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, 2021March 31, 2022
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: 001-38003
RAMACO RESOURCES, INC.
(Exact name of registrant as specified in its charter)
| |
Delaware | 38-4018838 |
(State or other jurisdiction | (I.R.S. Employer |
of incorporation or organization) | Identification No.) |
| |
250 West Main Street, Suite 1800 | |
Lexington, Kentucky | 40507 |
(Address of principal executive offices) | (Zip code) |
| |
(859) 244-7455 | |
(Registrant’s telephone number, including area code) 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, $0.01 par value | | METC | | NASDAQ Global Select Market |
9.00% Senior Notes due 2026 | | METCL | | NASDAQ Global Select Market |
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. 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 during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). 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 ☐ No ☒
As of November 1, 2021,May 12, 2022, the registrant had 44,109,36644,273,388 shares of common stock outstanding.
TABLE OF CONTENTS
| | |
| | Page |
| | |
| ||
| | |
5 | ||
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 17 | |
| ||
| ||
| | |
| ||
| ||
26 | ||
26 | ||
27 | ||
27 | ||
27 | ||
28 | ||
| | |
29 |
2
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (this “Quarterly Report”) includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements, other than statements of historical fact included in this Quarterly Report,report, regarding our strategy, future operations, financial position, estimated revenue and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this Quarterly Report, the words “could,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on management’s current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements described under, but not limited to, the heading “Item 1A. Risk Factors” included in this Quarterly Report and elsewhere in the Annual Report of Ramaco Resources, Inc. (the “Company”) on Form 10-K for the year ended December 31, 20202021 (the “Annual Report”) filed with the United States Securities and Exchange Commission (the “SEC”) on February 18, 2021April 1, 2022 and other filings of the Company with the SEC.
Forward-looking statements may include statements about:
● | risks related to the impact of the |
● | anticipated production levels, costs, sales volumes and revenue; |
● | timing and ability to complete major capital projects; |
● | economic conditions in the metallurgical coal and steel industries generally, including any near-term or long-term downturn in these industries as a result of the COVID-19 global pandemic and related actions; |
● | expected costs to develop planned and future mining operations, including the costs to construct necessary processing, refuse disposal and transport facilities; |
● | estimated quantities or quality of our metallurgical coal reserves; |
● | our ability to obtain additional financing on favorable terms, if required, to complete the acquisition of additional metallurgical coal reserves as currently contemplated or to fund the operations and growth of our business; |
● | maintenance, operating or other expenses or changes in the timing thereof; |
● | the financial condition and liquidity of our customers; |
● | competition in coal markets; |
● | the price of metallurgical coal or thermal coal; |
● | compliance with stringent domestic and foreign laws and regulations, including environmental, climate change and health and safety regulations, and permitting requirements, as well as changes in the regulatory environment, the adoption of new or revised laws, regulations and permitting requirements; |
● | potential legal proceedings and regulatory inquiries against us; |
● | the impact of weather and natural disasters on demand, production and transportation; |
● | purchases by major customers and our ability to renew sales contracts; |
● | credit and performance risks associated with customers, suppliers, contract miners, co-shippers and traders, banks and other financial counterparties; |
● | geologic, equipment, permitting, site access and operational risks and new technologies related to mining; |
● | transportation availability, performance and costs; |
● | availability, timing of delivery and costs of key supplies, capital equipment or commodities such as diesel fuel, steel, explosives and tires; |
● | timely review and approval of permits, permit renewals, extensions and amendments by regulatory authorities; |
● | our ability to comply with certain debt covenants; |
● | tax payments to be paid for the current fiscal year; |
● | our expectations relating to dividend payments and our ability to make such |
3
● | the anticipated |
● | risks related to Russia’s recent invasion of Ukraine and the |
● |
● | other risks identified in this Quarterly Report that are not historical. |
We caution you that these forward-looking statements are subject to a number of risks, uncertainties and assumptions, which are difficult to predict and many of which are beyond our control, incident to the development, production, gathering and sale of coal. Moreover, we operate in a very competitive and rapidly changing environment and additional risks may arise from time to time. It is not possible for our management to predict all of the risks associated with our business, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. Although we believe that our plans, intentions and expectations reflected in or suggested by the forward-looking statements we make in this Quarterly Report are reasonable, we can give no assurance that these plans, intentions or expectations will be achieved or occur, and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results.
