net income | $ | 252,817 | | | $ | 83,264 | | | $ | 1,227,865 | | | $ | 31,345 | | | | | |
| | | | | | | | | | | |
| Basic | | | | | | | | | | | |
| Weighted average common shares outstanding - basic | 17,119,328 | | | 18,445,709 | | | 18,019,161 | | | 18,426,639 | | | | | |
| | | | | | | | | | | |
| Basic income per common share: | | | | | | | | | | | |
| Income from continuing operations | $ | 14.71 | | | $ | 4.54 | | | $ | 68.16 | | | $ | 1.76 | | | | | |
| Income (loss) from discontinued operations | 0.06 | | | (0.03) | | | (0.02) | | | (0.06) | | | | | |
| Net income | $ | 14.77 | | | $ | 4.51 | | | $ | 68.14 | | | $ | 1.70 | | | | | |
| | | | | | | | | | | |
| Diluted | | | | | | | | | | | |
| Weighted average common shares outstanding - basic | 17,119,328 | | | 18,445,709 | | | 18,019,161 | | | 18,426,639 | | | | | |
| Diluted effect of warrants | 170,827 | | | — | | | 312,395 | | | — | | | | | |
| Diluted effect of stock options | 2,043 | | | 1,938 | | | 4,902 | | | 1,654 | | | | | |
| Diluted effect of other stock-based instruments | 426,319 | | | 465,705 | | | 464,216 | | | 355,350 | | | | | |
| Weighted average common shares outstanding - diluted | 17,718,517 | | | 18,913,352 | | | 18,800,674 | | | 18,783,643 | | | | | |
| | | | | | | | | | | |
| Diluted income per common share: | | | | | | | | | | | |
| Income from continuing operations | $ | 14.21 | | | $ | 4.43 | | | $ | 65.33 | | | $ | 1.73 | | | | | |
| Income (loss) from discontinued operations | 0.06 | | | (0.03) | | | (0.02) | | | (0.06) | | | | | |
| Net income | $ | 14.27 | | | $ | 4.40 | | | $ | 65.31 | | | $ | 1.67 | | | | | |
(6)(5) Inventories, net
Inventories, net consisted of the following:
| | | | September 30, 2022 | | December 31, 2021 | | March 31, 2023 | | December 31, 2022 |
| Raw coal | Raw coal | $ | 38,145 | | | $ | 20,347 | | Raw coal | $ | 54,848 | | | $ | 57,382 | |
| Saleable coal | Saleable coal | 100,655 | | | 81,240 | | Saleable coal | 152,383 | | | 91,474 | |
Materials, supplies and other, net | Materials, supplies and other, net | 39,759 | | | 27,795 | | Materials, supplies and other, net | 59,447 | | | 51,718 | |
| Total inventories, net | Total inventories, net | $ | 178,559 | | | $ | 129,382 | | Total inventories, net | $ | 266,678 | | | $ | 200,574 | |
(7)(6) Capital Stock
Share Repurchase Program
On March 4, 2022,February 21, 2023, the Company’s Board of Directors (the “Board”) adoptedapproved a $200,000 increase to the existing common share repurchase program that permitted the CompanyBoard adopted on March 4, 2022, bringing the total authorization to repurchase up to an aggregate amount of $150,000 of the Company's common stock. On May 3, 2022, the Company’s Board amended the share repurchase programstock to increase the aggregate amount the Company is permitted to repurchase to $600,000 of the Company's common stock. Share repurchases may be made from time to time through open market transactions, block trades, tender offers, or otherwise, and the program has no expiration date. The share repurchase
ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands except share and per share data)
program does not obligate the Company to acquire any particular amount of common stock or to acquire shares on any particular timetable, and the program may be suspended at any time at the Company’s discretion. Repurchases under the program are subject to market and business conditions, available liquidity, the Company’s cash needs, restrictions under agreements or obligations, legal or regulatory requirements or restrictions and other relevant factors.$1,200,000. As of September 30, 2022,March 31, 2023, the Company had repurchased an aggregate of 2,731,4894,414,451 shares under the plan for an aggregate purchase price of approximately $389,163$654,468 (comprised of $389,081$654,335 of share repurchases and $82$133 of related fees). Refer to Note 18 for subsequent event disclosuresThe Company has also accrued a stock repurchase excise tax of $1,199 related to an increase in the aggregate amount permitted to be repurchased under the share repurchase program.program as of March 31, 2023, which is recorded in treasury stock at cost.
Dividend Program
OnPursuant to the dividend policy adopted by the Board on May 3, 2022, the Company‘s Board adopted a dividend policy. Pursuant to this policy, the Board initially intended to pay aggregate cash dividends of $1.50 per share of common stock per year, with $0.375 per share paid each quarter. On August 4, 2022 the Company’s Board increased the quarterly dividend amount to $0.392 per share. In addition, pursuant to the terms of certain stock-based compensation awards under the Company’s Management Incentive Plan and Long-Term Incentive Plan, dividend equivalent amounts for each quarterly dividend will become payable at various vesting dates with respect to each underlying outstanding award.
The Company’s Board declared the following dividendsquarterly cash dividend on the Company’s common stock during the ninethree months ended September 30, 2022:March 31, 2023:
| | Dividend per share | Dividend per share | Dividends Paid (1) | | Declaration Date | | Holders of Record Date | | Payable Date | | Dividend per share | Dividend Paid (1) | | Declaration Date | | Holders of Record Date | | Payable Date | |
| $ | 0.375 | | $ | 6,773 | | | May 3, 2022 | | June 15, 2022 | | July 1, 2022 | | 0.44 | | $ | 6,602 | | | February 21, 2023 | | March 15, 2023 | | April 3, 2023 | |
| $ | 0.392 | | $ | 6,522 | | | August 4, 2022 | | September 15, 2022 | | October 3, 2022 | | |
(1) Excludes dividend equivalents paid or accrued of $411$223 as of September 30, 2022.March 31, 2023. As of September 30, 2022,March 31, 2023, a related $6,522$6,602 balance was held on deposit to facilitate the dividend payment on OctoberApril 3, 2022 which was included within Prepaid expenses and other current assets on the Company’s Condensed Consolidated Balance Sheets.2023.
The Company expects any future dividend payments will be targeted to be paid in the first month of each calendar quarter. Any decisions as to whether and when to pay future cash dividends will, however, be made by the Board and depend on the Company’s future earnings and financial condition and other relevant factors. Refer to Note 1817 for subsequent event disclosures related to the Company’s dividend program which includes the declaration of the quarterly cash dividend and a one-time, special dividend.program.
Warrants
On July 26, 2016, the Company issued 810,811 warrants, which are classified as equity instruments. Pursuant to the underlying warrants agreement, the warrants are exercisable for cash or on a cashless basis at any time until 5:00 p.m. Eastern Time on July 26, 2023, and no fractional shares shall be issued upon warrant exercises. Pursuant to the underlying warrants agreement, the exercise price was adjusted from $46.911$45.086 per share to $46.804$44.972 per share as of the JuneMarch 15, 20222023 dividend record date as a result ofwhile the occurrence of the dividend declaration on May 3, 2022. The warrant share number remained unchanged, at 1.15. The exercise price was subsequently adjusted from $46.804 per share to $46.679 per share and the warrant share number was adjusted from 1.15 to 1.16 as of the September 15, 2022 dividend record date as a result of the occurrence of the dividend declaration on August 4, 2022.1.20. Refer to Note 1817 for subsequent event disclosures related to the Company’s dividend program which could result in an additional adjustment to the warrants exercise price and warrants share number.
As of September 30, 2022, 211,477March 31, 2023, 159,668 warrants remained outstanding, with a total of 245,313191,602 shares underlying the un-exercised warrants. For the three and nine months ended September 30, 2022,March 31, 2023, the Company issued 60,084 and 678,24137,404 shares of common stock respectively, resulting from exercises of its warrants and, pursuant to the terms of the underlying warrants agreement, withheld 18,151 and 186,3978,514 of the issued shares respectively, in satisfaction of the warrant exercise price and in lieu of fractional shares, which were subsequently reclassified as treasury stock in the amountsamount of $1,680 and $18,331, respectively.$1,075.
As of September 30, 2021, 801,248March 31, 2022, 744,845 warrants were outstanding, with a total of 921,435856,572 shares underlying the un-exercised warrants. For the three and nine months ended September 30, 2021,March 31, 2022, the Company issued 14064,861 shares of common stock resulting from exercises of its warrants and, pursuant to the terms of the underlying warrants agreement, withheld 91 of the issued shares in satisfaction of the warrant exercise price and in lieu of fractional shares, which were subsequently reclassified as treasury stock.
ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands except share and per share data)
from exercises of its warrants and, pursuant to the terms of the underlying warrants agreement, withheld 16 of the issued shares in satisfaction of the warrant exercise price and in lieu of fractional shares.
(8)(7) Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following:
| | | September 30, 2022 | | December 31, 2021 | | March 31, 2023 | | December 31, 2022 |
| Wages and benefits | Wages and benefits | $ | 88,130 | | | $ | 52,310 | | Wages and benefits | $ | 55,739 | | | $ | 69,458 | |
| Workers’ compensation | Workers’ compensation | 10,582 | | | 10,582 | | Workers’ compensation | 11,651 | | | 11,651 | |
| Black lung | Black lung | 7,235 | | | 7,235 | | Black lung | 9,664 | | | 9,664 | |
| Taxes other than income taxes | Taxes other than income taxes | 28,006 | | | 30,734 | | Taxes other than income taxes | 30,820 | | | 24,959 | |
| Asset retirement obligations | Asset retirement obligations | 33,533 | | | 32,159 | | Asset retirement obligations | 36,543 | | | 36,963 | |
| Accrued interest and fees | 1,035 | | | 14,489 | | |
| Dividend payable | | Dividend payable | 6,824 | | | 86,118 | |
| Income taxes payable | | Income taxes payable | 14,898 | | | — | |
| Freight accrual | Freight accrual | 12,007 | | | 15,085 | | Freight accrual | 12,440 | | | 7,181 | |
| Dividend payable | 6,649 | | | — | | |
| Other | Other | 16,725 | | | 12,013 | | Other | 11,348 | | | 19,262 | |
| Total accrued expenses and other current liabilities | Total accrued expenses and other current liabilities | $ | 203,902 | | | $ | 174,607 | | Total accrued expenses and other current liabilities | $ | 189,927 | | | $ | 265,256 | |
(9)(8) Long-Term Debt
Long-term debt consisted of the following:
| | | | | | | | | | | |
| | September 30, 2022 | | December 31, 2021 |
| Term Loan Credit Facility - due June 2024 | $ | — | | | $ | 449,435 | |
| | | |
Other (1) | 4,698 | | | 5,311 | |
| Debt discount and issuance costs | — | | | (6,195) | |
| Total long-term debt | $ | 4,698 | | | $ | 448,551 | |
| Less current portion | (1,711) | | | (2,989) | |
| Long-term debt, net of current portion | $ | 2,987 | | | $ | 445,562 | |
(1) Includes financing leases. | | | | | | | | | | | |
| | March 31, 2023 | | December 31, 2022 |
| Notes payable and other | $ | 6,972 | | | $ | 6,179 | |
| | | |
| Financing leases | 4,969 | | | 4,796 | |
| | | |
| Total long-term debt | $ | 11,941 | | | $ | 10,975 | |
| Less current portion | (3,562) | | | (3,078) | |
| Long-term debt, net of current portion | $ | 8,379 | | | $ | 7,897 | |
Term Loan Credit Facility - due June 2024
On June 14, 2019, the Company entered into a Credit Agreement that provided for a senior secured term loan facility with a maturity date of June 14, 2024 (the “Term Loan Credit Facility”). As of September 30, 2022, there were no outstanding borrowings under the Term Loan Credit Facility as a result of the Company’s voluntary prepayments of $449,435 of outstanding principal borrowings during the first and second quarters of 2022. Effective with the final voluntary prepayment on June 3, 2022, the Credit Agreement was terminated, and the Company was released of all underlying obligations including the Credit Agreement covenants. As December 31, 2021, the carrying value of the Term Loan Credit Facility was $443,241, all of which was classified as long-term within the Condensed Consolidated Balance Sheets.
Second Amended and Restated Asset-Based Revolving Credit Agreement
The Second Amended and Restated Asset-Based Revolving Credit Agreement (“ABL(the “ABL Agreement”) includes a senior secured asset-based revolving credit facility (the “ABL Facility”). Under the ABL Facility, the Company may borrow cash or obtain letters of credit, on a revolving basis, in an aggregate amount of up to $155,000, of which no more than $150,000 may represent outstanding letters of credit ($125,000 on a committed basis and another $25,000 on an uncommitted cash collateralized basis) with any borrowingsthe facility having a maturity date of December 6, 2024. As of September 30, 2022March 31, 2023 and December 31, 2021,2022, there were no outstanding borrowings under the ABL Facility. As of September 30, 2022March 31, 2023 and December 31, 2021,2022, the Company had $63,898 and $121,037$61,877 letters of credit outstanding under the ABL Facility, respectively.Facility.
The ABL Agreement, as amended, and related documents contain negative and affirmative covenants including certain financial covenants. The Company is in compliance with all covenants under these agreements as of March 31, 2023.
(9) Acquisition-Related Obligations
Acquisition-related obligations consisted of the following:
| | | | | | | | | | | |
| March 31, 2023 | | December 31, 2022 |
| Contingent Revenue Obligation | $ | — | | | $ | 27,719 | |
| Environmental Settlement Obligation | 381 | | | 535 | |
| | | |
| Total acquisition-related obligations - current | $ | 381 | | | $ | 28,254 | |
| | | |
| | | |
ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands except share and per share data)
The ABL Agreement provides that a specified percentage of billed and unbilled receivables and raw and clean inventory meeting certain criteria are eligible to be counted for purposes of collateralizing the amount of financing available, subject to certain terms and conditions. Availability under the ABL Facility is calculated on a monthly basis and fluctuates based on qualifying amounts of coal inventory and trade accounts receivable (the “Borrowing Base”) and the facility's covenant limitations related to the Fixed Charge Coverage Ratio (as defined in therein). In accordance with terms of the ABL Facility, the Company may be required to collateralize the ABL Facility to the extent outstanding borrowings and letters of credit under the ABL Facility exceed the Borrowing Base after considering covenant limitations.
The ABL Facility is guaranteed by substantially all of Alpha’s direct and indirect subsidiaries (together with Alpha, the “Loan Parties”) and secured by all or substantially all assets of the Loan Parties, including equity in Alpha’s direct domestic subsidiaries, as collateral for the obligations under the ABL Facility. The ABL Facility has a first lien on ABL priority collateral and a second lien on Term Loan Priority Collateral. As noted above, the Term Loan Credit Facility was voluntarily prepaid in full on June 3, 2022, and in connection therewith, the Term Loan Priority Collateral has been released in connection therewith, and the ABL Facility’s lien on the Term Loan Priority Collateral is no longer second. The ABL Agreement, as amended, and related documents contain negative and affirmative covenants including certain financial covenants. The Company is in compliance with all covenants under these agreements as of September 30, 2022.
(10) Acquisition-Related Obligations
Acquisition-related obligations consisted of the following:
| | | | | | | | | | | |
| September 30, 2022 | | December 31, 2021 |
| Contingent Revenue Obligation | $ | 29,454 | | | $ | 35,005 | |
| Environmental Settlement Obligations | 677 | | | 6,633 | |
| Discount | — | | | (233) | |
| Total acquisition-related obligations | $ | 30,131 | | | $ | 41,405 | |
| Less current portion | (30,131) | | | (22,405) | |
| Acquisition-related obligations, net of current portion | $ | — | | | $ | 19,000 | |
Contingent Revenue Obligation
AsDuring the first quarter of September 30, 2022 and December 31, 2021,2023, the carrying valueCompany paid the final calculated payment pursuant to terms of the Contingent Revenue Obligation was $29,454 and $35,005, with $29,454 and $16,005 classified as current, respectively, classified as an acquisition-related obligation in the Condensed Consolidated Balance Sheets.Obligation. Refer to Note 1211 for further disclosures related to the fair value assignment and methods used.
(11)(10) Asset Retirement Obligations
The following table summarizes the changes in asset retirement obligations for the ninethree months ended September 30, 2022:March 31, 2023:
| | | | | |
Total asset retirement obligations at December 31, 20212022 | $ | 164,172179,011 | |
| Accretion for the period | 17,8226,377 | |
Sites added during the period | 634 | |
| Revisions in estimated cash flows | (897)(31) | |
| Expenditures for the period | (13,116)(3,963) | |
Total asset retirement obligations at September 30, 2022March 31, 2023 | 168,615181,394 | |
Less current portion (1) | (33,533)(36,543) | |
| Long-term portion | $ | 135,082144,851 | |
(1) Included within Accrued expenses and other current liabilities on the Company’s Condensed Consolidated Balance Sheets. Refer to Note 8.7.
ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands except share and per share data)
(12)(11) Fair Value of Financial Instruments and Fair Value Measurements
The estimated fair values of financial instruments are determined based on relevant market information. These estimates involve uncertainty and cannot be determined with precision.
The carrying amounts for cash and cash equivalents, trade accounts receivable, net, prepaid expenses and other current assets, short-term and long-term restricted cash, short-term and long-term deposits, trade accounts payable, short-term and long-term dividend payable, and accrued expenses and other current liabilities, and environmental settlement obligations approximate fair value as of September 30, 2022March 31, 2023 and December 31, 20212022 due to the short maturity of these instruments.
The following tables set forth by level, within the fair value hierarchy, the Company’s long-term debt and acquisition-related obligations at fair value as of September 30, 2022 and December 31, 2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2022 |
| Carrying Amount (1) | | Total Fair Value | | Quoted Prices in Active Markets
(Level 1) | | Significant Other Observable Inputs
(Level 2) | | Significant Unobservable Inputs
(Level 3) |
| Environmental Settlement Obligations | $ | 677 | | | $ | 677 | | | $ | — | | | $ | — | | | $ | 677 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 |
| Carrying Amount (1) | | Total Fair Value | | Quoted Prices in Active Markets
(Level 1) | | Significant Other Observable Inputs
(Level 2) | | Significant Unobservable Inputs
(Level 3) |
| Term Loan Credit Facility - due June 2024 | $ | 443,241 | | | $ | 447,561 | | | $ | — | | | $ | 447,561 | | | $ | — | |
| Environmental Settlement Obligations | $ | 6,400 | | | $ | 6,270 | | | $ | — | | | $ | — | | | $ | 6,270 | |
(1) Net of debt discounts and debt issuance costs.
The following table sets forth by level, within the fair value hierarchy, the Company’s financial and non-financial assets and liabilities that were accounted for at fair value on a recurring basis as of September 30, 2022March 31, 2023 and December 31, 2021.2022. Financial and non-financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the determination of fair value for assets and liabilities and their placement within the fair value hierarchy levels.
| | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2022 |
| Total Fair Value | | Quoted Prices in Active Markets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) |
| Contingent Revenue Obligation | $ | 29,454 | | | $ | — | | | $ | — | | | $ | 29,454 | |
| Trading securities | $ | 92,384 | | | $ | — | | | $ | 92,384 | | | $ | — | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2023 |
| Total Fair Value | | Quoted Prices in Active Markets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) |
Trading securities (1) | $ | 90,428 | | | $ | — | | | $ | 90,428 | | | $ | — | |
(1) Classified as Long-term restricted investments on the Company’s Condensed Consolidated Balance Sheets.
| | | | December 31, 2021 | | December 31, 2022 |
| | Total Fair Value | | Quoted Prices in Active Markets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | | Total Fair Value | | Quoted Prices in Active Markets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) |
| Contingent Revenue Obligation | Contingent Revenue Obligation | $ | 35,005 | | | $ | — | | | $ | — | | | $ | 35,005 | | Contingent Revenue Obligation | $ | 27,719 | | | $ | — | | | $ | — | | | $ | 27,719 | |
Trading securities | Trading securities | $ | 28,443 | | | $ | 27,075 | | | $ | 1,368 | | | $ | — | | Trading securities | $ | 151,787 | | | $ | — | | | $ | 151,787 | | | $ | — | |
The following tables present a reconciliation ofIncludes $46,052 classified as Short-term investments and $105,735 classified as Long-term restricted investments on the financial and non-financial assets and liabilities that were accounted for at fair value on a recurring basis and that were categorized within Level 3 of the fair value hierarchy:Company’s Condensed Consolidated Balance Sheets.
ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands except share and per share data)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 | | Payments | | Loss (Gain) Recognized in Earnings (1) | | Transfer In (Out) of Level 3 Fair Value Hierarchy | | September 30, 2022 |
| Contingent Revenue Obligation | $ | 35,005 | | | $ | (16,166) | | | $ | 10,615 | | | $ | — | | | $ | 29,454 | |
The following tables are reconciliations of the financial and non-financial assets and liabilities that were accounted for at fair value on a recurring basis and that were categorized within Level 3 of the fair value hierarchy:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2022 | | Payments | | Loss (Gain) Recognized in Earnings | | Transfer In (Out) of Level 3 Fair Value Hierarchy | | March 31, 2023 |
| Contingent Revenue Obligation | $ | 27,719 | | | $ | (27,719) | | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
December 31, 2021 | | Payments | | Loss (Gain) Recognized in Earnings (1) | | Transfer In (Out) of Level 3 Fair Value Hierarchy | | March 31, 2022 |
| Contingent Revenue Obligation | $ | 35,005 | | | $ | — | | | $ | 9,361 | | | $ | — | | | $ | 44,366 | |
(1) The loss recognized in earnings resulted primarily from an increase in forecasted future revenue as of September 30,March 31, 2022.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
December 31, 2020 | | Payments | | Loss (Gain) Recognized in Earnings (1) | | Transfer In (Out) of Level 3 Fair Value Hierarchy | | September 30, 2021 |
| Contingent Revenue Obligation | $ | 28,967 | | | $ | (11,396) | | | $ | 18,009 | | | $ | — | | | $ | 35,580 | |
(1) The loss recognized in earnings resulted primarily from an increase in forecasted future revenue as of September 30, 2021.
The following methods and assumptions were used to estimate the fair values of the assets and liabilities in the tables above:
Level 1 Fair Value Measurements
Trading Securities - Typically includes money market funds. The fair value is based on observable market data.
Level 2 Fair Value Measurements
Term Loan Credit Facility - due June 2024 - The fair value was based on the average between bid and ask prices provided by a third-party. As the fair value was based on observable market inputs and due to limited trading volume in the Term Loan Credit Facility, the Company had classified the fair value within Level 2 of the fair value hierarchy. Effective June 3, 2022, the Term Loan Credit Facility was terminated. Refer to Note 9 for additional information.
Trading Securities - Typically includes certificates of deposit, corporate fixed income, and U.S. government securities. The fair values of the Company’s trading securities are obtained from a third-party pricing service provider. The fair values provided by the pricing service provider are based on observable market inputs including credit spreads and broker-dealer quotes, among other inputs. The Company classifies the prices obtained from the pricing services within Level 2 of the fair value hierarchy because the underlying inputs are directly observable from active markets. However, the pricing models used entail a certain amount of subjectivity and therefore differing judgments in how the underlying inputs are modeled could result in different estimates of fair value.
Level 3 Fair Value Measurements
Environmental Settlement Obligations - Observable transactions are not available to aid in determining the fair value of these items. Therefore, the fair value was derived by using the expected present value approach in which estimated cash flows are discounted using a risk-free interest rate adjusted for credit risk (discount rate of approximately 0% as of September 30, 2022, based on the expected upcoming settlement date, and 13% as of December 31, 2021).
Contingent Revenue Obligation - The fair value of the contingent revenue obligationContingent Revenue Obligation was estimated using a Black-Scholes pricing model and is marked to market at each reporting period with changes in value reflected in earnings.model. The inputs included in the Black-Scholes pricing model are the Company'sCompany’s forecasted future revenue, the stated royalty rate, the remaining periods in the obligation, annual risk-free interest rate based on the U.S. Constant Maturity Treasury Curve and annualized volatility. The annualized volatility was calculated by observing volatilities for comparable companies with adjustments for the Company's size and leverage. The rangeAs the royalty period ended on December 31, 2022, the fair value of significant unobservable inputs used to value the Contingent Revenue Obligationremaining obligation as of September 30, 2022 and December 31, 2021, are set forth inthat date represents the following table:
| | | | | | | | | | | |
| September 30, 2022 | | December 31, 2021 |
Forecasted future revenue | $3.0 billion | | $1.5 - $2.0 billion |
Stated royalty rate | 1.0% - 1.5% | | 1.0% - 1.5% |
Annualized volatility | 20.5% - 31.8% (28.9%) | | 18.4% - 39.3% (29.9%) |
ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES
Notes2023. Refer to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands except share and per share data)
Note 9 for additional information.
(13)(12) Income Taxes
For the ninethree months ended September 30,March 31, 2023, the Company recorded income tax expense of $42,411 on income before income taxes of $313,182. The income tax expense differs from the expected statutory amount primarily due to the permanent impact of percentage depletion and foreign-derived intangible income deductions, partially offset by the impact of state income taxes, net of federal impact. For the three months ended March 31, 2022, the Company recorded income tax expense of $114,073$39,591 on income from continuing operations before income taxes of $1,342,342.$440,482. The income tax expense differs from the expected statutory amount primarily due to the decrease in the valuation allowance and the permanent impact of percentage depletion and foreign-derived intangible income deductions, partially offset by the impact of state income taxes, net of federal impact. For the nine months ended September 30, 2021, the Company recorded income tax expense of $211 on income from continuing operations before income taxes of $32,623. The income tax expense differs from the expected statutory amount primarily due to the decrease in the valuation allowance and the permanent impact of percentage depletion deductions, partially offset by the impact of state income taxes, net of federal impact.
As a result of generating income before income taxes during the nine months ended September 30, 2022, the Company recorded a decrease of $73,673 to its deferred tax asset valuation allowance recorded as of December 31, 2021. The decrease in the valuation allowance results in part from a decrease in deferred tax assets since the prior reporting date of December 31, 2021. The Company currently is relying primarily on the reversal of taxable temporary differences, along with consideration of taxable income via carryback to prior years and tax planning strategies, to support the realization of deferred tax assets. For each reporting period, the Company updates its assessment regarding the realizability of its deferred tax assets, including scheduling the reversal of its deferred tax assets and liabilities, to determine the amount of valuation allowance needed. Scheduling the reversal of deferred tax asset and liability balances requires judgment and estimation. The Company believes the deferred tax liabilities relied upon as future taxable income in its assessment will reverse in the same period and jurisdiction and are of the same character as the temporary differences giving rise to the deferred tax assets that will be realized. The valuation allowance recorded represents the portion of deferred tax assets for which the Company is unable to support realization through the methods described above.
During the nine months ended September 30, 2022, the Company paid estimated federal and state income taxes of $120,165. As of September 30, 2022, the Company has recorded a current federal income taxes receivable of $16,271, classified as Prepaid expenses and other current assets in the Condensed Consolidated Balance Sheets.
On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was signed into law. Among other provisions, the IRA enacts a 15% corporate alternative minimum tax and a 1% excise tax on repurchases of corporate stock for tax years beginning after December 31, 2022. The Company is currently assessing the impact of the IRA.
(14)(13) Employee Benefit Plans
The components of net periodic benefit cost (credit) cost other than the service cost component for black lung are included in the line item miscellaneous income, net in the Condensed Consolidated Statements of Operations.
Pension
The following table details the components of the net periodic benefit creditcost (credit) for pension obligations:
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, | | |
| 2022 | | 2021 | | 2022 | | 2021 | | | | |
| Interest cost | $ | 3,995 | | | $ | 3,392 | | | $ | 11,985 | | | $ | 10,176 | | | | | |
| Expected return on plan assets | (7,183) | | | (7,183) | | | (21,549) | | | (21,549) | | | | | |
| Amortization of net actuarial loss | 528 | | | 804 | | | 1,583 | | | 2,413 | | | | | |
| | | | | | | | | | | |
| Net periodic benefit credit | $ | (2,660) | | | $ | (2,987) | | | $ | (7,981) | | | $ | (8,960) | | | | | |
During the three months ended June 30, 2022, an annual census data actuarial revaluation of pension obligations was performed, which resulted in an increase in the liability for pension obligations of approximately $4,837 with the offset to accumulated other comprehensive gain and a slight decrease in net periodic benefit to be recognized subsequent to the revaluation date. An annual census data actuarial revaluation of pension obligations was also performed during the three months ended June 30, 2021, which resulted in a decrease in the liability for pension obligations of approximately $8,838 with the offset to accumulated other comprehensive gain and a slight increase in net periodic benefit to be recognized subsequent to the revaluation date.
ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands except share and per share data)
| | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | | | |
| 2023 | | 2022 | | | | | | | | |
| Interest cost | $ | 5,958 | | | $ | 3,984 | | | | | | | | | |
| Expected return on plan assets | (5,484) | | | (7,185) | | | | | | | | | |
| Amortization of net actuarial loss | 137 | | | 484 | | | | | | | | | |
| | | | | | | | | | | |
| Net periodic benefit cost (credit) | $ | 611 | | | $ | (2,717) | | | | | | | | | |
Black Lung
The following table details the components of the net periodic benefit cost for black lung obligations:
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | | Three Months Ended March 31, | |
| | 2022 | | 2021 | | 2022 | | 2021 | | | 2023 | | 2022 | |
| Service cost | Service cost | $ | 654 | | | $ | 739 | | | $ | 1,962 | | | $ | 2,217 | | | Service cost | $ | 513 | | | $ | 661 | | |
| Interest cost | Interest cost | 665 | | | 607 | | | 1,995 | | | 1,821 | | | Interest cost | 1,165 | | | 680 | | |
| Expected return on plan assets | Expected return on plan assets | (13) | | | (14) | | | (39) | | | (42) | | | Expected return on plan assets | (13) | | | (13) | | |
| Amortization of net actuarial loss | 209 | | | 522 | | | 627 | | | 1,566 | | | |
| Amortization of net actuarial (gain) loss | | Amortization of net actuarial (gain) loss | (708) | | | 314 | | |
| Net periodic benefit cost | Net periodic benefit cost | $ | 1,515 | | | $ | 1,854 | | | $ | 4,545 | | | $ | 5,562 | | | Net periodic benefit cost | $ | 957 | | | $ | 1,642 | | |
Defined Contribution and Profit Sharing Plans
During the third quarter of 2022, the Company announced a year-end discretionary employer contribution under the Alpha Metallurgical Resources 401(k) Retirement Savings Plan (the “Plan”) equal to the 2% of the Plan participants’ annual salaries. Effective in June 2021, the Company’s matching contributions under the Plan were reinstated after being suspended due to weak market conditions during the second quarter of 2020.
The Company’s total contributions to these plans for the three months ended September 30, 2022 and 2021 were $6,396 and $4,636, respectively. The Company’s total contributions to these plans for the nine months ended September 30, 2022 and 2021 were $12,599 and $4,830, respectively.
(15)(14) Related Party Transactions
During the three months ended September 30, 2021, the Company repurchased at a discount certain outstanding principal borrowings made under the Term Loan Credit Facility from existing shareholders through privately negotiated transactions. As the participating lenders were existing shareholders (related parties) of the Company as of the repurchase date, the Company analyzed various factors regarding each of the transactions and concluded such repurchases were at a reasonable market rate and reflected the terms of an arm’s length transaction per the requirements of the Term Loan Credit Facility. Refer to Note 9 for additional disclosures on long-term debt.
There were no other material related party transactions for the ninethree months ended September 30, 2022March 31, 2023 or 2021.2022.
(16)(15) Commitments and Contingencies
(a) General
Estimated losses from loss contingencies are accrued by a charge to income when information available indicates that it is probable that an asset has been impaired or a liability has been incurred and the amount of the loss can be reasonably estimated.
If a loss contingency is not probable or reasonably estimable, disclosure of the loss contingency is made in the Condensed Consolidated Financial Statements when it is at least reasonably possible that a loss may be incurred and that the loss could be material.
(b) Commitments and Contingencies
Commitments
The Company leases coal mining and other equipment under long-term financing and operating leases with varying terms. In addition, the Company leases mineral interests and surface rights from landowners under various terms and royalty rates.
ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands except share and per share data)
Coal royalty expense was $44,340 and $30,077 for the three months ended September 30, 2022 and 2021, respectively. Coal royalty expense was $174,310 and $70,116 for the nine months ended September 30, 2022 and 2021, respectively.
Other Commitments
As of September 30, 2022, the Company has obligations under certain coal purchase agreements that contain minimum quantities to be purchased in the remainder of 2022 and 2023 totaling an estimated $65,149 and $10,943, respectively. The Company also has obligations under certain unconditional purchase obligations totaling $47,776, $28,674, and $67,125 in the remainder of 2022, 2023, and 2024, respectively.
Contingencies
Extensive regulation of the impacts of mining on the environment and of maintaining workplace safety has had, and is expected to continue to have, a significant effect on the Company’s costs of production and results of operations. Further regulations, legislation or litigation in these areas may also cause the Company’s sales or profitability to decline by increasing costs or by hindering the Company’s ability to continue mining at existing operations or to permit new operations.
During the normal course of business, contract-related matters arise between the Company and its customers. When a loss related to such matters is considered probable and can reasonably be estimated, the Company records a liability.
ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands except share and per share data)
As of September 30, 2022,March 31, 2023, per terms of the Cumberland Back-to-Back Coal Supply Agreements, the Company is required to purchase and sell 900209 tons of coal in the remainder of 20222023 totaling $34,733.$8,045. For the three months ended September 30,March 31, 2023 and 2022, and 2021, the Company purchased and sold 443193 and 514419 tons, respectively, totaling $16,979$7,341 and $19,948,$16,185, respectively, under the Cumberland Back-to-Back Coal Supply Agreements. For the nine months ended September 30, 2022 and 2021, the Company purchased and sold 1,120 and 1,974 tons, respectively, totaling $43,100 and $76,501, respectively, underAs of March 31, 2023, the Cumberland Back-to-Back Coal Supply Agreements. During the fourth quarter of 2022, one Cumberland Back-to-Back Coal Supply Agreement initiallyAgreements are scheduled to be fully performed by December 31, 2022 was extended into 2023 and is expected to be fully performed by the end of the second quarter of 2023.
(c) Guarantees and Financial Instruments with Off-Balance Sheet Risk
In the normal course of business, the Company is a party to certain guarantees and financial instruments with off-balance sheet risk, such as bank letters of credit, performance or surety bonds, and other guarantees and indemnities related to the obligations of affiliated entities which are not reflected in the Company’s Condensed Consolidated Balance Sheets. However, the underlying liabilities that they secure, such as asset retirement obligations, workers’ compensation liabilities, and royalty obligations, are reflected in the Company’s Condensed Consolidated Balance Sheets.
The Company is required to provide financial assurance in order to perform the post-mining reclamation required by its mining permits, pay workers’ compensation claims under workers’ compensation laws in various states, pay federal black lung benefits, and perform certain other obligations. In order to provide the required financial assurance, the Company generally uses surety bonds for post-mining reclamation and workers’ compensation obligations. The Company can also use bank letters of credit to collateralize certain obligations.
As of September 30, 2022,March 31, 2023, the Company had $63,898$61,877 letters of credit outstanding under the Second Amended and Restated Asset-Based Revolving CreditABL Agreement. Additionally, as of September 30, 2022,March 31, 2023, the Company had $50 in letters of credit outstanding under the Credit and Security Agreement dated June 30, 2017, and related amendments, between ANR, Inc. and First Tennessee Bank National Association.
As of September 30, 2022,March 31, 2023, the Company had outstanding surety bonds with a total face amount of $162,105$166,543 to secure various obligations and commitments. To secure the Company’s reclamation-related obligations, the Company has $34,750$35,253 of collateral in the form of restricted cash and restricted investments and deposits supporting these obligations as of September 30, 2022.March 31, 2023.
The Company meets frequently with its surety providers and has discussions with certain providers regarding the extent of and the terms of their participation in the program. These discussions may cause the Company to shift surety bonds between providers or to alter the terms of their participation in our program. To the extent that surety bonds become unavailable or the
ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands except share and per share data)
Company’s surety bond providers require additional collateral, the Company would seek to secure its obligations with letters of credit, cash deposits or other suitable forms of collateral. The Company’s failure to maintain, or inability to acquire, surety bonds or to provide a suitable alternative would have a material adverse effect on its liquidity. These failures could result from a variety of factors, including the lack of availability, higher cost or unfavorable market terms of new surety bonds, and the exercise by third-party surety bond issuers of their right to refuse to renew the surety.
Amounts included in restricted cash provide collateral to secure the following obligations:
| | | | | | | | | | | |
| | September 30, 2022 | | December 31, 2021 |
| Workers’ compensation and black lung obligations | $ | 21,985 | | | $ | 70,637 | |
| Reclamation-related obligations | 206 | | | 10,449 | |
| Financial payments and other performance obligations | 9,533 | | | 8,340 | |
| Contingent Revenue Obligation escrow | 18,800 | | | 11,977 | |
| Total restricted cash | 50,524 | | | 101,403 | |
Less current portion (1) | (18,800) | | | (11,977) | |
| Restricted cash, net of current portion | $ | 31,724 | | | $ | 89,426 | |
(1) Included within Prepaid expenses and other current assets on the Company’s Condensed Consolidated Balance Sheets. | | | | | | | | | | | |
| | March 31, 2023 | | December 31, 2022 |
| Workers’ compensation and black lung obligations | $ | 40,030 | | | $ | 15,334 | |
| Reclamation-related obligations | 701 | | | 3,220 | |
| Financial payments and other performance obligations | 10,200 | | | 10,387 | |
| Contingent Revenue Obligation escrow | — | | | 24,547 | |
| Total restricted cash | 50,931 | | | 53,488 | |
| Less current portion | — | | | (24,547) | |
| Restricted cash, net of current portion | $ | 50,931 | | | $ | 28,941 | |
Amounts included in restricted investments provide collateral to secure the following obligations:
| | | | | | | | | | | |
| | September 30, 2022 | | December 31, 2021 |
| Workers’ compensation and black lung obligations | $ | 55,910 | | | $ | 210 | |
| Reclamation-related obligations | 34,442 | | | 26,225 | |
| Financial payments and other performance obligations | 2,032 | | | 2,008 | |
Total restricted investments (1) | $ | 92,384 | | | $ | 28,443 | |
ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands except share and per share data)
| | | | | | | | | | | |
| | March 31, 2023 | | December 31, 2022 |
| Workers’ compensation and black lung obligations | $ | 53,771 | | | $ | 72,136 | |
| Reclamation-related obligations | 34,552 | | | 31,718 | |
| Financial payments and other performance obligations | 2,105 | | | 1,881 | |
Total restricted investments (1) | $ | 90,428 | | | $ | 105,735 | |
(1) Classified as long-term trading securities as of September 30, 2022March 31, 2023 and December 31, 2021.2022.
Amounts included in deposits provide collateral to secure the following obligations:
| | | | September 30, 2022 | | December 31, 2021 | | March 31, 2023 | | December 31, 2022 |
| | Reclamation-related obligations | Reclamation-related obligations | $ | 102 | | | $ | 118 | | Reclamation-related obligations | $ | — | | | $ | 102 | |
| Financial payments and other performance obligations | Financial payments and other performance obligations | 391 | | | 403 | | Financial payments and other performance obligations | — | | | 391 | |
Other operating agreements (1) | Other operating agreements (1) | 7,407 | | | 873 | | Other operating agreements (1) | 7,472 | | | 85,618 | |
Total deposits (2) | Total deposits (2) | $ | 7,900 | | | $ | 1,394 | | Total deposits (2) | $ | 7,472 | | | $ | 86,111 | |
| Less current portion | | Less current portion | (6,602) | | | (84,748) | |
Total deposits, net of current portion (2) | | Total deposits, net of current portion (2) | 870 | | | 1,363 | |
(1) Includes $6,522Included $6,602 and $84,748 related to the Company’s dividend payable.payable as of March 31, 2023 and December 31, 2022, respectively. Refer to Note 76 for additional information.
(2) Included within Prepaid expenses and other current assets and Other non-current assets on the Company’s Condensed Consolidated Balance Sheets.
DCMWC Reauthorization Process
In July 2019, the U.S. Department of Labor (Division of Coal Mine Workers’ Compensation or “DCMWC”) began implementing a new authorization process for all self-insured coal mine operators. As requested by the DCMWC, the Company filed an application and supporting documentation for reauthorization to self-insure certain of its black lung obligations in October 2019. As a result of this application, the DCMWC notified the Company in a letter dated February 21, 2020 that the Company was reauthorized to self-insure certain of its black lung obligations for a period of one-year from February 21, 2020. The DCMWC reauthorization is contingent, however, upon the Company’s providing collateral of $65,700 to secure certain of its black lung obligations. This proposed collateral requirement is an increase from the approximate $2,600 in collateral that the Company currently provides to secure these self-insured black lung obligations. The reauthorization process provided the Company with the right to appeal the security determination in writing within 30 days of the date of the notification, which appeal period the DCMWC agreed to extend to May 22, 2020. The Company exercised this right of appeal in connection with the substantial increase in the amount of required collateral. In February 2021, the U.S. Department of Labor (“DOL”) withdrew its Federal Register notice seeking comments on its bulletin describing its new method of calculating collateral requirements. The Department removed the bulletin from its website in May 2021. On February 10, 2022, a telephone
ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands except share and per share data)
conference was held with DCMWC and DOL decision makers wherein the Company presented facts and arguments in support of its appeal. No ruling has been made on the appeal, but during the call the Company indicated that it would be willing to allocate an additional $10,000 in collateral. If the Company’s appeal is unsuccessful, the Company may be required to provide additional letters of credit to receive the self-insurance reauthorization from the DCMWC or alternatively insure these black lung obligations through a third partythird-party provider that would likely also require the Company to provide additional collateral. EitherIn January 2023, the DOL proposed for public comment new regulations which, if adopted, would substantially increase the collateral required to secure self-insured federal black lung obligations. Under the proposed 120% minimum collateral requirement, the Company estimates it could be required to provide approximately $80,000 to $100,000 of collateral to secure certain of its black lung obligations. A significant increase in these outcomes could potentially reducecollateral obligations would have a materially adverse effect on the Company’s liquidity.
(d) Legal Proceedings
The Company is party to legal proceedings from time to time. These proceedings, as well as governmental examinations, could involve various business units and a variety of claims including, but not limited to, contract disputes, personal injury claims, property damage claims (including those resulting from blasting, trucking and flooding), environmental and safety issues, securities-related matters and employment matters. While some legal matters may specify the damages claimed by the plaintiffs, many seek an unquantified amount of damages. Even when the amount of damages claimed against the Company or
ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands except share and per share data)
its subsidiaries is stated, (i) the claimed amount may be exaggerated or unsupported; (ii) the claim may be based on a novel legal theory or involve a large number of parties; (iii) there may be uncertainty as to the likelihood of a class being certified or the ultimate size of the class; (iv) there may be uncertainty as to the outcome of pending appeals or motions; and/or (v) there may be significant factual issues to be resolved. As a result, if such legal matters arise in the future, the Company may be unable to estimate a range of possible loss for matters that have not yet progressed sufficiently through discovery and the development of important factual information and legal issues. The Company records accruals based on an estimate of the ultimate outcome of these matters, but these estimates can be difficult to determine and involve significant judgment.
(17)(16) Segment Information
The Company extracts, processes and markets met and thermal coal from deep and surface mines for sale to steel and coke producers, industrial customers, and electric utilities. The Company conducts mining operations only in the United States with mines in Central Appalachia (“CAPP”). The Company has one reportable segment: Met, which consists of sixfive active mines and two preparation plants in Virginia, sixteen active mines and five preparation plants in West Virginia, as well as expenses associated with certain idled/closed mines.
In addition to the one reportable segment, the All Other category includes general corporate overhead and corporate assets and liabilities, the former CAPP - Thermal operations consisting of one active mine and one preparation plant in West Virginia, and the elimination of certain intercompany activity, as well as expenses associated with certain idled/closed mines. Certain immaterial amounts as of and for the three months ended March 31, 2022 in the Condensed Consolidated Financials Statements and notes to the Condensed Consolidated Financials Statements have been recast to reclassify discontinued operations and present the related amounts within continuing operations as part of the All Other category.
Reportable segment operating results are regularly reviewed by the Chief Operating Decision Maker (“CODM”(the “CODM”), who is the Chief Executive Officer of the Company.