All forward-looking statements, expressed or implied, included in this Quarterly Report are expressly qualified in their entirety by this cautionary statement and speak only as of the date of this Quarterly Report. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue.
Except as otherwise required by applicable law, we disclaim any duty to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this Quarterly Report.
4
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Ramaco Resources, Inc.
Unaudited Condensed Consolidated Balance Sheets
| | | | | | | | | | | | | | |
In thousands, except share and per-share amounts |
| September 30, 2021 |
| December 31, 2020 |
| |||||||||
In thousands, except share and per share information |
| March 31, 2022 |
| December 31, 2021 |
| |||||||||
| | | | | | | | | | | | | | |
Assets | | |
|
| |
| | | |
|
| |
| |
Current assets | | |
|
| |
| | | |
|
| |
| |
Cash and cash equivalents | | $ | 46,672 | | $ | 5,300 | | | $ | 71,472 | | $ | 21,891 | |
Accounts receivable | |
| 37,592 | |
| 20,299 | | |
| 47,647 | |
| 44,453 | |
Inventories | |
| 13,880 | |
| 11,947 | | |
| 19,543 | |
| 15,791 | |
Prepaid expenses and other | |
| 4,339 | |
| 4,953 | | |
| 2,939 | |
| 4,626 | |
Total current assets | |
| 102,483 | |
| 42,499 | | |
| 141,601 | |
| 86,761 | |
Property, plant and equipment, net | |
| 181,675 | |
| 180,455 | | |
| 245,930 | |
| 227,077 | |
Financing lease right-of-use assets, net | | | 8,897 | | | — | | | | 12,296 | | | 9,128 | |
Advanced coal royalties | |
| 5,509 | |
| 4,784 | | |
| 4,645 | |
| 5,576 | |
Other | |
| 520 | |
| 885 | | |
| 1,892 | |
| 491 | |
Total Assets | | $ | 299,084 | | $ | 228,623 | | | $ | 406,364 | | $ | 329,033 | |
| | | | | | | | | | | | | | |
Liabilities and Stockholders' Equity | | | | | | | | | | | | | | |
Liabilities | | | | | | | | | | | | | | |
Current liabilities | | | | | | | | | | | | | | |
Accounts payable | | $ | 21,157 | | $ | 11,742 | | | $ | 40,406 | | $ | 15,346 | |
Accrued expenses | |
| 14,081 | |
| 11,591 | | |
| 23,946 | |
| 19,410 | |
Asset retirement obligations | |
| 1,161 | |
| 46 | | |
| 489 | |
| 489 | |
Current portion of long-term debt | |
| 5,781 | |
| 4,872 | | |
| 7,133 | |
| 7,674 | |
Current portion of financing lease obligations | | | 3,057 | | | — | | | | 4,081 | | | 3,461 | |
Other current liabilities | | | 44 | | | 862 | | | | 175 | | | 280 | |
Total current liabilities | |
| 45,281 | |
| 29,113 | | |
| 76,230 | |
| 46,660 | |
Asset retirement obligations | |
| 14,629 | |
| 15,110 | | |
| 23,223 | |
| 22,060 | |
Long-term debt, net | |
| 2,809 | |
| 12,578 | | |
| 2,698 | |
| 3,339 | |
Long-term financing lease obligations, net | | | 4,847 | |
| — | | | | 5,968 | |
| 4,599 | |
Senior notes, net | | | 32,245 | |
| — | | | | 32,478 | |
| 32,363 | |
Deferred tax liability, net | |
| 3,412 | |
| 1,762 | | |
| 11,421 | |
| 6,406 | |
Other long-term liabilities | | | 2,054 | | | 965 | | | | 2,411 | | | 2,532 | |
Total liabilities | |
| 105,277 | | | 59,528 | | |
| 154,429 | | | 117,959 | |
| | | | | | | | | | | | | | |
Commitments and contingencies | |
| — | |
| — | | |
| — | |
| — | |
| | | | | | | | | | | | | | |
Stockholders' Equity | | | | | | | | | | | | | | |
Preferred stock, $0.01 par value, 50,000,000 shares authorized, none issued and outstanding | |
| — | |
| — | | |
| — | |
| — | |
Common stock, $0.01 par value, 260,000,000 shares authorized, 44,109,366 at September 30, 2021 and 42,706,908 at December 31, 2020 shares issued and outstanding | |
| 441 | |
| 427 | | |||||||
Common stock, $0.01 par value, 260,000,000 shares authorized, 44,273,388 at March 31, 2022 and 44,092,981 at December 31, 2021 shares issued and outstanding | |
| 443 | |
| 441 | | |||||||
Additional paid-in capital | |
| 162,437 | |
| 158,859 | | |
| 165,451 | |
| 163,566 | |
Retained earnings | |
| 30,929 | |
| 9,809 | | |
| 86,041 | |
| 47,067 | |
Total stockholders' equity | |
| 193,807 | |
| 169,095 | | |
| 251,935 | |
| 211,074 | |
Total Liabilities and Stockholders' Equity | | $ | 299,084 | | $ | 228,623 | | | $ | 406,364 | | $ | 329,033 | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5
Ramaco Resources, Inc.
Unaudited Condensed Consolidated Statements of Operations
| | | | | | | | | | | | | | | | | | | |
| | Three months ended September 30, | | Nine months ended September 30, | | Three months ended March 31, | | ||||||||||||
In thousands, except per-share amounts |
| 2021 |
| 2020 |
| 2021 |
| 2020 |
| 2022 |
| 2021 |
| ||||||
| | | | | | | | | | | | | | | | | | | |
Revenue |
| $ | 76,377 |
| $ | 39,459 |
| $ | 195,889 |
| $ | 117,769 |
| $ | 154,882 |
| $ | 43,455 |
|
| | | | | | | | | | | | | | | | | | | |
Costs and expenses | | | | | | | | | | | | | | | | | | | |
Cost of sales (exclusive of items shown separately below) | |
| 54,808 | |
| 35,689 | |
| 143,768 | |
| 96,758 | |
| 81,253 | |
| 31,198 | |
Asset retirement obligations accretion | |
| 156 | |
| 128 | |
| 461 | |
| 428 | |
| 235 | |
| 151 | |
Depreciation and amortization | |
| 6,751 | |
| 5,258 | |
| 18,861 | |
| 15,601 | |
| 8,680 | |
| 6,155 | |
Selling, general and administrative | |
| 5,895 | |
| 5,966 | |
| 15,767 | |
| 15,723 | |
| 11,824 | |
| 4,707 | |
Total costs and expenses | |
| 67,610 | |
| 47,041 | |
| 178,857 | |
| 128,510 | |
| 101,992 | |
| 42,211 | |
| | | | | | | | | | | | | | | | | | | |
Operating income (loss) | |
| 8,767 | |
| (7,582) | |
| 17,032 | |
| (10,741) | |||||||
Operating income | |
| 52,890 | |
| 1,244 | | ||||||||||||
| | | | | | | | | | | | | | | | | | | |
Other income | |
| 789 | |
| 1,743 | |
| 7,156 | |
| 11,456 | |
| 366 | |
| 2,935 | |
Interest expense, net | |
| (933) | |
| (344) | |
| (1,418) | |
| (915) | |
| (1,130) | |
| (202) | |
Income (loss) before tax | |
| 8,623 | |
| (6,183) | |
| 22,770 | |
| (200) | |||||||
| | | | | | | | ||||||||||||
Income before tax | |
| 52,126 | |
| 3,977 | | ||||||||||||
Income tax expense (benefit) | |
| 1,588 | |
| (1,407) | |
| 1,650 | |
| (38) | |
| 10,655 | |
| (166) | |
Net income (loss) | | $ | 7,035 | | $ | (4,776) | | $ | 21,120 | | $ | (162) | |||||||
Net income | | $ | 41,471 | | $ | 4,143 | | ||||||||||||
| | | | | | | | | | | | | | | | | | | |