Segment operating results and capital expenditures for the three months ended September 30,March 31, 2023 and 2022 and 2021 were as follows:
| | | Three Months Ended September 30, 2022 | | Three Months Ended March 31, 2023 |
| | Met | | All Other | | Consolidated | | Met | | All Other | | Consolidated |
| Total revenues | Total revenues | $ | 841,958 | | | $ | 27,810 | | | $ | 869,768 | | Total revenues | $ | 889,938 | | | $ | 21,297 | | | $ | 911,235 | |
| Depreciation, depletion, and amortization | Depreciation, depletion, and amortization | $ | 26,747 | | | $ | 1,178 | | | $ | 27,925 | | Depreciation, depletion, and amortization | $ | 28,879 | | | $ | 544 | | | $ | 29,423 | |
| Amortization of acquired intangibles, net | Amortization of acquired intangibles, net | $ | 3,591 | | | $ | 952 | | | $ | 4,543 | | Amortization of acquired intangibles, net | $ | 2,197 | | | $ | — | | | $ | 2,197 | |
| Adjusted EBITDA | Adjusted EBITDA | $ | 301,556 | | | $ | (6,697) | | | $ | 294,859 | | Adjusted EBITDA | $ | 362,008 | | | $ | (7,593) | | | $ | 354,415 | |
| Capital expenditures | Capital expenditures | $ | 32,623 | | | $ | 716 | | | $ | 33,339 | | Capital expenditures | $ | 71,614 | | | $ | 2,634 | | | $ | 74,248 | |
| | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2022 |
| Met | | All Other | | Consolidated |
| Total revenues | $ | 1,055,689 | | | $ | 16,275 | | | $ | 1,071,964 | |
| Depreciation, depletion, and amortization | $ | 27,060 | | | $ | 975 | | | $ | 28,035 | |
| Amortization of acquired intangibles, net | $ | 4,796 | | | $ | 952 | | | $ | 5,748 | |
| Adjusted EBITDA | $ | 513,301 | | | $ | (9,640) | | | $ | 503,661 | |
| Capital expenditures | $ | 27,297 | | | $ | 849 | | | $ | 28,146 | |
ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands except share and per share data)
| | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, 2021 |
| Met | | All Other | | Consolidated |
| Total revenues | $ | 626,103 | | | $ | 22,738 | | | $ | 648,841 | |
| Depreciation, depletion, and amortization | $ | 23,181 | | | $ | 1,338 | | | $ | 24,519 | |
| Amortization of acquired intangibles, net | $ | 3,063 | | | $ | (83) | | | $ | 2,980 | |
| Adjusted EBITDA | $ | 155,456 | | | $ | (7,233) | | | $ | 148,223 | |
| Capital expenditures | $ | 21,882 | | | $ | 465 | | | $ | 22,347 | |
Segment operating results and capital expenditures for the nine months ended September 30, 2022 and 2021 were as follows:
| | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, 2022 |
| Met | | All Other | | Consolidated |
| Total revenues | $ | 3,217,588 | | | $ | 60,556 | | | $ | 3,278,144 | |
| Depreciation, depletion, and amortization | $ | 81,010 | | | $ | 2,680 | | | $ | 83,690 | |
| Amortization of acquired intangibles, net | $ | 13,182 | | | $ | 2,856 | | | $ | 16,038 | |
| Adjusted EBITDA | $ | 1,521,089 | | | $ | (27,895) | | | $ | 1,493,194 | |
| Capital expenditures | $ | 99,979 | | | $ | 3,372 | | | $ | 103,351 | |
| | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, 2021 |
| Met | | All Other | | Consolidated |
| Total revenues | $ | 1,363,918 | | | $ | 66,451 | | | $ | 1,430,369 | |
| Depreciation, depletion, and amortization | $ | 75,403 | | | $ | 4,858 | | | $ | 80,261 | |
| Amortization of acquired intangibles, net | $ | 9,749 | | | $ | (347) | | | $ | 9,402 | |
| Adjusted EBITDA | $ | 234,824 | | | $ | (17,801) | | | $ | 217,023 | |
| Capital expenditures | $ | 59,408 | | | $ | 978 | | | $ | 60,386 | |
The following tables present a reconciliation of net income (loss) to Adjusted EBITDA for the three months ended September 30, 2022March 31, 2023 and 2021:2022:
| | | Three Months Ended September 30, 2022 | | Three Months Ended March 31, 2023 |
| | Met | | All Other | | Consolidated | | Met | | All Other | | Consolidated |
| Net income (loss) from continuing operations | $ | 268,157 | | | $ | (16,321) | | | $ | 251,836 | | |
| Net income (loss) | | Net income (loss) | $ | 327,214 | | | $ | (56,443) | | | $ | 270,771 | |
| Interest expense | Interest expense | 40 | | | 1,655 | | | 1,695 | | Interest expense | 165 | | | 1,555 | | | 1,720 | |
| Interest income | Interest income | (369) | | | (695) | | | (1,064) | | Interest income | (188) | | | (1,330) | | | (1,518) | |
| Income tax expense | Income tax expense | — | | | 5,437 | | | 5,437 | | Income tax expense | — | | | 42,411 | | | 42,411 | |
| Depreciation, depletion and amortization | Depreciation, depletion and amortization | 26,747 | | | 1,178 | | | 27,925 | | Depreciation, depletion and amortization | 28,879 | | | 544 | | | 29,423 | |
| Non-cash stock compensation expense | Non-cash stock compensation expense | — | | | 1,520 | | | 1,520 | | Non-cash stock compensation expense | 19 | | | 3,015 | | | 3,034 | |
| Mark-to-market adjustment - acquisition-related obligations | — | | | (2,954) | | | (2,954) | | |
| | Accretion on asset retirement obligations | Accretion on asset retirement obligations | 3,390 | | | 2,531 | | | 5,921 | | Accretion on asset retirement obligations | 3,722 | | | 2,655 | | | 6,377 | |
| Amortization of acquired intangibles, net | Amortization of acquired intangibles, net | 3,591 | | | 952 | | | 4,543 | | Amortization of acquired intangibles, net | 2,197 | | | — | | | 2,197 | |
| Adjusted EBITDA | Adjusted EBITDA | $ | 301,556 | | | $ | (6,697) | | | $ | 294,859 | | Adjusted EBITDA | $ | 362,008 | | | $ | (7,593) | | | $ | 354,415 | |
ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands except share and per share data)
| | | Three Months Ended September 30, 2021 | | Three Months Ended March 31, 2022 |
| | Met | | All Other | | Consolidated | | Met | | All Other | | Consolidated |
| Net income (loss) from continuing operations | $ | 125,750 | | | $ | (42,057) | | | $ | 83,693 | | |
| Net income (loss) | | Net income (loss) | $ | 478,167 | | | $ | (77,276) | | | $ | 400,891 | |
| Interest expense | Interest expense | 49 | | | 17,289 | | | 17,338 | | Interest expense | 49 | | | 13,034 | | | 13,083 | |
| Interest income | Interest income | (1) | | | (53) | | | (54) | | Interest income | (172) | | | (12) | | | (184) | |
| Income tax expense | Income tax expense | — | | | 208 | | | 208 | | Income tax expense | — | | | 39,591 | | | 39,591 | |
| Depreciation, depletion and amortization | Depreciation, depletion and amortization | 23,181 | | | 1,338 | | | 24,519 | | Depreciation, depletion and amortization | 27,060 | | | 975 | | | 28,035 | |
| Non-cash stock compensation expense | Non-cash stock compensation expense | 6 | | | 1,183 | | | 1,189 | | Non-cash stock compensation expense | 3 | | | 1,179 | | | 1,182 | |
| Mark-to-market adjustment - acquisition-related obligations | Mark-to-market adjustment - acquisition-related obligations | — | | | 11,676 | | | 11,676 | | Mark-to-market adjustment - acquisition-related obligations | — | | | 9,361 | | | 9,361 | |
| Accretion on asset retirement obligations | Accretion on asset retirement obligations | 3,408 | | | 3,266 | | | 6,674 | | Accretion on asset retirement obligations | 3,398 | | | 2,556 | | | 5,954 | |
| Amortization of acquired intangibles, net | Amortization of acquired intangibles, net | 3,063 | | | (83) | | | 2,980 | | Amortization of acquired intangibles, net | 4,796 | | | 952 | | | 5,748 | |
| Adjusted EBITDA | Adjusted EBITDA | $ | 155,456 | | | $ | (7,233) | | | $ | 148,223 | | Adjusted EBITDA | $ | 513,301 | | | $ | (9,640) | | | $ | 503,661 | |
The following tables present a reconciliation of net income (loss) to Adjusted EBITDA for the nine months ended September 30, 2022 and 2021:
| | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, 2022 |
| Met | | All Other | | Consolidated |
| Net income (loss) from continuing operations | $ | 1,417,125 | | | $ | (188,856) | | | $ | 1,228,269 | |
| Interest expense | 132 | | | 19,864 | | | 19,996 | |
| Interest income | (541) | | | (871) | | | (1,412) | |
| Income tax expense | — | | | 114,073 | | | 114,073 | |
| Depreciation, depletion and amortization | 81,010 | | | 2,680 | | | 83,690 | |
| Non-cash stock compensation expense | 3 | | | 4,100 | | | 4,103 | |
| Mark-to-market adjustment - acquisition-related obligations | — | | | 10,615 | | | 10,615 | |
| Accretion on asset retirement obligations | 10,178 | | | 7,644 | | | 17,822 | |
| Amortization of acquired intangibles, net | 13,182 | | | 2,856 | | | 16,038 | |
| Adjusted EBITDA | $ | 1,521,089 | | | $ | (27,895) | | | $ | 1,493,194 | |
| | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, 2021 |
| Met | | All Other | | Consolidated |
| Net income (loss) from continuing operations | $ | 139,354 | | | $ | (106,942) | | | $ | 32,412 | |
| Interest expense | 132 | | | 53,158 | | | 53,290 | |
| Interest income | (6) | | | (316) | | | (322) | |
| Income tax expense | — | | | 211 | | | 211 | |
| Depreciation, depletion and amortization | 75,403 | | | 4,858 | | | 80,261 | |
| Non-cash stock compensation expense | 22 | | | 4,329 | | | 4,351 | |
| Mark-to-market adjustment - acquisition-related obligations | — | | | 18,009 | | | 18,009 | |
| Accretion on asset retirement obligations | 10,170 | | | 9,800 | | | 19,970 | |
Asset impairment and restructuring | — | | | (561) | | | (561) | |
| Amortization of acquired intangibles, net | 9,749 | | | (347) | | | 9,402 | |
| Adjusted EBITDA | $ | 234,824 | | | $ | (17,801) | | | $ | 217,023 | |
No asset information has been disclosed as the CODM does not regularly review asset information by reportable segment.
ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands except share and per share data)
The Company markets produced, processed and purchased coal to customers in the United States and in international markets. Revenue is tracked within the Company’s accounting records based on the product destination. The following tables present additional information on our revenues and top customers:
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, | | |
| | 2022 | | 2021 | | 2022 | | 2021 | | | | |
| Total coal revenues | $ | 867,849 | | | $ | 647,129 | | | $ | 3,271,845 | | | $ | 1,426,039 | | | | | |
| Export coal revenues | $ | 641,345 | | | $ | 516,877 | | | $ | 2,681,873 | | | $ | 1,016,677 | | | | | |
| Export coal revenues as % of total coal revenues | 74 | % | | 80 | % | | 82 | % | | 71 | % | | | | |
| Countries with export coal revenue exceeding 10% of total revenue | India | | China, India | | India | | China, India, Brazil | | | | |
| Top customer as % of total revenue | 18 | % | | 28 | % | | 28 | % | | 15 | % | | | | |
| Top 10 customers as % of total revenue | 65 | % | | 72 | % | | 70 | % | | 68 | % | | | | |
| Number of customers exceeding 10% of total revenue | 1 | | 2 | | 1 | | 2 | | | | |
| | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | | | |
| | 2023 | | 2022 | | | | | | | | |
| Total coal revenues | $ | 906,698 | | | $ | 1,069,738 | | | | | | | | | |
| Total revenues | $ | 911,235 | | | $ | 1,071,964 | | | | | | | | | |
| Export coal revenues | $ | 678,131 | | | $ | 894,525 | | | | | | | | | |
| Export coal revenues as % of total coal revenues | 75 | % | | 84 | % | | | | | | | | |
| Countries with export coal revenue exceeding 10% of total revenues | India | | India | | | | | | | | |
| Top customer as % of total revenues | 17 | % | | 29 | % | | | | | | | | |
| Top 10 customers as % of total revenues | 78 | % | | 73 | % | | | | | | | | |
| Number of customers exceeding 10% of total revenues | 4 | | 1 | | | | | | | | |
| | | | | | | | | | | |
| As of September 30, |
| | 2022 | | 2021 |
| Number of customers exceeding 10% of total trade accounts receivable, net | 2 | | 2 |
ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands except share and per share data)
| | | | | | | | | | | |
| As of March 31, |
| | 2023 | | 2022 |
| Number of customers exceeding 10% of total trade accounts receivable, net | 3 | | 1 |
(18)(17) Subsequent Events
On November 4, 2022,May 3, 2023, the Company’s Board declared a quarterly cash dividend of $0.418$0.50 per share which will be payable on January 3,July 5, 2023 for holders of record as of DecemberJune 15, 2022.2023. The quarterly cash dividend was increased to $0.418 from the previous quarterly cash dividend of $0.392$0.44 per share.
Additionally, on November 4, 2022, the Company’s Board declared a one-time, special dividend of $5.00 per share which will be payable on January 3, 2023 for holders of record as of December 15, 2022.
On November 4, 2022, the Company’s Board also approved a $400,000 increase to the existing common share repurchase program, bringing the total authorization to repurchase the Company’s stock to $1,000,000.
Refer to Note 76 for information regarding the Company’s dividend program and share repurchase program.
GLOSSARY
Alpha. Alpha Metallurgical Resources, Inc. (the “Company”) (previously named Contura Energy, Inc.).
Ash. Impurities consisting of iron, alumina and other incombustible matter that are contained in coal. Since ash increases the weight of coal, it adds to the cost of handling and can affect the burning characteristics of coal.
Bituminous coal. Coal used primarily to generate electricity and to make coke for the steel industry with a heat value ranging between 10,500 and 15,500 BTU’s per pound.
British Thermal Unit or BTU. A measure of the thermal energy required to raise the temperature of one pound of pure liquid water one degree Fahrenheit at the temperature at which water has its greatest density (39 degrees Fahrenheit).
Central Appalachia or CAPP. Coal producing area in eastern Kentucky, Virginia, southern West Virginia and a portion of eastern Tennessee.
Coal reserves. The economically mineable part of a measured or indicated coal resource, which includes diluting materials and allowances for losses that may occur when coal is mined or extracted.
Coal resources. Coal deposits in such form, quality, and quantity that there are reasonable prospects for economic extraction.
Coal seam. Coal deposits occur in layers. Each layer is called a “seam.”
Coke. A hard, dry carbon substance produced by heating coal to a very high temperature in the absence of air. Coke is used in the manufacture of iron and steel. Its production results in a number of useful byproducts.
Cumberland Back-to-Back Coal Supply Agreement. Certain agreements with Iron Senergy under which Iron Senergy will sell to the Company all of the coal that the Company is obligated to sell to customers under Cumberland coal supply agreements (“Cumberland CSAs”) which existed as of the transaction closing date but did not transfer to Iron Senergy at closing (each, a “Cumberland Back-to-Back Coal Supply Agreement”). Each Cumberland Back-to-Back Coal Supply Agreement has economic terms identical to, but offsetting, the related Cumberland CSA. If a Cumberland customer subsequently consents to assign a Cumberland CSA to Iron Senergy after closing, the related Cumberland CSA will immediately and automatically transfer to Iron Senergy and the related Cumberland Back-to-Back Coal Supply Agreements executed by the parties shall thereupon terminate as set forth therein.
ESG. Environmental, social and governance sustainability criteria.
Indicated coal resource. That part of a coal resource for which quantity and quality are estimated on the basis of adequate geological evidence and sampling sufficient to establish geological and quality continuity with reasonable certainty.
In situ coal resources. Coal resources stated on an in-seam dry basis (excluding surface and inherent moisture) with no consideration for dilution or losses that may occur when coal is mined or extracted.
Measured coal resource. That part of a coal resource for which quantity and quality are estimated on the basis of conclusive geological evidence and sampling sufficient to test and confirm geological and quality continuity.
Merger. Merger with ANR, Inc. and Alpha Natural Resources Holdings, Inc. completed on November 9, 2018.
Metallurgical coal. The various grades of coal suitable for carbonization to make coke for steel manufacture. Also known as “met” coal, its quality is primarily differentiated based on volatility or its percent of volatile matter. Met coal typically has a particularly high BTU but low ash and sulfur content.
Northern Appalachia or NAPP.MSHA. Coal producing area in Maryland, Ohio, PennsylvaniaThe United States Mine Safety and northern West Virginia.Health Administration, which has responsibility for developing and enforcing safety and health rules for U.S. mines.
Operating Margin. Coal revenues less cost of coal sales.
Preparation plant. A preparation plant is a facility for crushing, sizing and washing coal to remove impurities and prepare it for use by a particular customer. The washing process has the added benefit of removing some of the coal’s sulfur content. A preparation plant is usually located on a mine site, although one plant may serve several mines.
Probable mineral reserve. The economically mineable part of an indicated and, in some cases, a measured coal resource.
Productivity. As used in this report, refers to clean metric tons of coal produced per underground man hour worked, as published by the MSHA.
Proven mineral reserve. The economically mineable part of a measured coal resource.
Reclamation. The process of restoring land and the environment to their original state following mining activities. The process commonly includes “recontouring” or reshaping the land to its approximate original appearance, restoring topsoil and planting native grass and ground covers. Reclamation operations are usually underway before the mining of a particular site is completed. Reclamation is closely regulated by both state and federal law.
Roof. The stratum of rock or other mineral above a coal seam; the overhead surface of a coal working place.
Sulfur. One of the elements present in varying quantities in coal that contributes to environmental degradation when coal is burned. Sulfur dioxide is produced as a gaseous by-product of coal combustion.
Surface mine. A mine in which the coal lies near the surface and can be extracted by removing the covering layer of soil.
Thermal coal. Coal used by power plants and industrial steam boilers to produce electricity, steam or both. It generally is lower in BTU heat content and higher in volatile matter than metallurgical coal.
Tons. A “short” or net ton is equal to 2,000 pounds. A “long” or British ton is equal to 2,240 pounds; a “metric” ton (or “tonne”) is approximately 2,205 pounds. Tonnage amounts in this report are stated in short tons, unless otherwise indicated.
Underground mine. Also known as a “deep��“deep” mine. Usually located several hundred feet below the earth’s surface, an underground mine’s coal is removed mechanically and transferred by shuttle car and conveyor to the surface.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis provides a narrative of our results of operations and financial condition for the three and nine months ended September 30, 2022March 31, 2023 and 2021.2022. The following discussion and analysis contains forward-looking statements and should be read in conjunction with our Condensed Consolidated Financial Statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and our Consolidated Financial Statements and related notes and risk factors contained in our Annual Report on Form 10-K for the year ended December 31, 2021.2022.
The following discussion includes forward-looking statements about our business, financial condition and results of operations, including discussions about management’s expectations for our business. These statements represent projections, beliefs and expectations based on current circumstances and conditions and in light of recent events and trends, and you should not construe these statements either as assurances of performance or as promises of a given course of action. Instead, various known and unknown factors are likely to cause our actual performance and management’s actions to vary, and the results of these variances may be both material and adverse. See “Cautionary NoteStatement Regarding Forward-Looking Statements” included elsewhere herein.and “Item 1A. Risk Factors.”
Market Overview
AcrossSince the globe, continued recessionary pressure and weakening economic conditions alongside the ongoing war between Russia and Ukraine and the intensifying European energy crisis have influencedbeginning of 2023, metallurgical coal markets. Coal indices continued retreating duringmarkets have softened amid broader recessionary concerns, uneven recoveries in manufacturing demand, and, most recently, economic unease stemming from the early partregional banking failures in March. Persistent inflation and rising interest rate environments in many economies, including the United States, have hampered steel demand. As global geopolitical issues persist, the strength of China’s reopening after its years-long, strict zero-COVID policy is a factor that will influence demand. Additionally, the third quarter but have leveled offduration and potential outcome of Russia’s war in the weeks following the quarter close. Additionally, in October 2022, the imbalances in typical pricing hierarchies for coal qualities have shifted to be more consistent with historical norms, with the API2 thermal index dropping below pricing levels for metallurgical coal qualities.Ukraine could significantly impact Europe’s resiliency and growth prospects.
Despite these uncertainties, the World Steel Association’s (“WSA”) most recent Short Range Outlook projects a 2.3% rebound in steel demand this year, bringing expected global demand to 1.82 billion metric tons. The organization expects steel demand of 1.85 billion metric tons in 2024, a further increase of 1.7%, likely led by manufacturing and accelerating growth in most regions with the exception of China, where WSA expects deceleration due to population decline.
Metallurgical coal indices ended the first quarter roughly flat from where they began the 2023 calendar year, with additional softening occurring after the quarter end. In the case of all four indices Alpha closely monitors, pricing meaningfully increased in mid-February before declining to roughly the same level on March 31, 2023 as at the beginning of January. The Australian Premium Low Volatile index droppedincreased from $302.00$294.50 per metric ton on JulyJanuary 1, 20222023 to $270.50$301.00 per ton at the end of the third quarter.quarter close. The U.S. East Coast Low Volatile index declinedincreased from $315.00$280.00 per metric ton on January 1, 2023 to $287.00 per metric ton on March 31, 2023. The U.S. East Coast High Volatile A index moved from $276.00 per metric ton at the start of the first quarter to $270.00$285.00 per metric ton on September 30, 2022.at the end of March. Over the course of the quarter, the U.S. East Coast High Volatile B index fell ten dollars, from $275.00 per metric ton at the beginning of January to $265.00 per metric ton at the end of March. Throughout April, all four indices have softened from their quarter-close levels. As of April 27, 2023, Australian Premium Low Volatile has decreased to $231.50 per metric ton and U.S. East Coast Low Volatile has dropped to $246.00 per metric ton. The U.S. East Coast High Volatile A index started the quarter at $325.00 per metric ton and dropped to $287.00 per metric ton at quarter close. U.S. East Coast High Volatile B fell from $317.50indices were $236.00 per metric ton to $284.00 overand $220.00 per ton, respectively, on the course of the third quarter. The pricing movements have largely leveled off in recent weeks for the two High Volatile indices, which are hovering at or near their quarter-close levels as of the end of October. The two Low Volatile indices have increased from their quarter-end levels to $311.50 per metric ton for Australian Premium Low Volatile and $293 per metric ton for U.S. East Coast Low Volatile as of October 31, 2022.same date.
The negative economic impacts ofEconomic uncertainty across the Russian war and intensifying recessionary fears are evidentglobe continued to impact manufacturing production in the most recent global economic indicators showing a continued softening of the global economy.first quarter. The world Purchasing Managers’ Index (“PMI”) contracteddeclined slightly to 49.849.6 in September,March 2023, from 49.9 in February, marking the seventh month in a row the metric remained below the 50.0 level in contractionary territory. PMI for Europe dropped to 47.3 in March from a February level of 48.5. Challenging operating conditions in Brazil brought down its PMI to 47.0 in March from 49.2 in the prior month. While neutral at 50.0, China’s March PMI represented a slowing of growth month-over-month, down from 50.3an eight-month high of 51.6 in August, falling belowFebruary. Conversely, the neutral 50.0 levelUnited States PMI index rose for the first time since June 2020. Europe’s PMI decreasedthird month in a row, moving up to 49.2 in March from 49.6 in August to 48.4 in September due to high uncertainty, accelerating inflationary pressures, and decreasing production volumes. Similarly, China’s PMI dropped from 49.5 in August to 48.1 in September due to falling demand and production levels as a resultFebruary level of the country’s extensive COVID-19 containment efforts. Conversely, indicators show that certain areas of the world—such as47.3. Lastly, India, a key market for Alpha—are experiencing growth. India’s SeptemberAlpha, continued to show strength with reported increases in new business placed with Indian manufacturers and a March PMI of 55.1 is down56.4, up from 56.255.3 in August but still represents solid growth. Brazil posted a September PMI of 51.1, down slightly from 51.9 in August. The United States PMI index increased to 52.0 in September 2022 from 51.5 in August.February.
In addition toAs compiled by the uneven growth trajectories across the globe, currency valuations have also played a role in the shifting international trade landscape. The U.S. dollar has shown increasing strength against other world currencies, which can influence the relative pricing of Alpha’s products for customers in certain markets. Our coal is sold internationally in U.S. dollars and, as a result, general economic conditions in foreign markets and changes in foreign currency exchange rates may provide our foreign competitors with a competitive advantage. Refer to “Quantitative and Qualitative Disclosures about Market Risk—Foreign Currency Risk” for additional information.
In its periodic review of macroeconomic factors affecting the steel industry, the World Steel Association (“WSA”) issued revisions in October to its Short Range Outlook for 2022 and 2023. The WSA, forecasts a contraction in steel demand of 2.3% in 2022. The WSA now projects a recovery of 1.0% for steel demand inMarch 2023 which represents a downward revision from its prior estimates. The WSA attributed the altered outlook to deteriorating economic conditions over the course of 2022, including persisting inflation and rising interest rates globally, alongside Russia’s invasion of Ukraine and China’s economic deceleration. The WSA cited infrastructure demand as the expected catalyst for slight increases in 2023 steel demand, contingent on the impact of tightening monetary policies, falling consumer confidence, and potential further inflation risk.
The most recent global crude steel production data showedof 165.1 million metric tons represented a 1.7% increase from March 2022, led by an increase in production of 151.7in the Asia and Oceania region. Specifically, China, the world’s largest steel-producing country, produced 95.7 million metric tons in September 2022, an increase of 3.7% overMarch 2023, 6.9% more than its year-ago March production level. At 11.4 million metric tons, India’s March production was 2.7% more than in March 2022. Other regions across the year-ago period. This increase is largely attributable toglobe posted year-over-year declines in production, in Asia and Oceania,like the European Union, which represented a 10.6% increase over that region’s September 2021 period. China produced 87.011.9 million metric tons in September 2022, an increaseMarch 2023, a drop of 17.6%5.6% from September 2021. India’s production of 9.9March 2022. North America’s 9.3 million metric tons wasof production represented a slight 1.8% increase over the year-ago period. Several other regions posted significant declines for the comparison timeframe. The European Union’s September 2022 crude steel production of 10.7 million metric tons was a 16.7% drop as compared to its September 2021 level. Steel production of2.6% decline year-over-year, while South America produced 3.5 million metric tons, in South America was a decrease of 9.6% against September 2021, while North American production of 9.1 million metric tons for September 2022 represented a 7.6% drop as compared to the year-ago period.
year period. Both Japan and the United States posted single-digit percentage declines, 5.9% and 2.1%, respectively, from their March 2022 production levels.
The American Iron and Steel Institute’s capacity utilization rate for U.S. steel mills was 79.3%75.6% for the week ending October 15, 2022.April 22, 2023. This is down in comparison to the year-ago period of October 15, 2021the week ended April 22, 2022, when the capacity utilization rate was 81.2%81.9%.
The volatility inIn the seaborne thermal coal market, largely a result of Russia’s invasion of Ukraine, continued through the third quarter, with the API2 index at $328.95continued its several-month decline, moving from $188.05 per metric ton on July 1, 2022 and decliningJanuary 3, 2023 to $312.00$138.00 per metric ton as of September 30, 2022. In the weeks following the quarter close, the API2 fell back below pricing for metallurgical coal qualities, which has historically been the norm.
COVID-19 Pandemic
The COVID-19 pandemic has had negative impacts on our business, results of operations, financial condition and cash flows. Our Company experienced an increase in employee absences due to COVID-19. Indirectly, through some of our third-party vendors, we and our customers have experienced some supply chain disruptions due to the COVID-19 pandemic. The full extent of the impact of the COVID-19 pandemic on our operational and financial performance will depend on certain developments, including the duration of the virus, its impact on our customers and suppliers, and the range of governmental and community reactions to the pandemic, which cannot be fully predicted. Health and safety are core values of our Company and are the foundation for how we manage every aspect of our business. We continue to monitor developments closely and adjust as necessary, including with respect to our implemented policies, procedures, and prevention measures to protect the safety and health of our employees.March 31, 2023.
Business Overview
We are a Tennessee-based mining company with operations across Virginia and West Virginia. With customers across the globe, high-quality reserves and significant port capacity, we reliably supplyare a leading supplier metallurgical coal products to the steel industry. We operate high-quality, cost-competitive coal mines across the CAPP coal basin. As of September 30, 2022,March 31, 2023, our operations consisted of twenty-threetwenty-two active mines and eight coal preparation and load-out facilities, with approximately 3,6203,950 employees. We produce, process, and sell met coal and thermal coal. We also sell coal produced by others, some of which is processed and/or blended with coal produced from our mines prior to resale, with the remainder purchased for resale. As of December 31, 2021,2022, we had 351.1336.7 million tons of reserves, including 335.8which included 322.7 million tons of proven and probable metallurgical reserves and 15.314.0 million tons of proven and probable thermal reserves. Additionally, we had approximately 381.7527.3 million tons of in situ bituminous coal resources.
For the three months ended September 30,March 31, 2023 and 2022, and 2021, sales of met coal were 3.5 million tons and 3.93.5 million tons, respectively, and accounted for approximately 85%90% and 82%88%, respectively, of our coal sales volume. Sales of thermal coal were 0.60.4 million tons and 0.80.5 million tons, respectively, and accounted for approximately 15%10% and 18%, respectively, of our coal sales volume. For the nine months ended September 30, 2022 and 2021, sales of met coal were 10.8 million tons and 10.6 million tons, respectively, and accounted for approximately 87% and 83%, respectively, of our coal sales volume. Sales of thermal coal were 1.6 million tons and 2.2 million tons, respectively, and accounted for approximately 13% and 17%12%, respectively, of our coal sales volume.
Our sales of met coal were made primarily to steel companies in the northeastern and midwestern regions of the United States and in several countries in Asia, Europe, and the Americas. Our sales of thermal coal were made primarily to large utilities and industrial customers throughout the United States. For the three months ended September 30,March 31, 2023 and 2022 approximately 75% and 2021 approximately 74% and 80%84%, respectively, of our coal revenues were derived from coal sales made to customers outside the United States. For the nine months ended September 30, 2022 and 2021 approximately 82% and 71%, respectively, of our total coal revenues were derived from coal sales made to customers outside the United States.
In addition, we generate other revenues from equipment sales, rentals, terminal and processing fees, coal and environmental analysis fees, royalties and the sale of natural gas. We also record freight and handling fulfillment revenue within coal revenues for freight and handling services provided in delivering coal to certain customers, which are a component of the contractual selling price.
As of September 30, 2022,March 31, 2023, we have one reportable segment: Met. Our Met segment operations consist of high-quality met coal mines, including Deep Mine 41, Road Fork 52, Black Eagle, and Lynn Branch. The coal produced by our Met segment operations is predominantly met coal with some amounts of thermal coal being produced as a byproduct of mining. In addition to the one reportable segment, our All Other category includes general corporate overhead and corporate assets and liabilities, our former CAPP - Thermal operations consisting of one active mine and one preparation plant in West Virginia, and the elimination of certain intercompany activity, as well as expenses associated with certain idled/closed mines. Refer to Note 1716 to
our Condensed Consolidated Financial Statements for additional disclosures on reportable segments, geographic areas, and export coal revenue information.
The disposition of our former NAPP operations during the fourth quarter of 2020 accelerated our strategic exit from thermal coal production to shift our focus toward met coal production. The former NAPP operations results of operations and financial position are reported as discontinued operations in the Condensed Consolidated Financial Statements. Refer to Note 2 for further information on discontinued operations.
As discussed in the “Market Overview” presented above, continued recessionary pressure and weakening economic conditions alongside the ongoing war between Russia and Ukraine and the intensifying European energy crisis have influenced metallurgical coal markets. As a result, our three months ended September 30, 2022March 31, 2023 results of operations were impacted by the coal indices’ drop from their early-2022 historic highs. However, as further discussed in the “Results of Operations” presented below, our three and nine months ended September 30, 2022March 31, 2023 results of operations still remain strong from a historical average perspective compared to the three and nine months ended September 30, 2021 due to higher coal sales realization as a result of an improved pricing environment during the current period. Increasing coal demand, resulting from improved economic activity, coupled with a limited supply response contributed to a rise in coal prices in the current periods compared to the prior year periods.perspective.
Other Business Developments
In January 2023, our subsidiary Maxxim Rebuild Co., LLC (“Maxxim”) completed a series of transactions to acquire a number of coal trucks and related equipment and facilities to secure trucking services for our operations.
Factors Affecting Our Results of Operations
Sales Agreements. We manage our commodity price risk for coal sales through the use of coal supply agreements. As of October 28, 2022,April 27, 2023, we had sales commitments for 20222023 as follows:
| | | Tons | | % Priced | | Average Realized Price per Ton | | Tons | | % Priced | | Average Realized Price per Ton |
| Met - Domestic | Met - Domestic | | | | | $192.03 | | Met - Domestic | | | | | $193.26 | |
| Met - Export | Met - Export | | $265.02 | | Met - Export | | $220.89 | |
| Met Total | Met Total | 14.5 million | | 87 | % | | $243.30 | | Met Total | 15.5 million | | 51 | % | | $203.86 | |
| Thermal | Thermal | 1.2 million | | 100 | % | | $97.43 | | Thermal | 1.6 million | | 75 | % | | $108.77 | |
| Met Segment | Met Segment | 15.7 million | | 89 | % | | $228.76 | | Met Segment | 17.1 million | | 53 | % | | $191.28 | |
| All Other | All Other | 0.7 million | | 100 | % | | $77.69 | | All Other | 0.5 million | | 100 | % | | $88.74 | |
Realized Pricing. Our realized price per ton of coal is influenced by many factors that vary by region, including (i) coal quality, which includes energy (heat content), sulfur, ash, volatile matter and moisture content; (ii) differences in market conventions concerning transportation costs and volume measurement; and (iii) regional supply and demand.
Costs. Our results of operations are dependent upon our ability to maximize productivity and control costs. Our primary expenses are for operating supply costs, repair and maintenance expenditures, costcosts of purchased coal, royalties, wages and benefits, freight and handling costs and taxes incurred in selling our coal. PrincipalThe principal goods and services we use in our operations include maintenance and repair parts and services, electricity, fuel, roof control and support items, explosives, tires, conveyance structures, ventilation supplies and lubricants. Our management strives to aggressively control costs and improve operating performance to mitigate external cost pressures. We experience volatility in operating costs related to fuel, explosives, steel, tires, contract services and healthcare, among others, and take measures to mitigate the increases in these costs at all operations. We have a centralized sourcing group for major supplier contract negotiation and administration, for the negotiation and purchase of major capital goods, and to support the business units. We promote competition between suppliers and seek to develop relationships with suppliers that focus on lowering our costs. We seek suppliers who identify and concentrate on implementing continuous improvement opportunities within their area of expertise. To the extent upward pressure on costs exceeds our ability to realize sales increases, or if we experience unanticipated operating or transportation difficulties, our operating margins would be negatively impacted. We may also experience difficult geologic conditions, delays in obtaining permits, labor shortages, unforeseen equipment problems, and unexpected shortages of critical materials such as tires, fuel and explosives that may result in adverse cost increases and limit our ability to produce at forecasted levels.
Results of Operations
Our results of operations for the three months ended September 30,March 31, 2023 and 2022 and 2021 are discussed in these “Results of Operations” presented below. Certain immaterial amounts for the three months ended March 31, 2022 have been recast to reclassify discontinued operations and present the related amounts within continuing operations as part of the All Other category.
Three Months Ended September 30, 2022March 31, 2023 Compared to the Three Months Ended September 30, 2021
Revenues
The following table summarizes information about our revenues during the three months ended September 30, 2022March 31, 2023 and 2021:2022:
| | | Three Months Ended September 30, | | Increase (Decrease) | | Three Months Ended March 31, | | Increase (Decrease) |
| (In thousands, except for per ton data) | (In thousands, except for per ton data) | 2022 | | 2021 | | $ or Tons | | % | (In thousands, except for per ton data) | 2023 | | 2022 | | $ or Tons | | % |
| Coal revenues | Coal revenues | $ | 867,849 | | | $ | 647,129 | | | $ | 220,720 | | | 34.1 | % | Coal revenues | $ | 906,698 | | | $ | 1,069,738 | | | $ | (163,040) | | | (15.2) | % |
| Other revenues | Other revenues | 1,919 | | | 1,712 | | | 207 | | | 12.1 | % | Other revenues | 4,537 | | | 2,226 | | | 2,311 | | | 103.8 | % |
| Total revenues | Total revenues | $ | 869,768 | | | $ | 648,841 | | | $ | 220,927 | | | 34.0 | % | Total revenues | $ | 911,235 | | | $ | 1,071,964 | | | $ | (160,729) | | | (15.0) | % |
| | Tons sold | Tons sold | 4,145 | | | 4,728 | | | (583) | | | (12.3) | % | Tons sold | 3,915 | | | 4,048 | | | (133) | | | (3.3) | % |
Coal revenues. Coal revenues increased $220.7decreased $163.0 million, or 34.1%15.2%, for the three months ended September 30, 2022March 31, 2023 compared to the prior year period. The increasedecrease was primarily due to higherlower coal sales realizationrealizations within our Met segment as a result of an improvedpricing moderated from the higher levels experienced during the prior year. The elevated coal sales pricing environment duringin the current period. Increasingprior year period was driven by increased coal demand, resulting from improved economic activity, coupled with a limited supply response contributed to a rise in coal prices.response. Refer to the “Non-GAAP Coal revenues” section below for further detail on coal revenues for the three months ended September 30, 2022March 31, 2023 compared to the prior year period.
Cost and Expenses
The following table summarizes information about our costs and expenses during the three months ended September 30, 2022March 31, 2023 and 2021:2022:
| | | Three Months Ended September 30, | | Increase (Decrease) | | Three Months Ended March 31, | | Increase (Decrease) |
| (In thousands) | (In thousands) | 2022 | | 2021 | | $ | | % | (In thousands) | 2023 | | 2022 | | $ | | % |
| Cost of coal sales (exclusive of items shown separately below) | Cost of coal sales (exclusive of items shown separately below) | $ | 555,502 | | | $ | 488,169 | | | $ | 67,333 | | | 13.8 | % | Cost of coal sales (exclusive of items shown separately below) | $ | 539,137 | | | $ | 555,342 | | | $ | (16,205) | | | (2.9) | % |
| Depreciation, depletion and amortization | Depreciation, depletion and amortization | 27,925 | | | 24,519 | | | 3,406 | | | 13.9 | % | Depreciation, depletion and amortization | 29,423 | | | 28,035 | | | 1,388 | | | 5.0 | % |
| Accretion on asset retirement obligations | Accretion on asset retirement obligations | 5,921 | | | 6,674 | | | (753) | | | (11.3) | % | Accretion on asset retirement obligations | 6,377 | | | 5,954 | | | 423 | | | 7.1 | % |
| Amortization of acquired intangibles, net | Amortization of acquired intangibles, net | 4,543 | | | 2,980 | | | 1,563 | | | 52.4 | % | Amortization of acquired intangibles, net | 2,197 | | | 5,748 | | | (3,551) | | | (61.8) | % |
| Selling, general and administrative expenses (exclusive of depreciation, depletion and amortization shown separately above) | Selling, general and administrative expenses (exclusive of depreciation, depletion and amortization shown separately above) | 15,095 | | | 15,264 | | | (169) | | | (1.1) | % | Selling, general and administrative expenses (exclusive of depreciation, depletion and amortization shown separately above) | 20,692 | | | 15,086 | | | 5,606 | | | 37.2 | % |
| Total other operating loss (income): | Total other operating loss (income): | | Total other operating loss (income): | |
| Mark-to-market adjustment for acquisition-related obligations | Mark-to-market adjustment for acquisition-related obligations | (2,954) | | | 11,676 | | | (14,630) | | | (125.3) | % | Mark-to-market adjustment for acquisition-related obligations | — | | | 9,361 | | | (9,361) | | | (100.0) | % |
| Other expense (income) | 2,713 | | | (457) | | | 3,170 | | | 693.7 | % | |
| Other income | | Other income | (1,092) | | | (628) | | | (464) | | | (73.9) | % |
| Total costs and expenses | Total costs and expenses | $ | 608,745 | | | $ | 548,825 | | | $ | 59,920 | | | 10.9 | % | Total costs and expenses | $ | 596,734 | | | $ | 618,898 | | | $ | (22,164) | | | (3.6) | % |
Cost of coal sales. Cost of coal sales increased $67.3decreased $16.2 million, or 13.8%2.9%, for the three months ended September 30, 2022March 31, 2023 compared to the prior year period. The increasedecrease was primarily driven by increased supplieslower per ton freight and maintenance expense, salarieshandling, royalty, and wages expense, rail freightseverance tax costs and royalties and taxes.
Depreciation, depletion and amortization. Depreciation, depletion and amortization increased $3.4 million, or 13.9%, for the three months ended September 30, 2022 compared to the prior year period. The increase in depreciation, depletion and amortization was primarilyas a result of annual changes in depletion ratesthe lower coal pricing environment which more than offset the impact of higher labor and supply costs due to the Company’s updated estimated coal reserves.
Amortization of acquired intangibles, net. Amortization of acquired intangibles, net increased $1.6decreased $3.6 million, or 52.4%61.8%, for the three months ended September 30, 2022March 31, 2023 compared to the prior year period. The increasedecrease was primarily driven by accelerated currentprior period amortization of certain acquired mine permits as a result of an update to the estimated life of the associated mines.
Selling, general and administrative. Selling, general and administrative expenses increased $5.6 million, or 37.2%, for the
three months ended March 31, 2023 compared to the prior year period. This increase was primarily related to increases of $1.8 million in incentive pay, $1.7 million in stock compensation expense, $1.0 million in wages and benefits expense, and $0.6 million in professional fees.
Mark-to-market adjustment for acquisition-related obligations. The mark-to-market adjustment for acquisition-related obligations resulted in an increase to income of $14.6was $9.4 million for the three months ended September 30,March 31, 2022. As the royalty period ended on December 31, 2022, comparedthere was no mark-to-market adjustment recorded during the three months ended March 31, 2023. Refer to Notes 9 and 11for additional information on the Contingent Revenue Obligation.
prior year period. This increase was related to the ($3.0) million Contingent Revenue Obligation mark-to-market adjustment recorded during the three months ended September 30, 2022 due to changes in underlying fair value assumptions during the current period. Refer to Note 12for Contingent Revenue Obligation fair value input assumptions.
Other expense (income). Other income decreased $3.2 million, or 693.7%, for the three months ended September 30, 2022 compared to the prior year period, primarily due to a decrease in income on sale of assets in the current period.
Other (Expense) Income
The following table summarizes information about our other (expense) income during the three months ended September 30, 2022March 31, 2023 and 2021:2022:
| | | Three Months Ended September 30, | | Increase (Decrease) | | Three Months Ended March 31, | | Increase (Decrease) |
| (In thousands) | (In thousands) | 2022 | | 2021 | | $ | | % | (In thousands) | 2023 | | 2022 | | $ | | % |
| Other (expense) income: | Other (expense) income: | | | | | | | | Other (expense) income: | | | | | | | |
| Interest expense | Interest expense | $ | (1,695) | | | $ | (17,338) | | | $ | 15,643 | | | 90.2 | % | Interest expense | $ | (1,720) | | | $ | (13,083) | | | $ | 11,363 | | | 86.9 | % |
| Interest income | Interest income | 1,064 | | | 54 | | | 1,010 | | | 1,870.4 | % | Interest income | 1,518 | | | 184 | | | 1,334 | | | 725.0 | % |
| Equity loss in affiliates | Equity loss in affiliates | (4,821) | | | (643) | | | (4,178) | | | (649.8) | % | Equity loss in affiliates | (1,748) | | | (1,361) | | | (387) | | | (28.4) | % |
| Miscellaneous income, net | Miscellaneous income, net | 1,702 | | | 1,812 | | | (110) | | | (6.1) | % | Miscellaneous income, net | 631 | | | 1,676 | | | (1,045) | | | (62.4) | % |
| Total other expense, net | Total other expense, net | $ | (3,750) | | | $ | (16,115) | | | $ | 12,365 | | | 76.7 | % | Total other expense, net | $ | (1,319) | | | $ | (12,584) | | | $ | 11,265 | | | 89.5 | % |
Interest expense. Interest expense decreased $15.6$11.4 million, or 90.2%86.9%, for the three months ended September 30, 2022March 31, 2023 compared to the prior year period, primarily due to a decrease in debt outstanding. Refer to Note 9 for additional information.
Equity loss in affiliates. Equity loss in affiliates increased $4.2 million, or 649.8%, for the three months ended September 30, 2022 compared to the prior year period, primarily driven by a net decrease in net income of our equity affiliates.