Earnings (loss) per common share | | | | | | | | | | | | | |||||||
Earnings per common share | | | | | | | | ||||||||||||
Basic | | $ | 0.16 | | $ | (0.11) | | $ | 0.48 | | $ | — | | $ | 0.94 | | $ | 0.10 | |
Diluted | | $ | 0.16 | | $ | (0.11) | | $ | 0.48 | | $ | — | | $ | 0.92 | | $ | 0.10 | |
| | | | | | | | | | | | | | | | | | | |
Basic weighted average shares outstanding | |
| 44,109 | |
| 42,647 | |
| 43,915 | |
| 42,373 | |
| 44,181 | |
| 43,443 | |
Diluted weighted average shares outstanding | |
| 44,465 | |
| 42,647 | |
| 43,996 | |
| 42,373 | |
| 44,908 | |
| 43,443 | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6
Ramaco Resources, Inc.
Unaudited Condensed Consolidated Statements of Stockholders’ Equity
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Additional | | | | Total | | | | | Additional | | | | Total | ||||||
|
| Common |
| Paid- |
| Retained |
| Stockholders' |
| Common |
| Paid- |
| Retained |
| Stockholders' | ||||||||
In thousands |
| Stock |
| in Capital |
| Earnings |
| Equity |
| Stock |
| in Capital |
| Earnings |
| Equity | ||||||||
Balance at January 1, 2022 | | $ | 441 | | $ | 163,566 | | $ | 47,067 | | $ | 211,074 | ||||||||||||
Stock-based compensation | |
| 2 | |
| 1,885 | |
| — | |
| 1,887 | ||||||||||||
Dividends paid | | | — | |
| — | |
| (2,497) | |
| (2,497) | ||||||||||||
Net income | |
| — | |
| — | |
| 41,471 | |
| 41,471 | ||||||||||||
Balance at March 31, 2022 | | $ | 443 | | $ | 165,451 | | $ | 86,041 | | $ | 251,935 | ||||||||||||
| | | | | | | | | | | | | ||||||||||||
Balance at January 1, 2021 | | $ | 427 | | $ | 158,859 | | $ | 9,809 | | $ | 169,095 | | $ | 427 | | $ | 158,859 | | $ | 9,809 | | $ | 169,095 |
Stock-based compensation | |
| 15 | |
| 1,040 | |
| — | |
| 1,055 | |
| 15 | |
| 1,040 | |
| — | |
| 1,055 |
Net income | |
| — | |
| — | |
| 4,143 | |
| 4,143 | |
| — | |
| — | |
| 4,143 | |
| 4,143 |
Balance at March 31, 2021 | | | 442 | | | 159,899 | | | 13,952 | | | 174,293 | | $ | 442 | | $ | 159,899 | | $ | 13,952 | | $ | 174,293 |
Restricted stock surrendered for withholding taxes payable | | | (1) | | | (326) | | | — | | | (327) | ||||||||||||
Stock-based compensation | |
| — | |
| 1,522 | |
| — | |
| 1,522 | ||||||||||||
Net income | |
| — | |
| — | |
| 9,942 | |
| 9,942 | ||||||||||||
Balance at June 30, 2021 | | | 441 | | | 161,095 | | | 23,894 | | | 185,430 | ||||||||||||
Stock-based compensation | |
| — | |
| 1,342 | |
| — | |
| 1,342 | ||||||||||||
Net income | |
| — | |
| — | |
| 7,035 | |
| 7,035 | ||||||||||||
Balance at September 30, 2021 | | $ | 441 | | $ | 162,437 | | $ | 30,929 | | $ | 193,807 | ||||||||||||
| | | | | | | | | | | | | ||||||||||||
| | | | | | | | | | | | | ||||||||||||
Balance at January 1, 2020 | | $ | 410 | | $ | 154,957 | | $ | 14,716 | | $ | 170,083 | ||||||||||||
Stock-based compensation | |
| 17 | |
| 906 | |
| — | |
| 923 | ||||||||||||
Net income | |
| — | |
| — | |
| 1,962 | |
| 1,962 | ||||||||||||
Balance at March 31, 2020 | | | 427 | | | 155,863 | | | 16,678 | | | 172,968 | ||||||||||||