Income Tax Expense
The following table summarizes information about our income tax expense during the three months ended September 30, 2022March 31, 2023 and 2021:2022:
| | | Three Months Ended September 30, | | Increase (Decrease) | | Three Months Ended March 31, | | Increase (Decrease) |
| (In thousands) | (In thousands) | 2022 | | 2021 | | $ | | % | (In thousands) | 2023 | | 2022 | | $ | | % |
| Income tax expense | Income tax expense | $ | (5,437) | | | $ | (208) | | | $ | (5,229) | | | (2,513.9) | % | Income tax expense | $ | (42,411) | | | $ | (39,591) | | | $ | (2,820) | | | (7.1) | % |
Income taxes. Income tax expense of $5.4$42.4 million was recorded for the three months ended September 30, 2022March 31, 2023 on income from continuing operations before income taxes of $257.3$313.2 million. The effective tax rate differs from the federal statutory rate of 21% primarily due to the permanent impact of percentage depletion and foreign-derived intangible income deductions.
Income tax expense of $39.6 million was recorded for the three months ended March 31, 2022 on income before income taxes of $440.5 million. The effective tax rate differs from the federal statutory rate of 21% primarily due to the decrease in the valuation allowance and the permanent impact of percentage depletion and foreign-derived intangible income deductions.
Income tax expense of $0.2 million was recorded for the three months ended September 30, 2021 on income from continuing operations before income taxes of $83.9 million. The effective tax rate differs from the federal statutory rate of 21% primarily due to the decrease in the valuation allowance. Refer to Note 1312 for additional information.
Non-GAAP Financial Measures
The discussion below contains “non-GAAP financial measures.” These are financial measures which either exclude or include amounts that are not excluded or included in the most directly comparable measures calculated and presented in accordance with generally accepted accounting principles in the United States (“U.S. GAAP” or “GAAP”). Specifically, we make use of the non-GAAP financial measures “Adjusted EBITDA,” “non-GAAP coal revenues,” “non-GAAP cost of coal sales,” “non-GAAP coal margin,” and “Adjusted cost of produced coal sold.” We use Adjusted EBITDA to measure the operating performance of our segments and allocate resources to the segments. Adjusted EBITDA does not purport to be an alternative to net income (loss) as a measure of operating performance or any other measure of operating results or liquidity presented in accordance with GAAP. We use non-GAAP coal revenues to present coal revenues generated, excluding freight and handling fulfillment revenues. Non-GAAP coal sales realization per ton for our operations is calculated as non-GAAP coal revenues divided by tons sold. We use non-GAAP cost of coal sales to adjust cost of coal sales to remove freight and handling costs, depreciation, depletion and amortization - production (excluding the depreciation, depletion and amortization related to
selling, general and administrative functions), accretion on asset retirement obligations, amortization of acquired intangibles, net, and idled and closed mine costs. Non-GAAP cost of coal sales per ton for our operations is calculated as non-GAAP cost of coal sales divided by tons sold. Non-GAAP coal margin per ton for our coal operations is calculated as non-GAAP coal sales realization per ton for our coal operations less non-GAAP cost of coal sales per ton for our coal operations. We also use Adjusted cost of produced coal sold to distinguish the cost of captive produced coal from the effects of purchased coal. The presentation of these measures should not be considered in isolation, or as a substitute for analysis of our results as reported under GAAP.
Management uses non-GAAP financial measures to supplement GAAP results to provide a more complete understanding of the factors and trends affecting the business than GAAP results alone. The definition of these non-GAAP measures may be changed periodically by management to adjust for significant items important to an understanding of operating trends and to adjust for items that may not reflect the trend of future results by excluding transactions that are not indicative of our core operating performance. Furthermore, analogous measures are used by industry analysts to evaluate the Company’s operating performance. Because not all companies use identical calculations, the presentations of these measures may not be comparable to other similarly titled measures of other companies and can differ significantly from company to company depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which companies operate, and capital investments.
Included below are reconciliations of non-GAAP financial measures to GAAP financial measures.
The following tables summarize certain financial information relating to our coal operations for the three months ended September 30, 2022March 31, 2023 and 2021:2022:
| | | Three Months Ended September 30, 2022 | | Three Months Ended March 31, 2023 |
| (In thousands, except for per ton data) | (In thousands, except for per ton data) | Met | | All Other | | Consolidated | (In thousands, except for per ton data) | Met | | All Other | | Consolidated |
| Coal revenues | Coal revenues | $ | 840,638 | | | $ | 27,211 | | | $ | 867,849 | | Coal revenues | $ | 887,007 | | | $ | 19,691 | | | $ | 906,698 | |
| Less: Freight and handling fulfillment revenues | Less: Freight and handling fulfillment revenues | (122,585) | | | (3) | | | (122,588) | | Less: Freight and handling fulfillment revenues | (106,252) | | | (225) | | | (106,477) | |
| Non-GAAP Coal revenues | Non-GAAP Coal revenues | $ | 718,053 | | | $ | 27,208 | | | $ | 745,261 | | Non-GAAP Coal revenues | $ | 780,755 | | | $ | 19,466 | | | $ | 800,221 | |
| Tons sold | Tons sold | 3,896 | | | 249 | | | 4,145 | | Tons sold | 3,737 | | | 178 | | | 3,915 | |
| Non-GAAP Coal sales realization per ton | Non-GAAP Coal sales realization per ton | $ | 184.31 | | | $ | 109.27 | | | $ | 179.80 | | Non-GAAP Coal sales realization per ton | $ | 208.93 | | | $ | 109.36 | | | $ | 204.40 | |
| | Cost of coal sales (exclusive of items shown separately below) | Cost of coal sales (exclusive of items shown separately below) | $ | 534,718 | | | $ | 20,784 | | | $ | 555,502 | | Cost of coal sales (exclusive of items shown separately below) | $ | 522,998 | | | $ | 16,139 | | | $ | 539,137 | |
Depreciation, depletion and amortization - production (1) | Depreciation, depletion and amortization - production (1) | 26,747 | | | 906 | | | 27,653 | | Depreciation, depletion and amortization - production (1) | 28,879 | | | 258 | | | 29,137 | |
| Accretion on asset retirement obligations | Accretion on asset retirement obligations | 3,390 | | | 2,531 | | | 5,921 | | Accretion on asset retirement obligations | 3,722 | | | 2,655 | | | 6,377 | |
| Amortization of acquired intangibles, net | Amortization of acquired intangibles, net | 3,591 | | | 952 | | | 4,543 | | Amortization of acquired intangibles, net | 2,197 | | | — | | | 2,197 | |
| Total Cost of coal sales | Total Cost of coal sales | $ | 568,446 | | | $ | 25,173 | | | $ | 593,619 | | Total Cost of coal sales | $ | 557,796 | | | $ | 19,052 | | | $ | 576,848 | |
| Less: Freight and handling costs | Less: Freight and handling costs | (122,585) | | | (3) | | | (122,588) | | Less: Freight and handling costs | (106,252) | | | (225) | | | (106,477) | |
Less: Depreciation, depletion and amortization - production (1) | Less: Depreciation, depletion and amortization - production (1) | (26,747) | | | (906) | | | (27,653) | | Less: Depreciation, depletion and amortization - production (1) | (28,879) | | | (258) | | | (29,137) | |
| Less: Accretion on asset retirement obligations | Less: Accretion on asset retirement obligations | (3,390) | | | (2,531) | | | (5,921) | | Less: Accretion on asset retirement obligations | (3,722) | | | (2,655) | | | (6,377) | |
| Less: Amortization of acquired intangibles, net | Less: Amortization of acquired intangibles, net | (3,591) | | | (952) | | | (4,543) | | Less: Amortization of acquired intangibles, net | (2,197) | | | — | | | (2,197) | |
| Less: Idled and closed mine costs | Less: Idled and closed mine costs | (3,580) | | | (3,978) | | | (7,558) | | Less: Idled and closed mine costs | (3,578) | | | (2,620) | | | (6,198) | |
| Non-GAAP Cost of coal sales | Non-GAAP Cost of coal sales | $ | 408,553 | | | $ | 16,803 | | | $ | 425,356 | | Non-GAAP Cost of coal sales | $ | 413,168 | | | $ | 13,294 | | | $ | 426,462 | |
| Tons sold | Tons sold | 3,896 | | | 249 | | | 4,145 | | Tons sold | 3,737 | | | 178 | | | 3,915 | |
| Non-GAAP Cost of coal sales per ton | Non-GAAP Cost of coal sales per ton | $ | 104.86 | | | $ | 67.48 | | | $ | 102.62 | | Non-GAAP Cost of coal sales per ton | $ | 110.56 | | | $ | 74.69 | | | $ | 108.93 | |
(1) Depreciation, depletion and amortization - production excludes the depreciation, depletion and amortization related to selling, general and administrative functions.
| | | Three Months Ended September 30, 2022 | | Three Months Ended March 31, 2023 |
| (In thousands, except for per ton data) | (In thousands, except for per ton data) | Met | | All Other | | Consolidated | (In thousands, except for per ton data) | Met | | All Other | | Consolidated |
| Coal revenues | Coal revenues | $ | 840,638 | | | $ | 27,211 | | | $ | 867,849 | | Coal revenues | $ | 887,007 | | | $ | 19,691 | | | $ | 906,698 | |
| Less: Total Cost of coal sales (per table above) | Less: Total Cost of coal sales (per table above) | (568,446) | | | (25,173) | | | (593,619) | | Less: Total Cost of coal sales (per table above) | (557,796) | | | (19,052) | | | (576,848) | |
| GAAP Coal margin | GAAP Coal margin | $ | 272,192 | | | $ | 2,038 | | | $ | 274,230 | | GAAP Coal margin | $ | 329,211 | | | $ | 639 | | | $ | 329,850 | |
| Tons sold | Tons sold | 3,896 | | | 249 | | | 4,145 | | Tons sold | 3,737 | | | 178 | | | 3,915 | |
| GAAP Coal margin per ton | GAAP Coal margin per ton | $ | 69.86 | | | $ | 8.18 | | | $ | 66.16 | | GAAP Coal margin per ton | $ | 88.09 | | | $ | 3.59 | | | $ | 84.25 | |
| | GAAP Coal margin | GAAP Coal margin | $ | 272,192 | | | $ | 2,038 | | | $ | 274,230 | | GAAP Coal margin | $ | 329,211 | | | $ | 639 | | | $ | 329,850 | |
Add: Depreciation, depletion and amortization - production (1) | Add: Depreciation, depletion and amortization - production (1) | 26,747 | | | 906 | | | 27,653 | | Add: Depreciation, depletion and amortization - production (1) | 28,879 | | | 258 | | | 29,137 | |
| Add: Accretion on asset retirement obligations | Add: Accretion on asset retirement obligations | 3,390 | | | 2,531 | | | 5,921 | | Add: Accretion on asset retirement obligations | 3,722 | | | 2,655 | | | 6,377 | |
| Add: Amortization of acquired intangibles, net | Add: Amortization of acquired intangibles, net | 3,591 | | | 952 | | | 4,543 | | Add: Amortization of acquired intangibles, net | 2,197 | | | — | | | 2,197 | |
| Add: Idled and closed mine costs | Add: Idled and closed mine costs | 3,580 | | | 3,978 | | | 7,558 | | Add: Idled and closed mine costs | 3,578 | | | 2,620 | | | 6,198 | |
| Non-GAAP Coal margin | Non-GAAP Coal margin | $ | 309,500 | | | $ | 10,405 | | | $ | 319,905 | | Non-GAAP Coal margin | $ | 367,587 | | | $ | 6,172 | | | $ | 373,759 | |
| Tons sold | Tons sold | 3,896 | | | 249 | | | 4,145 | | Tons sold | 3,737 | | | 178 | | | 3,915 | |
| Non-GAAP Coal margin per ton | Non-GAAP Coal margin per ton | $ | 79.44 | | | $ | 41.79 | | | $ | 77.18 | | Non-GAAP Coal margin per ton | $ | 98.36 | | | $ | 34.67 | | | $ | 95.47 | |
(1) Depreciation, depletion and amortization - production excludes the depreciation, depletion and amortization related to selling, general and administrative functions.
| | | Three Months Ended September 30, 2021 | | Three Months Ended March 31, 2022 |
| (In thousands, except for per ton data) | (In thousands, except for per ton data) | Met | | All Other | | Consolidated | (In thousands, except for per ton data) | Met | | All Other | | Consolidated |
| Coal revenues | Coal revenues | $ | 625,387 | | | $ | 21,742 | | | $ | 647,129 | | Coal revenues | $ | 1,054,340 | | | $ | 15,398 | | | $ | 1,069,738 | |
| Less: Freight and handling fulfillment revenues | Less: Freight and handling fulfillment revenues | (128,192) | | | (18) | | | (128,210) | | Less: Freight and handling fulfillment revenues | (144,025) | | | (18) | | | (144,043) | |
| Non-GAAP Coal revenues | Non-GAAP Coal revenues | $ | 497,195 | | | $ | 21,724 | | | $ | 518,919 | | Non-GAAP Coal revenues | $ | 910,315 | | | $ | 15,380 | | | $ | 925,695 | |
| Tons sold | Tons sold | 4,380 | | | 348 | | | 4,728 | | Tons sold | 3,780 | | | 268 | | | 4,048 | |
| Non-GAAP Coal sales realization per ton | Non-GAAP Coal sales realization per ton | $ | 113.51 | | | $ | 62.43 | | | $ | 109.75 | | Non-GAAP Coal sales realization per ton | $ | 240.82 | | | $ | 57.39 | | | $ | 228.68 | |
| | Cost of coal sales (exclusive of items shown separately below) | Cost of coal sales (exclusive of items shown separately below) | $ | 468,706 | | | $ | 19,463 | | | $ | 488,169 | | Cost of coal sales (exclusive of items shown separately below) | $ | 539,282 | | | $ | 16,060 | | | $ | 555,342 | |
Depreciation, depletion and amortization - production (1) | Depreciation, depletion and amortization - production (1) | 23,181 | | | 1,160 | | | 24,341 | | Depreciation, depletion and amortization - production (1) | 27,060 | | | 797 | | | 27,857 | |
| Accretion on asset retirement obligations | Accretion on asset retirement obligations | 3,408 | | | 3,266 | | | 6,674 | | Accretion on asset retirement obligations | 3,398 | | | 2,556 | | | 5,954 | |
| Amortization of acquired intangibles, net | Amortization of acquired intangibles, net | 3,063 | | | (83) | | | 2,980 | | Amortization of acquired intangibles, net | 4,796 | | | 952 | | | 5,748 | |
| Total Cost of coal sales | Total Cost of coal sales | $ | 498,358 | | | $ | 23,806 | | | $ | 522,164 | | Total Cost of coal sales | $ | 574,536 | | | $ | 20,365 | | | $ | 594,901 | |
| Less: Freight and handling costs | Less: Freight and handling costs | (128,192) | | | (18) | | | (128,210) | | Less: Freight and handling costs | (144,025) | | | (18) | | | (144,043) | |
Less: Depreciation, depletion and amortization - production (1) | Less: Depreciation, depletion and amortization - production (1) | (23,181) | | | (1,160) | | | (24,341) | | Less: Depreciation, depletion and amortization - production (1) | (27,060) | | | (797) | | | (27,857) | |
| Less: Accretion on asset retirement obligations | Less: Accretion on asset retirement obligations | (3,408) | | | (3,266) | | | (6,674) | | Less: Accretion on asset retirement obligations | (3,398) | | | (2,556) | | | (5,954) | |
| Less: Amortization of acquired intangibles, net | Less: Amortization of acquired intangibles, net | (3,063) | | | 83 | | | (2,980) | | Less: Amortization of acquired intangibles, net | (4,796) | | | (952) | | | (5,748) | |
| Less: Idled and closed mine costs | Less: Idled and closed mine costs | (4,932) | | | (2,927) | | | (7,859) | | Less: Idled and closed mine costs | (3,604) | | | (2,671) | | | (6,275) | |
| Non-GAAP Cost of coal sales | Non-GAAP Cost of coal sales | $ | 335,582 | | | $ | 16,518 | | | $ | 352,100 | | Non-GAAP Cost of coal sales | $ | 391,653 | | | $ | 13,371 | | | $ | 405,024 | |
| Tons sold | Tons sold | 4,380 | | | 348 | | | 4,728 | | Tons sold | 3,780 | | | 268 | | | 4,048 | |
| Non-GAAP Cost of coal sales per ton | Non-GAAP Cost of coal sales per ton | $ | 76.62 | | | $ | 47.47 | | | $ | 74.47 | | Non-GAAP Cost of coal sales per ton | $ | 103.61 | | | $ | 49.89 | | | $ | 100.06 | |
(1) Depreciation, depletion and amortization - production excludes the depreciation, depletion and amortization related to selling, general and administrative functions.
| | | Three Months Ended September 30, 2021 | | Three Months Ended March 31, 2022 |
| (In thousands, except for per ton data) | (In thousands, except for per ton data) | Met | | All Other | | Consolidated | (In thousands, except for per ton data) | Met | | All Other | | Consolidated |
| Coal revenues | Coal revenues | $ | 625,387 | | | $ | 21,742 | | | $ | 647,129 | | Coal revenues | $ | 1,054,340 | | | $ | 15,398 | | | $ | 1,069,738 | |
| Less: Total Cost of coal sales (per table above) | Less: Total Cost of coal sales (per table above) | (498,358) | | | (23,806) | | | (522,164) | | Less: Total Cost of coal sales (per table above) | (574,536) | | | (20,365) | | | (594,901) | |
| GAAP Coal margin | GAAP Coal margin | $ | 127,029 | | | $ | (2,064) | | | $ | 124,965 | | GAAP Coal margin | $ | 479,804 | | | $ | (4,967) | | | $ | 474,837 | |
| Tons sold | Tons sold | 4,380 | | | 348 | | | 4,728 | | Tons sold | 3,780 | | | 268 | | | 4,048 | |
| GAAP Coal margin per ton | GAAP Coal margin per ton | $ | 29.00 | | | $ | (5.93) | | | $ | 26.43 | | GAAP Coal margin per ton | $ | 126.93 | | | $ | (18.53) | | | $ | 117.30 | |
| | GAAP Coal margin | GAAP Coal margin | $ | 127,029 | | | $ | (2,064) | | | $ | 124,965 | | GAAP Coal margin | $ | 479,804 | | | $ | (4,967) | | | $ | 474,837 | |
Add: Depreciation, depletion and amortization - production (1) | Add: Depreciation, depletion and amortization - production (1) | 23,181 | | | 1,160 | | | 24,341 | | Add: Depreciation, depletion and amortization - production (1) | 27,060 | | | 797 | | | 27,857 | |
| Add: Accretion on asset retirement obligations | Add: Accretion on asset retirement obligations | 3,408 | | | 3,266 | | | 6,674 | | Add: Accretion on asset retirement obligations | 3,398 | | | 2,556 | | | 5,954 | |
| Add: Amortization of acquired intangibles, net | Add: Amortization of acquired intangibles, net | 3,063 | | | (83) | | | 2,980 | | Add: Amortization of acquired intangibles, net | 4,796 | | | 952 | | | 5,748 | |
| Add: Idled and closed mine costs | Add: Idled and closed mine costs | 4,932 | | | 2,927 | | | 7,859 | | Add: Idled and closed mine costs | 3,604 | | | 2,671 | | | 6,275 | |
| Non-GAAP Coal margin | Non-GAAP Coal margin | $ | 161,613 | | | $ | 5,206 | | | $ | 166,819 | | Non-GAAP Coal margin | $ | 518,662 | | | $ | 2,009 | | | $ | 520,671 | |
| Tons sold | Tons sold | 4,380 | | | 348 | | | 4,728 | | Tons sold | 3,780 | | | 268 | | | 4,048 | |
| Non-GAAP Coal margin per ton | Non-GAAP Coal margin per ton | $ | 36.90 | | | $ | 14.96 | | | $ | 35.28 | | Non-GAAP Coal margin per ton | $ | 137.21 | | | $ | 7.50 | | | $ | 128.62 | |
(1) Depreciation, depletion and amortization - production excludes the depreciation, depletion and amortization related to selling, general and administrative functions.
| | | Three Months Ended September 30, | | Increase (Decrease) | | Three Months Ended March 31, | | Increase (Decrease) |
| (In thousands, except for per ton data) | (In thousands, except for per ton data) | 2022 | | 2021 | | $ or Tons | | % | (In thousands, except for per ton data) | 2023 | | 2022 | | $ or Tons | | % |
| Met segment operations: | Met segment operations: | | | | | | | | Met segment operations: | | | | | | | |
| Tons sold | Tons sold | 3,896 | | | 4,380 | | | (484) | | | (11.1) | % | Tons sold | 3,737 | | | 3,780 | | | (43) | | | (1.1) | % |
| Non-GAAP Coal revenues | Non-GAAP Coal revenues | $ | 718,053 | | | $ | 497,195 | | | $ | 220,858 | | | 44.4 | % | Non-GAAP Coal revenues | $ | 780,755 | | | $ | 910,315 | | | $ | (129,560) | | | (14.2) | % |
| Non-GAAP Coal sales realization per ton | Non-GAAP Coal sales realization per ton | $ | 184.31 | | | $ | 113.51 | | | $ | 70.80 | | | 62.4 | % | Non-GAAP Coal sales realization per ton | $ | 208.93 | | | $ | 240.82 | | | $ | (31.89) | | | (13.2) | % |
| | All Other category: | All Other category: | | All Other category: | |
| Tons sold | Tons sold | 249 | | | 348 | | | (99) | | | (28.4) | % | Tons sold | 178 | | | 268 | | | (90) | | | (33.6) | % |
| Non-GAAP Coal revenues | Non-GAAP Coal revenues | $ | 27,208 | | | $ | 21,724 | | | $ | 5,484 | | | 25.2 | % | Non-GAAP Coal revenues | $ | 19,466 | | | $ | 15,380 | | | $ | 4,086 | | | 26.6 | % |
| Non-GAAP Coal sales realization per ton | Non-GAAP Coal sales realization per ton | $ | 109.27 | | | $ | 62.43 | | | $ | 46.84 | | | 75.0 | % | Non-GAAP Coal sales realization per ton | $ | 109.36 | | | $ | 57.39 | | | $ | 51.97 | | | 90.6 | % |
Non-GAAP Coal revenues. Met segment operations non-GAAP coal revenues increased $220.9decreased $129.6 million, or 44.4%14.2%, for the three months ended September 30, 2022March 31, 2023 compared to the prior year period. The increasedecrease was primarily due to highera $31.89 per ton, or 13.2%, reduction in average non-GAAP coal sales realization as prices moderated from the higher levels experienced during the first quarter of 62.4% per ton resulting from an improved2022. The elevated coal sales pricing environment compared toin the prior year period.period was driven by increased coal demand, resulting from improved economic activity, coupled with limited supply response.