Restricted stock surrendered for withholding taxes payable | | | (1) | | | (192) | | | — | | | (193) | ||||||||||||
Stock-based compensation | |
| — | |
| 1,106 | |
| — | |
| 1,106 | ||||||||||||
Net income | |
| — | |
| — | |
| 2,652 | |
| 2,652 | ||||||||||||
Balance at June 30, 2020 | | | 426 | | | 156,777 | | | 19,330 | | | 176,533 | ||||||||||||
Stock-based compensation | |
| 1 | |
| 1,089 | |
| — | |
| 1,090 | ||||||||||||
Net loss | |
| — | |
| — | |
| (4,776) | |
| (4,776) | ||||||||||||
Balance at September 30, 2020 | | $ | 427 | | $ | 157,866 | | $ | 14,554 | | $ | 172,847 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
7
Ramaco Resources, Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
| | | | | | | | | | | | | | |
| | Nine months ended September 30, | | | Three months ended March 31, | | ||||||||
In thousands |
| 2021 |
| 2020 | |
| 2022 |
| 2021 | | ||||
Cash flows from operating activities: |
| |
|
| |
| |
| |
|
| |
| |
Net income (loss) | | $ | 21,120 | | $ | (162) | | |||||||
Adjustments to reconcile net income (loss) to net cash from operating activities: | | | | | | | | |||||||
Net income | | $ | 41,471 | | $ | 4,143 | | |||||||
Adjustments to reconcile net income to net cash from operating activities: | | | | | | | | |||||||
Accretion of asset retirement obligations | |
| 461 | |
| 428 | | |
| 235 | |
| 151 | |
Depreciation and amortization | |
| 18,861 | |
| 15,601 | | |
| 8,680 | |
| 6,155 | |
Amortization of debt issuance costs | |
| 96 | |
| 43 | | |
| 121 | |
| 14 | |
Stock-based compensation | |
| 3,919 | |
| 3,119 | | |
| 1,887 | |
| 1,055 | |
Other income - employee retention tax credit | | | (5,407) | | | — | | | | — | | | (2,462) | |
Other income - PPP Loan | | | — | | | (8,444) | | |||||||
Deferred income taxes | |
| 1,650 | |
| (37) | | |
| 5,015 | |
| (166) | |
Changes in operating assets and liabilities: | | | | | | | | | | | | | | |
Accounts receivable | |
| (17,293) | |
| (2,030) | | |
| (3,194) | |
| (1,444) | |
Prepaid expenses and other current assets | |
| 5,611 | |
| 630 | | |
| 1,807 | |
| 1,127 | |
Inventories | |
| (1,933) | |
| (8,027) | | |
| (3,752) | |
| (12,243) | |
Other assets and liabilities | |
| 760 | |
| (1,154) | | |
| (591) | |
| (220) | |
Accounts payable | |
| 7,515 | |
| 3,409 | | |
| 18,653 | |
| 5,324 | |
Accrued expenses | |
| 2,397 | |
| (2,429) | | |
| 7,037 | |
| (935) | |
Net cash from operating activities | |
| 37,757 | |
| 947 | | |
| 77,369 | |
| 499 | |
| | | | | | | | | | | | | | |
Cash flow from investing activities: | | | | | | | | | | | | | | |
Purchases of property, plant and equipment | |
| (17,642) | |
| (20,515) | | |||||||
Capital expenditures | |
| (19,742) | |
| (3,725) | | |||||||
Net cash from investing activities | | | (17,642) | | | (20,515) | | | | (19,742) | | | (3,725) | |
| | | | | | | | | | | | | | |
Cash flows from financing activities: | | | | | | | | | | | | | | |
Proceeds from PPP Loan | | | — | | | 8,444 | | |||||||
Proceeds from borrowings | |
| 50,545 | |
| 45,543 | | |
| 1,337 | |
| 11,600 | |
Payments of debt issuance cost | | | (2,356) | | | — | | |||||||
Payment of dividends | | | (4,998) | | | — | | |||||||
Repayment of borrowings | |
| (24,900) | |
| (32,597) | | |
| (2,519) | |
| (8,208) | |
Repayments of financed insurance payable | | | (862) | | | (656) | | | | (105) | | | (377) | |
Repayments of financing leased equipment | | | (1,253) | | | — | | | | (1,635) | | | — | |
Restricted stock surrendered for withholding taxes payable | | | (327) | | | (193) | | |||||||
Net cash from financing activities | |
| 20,847 | |
| 20,541 | | |
| (7,920) | |
| 3,015 | |
| | | | | | | | | | | | | | |
Net change in cash and cash equivalents and restricted cash | |
| 40,962 | |
| 973 | | |
| 49,707 | |
| (211) | |
Cash and cash equivalents and restricted cash, beginning of period | |
| 6,710 | |
| 6,865 | | |
| 22,806 | |
| 6,710 | |
Cash and cash equivalents and restricted cash, end of period | | $ | 47,672 | | $ | 7,838 | | | $ | 72,513 | | $ | 6,499 | |
| | | | | | | | | | | | | | |
Supplemental cash flow information: | | | | | | | | | | | | | | |
Cash paid for interest | | $ | 852 | | $ | 820 | | | $ | 903 | | $ | 186 | |
Cash paid for taxes | |
| — | |
| — | | |
| — | |
| — | |
Non-cash investing and financing activities: | | | | | | | | | | | | | | |
Leased assets obtained under new financing leases | |
| 9,157 | |
| — | | |
| 3,624 | |
| — | |
Capital expenditures included in accounts payable and accrued expenses | |
| 3,128 | |
| 633 | | |
| 13,059 | |
| 913 | |
Additional asset retirement obligations incurred | |
| 235 | |
| 172 | | |||||||
Additional asset retirement obligations incurred, net | |
| 928 | |
| 26 | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
8
Ramaco Resources, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
NOTE 1—BUSINESS
Ramaco Resources, Inc. (the “Company,” “we,” “us” or “our,”) is a Delaware corporation formed in October 2016. Our principal corporate offices are located in Lexington, Kentucky. We are an operator and developer of high-quality, low-cost metallurgical coal in southern West Virginia, southwestern Virginia, and southwestern Pennsylvania.
COVID-19 Pandemic—The global spread of COVID-19 created significant volatility, uncertaintycontinues to impact countries across the world, and economic disruption during 2020. The Company was adversely affected by the deteriorationduration and increased uncertainty in the macroeconomic outlook as a resultseverity of the impact of COVID-19. After the initial outbreak, we observed a declining demand for, and declines in the spot price of, metallurgical coal as business and consumer activity decelerated across the globe. Throughout 2021, weeffects are seeing increases in demand from our primary customers, as the global economic recovery began. U.S. steel prices also have increased significantly due to this recovery and the effects from large-scale government stimulus measures.
currently unknown. We continue to actively monitor the situation and may take further actions altering our business operations that we determine are in the best interests of our employees, customers, suppliers, and stakeholders, or as required by federal, state, or local authorities.