All Other category non-GAAP coal revenues increased $5.5$4.1 million, or 25.2%26.6%, for the three months ended September 30, 2022March 31, 2023 compared to the prior year period primarily due to higher average non-GAAPas an improved thermal coal pricing environment more than offset a decline in coal sales realizationvolumes as our Mammoth mining complex's remaining mine works toward cessation of 75.0% per ton resulting from an improved pricing environment compared tomining by the prior year period.end of 2023.
| | | Three Months Ended September 30, | | Increase (Decrease) | | Three Months Ended March 31, | | Increase (Decrease) |
| (In thousands, except for per ton data) | (In thousands, except for per ton data) | 2022 | | 2021 | | $ | | % | (In thousands, except for per ton data) | 2023 | | 2022 | | $ | | % |
| Met segment operations: | Met segment operations: | | | | | | | | Met segment operations: | | | | | | | |
| Non-GAAP Cost of coal sales | Non-GAAP Cost of coal sales | $ | 408,553 | | | $ | 335,582 | | | $ | 72,971 | | | 21.7 | % | Non-GAAP Cost of coal sales | $ | 413,168 | | | $ | 391,653 | | | $ | 21,515 | | | 5.5 | % |
| Non-GAAP Cost of coal sales per ton | Non-GAAP Cost of coal sales per ton | $ | 104.86 | | | $ | 76.62 | | | $ | 28.24 | | | 36.9 | % | Non-GAAP Cost of coal sales per ton | $ | 110.56 | | | $ | 103.61 | | | $ | 6.95 | | | 6.7 | % |
| Non-GAAP Coal margin per ton | Non-GAAP Coal margin per ton | $ | 79.44 | | | $ | 36.90 | | | $ | 42.54 | | | 115.3 | % | Non-GAAP Coal margin per ton | $ | 98.36 | | | $ | 137.21 | | | $ | (38.85) | | | (28.3) | % |
| | All Other category: | All Other category: | | All Other category: | |
| Non-GAAP Cost of coal sales | Non-GAAP Cost of coal sales | $ | 16,803 | | | $ | 16,518 | | | $ | 285 | | | 1.7 | % | Non-GAAP Cost of coal sales | $ | 13,294 | | | $ | 13,371 | | | $ | (77) | | | (0.6) | % |
| Non-GAAP Cost of coal sales per ton | Non-GAAP Cost of coal sales per ton | $ | 67.48 | | | $ | 47.47 | | | $ | 20.01 | | | 42.2 | % | Non-GAAP Cost of coal sales per ton | $ | 74.69 | | | $ | 49.89 | | | $ | 24.80 | | | 49.7 | % |
| Non-GAAP Coal margin per ton | Non-GAAP Coal margin per ton | $ | 41.79 | | | $ | 14.96 | | | $ | 26.83 | | | 179.3 | % | Non-GAAP Coal margin per ton | $ | 34.67 | | | $ | 7.50 | | | $ | 27.17 | | | 362.3 | % |
Non-GAAP Cost of coal sales. Met segment operations non-GAAP cost of coal sales increased $73.0$21.5 million, or 21.7%5.5%, for the three months ended September 30, 2022March 31, 2023 compared to the prior year period. The increase was primarily driven by increased labor and supplies and maintenance expense, salaries and wages expense, rail freight costs anddue to inflationary pressures, partially offset by reductions in royalties and taxes.taxes as a result of a lower coal pricing environment.
All Other category non-GAAP cost of coal sales increased $0.3decreased $0.1 million, or 1.7%0.6%, for the three months ended September 30, 2022March 31, 2023 compared to the prior year period. The increaseperiod as the impact of lower coal sales volumes was primarily drivenpartially offset by increases in supplies and maintenance expense, royalties and taxes, and salaries and wages expense.
Ourhigher non-GAAP cost of coal sales includes purchased coal costs. In the following tables, we calculate Adjusted cost of produced coal sold asper ton. The increase in non-GAAP cost of coal sales less purchased coal costs.
| | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, 2022 |
| (In thousands, except for per ton data) | Met | | All Other | | Consolidated |
| Non-GAAP Cost of coal sales | $ | 408,553 | | | $ | 16,803 | | | $ | 425,356 | |
| Less: cost of purchased coal sold | (21,222) | | | — | | | (21,222) | |
| Adjusted cost of produced coal sold | $ | 387,331 | | | $ | 16,803 | | | $ | 404,134 | |
| Produced tons sold | 3,795 | | | 249 | | | 4,044 | |
Adjusted cost of produced coal sold per ton (1) | $ | 102.06 | | | $ | 67.48 | | | $ | 99.93 | |
(1) Cost of produced coal sold per ton for our operations is calculated as non-GAAP costwas driven by higher labor and supplies costs due to inflationary pressures, increased royalties and taxes due to the increased thermal coal pricing environment, and the impact of produced coal sold divided by produced tons sold.
| | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, 2021 |
| (In thousands, except for per ton data) | Met | | All Other | | Consolidated |
| Non-GAAP Cost of coal sales | $ | 335,582 | | | $ | 16,518 | | | $ | 352,100 | |
| Less: cost of purchased coal sold | (32,168) | | | — | | | (32,168) | |
| Adjusted cost of produced coal sold | $ | 303,414 | | | $ | 16,518 | | | $ | 319,932 | |
| Produced tons sold | 4,107 | | | 348 | | | 4,455 | |
Adjusted cost of produced coal sold per ton (1) | $ | 73.88 | | | $ | 47.47 | | | $ | 71.81 | |
(1) Cost of produced coal sold per ton for our operations is calculated as non-GAAP cost of produced coal sold divided by produced tons sold.lower sales volumes on fixed costs.
Adjusted EBITDA
Adjusted EBITDA is a non-GAAP financial measure that is presented as a supplemental measure and is not intended to replace financial performance or liquidity measures determined in accordance with GAAP. Moreover, this measure is not calculated identically by all companies and therefore may not be comparable to similarly titled measures used by other companies. Adjusted EBITDA is presented because management believes it is a useful indicator of the financial performance of our coal operations. The following tables present a reconciliation of net income (loss) to Adjusted EBITDA for the three months ended September 30, 2022March 31, 2023 and 2021:2022:
| | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2023 |
| (In thousands) | Met | | All Other | | Consolidated |
| Net income (loss) | $ | 327,214 | | | $ | (56,443) | | | $ | 270,771 | |
| Interest expense | 165 | | | 1,555 | | | 1,720 | |
| Interest income | (188) | | | (1,330) | | | (1,518) | |
| Income tax expense | — | | | 42,411 | | | 42,411 | |
| Depreciation, depletion and amortization | 28,879 | | | 544 | | | 29,423 | |
| Non-cash stock compensation expense | 19 | | | 3,015 | | | 3,034 | |
| Accretion on asset retirement obligations | 3,722 | | | 2,655 | | | 6,377 | |
| Amortization of acquired intangibles, net | 2,197 | | | — | | | 2,197 | |
| Adjusted EBITDA | $ | 362,008 | | | $ | (7,593) | | | $ | 354,415 | |
| | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, 2022 |
| (In thousands) | Met | | All Other | | Consolidated |
| Net income (loss) from continuing operations | $ | 268,157 | | | $ | (16,321) | | | $ | 251,836 | |
| Interest expense | 40 | | | 1,655 | | | 1,695 | |
| Interest income | (369) | | | (695) | | | (1,064) | |
| Income tax expense | — | | | 5,437 | | | 5,437 | |
| Depreciation, depletion and amortization | 26,747 | | | 1,178 | | | 27,925 | |
| Non-cash stock compensation expense | — | | | 1,520 | | | 1,520 | |
| Mark-to-market adjustment - acquisition-related obligations | — | | | (2,954) | | | (2,954) | |
| Accretion on asset retirement obligations | 3,390 | | | 2,531 | | | 5,921 | |
| Amortization of acquired intangibles, net | 3,591 | | | 952 | | | 4,543 | |
| Adjusted EBITDA | $ | 301,556 | | | $ | (6,697) | | | $ | 294,859 | |
| | | Three Months Ended September 30, 2021 | | Three Months Ended March 31, 2022 |
| (In thousands) | (In thousands) | Met | | All Other | | Consolidated | (In thousands) | Met | | All Other | | Consolidated |
| Net income (loss) from continuing operations | $ | 125,750 | | | $ | (42,057) | | | $ | 83,693 | | |
| Net income (loss) | | Net income (loss) | $ | 478,167 | | | $ | (77,276) | | | $ | 400,891 | |
| Interest expense | Interest expense | 49 | | | 17,289 | | | 17,338 | | Interest expense | 49 | | | 13,034 | | | 13,083 | |
| Interest income | Interest income | (1) | | | (53) | | | (54) | | Interest income | (172) | | | (12) | | | (184) | |
| Income tax expense | Income tax expense | — | | | 208 | | | 208 | | Income tax expense | — | | | 39,591 | | | 39,591 | |
| Depreciation, depletion and amortization | Depreciation, depletion and amortization | 23,181 | | | 1,338 | | | 24,519 | | Depreciation, depletion and amortization | 27,060 | | | 975 | | | 28,035 | |
| Non-cash stock compensation expense | Non-cash stock compensation expense | 6 | | | 1,183 | | | 1,189 | | Non-cash stock compensation expense | 3 | | | 1,179 | | | 1,182 | |
| Mark-to-market adjustment - acquisition-related obligations | Mark-to-market adjustment - acquisition-related obligations | — | | | 11,676 | | | 11,676 | | Mark-to-market adjustment - acquisition-related obligations | — | | | 9,361 | | | 9,361 | |
| Accretion on asset retirement obligations | Accretion on asset retirement obligations | 3,408 | | | 3,266 | | | 6,674 | | Accretion on asset retirement obligations | 3,398 | | | 2,556 | | | 5,954 | |
| Amortization of acquired intangibles, net | Amortization of acquired intangibles, net | 3,063 | | | (83) | | | 2,980 | | Amortization of acquired intangibles, net | 4,796 | | | 952 | | | 5,748 | |
| Adjusted EBITDA | Adjusted EBITDA | $ | 155,456 | | | $ | (7,233) | | | $ | 148,223 | | Adjusted EBITDA | $ | 513,301 | | | $ | (9,640) | | | $ | 503,661 | |
The following table summarizes Adjusted EBITDA for our Met segment operations and All Other category:
| | | Three Months Ended September 30, | | Increase (Decrease) | | Three Months Ended March 31, | | Increase (Decrease) |
| (In thousands) | (In thousands) | 2022 | | 2021 | | $ | | % | (In thousands) | 2023 | | 2022 | | $ | | % |
| Adjusted EBITDA | Adjusted EBITDA | | | | | | | | Adjusted EBITDA | | | | | | | |
| Met segment operations | Met segment operations | $ | 301,556 | | | $ | 155,456 | | | $ | 146,100 | | | 94.0 | % | Met segment operations | $ | 362,008 | | | $ | 513,301 | | | $ | (151,293) | | | (29.5) | % |
| All Other category | All Other category | (6,697) | | | (7,233) | | | 536 | | | 7.4 | % | All Other category | (7,593) | | | (9,640) | | | 2,047 | | | 21.2 | % |
| Total | Total | $ | 294,859 | | | $ | 148,223 | | | $ | 146,636 | | | 98.9 | % | Total | $ | 354,415 | | | $ | 503,661 | | | $ | (149,246) | | | (29.6) | % |
Met segment operations. Adjusted EBITDA increased $146.1decreased $151.3 million, or 94.0%29.5%, for the three months ended September 30, 2022March 31, 2023 compared to the prior year period. The decrease in Adjusted EBITDA was primarily driven by decreased coal margin and lower non-GAAP coal sales realization per ton in the current period.
All Other category. Adjusted EBITDA increased $2.0 million, or 21.2%, for the three months ended March 31, 2023 compared to the prior year period. The increase in Adjusted EBITDA was primarily driven by increased coal margin.
All Other category. Adjusted EBITDA increased $0.5 million, or 7.4%, for the three months ended September 30, 2022 compared to the prior year period. The increase in Adjusted EBITDA was primarily driven by increased coal margin.
Discontinued Operations
The former NAPP operations results of operationsmargin and financial position are reported as discontinued operations in the Condensed Consolidated Financial Statements. Refer to Note 2 for further information on discontinued operations. Refer to Note 16 for disclosures on the Cumberland Back-to-Back Coal Supply Agreements.
Nine Months Ended September 30, 2022 Compared to the Nine Months Ended September 30, 2021
Revenues
The following table summarizes information about our revenues during the nine months ended September 30, 2022 and 2021:
| | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, | | Increase (Decrease) |
| (In thousands, except for per ton data) | 2022 | | 2021 | | $ or Tons | | % |
| Coal revenues | $ | 3,271,845 | | | $ | 1,426,039 | | | $ | 1,845,806 | | | 129.4 | % |
| Other revenues | 6,299 | | | 4,330 | | | 1,969 | | | 45.5 | % |
| Total revenues | $ | 3,278,144 | | | $ | 1,430,369 | | | $ | 1,847,775 | | | 129.2 | % |
| | | | | | | |
| Tons sold | 12,497 | | | 12,815 | | | (318) | | | (2.5) | % |
Coal revenues. Coal revenues increased $1,845.8 million, or 129.4%, for the nine months ended September 30, 2022 compared to the prior year period. The increase was primarily due to higher coal sales realization as a result of an improved pricing environment during the current period. Increasing coal demand, resulting from improved economic activity, coupled with a limited supply response contributed to a rise in coal prices. Refer to the “Non-GAAP Coal revenues” section below for further detail on coal revenues for the nine months ended September 30, 2022 compared to the prior year period.
Cost and Expenses
The following table summarizes information about our costs and expenses during the nine months ended September 30, 2022 and 2021:
| | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, | | Increase (Decrease) |
| (In thousands) | 2022 | | 2021 | | $ | | % |
| Cost of coal sales (exclusive of items shown separately below) | $ | 1,736,711 | | | $ | 1,182,360 | | | $ | 554,351 | | | 46.9 | % |
| Depreciation, depletion and amortization | 83,690 | | | 80,261 | | | 3,429 | | | 4.3 | % |
| Accretion on asset retirement obligations | 17,822 | | | 19,970 | | | (2,148) | | | (10.8) | % |
| Amortization of acquired intangibles, net | 16,038 | | | 9,402 | | | 6,636 | | | 70.6 | % |
| Asset impairment and restructuring | — | | | (561) | | | 561 | | | 100.0 | % |
| Selling, general and administrative expenses (exclusive of depreciation, depletion and amortization shown separately above) | 48,339 | | | 44,891 | | | 3,448 | | | 7.7 | % |
| Total other operating loss (income): | | | | | | | |
| Mark-to-market adjustment for acquisition-related obligations | 10,615 | | | 18,009 | | | (7,394) | | | (41.1) | % |
| Other expense (income) | 569 | | | (5,290) | | | 5,859 | | | 110.8 | % |
| Total costs and expenses | $ | 1,913,784 | | | $ | 1,349,042 | | | $ | 564,742 | | | 41.9 | % |
Cost of coal sales. Cost of coal sales increased $554.4 million, or 46.9%, for the nine months ended September 30, 2022 compared to the prior year period. The increase was primarily driven by increased rail freight costs, royalties and taxes, salaries and wages expense, and supplies and maintenance expense, partially offset by inventory change during the current period.
Depreciation, depletion and amortization. Depreciation, depletion and amortization increased $3.4 million, or 4.3%, for the nine months ended September 30, 2022 compared to the prior year period. The increase in depreciation, depletion and amortization was primarily a result of annual changes in depletion rates due to the Company’s updated estimated coal reserves.
Amortization of acquired intangibles, net. Amortization of acquired intangibles, net increased $6.6 million, or 70.6%, for the nine months ended September 30, 2022 compared to the prior year period. The increase was primarily driven by accelerated current period amortization of certain acquired mine permits as a result of an update to the estimated life of the associated mines.
Selling, general and administrative. Selling, general and administrative expenses increased $3.4 million, or 7.7%, for the nine months ended September 30, 2022 compared to the prior year period. This increase in expense was primarily related to increases of $2.8 million in wages and benefits expense.
Mark-to-market adjustment for acquisition-related obligations. The mark-to-market adjustment for acquisition-related obligations resulted in an increase to income of $7.4 million for the nine months ended September 30, 2022 compared to the prior year period. This increase was related to the $10.6 million Contingent Revenue Obligation mark-to-market adjustment recorded during the nine months ended September 30, 2022 due to changes in underlying fair value assumptions during the current period. Refer to Note 12for Contingent Revenue Obligation fair value input assumptions.
Other expense (income). Other income decreased $5.9 million, or 110.8%, for the nine months ended September 30, 2022 compared to the prior year period, primarily due to a decrease in income on sale of assets in the current period.
Other (Expense) Income
The following table summarizes information about our other (expense) income during the nine months ended September 30, 2022 and 2021:
| | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, | | Increase (Decrease) |
| (In thousands) | 2022 | | 2021 | | $ | | % |
| Other (expense) income: | | | | | | | |
| Interest expense | $ | (19,996) | | | $ | (53,290) | | | $ | 33,294 | | | 62.5 | % |
| Interest income | 1,412 | | | 322 | | | 1,090 | | | 338.5 | % |
| Equity loss in affiliates | (8,318) | | | (1,161) | | | (7,157) | | | (616.5) | % |
| Miscellaneous income, net | 4,884 | | | 5,425 | | | (541) | | | (10.0) | % |
| Total other expense, net | $ | (22,018) | | | $ | (48,704) | | | $ | 26,686 | | | 54.8 | % |
Interest expense. Interest expense decreased $33.3 million, or 62.5%, for the nine months ended September 30, 2022 compared to the prior year period, primarily due to a decrease in debt outstanding. Refer to Note 9 for additional information.
Equity loss in affiliates. Equity loss in affiliates increased $7.2 million, or 616.5%, for the nine months ended September 30, 2022 compared to the prior year period, primarily driven by a net decrease in net income of our equity affiliates.
Income Tax Expense
The following table summarizes information about our income tax expense during the nine months ended September 30, 2022 and 2021:
| | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, | | Increase (Decrease) |
| (In thousands) | 2022 | | 2021 | | $ | | % |
| Income tax expense | $ | (114,073) | | | $ | (211) | | | $ | (113,862) | | | (53,963.0) | % |
Income taxes. Income tax expense of $114.1 million was recorded for the nine months ended September 30, 2022 on income from continuing operations before income taxes of $1,342.3 million. The effective tax rate differs from the federal statutory rate of 21% primarily due to the decrease in the valuation allowance and the permanent impact of percentage depletion and foreign-derived intangible income deductions.
Income tax expense of $0.2 million was recorded for the nine months ended September 30, 2021 on income from continuing operations before income taxes of $32.6 million. The effective tax rate differs from the federal statutory rate of 21% primarily due to the decrease in the valuation allowance. Refer to Note 13 for additional information.
Non-GAAP Financial Measures
Included below are reconciliations of non-GAAP financial measures to GAAP financial measures.
The following tables summarize certain financial information relating to our coal operations for the nine months ended September 30, 2022 and 2021:
| | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, 2022 |
| (In thousands, except for per ton data) | Met | | All Other | | Consolidated |
| Coal revenues | $ | 3,213,639 | | | $ | 58,206 | | | $ | 3,271,845 | |
| Less: Freight and handling fulfillment revenues | (423,132) | | | (21) | | | (423,153) | |
| Non-GAAP Coal revenues | $ | 2,790,507 | | | $ | 58,185 | | | $ | 2,848,692 | |
| Tons sold | 11,726 | | | 771 | | | 12,497 | |
| Non-GAAP Coal sales realization per ton | $ | 237.98 | | | $ | 75.47 | | | $ | 227.95 | |
| | | | | |
| Cost of coal sales (exclusive of items shown separately below) | $ | 1,684,224 | | | $ | 52,487 | | | $ | 1,736,711 | |
Depreciation, depletion and amortization - production (1) | 81,009 | | | 1,953 | | | 82,962 | |
| Accretion on asset retirement obligations | 10,178 | | | 7,644 | | | 17,822 | |
| Amortization of acquired intangibles, net | 13,182 | | | 2,856 | | | 16,038 | |
| Total Cost of coal sales | $ | 1,788,593 | | | $ | 64,940 | | | $ | 1,853,533 | |
| Less: Freight and handling costs | (423,132) | | | (21) | | | (423,153) | |
Less: Depreciation, depletion and amortization - production (1) | (81,009) | | | (1,953) | | | (82,962) | |
| Less: Accretion on asset retirement obligations | (10,178) | | | (7,644) | | | (17,822) | |
| Less: Amortization of acquired intangibles, net | (13,182) | | | (2,856) | | | (16,038) | |
| Less: Idled and closed mine costs | (9,892) | | | (9,617) | | | (19,509) | |
| Non-GAAP Cost of coal sales | $ | 1,251,200 | | | $ | 42,849 | | | $ | 1,294,049 | |
| Tons sold | 11,726 | | | 771 | | | 12,497 | |
| Non-GAAP Cost of coal sales per ton | $ | 106.70 | | | $ | 55.58 | | | $ | 103.55 | |
(1) Depreciation, depletion and amortization - production excludes the depreciation, depletion and amortization related to selling, general and administrative functions.
| | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, 2022 |
| (In thousands, except for per ton data) | Met | | All Other | | Consolidated |
| Coal revenues | $ | 3,213,639 | | | $ | 58,206 | | | $ | 3,271,845 | |
| Less: Total Cost of coal sales (per table above) | (1,788,593) | | | (64,940) | | | (1,853,533) | |
| GAAP Coal margin | $ | 1,425,046 | | | $ | (6,734) | | | $ | 1,418,312 | |
| Tons sold | 11,726 | | | 771 | | | 12,497 | |
| GAAP Coal margin per ton | $ | 121.53 | | | $ | (8.73) | | | $ | 113.49 | |
| | | | | |
| GAAP Coal margin | $ | 1,425,046 | | | $ | (6,734) | | | $ | 1,418,312 | |
Add: Depreciation, depletion and amortization - production (1) | 81,009 | | | 1,953 | | | 82,962 | |
| Add: Accretion on asset retirement obligations | 10,178 | | | 7,644 | | | 17,822 | |
| Add: Amortization of acquired intangibles, net | 13,182 | | | 2,856 | | | 16,038 | |
| Add: Idled and closed mine costs | 9,892 | | | 9,617 | | | 19,509 | |
| Non-GAAP Coal margin | $ | 1,539,307 | | | $ | 15,336 | | | $ | 1,554,643 | |
| Tons sold | 11,726 | | | 771 | | | 12,497 | |
| Non-GAAP Coal margin per ton | $ | 131.27 | | | $ | 19.89 | | | $ | 124.40 | |
(1) Depreciation, depletion and amortization - production excludes the depreciation, depletion and amortization related to selling, general and administrative functions.
| | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, 2021 |
| (In thousands, except for per ton data) | Met | | All Other | | Consolidated |
| Coal revenues | $ | 1,362,119 | | | $ | 63,920 | | | $ | 1,426,039 | |
| Less: Freight and handling fulfillment revenues | (252,532) | | | (504) | | | (253,036) | |
| Non-GAAP Coal revenues | $ | 1,109,587 | | | $ | 63,416 | | | $ | 1,173,003 | |
| Tons sold | 11,785 | | | 1,030 | | | 12,815 | |
| Non-GAAP Coal sales realization per ton | $ | 94.15 | | | $ | 61.57 | | | $ | 91.53 | |
| | | | | |
| Cost of coal sales (exclusive of items shown separately below) | $ | 1,125,840 | | | $ | 56,520 | | | $ | 1,182,360 | |
Depreciation, depletion and amortization - production (1) | 75,403 | | | 4,321 | | | 79,724 | |
| Accretion on asset retirement obligations | 10,170 | | | 9,800 | | | 19,970 | |
| Amortization of acquired intangibles, net | 9,749 | | | (347) | | | 9,402 | |
| Total Cost of coal sales | $ | 1,221,162 | | | $ | 70,294 | | | $ | 1,291,456 | |
| Less: Freight and handling costs | (252,532) | | | (504) | | | (253,036) | |
Less: Depreciation, depletion and amortization - production (1) | (75,403) | | | (4,321) | | | (79,724) | |
| Less: Accretion on asset retirement obligations | (10,170) | | | (9,800) | | | (19,970) | |
| Less: Amortization of acquired intangibles, net | (9,749) | | | 347 | | | (9,402) | |
| Less: Idled and closed mine costs | (13,325) | | | (10,215) | | | (23,540) | |
| Non-GAAP Cost of coal sales | $ | 859,983 | | | $ | 45,801 | | | $ | 905,784 | |
| Tons sold | 11,785 | | | 1,030 | | | 12,815 | |
| Non-GAAP Cost of coal sales per ton | $ | 72.97 | | | $ | 44.47 | | | $ | 70.68 | |
(1) Depreciation, depletion and amortization - production excludes the depreciation, depletion and amortization related to selling, general and administrative functions.
| | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, 2021 |
| (In thousands, except for per ton data) | Met | | All Other | | Consolidated |
| Coal revenues | $ | 1,362,119 | | | $ | 63,920 | | | $ | 1,426,039 | |
| Less: Total Cost of coal sales (per table above) | (1,221,162) | | | (70,294) | | | (1,291,456) | |
| GAAP Coal margin | $ | 140,957 | | | $ | (6,374) | | | $ | 134,583 | |
| Tons sold | 11,785 | | | 1,030 | | | 12,815 | |
| GAAP Coal margin per ton | $ | 11.96 | | | $ | (6.19) | | | $ | 10.50 | |
| | | | | |
| GAAP Coal margin | $ | 140,957 | | | $ | (6,374) | | | $ | 134,583 | |
Add: Depreciation, depletion and amortization - production (1) | 75,403 | | | 4,321 | | | 79,724 | |
| Add: Accretion on asset retirement obligations | 10,170 | | | 9,800 | | | 19,970 | |
| Add: Amortization of acquired intangibles, net | 9,749 | | | (347) | | | 9,402 | |
| Add: Idled and closed mine costs | 13,325 | | | 10,215 | | | 23,540 | |
| Non-GAAP Coal margin | $ | 249,604 | | | $ | 17,615 | | | $ | 267,219 | |
| Tons sold | 11,785 | | | 1,030 | | | 12,815 | |
| Non-GAAP Coal margin per ton | $ | 21.18 | | | $ | 17.10 | | | $ | 20.85 | |
(1) Depreciation, depletion and amortization - production excludes the depreciation, depletion and amortization related to selling, general and administrative functions.
| | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, | | Increase (Decrease) |
| (In thousands, except for per ton data) | 2022 | | 2021 | | $ | | % |
| Met segment operations: | | | | | | | |
| Tons sold | 11,726 | | | 11,785 | | | (59) | | | (0.5) | % |
| Non-GAAP Coal revenues | $ | 2,790,507 | | | $ | 1,109,587 | | | $ | 1,680,920 | | | 151.5 | % |
| Non-GAAP Coal sales realization per ton | $ | 237.98 | | | $ | 94.15 | | | $ | 143.83 | | | 152.8 | % |
| | | | | | | |
| All Other category: | | | | | | | |
| Tons sold | 771 | | | 1,030 | | | (259) | | | (25.1) | % |
| Non-GAAP Coal revenues | $ | 58,185 | | | $ | 63,416 | | | $ | (5,231) | | | (8.2) | % |
| Non-GAAP Coal sales realization per ton | $ | 75.47 | | | $ | 61.57 | | | $ | 13.90 | | | 22.6 | % |
Non-GAAP Coal revenues. Met segment operations non-GAAP coal revenues increased $1,680.9 million, or 151.5%, for the nine months ended September 30, 2022 compared to the prior year period. The increase was primarily due to higher average non-GAAP coal sales realization of 152.8% per ton resulting from an improved pricing environment compared to the prior year period.
All Other category non-GAAP coal revenues decreased $5.2 million, or 8.2%, for the nine months ended September 30, 2022 compared to the prior year period primarily due to a decrease in tons sold, partially offset by higher non-GAAP coal sales realization per ton in the current period.
| | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, | | Increase (Decrease) |
| (In thousands, except for per ton data) | 2022 | | 2021 | | $ | | % |
| Met segment operations: | | | | | | | |
| Non-GAAP Cost of coal sales | $ | 1,251,200 | | | $ | 859,983 | | | $ | 391,217 | | | 45.5 | % |
| Non-GAAP Cost of coal sales per ton | $ | 106.70 | | | $ | 72.97 | | | $ | 33.73 | | | 46.2 | % |
| Non-GAAP Coal margin per ton | $ | 131.27 | | | $ | 21.18 | | | $ | 110.09 | | | 519.8 | % |
| | | | | | | |
| All Other category: | | | | | | | |
| Non-GAAP Cost of coal sales | $ | 42,849 | | | $ | 45,801 | | | $ | (2,952) | | | (6.4) | % |
| Non-GAAP Cost of coal sales per ton | $ | 55.58 | | | $ | 44.47 | | | $ | 11.11 | | | 25.0 | % |
| Non-GAAP Coal margin per ton | $ | 19.89 | | | $ | 17.10 | | | $ | 2.79 | | | 16.3 | % |
Non-GAAP Cost of coal sales. Met segment operations non-GAAP cost of coal sales increased $391.2 million, or 45.5%, for the nine months ended September 30, 2022 compared to the prior year period. The increase was primarily driven by increased rail freight costs, royalties and taxes, supplies and maintenance expense, and salaries and wages expense, partially offset by inventory change during the current period.
All Other category non-GAAP cost of coal sales decreased $3.0 million, or 6.4%, for the nine months ended September 30, 2022 compared to the prior year period. The decrease was primarily driven by a decrease in tons sold, inventory change during the current period, and decreased royalties and taxes, partially offset by increased salaries and wages expense and supplies and maintenance expense.
Our non-GAAP cost of coal sales includes purchased coal costs. In the following tables, we calculate Adjusted cost of produced coal sold as non-GAAP cost of coal sales less purchased coal costs.
| | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, 2022 |
| (In thousands, except for per ton data) | Met | | All Other | | Consolidated |
| Non-GAAP Cost of coal sales | $ | 1,251,200 | | | $ | 42,849 | | | $ | 1,294,049 | |
| Less: cost of purchased coal sold | (82,235) | | | (37) | | | (82,272) | |
| Adjusted cost of produced coal sold | $ | 1,168,965 | | | $ | 42,812 | | | $ | 1,211,777 | |
| Produced tons sold | 11,377 | | | 770 | | | 12,147 | |
Adjusted cost of produced coal sold per ton (1) | $ | 102.75 | | | $ | 55.60 | | | $ | 99.76 | |
(1) Cost of produced coal sold per ton for our operations is calculated as non-GAAP cost of produced coal sold divided by produced tons sold.
| | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, 2021 |
| (In thousands, except for per ton data) | Met | | All Other | | Consolidated |
| Non-GAAP Cost of coal sales | $ | 859,983 | | | $ | 45,801 | | | $ | 905,784 | |
| Less: cost of purchased coal sold | (75,074) | | | — | | | (75,074) | |
| Adjusted cost of produced coal sold | $ | 784,909 | | | $ | 45,801 | | | $ | 830,710 | |
| Produced tons sold | 11,028 | | | 1,030 | | | 12,058 | |
Adjusted cost of produced coal sold per ton (1) | $ | 71.17 | | | $ | 44.47 | | | $ | 68.89 | |
(1) Cost of produced coal sold per ton for our operations is calculated as non-GAAP cost of produced coal sold divided by produced tons sold.
Adjusted EBITDA
Adjusted EBITDA is a non-GAAP financial measure that is presented as a supplemental measure and is not intended to replace financial performance or liquidity measures determined in accordance with GAAP. Moreover, this measure is not calculated identically by all companies and therefore may not be comparable to similarly titled measures used by other companies. Adjusted EBITDA is presented because management believes it is a useful indicator of the financial performance of our coal operations. The following tables present a reconciliation of net income (loss) to Adjusted EBITDA for the nine months ended September 30, 2022 and 2021:
| | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, 2022 |
| Met | | All Other | | Consolidated |
| Net income (loss) from continuing operations | $ | 1,417,125 | | | $ | (188,856) | | | $ | 1,228,269 | |
| Interest expense | 132 | | | 19,864 | | | 19,996 | |
| Interest income | (541) | | | (871) | | | (1,412) | |
| Income tax expense | — | | | 114,073 | | | 114,073 | |
| Depreciation, depletion and amortization | 81,010 | | | 2,680 | | | 83,690 | |
| Non-cash stock compensation expense | 3 | | | 4,100 | | | 4,103 | |
| Mark-to-market adjustment - acquisition-related obligations | — | | | 10,615 | | | 10,615 | |
| Accretion on asset retirement obligations | 10,178 | | | 7,644 | | | 17,822 | |
| Amortization of acquired intangibles, net | 13,182 | | | 2,856 | | | 16,038 | |
| Adjusted EBITDA | $ | 1,521,089 | | | $ | (27,895) | | | $ | 1,493,194 | |
| | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, 2021 |
| Met | | All Other | | Consolidated |
| Net income (loss) from continuing operations | $ | 139,354 | | | $ | (106,942) | | | $ | 32,412 | |
| Interest expense | 132 | | | 53,158 | | | 53,290 | |
| Interest income | (6) | | | (316) | | | (322) | |
| Income tax expense | — | | | 211 | | | 211 | |
| Depreciation, depletion and amortization | 75,403 | | | 4,858 | | | 80,261 | |
| Non-cash stock compensation expense | 22 | | | 4,329 | | | 4,351 | |
| Mark-to-market adjustment - acquisition-related obligations | — | | | 18,009 | | | 18,009 | |
| Accretion on asset retirement obligations | 10,170 | | | 9,800 | | | 19,970 | |
Asset impairment and restructuring | — | | | (561) | | | (561) | |
| Amortization of acquired intangibles, net | 9,749 | | | (347) | | | 9,402 | |
| Adjusted EBITDA | $ | 234,824 | | | $ | (17,801) | | | $ | 217,023 | |
The following table summarizes Adjusted EBITDA for our Met segment operations and All Other category:
| | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, | | Increase (Decrease) |
| (In thousands) | 2022 | | 2021 | | $ | | % |
| Adjusted EBITDA | | | | | | | |
| Met segment operations | $ | 1,521,089 | | | $ | 234,824 | | | $ | 1,286,265 | | | 547.8 | % |
| All Other category | (27,895) | | | (17,801) | | | (10,094) | | | (56.7) | % |
| Total | $ | 1,493,194 | | | $ | 217,023 | | | $ | 1,276,171 | | | 588.0 | % |
Met segment operations. Adjusted EBITDA increased $1,286.3 million, or 547.8%, for the nine months ended September 30, 2022 compared to the prior year period. The increase in Adjusted EBITDA was primarily driven by increased coal margin.
All Other category. Adjusted EBITDA decreased $10.1 million, or 56.7%, for the nine months ended September 30, 2022 compared to the prior year period. The decrease in Adjusted EBITDA was primarily driven by a decrease in tons sold, partially offset by higher non-GAAP coal sales realization per ton in the current period.
Discontinued Operations
The former NAPP operations results of operations and financial position are reported as discontinued operations in the Condensed Consolidated Financial Statements. Refer to Note 2 for further information on discontinued operations. Refer to Note 16 for disclosures on the Cumberland Back-to-Back Coal Supply Agreements.
Liquidity and Capital Resources
Overview
Our primary liquidity and capital resource requirements stem from the cost of our coal production and purchases, our capital expenditures, our debt service, our reclamation obligations, taxes, our regulatory costs and settlements and associated costs. Our primary sources of liquidity are derived from sales of coal, our debt financing, and miscellaneous revenues.
We believe that cash on hand and cash generated from our operations will be sufficient to meet our working capital requirements, anticipated capital expenditures, income taxes, debt service requirements, acquisition-related obligations, and reclamation obligations for the next 12 months and the reasonably foreseeable future. The CompanyWe may also use cash in accordance with itsour share repurchase program and dividend program. We rely on a number of assumptions in budgeting for our future activities. These include the costs for mine development to sustain capacity of our operating mines, our cash flows from operations, effects of regulation and taxes by governmental agencies, mining technology improvements and reclamation costs. These assumptions are inherently subject to significant business, political, economic, regulatory, environmental and competitive uncertainties, pending and existing climate-related initiatives, contingencies and risks, all of which are difficult to predict and many of which are beyond our control. For example, if the new authorization process for all self-insured coal mine operators is adopted, it would substantially increase the collateral required to secure our self-insured federal black lung obligations. Refer to the DCMWC Reauthorization Process section below for more information. Increased scrutiny of ESG matters specific to the coal sector could negatively influence our ability to raise capital in the future and result in a reduced number of surety and insurance providers. We may need to raise
additional funds if market conditions deteriorate, and we may not be able to do so in a timely fashion, on terms acceptable to us, or at all; or one or more of our assumptions prove to be incorrect or if we choose to expand our acquisition, exploration, appraisal, or development efforts or any other activity more rapidly than we presently anticipate. Additionally, we may elect to raise additional funds before we need them if the conditions for raising capital are favorable. We may seek to sell equity or debt securities or obtain additional bank credit facilities. The sale of equity securities
could result in dilution to our stockholders. The incurrence of additional indebtedness could result in increased fixed obligations and additional covenants that could restrict our operations.
Liquidity
The following table summarizes our total liquidity as of September 30, 2022:March 31, 2023:
| | | | | |
| (in thousands) | September 30, 2022March 31, 2023 |
| Cash and cash equivalents | $ | 404,430222,507 | |
Credit facility availability (1) | 91,10293,123 | |
| Total liquidity | $ | 495,532315,630 | |
(1) Comprised of our unused commitments available under the Second Amended and Restated Asset-Based Revolving Credit
Agreement (“ABL(the “ABL Agreement”), subject to limitations described therein.
Cash Collateral
We are required to provide cash collateral to secure our obligations under certain worker’sworkers’ compensation, black lung, reclamation-related obligations, financial payments and other performance obligations, and other operating agreements. Additionally, we have short-term restricted cash held in escrow related to our Contingent Revenue Obligation (refer to Note 10). Future regulatory changes relating to these obligations could result in increased obligations, additional costs, or additional collateral requirements which could require greater use of alternative sources of funding for this purpose, which would reduce our liquidity. Refer to the DCMWC Reauthorization Process section below for information related to the new authorization process for self-insured coal mine operators being implemented by the U.S. Department of Labor (Division of Coal Mine Workers’ Compensation). As of September 30, 2022,March 31, 2023, we had the following cash collateral on our Condensed Consolidated Balance Sheets:
| | | | | |
| (in thousands) | September 30, 2022March 31, 2023 |
Short-term and long-termLong-term restricted cash | $ | 50,52450,931 | |
| Long-term restricted investments | 92,38490,428 | |
Short-term and long-term deposits (1) | 7,9007,472 | |
| Total cash collateral | $ | 150,808148,831 | |
(1) Includes $6,522$6,602 related to our dividend payable. Refer to Note 76 for additional information.
Off-Balance Sheet Arrangements
We are required to provide financial assurance in order to perform the post-mining reclamation required by our mining permits, pay workers’ compensation claims under workers’ compensation laws in various states, pay federal black lung benefits, and perform certain other obligations. In order to provide the required financial assurance, we generally use surety bonds for post-mining reclamation and workers’ compensation obligations. We also use bank letters of credit to collateralize certain obligations. As of September 30, 2022,March 31, 2023, we had the following outstanding surety bonds and letters of credit:
| | | | | |
| (in thousands) | September 30, 2022March 31, 2023 |
| Surety bonds | $ | 162,105166,543 | |
Letters of credit (1) | $ | 63,94861,927 | |
(1) The letters of credit outstanding are under the Second Amended and Restated Asset-Based Revolving CreditABL Agreement dated December 6, 2021 and the Credit and Security Agreement dated June 30, 2017, and related amendments, between ANR, Inc. and First Tennessee Bank National Association.
Refer to Note 16,15, part (c) for further disclosures on off-balance sheet arrangements.
Debt Financing and Related Transactions
As of September 30, 2022, we had $4.7 million of indebtedness outstanding before debt discount and issuance costs. Our indebtedness is comprised of financing leases and other financing obligations. Our Credit Agreement entered into on June 14, 2019 provided for a senior secured term loan facility with a maturity date of June 14, 2024 (the “Term Loan Credit Facility”). As of September 30, 2022, we had no outstanding borrowings under the Term Loan Credit Facility as a result of voluntary prepayments of $449.4 million of outstanding principal borrowings during the first and second quarters of 2022 in our continued strategic effort to reduce our outstanding debt and strengthen our balance sheet. Effective with the final voluntary prepayment on June 3, 2022, the Credit Agreement was terminated, and we were released of all underlying obligations including the Credit Agreement covenants.
The ABL Agreement includes a senior secured asset-based revolving credit facility (the “ABL Facility”). Under the ABL Facility, the Companywe may borrow cash or obtain letters of credit, on a revolving basis, in an aggregate amount of up to $155.0 million, of which no more than $150.0 million may represent outstanding letters of credit ($125.0 million on a committed basis and another $25.0 million on an uncommitted cash collateralized basis) with any borrowingsthe facility having a maturity date of December 6, 2024. Availability under the ABL Facility is calculated on a monthly basis and fluctuates based on qualifying amounts of coal inventory and trade accounts receivable (the “Borrowing Base”) and the facility's covenant limitations related to our Fixed
Charge Coverage Ratio (refer to “Analysis of Material Debt Covenants” below). In accordance with terms of the ABL Facility, we may be required to cash collateralize the ABL Facility to the extent outstanding borrowings and letters of credit under the ABL Facility exceed the Borrowing Base after considering covenant limitations.
During the second quarter of 2022, in connection with our improved financial position, we received a reduction of $40.1 million in collateral requirements under the ABL Facility related to our self-insured workers compensation at certain locations in West Virginia. Additionally, during the second quarter of 2022 and as part of routine surety program review and negotiation, we received a $16.5 million reduction in surety collateral requirements under the ABL Facility, while securing multi-year visibility on surety program terms and conditions. These collateral releases increased our availability under the ABL Facility and thus our financial liquidity.
Refer to Note 98 for additional disclosures on long-term debt.
Acquisition-Related Obligations
During the first quarter of 2023, we paid the final calculated payment pursuant to terms of the Contingent Revenue Obligation. At September 30, 2022,March 31, 2023, we had $30.1$0.4 million of acquisition-related obligations outstanding. Our acquisition-related obligations are primarily comprised of the Contingent Revenue Obligation which has an offsetting short-term restricted cash amount held in escrow (referRefer to Note 10 and Note 16). During the second quarter of 2022, we paid $16.2 million pursuant to the terms of the Contingent Revenue Obligation.9 for additional disclosures on acquisition-related obligations.
Capital Requirements
Our capital expenditures for the ninethree months ended September 30, 2022March 31, 2023 were $103.4$74.2 million. We expect to spend between $160.0$250.0 million and $190.0$280.0 million on capital expenditures during 2022.2023.
Contractual Obligations
Our contractual obligations are discussed in the “Liquidity and Capital Resources—Contractual Obligations” section contained in our Annual Report on Form 10-K for the year ended December 31, 2021.
Our contractual obligations relating2022. There have been no material changes to the Term Loan Credit Facility were eliminated during the nine months ended September 30, 2022 due to the final voluntary prepayments we made during the period terminating our Credit Agreement. Our contractual obligations relating to the Contingent Revenue Obligation decreased during the nine months ended September 30, 2022 primarily as a result of payments made during the period, partially offset by an increase in forecasted future revenue. Our contractual obligations relating to coal purchase commitments increased during the nine months ended September 30, 2022 primarily as a result of new agreements during the period. Additionally, our contractual obligations relating to unconditional purchase obligations decreased during the ninethree months ended September 30, 2022 primarily as a result of expected fulfillment of commitments during the current period, partially offset by new agreements. The table below reflects these obligations as of September 30, 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in thousands) | Remainder of 2022 | | 2023 | | 2024 | | 2025 | | 2026 | | After 2026 | | Total |
Term Loan Credit Facility (1) | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| Contingent Revenue Obligation | $ | — | | | $ | 30,369 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 30,369 | |
| Coal purchase commitments | $ | 65,149 | | | $ | 10,943 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 76,092 | |
Unconditional purchase obligations (2) | $ | 47,776 | | | $ | 28,674 | | | $ | 67,125 | | | $ | — | | | $ | — | | | $ | — | | | $ | 143,575 | |
(1) On June 3, 2022, the remaining outstanding principal and interest on the Term Loan Credit Facility were eliminated and the underlying Credit Agreement was terminated.
(2) Includes transportation commitments, minimum equipment purchase commitments, and diesel fuel purchase commitments.March 31, 2023.
Refer to Note 9,8, Note 10,9, and Note 1615 for additional disclosures on long-term debt, acquisition-related obligations, and other commitments, respectively.