Russian/Ukraine Conflict—The extent and duration of the military conflict involving Russia and Ukraine, resulting sanctions and future market or supply disruptions in the region, are impossible to predict, but could be significant and may have a severe adverse effect on the region. Globally, various governments have banned imports from Russia including commodities such as oil, natural gas and coal. These events have caused volatility in the commodity markets. This volatility, including market expectations of potential changes in coal prices and inflationary pressures on steel products, may have a significant effect on market prices and overall demand for our coal and the cost of supplies and equipment. We are closely monitoring the potential effects on the market.
We have no meaningful direct financial exposure to Russia and Ukraine. As the European Union ban on Russian coal goes into effect in August, it could create further tightness in the metallurgical coal markets as Russia was the third largest exporter of metallurgical coal in 2021 or 10% of global metallurgical coal trade.
NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation—These interim financial statements are unaudited and have been prepared pursuant to the rules and regulations of the SEC regarding interim financial reporting. Certain disclosures have been condensed or omitted from these financial statements. Accordingly, they do not include all the information and notes required by accounting principles generally accepted in the United States of America (“GAAP”) for complete consolidated financial statements, and should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report.Report on Form 10-K for the year ended December 31, 2021.
In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, necessary to fairly present the financial position as of, and the results of operations for, all periods presented. In preparing the accompanying financial statements, management has made certain estimates and assumptions that affect reported amounts in the condensed consolidated financial statements and disclosures of contingencies. Actual results may differ from those estimates. The results for interim periods are not necessarily indicative of annual results. Intercompany balances and transactions between consolidated entities have been eliminated.
Cash and Cash Equivalents—We classify all highly-liquid instruments with an original maturity of three months or less to be cash equivalents. Restricted cash balances were $1.0 million at September 30, 2021March 31, 2022 and $1.4$0.9 million at December 31, 2020.2021. These consisted of funds held in escrow for potential future workers’ compensation claims and were classified in other current assets in the consolidated balance sheets.
Self-Insurance—We are self-insured for certain losses relating to workers’ compensation claims, including pneumoconiosis (occupational disease) claims. We purchase insurance coverage to reduce our exposure to significant levels of these claims. Self-insured losses are accrued based upon estimates of the aggregate liability for uninsured claims incurred as of the balance sheet date using current and historical claims experience and certain actuarial assumptions. At September 30, 2021,March 31, 2022, the estimated aggregate liability for uninsured claims totaled $3.5$3.6 million. Of this, $2.1$2.4 million is included in other long-term liabilities within the consolidated balance sheets. At December 31, 2020,2021, the
9
estimated aggregate liability for uninsured claims totaled $1.7$3.9 million including $0.9$2.4 million included in other long-term liabilities. These estimates are subject to uncertainty due to a variety of factors, including extended lag times in the reporting and resolution of claims, and trends or changes in claim settlement patterns, insurance industry practices and legal interpretations. As a result, actual costs could differ significantly from the estimated amounts. Adjustments to estimated liabilities are recorded in the period in which the change in estimate occurs.
9
Financial Instruments—Our financial assets and liabilities consist of cash, accounts receivable, accounts payable and indebtedness. The fair values of these instruments approximate their carrying amounts at each reporting date.date, except that our Senior Notes have an estimated fair value of approximately $2.7 million higher than the balance recorded.
Nonrecurring fair value measurements include asset retirement obligations, the estimated fair value of which is calculated as the present value of estimated cash flows related to its reclamation liabilities using Level 3 inputs. The significant inputs used to calculate such liabilities include estimates of costs to be incurred, our credit adjusted discount rate, inflation rates and estimated date of reclamation.