Business Updates
On June 3, 2022, in a significant step in further strengthening our balance sheet, we voluntarily prepaid in full the remaining outstanding principal borrowings of the Term Loan Credit Facility two years ahead of maturity.
On July 28, 2022, S&P Global Ratings upgraded its issuer credit rating on the Company to B from B- following our full repayment of the Term Loan Credit Facility and amid improving credit metrics. The rating outlook was noted as stable. On July 21, 2022, Moody’s Investors Service upgraded our Corporate Family Rating to B2 from B3, upgraded our Probability of Default Rating to B2-PD from B3-PD, assigned a B1 rating to our ABL Facility, and withdrew the B3 rating on our Term Loan Credit Facility following our full repayment. Our Speculative Grade Liquidity Rating remained unchanged at SGL-2. The rating outlook was revised to positive from stable. On March 30, 2022, S&P Global Ratings upgraded its issuer-level rating on our senior secured debt to B from B- amid favorable market indicators and credit metrics. The rating outlook was revised to positive from stable. Should we receive any negative outlook ratings in the future, such negative outlook ratings would result in potential liquidity risks for us, including the risks of declines in our stock value, declines in our cash and cash equivalents, less availability and higher costs of additional credit, and requests for additional collateral by surety providers.
Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations—COVID-19 Pandemic” for information on the impact of the COVID-19 pandemic on our business.
We continually strive to enhance our capital structure and financial flexibility and reduce cash outflows from operations. As opportunities arise, we will continue to consider the possibility of the refinancing, repayment or repurchase of any outstanding debt and amendment of our credit facility, and may consider the sale of other assets or businesses, and such other measures as we believe circumstances warrant. We may decide to pursue or not pursue these opportunities at any time. Access to additional funds from liquidity-generating transactions or other sources of external financing is subject to market conditions and certain limitations, including our credit rating and covenant restrictions in our credit facilities.
As a regular part of our business, we review opportunities for, and engage in discussions and negotiations concerning, the acquisition or disposition of coal mining and related infrastructure assets and interests in coal mining companies, and acquisitions or dispositions of, or combinations or other strategic transactions involving, companies with coal mining or other energy assets. When we believe that these opportunities are consistent with our strategic plans and our acquisition or disposition criteria, we will make bids or proposals and/or enter into letters of intent and other similar agreements. These bids or proposals, which may be binding or non-binding, are customarily subject to a variety of conditions and usually permit us to terminate the discussions and any related agreement if, among other things, we are not satisfied with the results of due diligence. Any acquisition opportunities we pursue could materially affect our liquidity and capital resources and may require us to incur indebtedness, seek equity capital or both. There can be no assurance that additional financing will be available on terms acceptable to us, or at all.
Income Taxes
DuringAs of March 31, 2023, the nine months ended September 30, 2022, we paid estimatedCompany has recorded federal and state income taxes payable of $120.2$14.9 million. Refer to Note 1312 for further disclosures related to income taxes.
Pension Plans
We expect to contribute $16.4 million to the pension plans in the remainder of 2023, which includes amounts above the estimated minimum required contributions for the 2023 plan year. Refer to Note 13 for further disclosures related to this obligation.
Pension Plans
We expect our minimum required contributions to the pension plans to be $0.4 million in the remainder of 2022. Refer to Note 14 for further disclosures related to this obligation.
Discontinued Operations
Refer to Note 2 for disclosure information on discontinued operations.
DCMWC Reauthorization Process
In July 2019, the U.S. Department of Labor (Division of Coal Mine Workers’ Compensation or “DCMWC”) began implementing a new authorization process for all self-insured coal mine operators. As requested by DCMWC, we filed an application and supporting documentation for reauthorization to self-insure certain of our black lung obligations in October 2019. As a result of this application, the DCMWC notified us in a letter dated February 21, 2020 that we were reauthorized to self-insure certain of our black lung obligations for a period of one-year from February 21, 2020. The DCMWC reauthorization is contingent, however, upon us providing collateral of $65.7 million to secure certain of our black lung obligations. This collateral requirement, which the DCMWC advises represents 70% of our estimated future liability according to the DCMWC’s estimation methodology, is an increase of approximately 2,400% from the approximately $2.6 million in collateral which we (previously by Alpha Natural Resources Inc. prior to the Merger) have provided since 2016 to secure these self-insured black lung obligations. Future liability has not previously been estimated by the DCMWC in connection with the reauthorization process but is now being considered as part of its new collateral-setting methodology.
The reauthorization process provided us with the right to appeal the security determination in writing within 30 days of the date of the notification, which appeal period the DCMWC agreed to extend to May 22, 2020, and we exercised this right of appeal. We strongly disagree with the DCMWC’s substantially higher collateral determination and the methodology through which the calculation was derived. In February 2021, the U.S. Department of Labor (“DOL”) withdrew its Federal Register notice seeking comments on its bulletin describing its new method of calculating collateral requirements. The Department removed the bulletin from its website in May 2021. On February 10, 2022, a telephone conference was held with DCMWC and DOL decision makers wherein we presented facts and arguments in support of our appeal. No ruling has been made on the appeal, but during the call we indicated that we would be willing to allocate an additional $10.0 million in collateral. If our appeal is unsuccessful, we may be required to provide additional letters of credit in order to receive self-insurance reauthorization from the DCMWC or insure these black lung obligations through a third partythird-party provider, which would likely also require us to provide additional collateral. EitherIn January 2023, the DOL proposed for public comment new regulations which, if adopted, would substantially increase the collateral required to secure self-insured federal black lung obligations. Under the proposed 120% minimum collateral requirement, we estimate we could be required to provide approximately $80.0 million to $100.0 million of collateral to secure certain of our black lung obligations. A significant increase in these outcomescollateral obligations would significantly reducehave a materially adverse effect on our liquidity.
Share Repurchase Program
Refer to Note 76 and “Unregistered Sales of Equity Securities and Use of Proceeds” for information on the share repurchase program and the shares repurchased during the current period. Also refer to Note 18 for information related to the Board’s approval to increase the aggregate amount permitted to be repurchased under the share repurchase program.
Dividend Program
Refer to Note 76 and Note 1817 for information related to our dividend program, the quarterly cash dividendsdividend declared during the current period, and the related subsequent event disclosures which includes the declaration of the quarterly cash dividend and a one-time, special dividend.
Cash Flows
Cash, cash equivalents, and restricted cash decreased by $82.0 million and increased by $272.3 million and decreased by $74.6$112.9 million over the ninethree months ended September 30,March 31, 2023 and 2022, and 2021, respectively. The net change in cash, cash equivalents, and restricted cash was attributable to the following:
| | | Nine Months Ended September 30, | | Three Months Ended March 31, |
| | 2022 | | 2021 | | 2023 | | 2022 |
| Cash flows (in thousands): | Cash flows (in thousands): | | | | Cash flows (in thousands): | | | |
| Net cash provided by operating activities | Net cash provided by operating activities | $ | 1,299,037 | | | $ | 70,573 | | Net cash provided by operating activities | $ | 177,387 | | | $ | 336,125 | |
| Net cash used in investing activities | Net cash used in investing activities | (182,564) | | | (62,302) | | Net cash used in investing activities | (27,891) | | | (3,552) | |
| Net cash used in financing activities | Net cash used in financing activities | (844,133) | | | (82,916) | | Net cash used in financing activities | (231,452) | | | (219,700) | |
| Net increase (decrease) in cash and cash equivalents and restricted cash | $ | 272,340 | | | $ | (74,645) | | |
| Net (decrease) increase in cash and cash equivalents and restricted cash | | Net (decrease) increase in cash and cash equivalents and restricted cash | $ | (81,956) | | | $ | 112,873 | |
Operating Activities. The increasedecrease in net cash provided by operating activities for the ninethree months ended September 30, 2022March 31, 2023 compared to the prior year period was primarily attributable to the improvement in our results from operationslower coal sale realizations as discussed above in “Results of Operations,” partially offset by changesOperations” and an increase in net operating assets and liabilities. The increase in net operating assets and liabilities primarily attributable to an increase in our working capital. Our working capital increase was primarily driven byrelated to increases in our cash and cash equivalents and trade accounts receivable net.and inventory, partially offset by a reduction in deposits.
Investing Activities. The increase in net cash used in investing activities for the ninethree months ended September 30, 2022March 31, 2023 compared to the prior year period was primarily driven by increases in our purchases of investment securitiescapital expenditures and capital expenditures,cash paid for a business acquired, partially offset by an increase in the maturity ofcash from net investment securities.security activity.
Financing Activities. The increase in net cash used in financing activities for the ninethree months ended September 30, 2022March 31, 2023 compared to the prior year period was primarily driven by the voluntary prepayments of our remaining outstanding principal borrowings under the Term Loan Credit Facilityincreases in dividends paid and the common stock repurchases under our share repurchase program during the current period (refer to Note 7 and Note 9 for further information).related expenses, partially offset by decreases in principal repayments of long-term debt.
Analysis of Material Debt Covenants
We are in compliance with all covenants under the ABL Agreement as of September 30, 2022.March 31, 2023. A breach of the covenants in the ABL Agreement could result in a default under the terms of such agreement, and the respective lenders could then elect to declare all amounts borrowed due and payable.
Pursuant to the ABL Agreement, during any Liquidity Period (capitalized terms as defined in the ABL Agreement), our Fixed Charge Coverage Ratio cannot be less than 1.0 as of the last day of any Test Period, commencing with the Test Period ended immediately preceding the commencement of such Liquidity Period. The Fixed Charge Coverage Ratio is calculated as (a) Consolidated EBITDA of the Company and its Restricted Subsidiaries for such period, minus non-financed Capital Expenditures (including Capital Expenditures financed with the proceeds of any Loans) paid or payable currently in cash by the Company or any of its Subsidiaries for such period to (b) the Fixed Charges of the Company and its Restricted Subsidiaries during such period. As of September 30, 2022,March 31, 2023, we were not in a Liquidity Period.
Critical Accounting Policies and Estimates
The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other factors and assumptions, including the current economic environment, that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis and adjust such estimates and assumptions as facts and circumstances require. Foreign currency and energy markets, and fluctuations in demand for steel products, have combined to increase the uncertainty inherent in such estimates and assumptions. As future events and their effects cannot be determined with precision, actual results may differ significantly from these estimates. Changes in these estimates resulting from continuing changes in the economic environment will be reflected in the financial statements in future periods.
Our critical accounting policies are discussed in the “Critical Accounting Policies and Estimates” section contained in our Annual Report on Form 10-K for the year ended December 31, 2021.2022. Our critical accounting policies remain unchanged at September 30, 2022.March 31, 2023. Refer to the Recent Accounting Guidance section in Note 1 for disclosures related to new accounting policies adopted.further information.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Commodity Price Risk
We manage our commodity price risk for coal sales through the use of coal supply agreements. Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Factors Affecting Our Results of Operations” for information on our sales commitments for 2022.2023.
We have exposure to commodity price risk for supplies that are used directly or indirectly in the normal course of production such as diesel fuel, steel and other items such as explosives. We manage our risk for these items through strategic sourcing contracts in normal quantities with our suppliers.
The market price of diesel fuel fluctuates due to changes in production, seasonality, and other market factors generally outside of our control. Increased fuel costs may have a negative impact on our results of operations and financial condition. Based uponAs of March 31, 2023, our 2021forecasted diesel fuel consumption (approximately 23.0 million gallons), a 10% increase in the average annualusage and fixed price per gallon of diesel fuel would have increased our annual diesel fuel expense by approximately $5.4 million. As of September 30, 2022, we had diesel fuel purchase commitments for 20222023 are as
follows:
| | | | | | | | | | | | | | | | | |
| Budgeted Usage in Gallons (1) | | % Priced | | Average Realized Price per Gallon |
| Diesel fuel | 24.3 million | | 85.2 | % | | $3.07 | |
(1) Includes fixed price purchase agreements covering approximately 13.1 million gallons (53.8% of expected 2022 usage). | | | | | | | | | | | | | | | | | |
| Budgeted Usage in Gallons | | % Priced | | Average Realized Price per Gallon |
| Diesel fuel | 22.2 million | | 83.3 | % | | $3.60 | |
Interest Rate Risk
As of September 30,March 31, 2023, we maintain a senior secured asset-based revolving credit facility under which we may borrow up to $155.0 million (less amounts outstanding for letters of credit). Any cash borrowings under the facility would bear a floating rate of interest. No cash borrowings were outstanding under the facility as of March 31, 2023 or December 31, 2022. As of March 31, 2023 and December 31, 2022, we do not have anyhad $61.9 million letters of credit outstanding variable rate borrowings with market risk exposure with respect to interest rates.under the facility. Refer to Note 98 for additional information. Also refer to the“Financialthe “Financial Statements and Supplementary Data—Note 14” section contained in our Annual Report on Form 10-K for the year ended December 31, 20212022 for discussion on the terms of our long-term debt.
As of March 31, 2023 and December 31, 2022, we had investments in trading securities of $90.4 million and $151.8 million respectively. While the fair value of these investments is exposed to risk with respect to changes in market rates of
interest, we do not believe exposure to changes in interest rates is material to our consolidated financial statements. We manage
risk by investing in shorter term highly rated debt obligations (primarily U.S. government securities). As of March 31, 2023
and December 31, 2022, the remaining maturities of our acquired debt securities was less than 12 months.
Foreign Currency Risk
Our transactions are denominated in U.S. dollars, and, as a result, we do not have material exposure to currency exchange-rate risks. However, our coal is sold internationally in U.S. dollars and, as a result, general economic conditions in foreign markets and changes in foreign currency exchange rates may provide our foreign competitors with a competitive advantage. If our competitors’ currencies decline against the U.S. dollar or against our foreign customers’ local currencies, those competitors may be able to offer lower prices for coal to customers. Furthermore, if the currencies of our overseas customers were to significantly decline in value in comparison to the U.S. dollar, those customers may seek decreased prices for the coal we sell to them. Consequently, currency fluctuations could adversely affect the competitiveness of our coal in international markets, which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In accordance with Rule 13a-15(b) of the Exchange Act, we have evaluated, under the supervision of our CEO and our CFO, the effectiveness of
disclosure controls and procedures as of September 30, 2022.March 31, 2023. Based on this evaluation, our CEO and our CFO concluded that our disclosure controls and procedures were effective as of September 30, 2022.March 31, 2023.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or isare reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Disclosure Controls and Procedures
Our CEO, our CFO and other members of management do not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Part II - Other Information
Item 1. Legal Proceedings
For a description of the Company’s legal proceedings, refer to Note 16,15, part (d), to the unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.
Item 1A. Risk Factors
In addition to the other information set forth in this report, you should carefully consider the factors discussed in the “Risk Factors” section contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021,2022, together with the cautionary statement under the caption “Cautionary Note Regarding Forward-Looking Statements” included elsewhere in this Quarterly Report on Form 10-Q. These described risks are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.
Dividends on our common stock are only payable if declared by the Company’s Board of Directors (the “Board”) and permitted by Delaware law.
Dividends on our common stock will be paid only if declared by the Board. The Board is not legally obligated or required to declare dividends on our common stock even if we have funds available for that purpose. In addition, even if the Board wishes to declare a dividend, we cannot make payments of cash in respect of dividends to the extent such payments are not permitted under Delaware law. If we do not declare and pay dividends on our common stock as expected, the market price of our common stock is likely to be adversely affected.
If our earnings and cash flow decline materially, we may be unable to continue to pay dividends on our common stock and/or execute our share repurchase program as intended.
Our ability to pay dividends on our common stock and repurchase shares of common stock depends upon on our earnings and cash flows. If our earnings and cash flows were to decline materially, we may be unable to continue to pay dividends in the amounts previously paid, or at all. In addition, in such a circumstance, we may be unable to execute our share repurchase program in part or as a whole.
Decreased availability or increased costs of key equipment and materials, including certain items mandated by regulations, increased commodities costs, sustained inflation or increased costs of coal that we purchase from third parties, could increase our cost of production and decrease our profitability.
We depend on reliable supplies of mining equipment, replacement parts and materials such as explosives, diesel fuel, tires, steel, magnetite and other raw materials and consumables which, in some cases, do not have ready substitutes. Some equipment and materials are needed to comply with regulations, such as proximity detection devices on continuous mining machines and
steel. The supplier base providing mining materials and equipment has been relatively consistent in recent years, although there continues to be consolidation, which has resulted in a limited number of suppliers for certain types of equipment and supplies.
Any significant reduction in availability or increase in cost of any mining equipment or key supplies could adversely affect our operations and increase our costs, which could adversely affect our operating results and cash flows. Diesel fuel supply, in particular, is unusually limited at present due to the current global economy, and a sustained or worsened shortage of diesel fuel could negatively and materially impact our results of operations.
In addition, the prices we pay for materials are strongly influenced by the global commodities markets. Coal mines consume large quantities of these commodities, such as steel, copper, rubber products, explosives and diesel and other liquid fuels. A rapid or significant increase in the cost of these commodities would increase our mining costs. Diesel fuel, for example, is one of our largest variable costs, and any increase in the price we pay for diesel fuel has a negative impact on our results of operations. Further, if the value of the U.S. dollar declines relative to foreign currencies with respect to certain imported supplies or other products, our operating expenses will increase, which could materially adversely impact our profitability.
The U.S. and global economies have recently experienced high levels of inflation. If inflation were to remain at high levels for an extended period, or increase further, a related increase in our input costs could materially adversely affect our profitability.
We purchase coal from third parties, for use in coal blending and for other purposes, for which ready substitutes may not be immediately available. A significant reduction in availability or increase in cost of these supplies, or the failure of third party coal producers to provide them in a timely fashion, could adversely affect our operations and increase our costs, which could adversely affect our operating results and cash flows.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Dividend Policy
OnPursuant to the dividend policy adopted by the Board on May 3, 2022, the Company’s Board adopteddeclared a quarterly cash dividend policy. Pursuant to this policy, the Board initially intended to pay aggregate cash dividends of $1.50$0.44 per share ofon the Company’s common stock per year, with $0.375 per share paid each quarter. On August 4, 2022during the Company’s Board increased the quarterly dividend amount to $0.392 per share.three months ended March 31, 2023. Refer to Note 1817 for subsequent event disclosures related to the Company’s dividend program. The holders of the Company’s common stock are entitled to receive such dividends, if any, when they are declared by the Company’s Board. Future dividends are subject to declaration by the Company’s Board and depend on Alpha’s future earnings and financial condition and other relevant factors. Refer to Note 76 for further information related to the Company’s dividend program.
Repurchase of Common Stock
The following table summarizes information about shares of common stock that were repurchased during the thirdfirst quarter of 2022.2023.
| | | | | | | | | | | | | | | | | | | | | | | |
| Total Number of Shares Purchased (1) | | Average Price Paid per Share | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) | | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (In thousands) (2),(3),(4) |
| July 1, 2022 through July 31, 2022 | 433,470 | | | $ | 127.27 | | | 429,180 | | | $ | 420,147 | |
| August 1, 2022 through August 31, 2022 | 534,848 | | | $ | 147.22 | | | 534,848 | | | $ | 341,407 | |
| September 1, 2022 through September 30, 2022 | 458,099 | | | $ | 137.39 | | | 458,099 | | | $ | 278,471 | |
| 1,426,417 | | | | | 1,422,127 | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Total Number of Shares Purchased (1) | | Average Price Paid per Share | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) | | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (In thousands) (2)(3)(4) |
| January 1, 2023 through January 31, 2023 | 315,740 | | | $ | 155.43 | | | 278,750 | | | $ | 507,713 | |
| February 1, 2023 through February 28, 2023 | 265,768 | | | $ | 162.37 | | | 247,535 | | | $ | 667,659 | |
| March 1, 2023 through March 31, 2023 | 343,753 | | | $ | 158.38 | | | 343,753 | | | $ | 613,217 | |
| 925,261 | | | | | 870,038 | | | |
(1) Includes 4,29055,223 common shares repurchased from employees to satisfy the employees’ statutory tax withholdings upon the vesting of stock grants. Shares that are repurchased to satisfy the employees’ statutory tax withholdings are recorded in treasury stock at cost.
(2) On February 21, 2023, the Board approved an increase to the existing common share repurchase program that the Board adopted on March 4, 2022, bringing the total authorization to repurchase the Company’s Board adopted a share repurchase program with no expiration date that permitted the Companystock to repurchase up to an aggregate amount of $150 million of the Company's common stock. On May 3, 2022, the Company’s Board amended the share repurchase program to increase the aggregate amount the Company is permitted to repurchase to $600 million of the Company's common stock.$1.2 billion. Refer to Notes 7 and 18Note 6 for additional information and subsequent event disclosures.information.
(3) The Company adopted a capital return program in 2019, including a stock repurchase plan with no expiration date that permitted the Company to repurchase up to an aggregate amount of $100 million of the Company's common stock. The Company suspended this stock repurchase plan on October 1, 2019 and does not currently intend to make further repurchases under it.
(4) We cannot estimate the number of shares that will be repurchased because decisions to purchase are subject to market and business conditions, levels of available liquidity, our cash needs, restrictions under agreements or obligations, legal or regulatory requirements or restrictions, and other relevant factors. This amount does not include $97 thousand of stock repurchase related fees.fees and excise taxes.
Refer to Note 76 for information about repurchases related to warrants during the current quarter.
Item 4. Mine Safety Disclosures
Information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in Exhibit 95 to this Quarterly Report on Form 10-Q.
Item 6. Exhibits
Refer to the Exhibit Index following the signature page to this Quarterly Report on Form 10-Q.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | | | | | | | |
| | ALPHA METALLURGICAL RESOURCES, INC. |
Date: November 7, 2022May 8, 2023 | By: | /s/ J. Todd Munsey |
| | Name: | J. Todd Munsey |
| | Title: | Chief Financial Officer |
| | (Principal Financial Officer and Principal Accounting Officer) |
Exhibit Index
| | | | | |
| Exhibit No. | Description of Exhibit |
| 3.1 | |
| 3.2 | |
| 31* | |
| 32** | |
| 95* | |
| 101* | The following financial information from Alpha Metallurgical Resources, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2022March 31, 2023 formatted in Inline XBRL (Extensible Business Reporting Language) includes: (i) Condensed Consolidated Statements of Operations, (ii) Condensed Consolidated Statements of Comprehensive Income, (iii) Condensed Consolidated Balance Sheets, (iv) Condensed Consolidated Statements of Cash Flows, (v) Condensed Consolidated Statements of Stockholders’ Equity, and (vi) Notes to the Condensed Consolidated Financial Statements. |
| 104* | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
* Filed herewith
** Furnished herewith