Concentrations—During the three months ended September 30, 2021,March 31, 2022, sales to our top threefour customers accounted for approximately 29%23%, 19%18%, 18% and 16%11% of our total revenue, respectively, aggregating to approximately 64%70% of our total revenue. The balances due in the aggregate from these threefour customers at September 30, 2021March 31, 2022 was approximately 63% of our total accounts receivable. During the nine months ended September 30, 2021, sales to our top three customers accounted for approximately 31%, 18% and 10% of our total revenue, respectively, aggregating to approximately 59% of our total revenue. The balances due in the aggregate from these three customers at September 30, 2021 was approximately 63%60% of our total accounts receivable. During the three months ended September 30, 2020,March 31, 2021, sales to our top three2 customers accounted for approximately 86% of total revenue. During the nine months ended September 30, 2020, sales to our top three customers accounted for approximately 71%66% of total revenue.
RecentAdoption of New Accounting PronouncementsStandards—
In December 2019, the FASBFinancial Accounting Standards Board (“FASB”) issued ASUAccounting Standards Update (“ASU”) 2019-12, Income Taxes, which enhances and simplifies various aspects of the income tax accounting guidance, including requirements such as tax basis step-up in goodwill obtained in a transaction that is not a business combination, ownership changes in investments, and interim-period accounting for enacted changes in tax law. The standard was effective for us in the first quarter of our fiscal year 2021. The adoption of this ASU did not have a material impact on our consolidated financial statements.
Recent Accounting Pronouncements Being Assessed
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial ReportingReporting. , which provides optional expedientsThe amendments in ASU 2020-04 are elective and exceptions for applying generally accepted accounting principlesapply to all entities that have contracts, hedging relationships, and other transactions that reference the London Inter-Bank Offered Rate (“LIBOR’) or another reference rate expected to be discontinued due to reference rate reform. The new guidance provides the following optional expedients: simplify accounting analyses under current GAAP for contract modifications, simplify the assessment of hedge effectiveness, allow hedging relationships affected by reference rate reform to continue and allow a one-time election to sell or transfer debt securities classified as held to maturity that reference a rate affected by reference rate reform.
In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope. The update provides additional optional guidance on the transition from LIBOR to include derivative instruments that use an interest rate for margining, discounting or contract price alignment. The standard will ease, if certain criteria are met. Thewarranted, the requirements for accounting for the future effects of the rate reform. An entity may elect to apply the amendments are effective for all entities beginning on March 12, 2020prospectively through December 31, 2022. The Company has not adopted this ASU. The Company is currently assessing the impact of adopting this standard on its consolidated financial statements and the timing of adoption.
NOTE 3—PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
| | | | | | | |
| | | | ||||
(In thousands) |
| September 30, 2021 |
| December 31, 2020 | | ||
Plant and equipment | | $ | 161,566 | | $ | 155,173 | |
Construction in process | |
| 4,890 | |
| 7,245 | |
Capitalized mine development costs | |
| 88,713 | |
| 74,279 | |
Less: accumulated depreciation and amortization | |
| (73,494) | |
| (56,242) | |
Total property, plant and equipment, net | | $ | 181,675 | | $ | 180,455 | |
Capitalized amounts related to coal reserves at properties where we are not currently developing or actively engaged in mining operations totaled $14.7 million as of September 30, 2021 and $15.4 million as of December 31, 2020.
10
NOTE 3—PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
| | | | | | | |
| | | | ||||
(In thousands) |
| March 31, 2022 |
| December 31, 2021 | | ||
Plant and equipment | | $ | 175,557 | | $ | 167,019 | |
Mining property and mineral rights | | | 26,953 | | | 26,064 | |
Construction in process | |
| 19,978 | |
| 9,972 | |
Capitalized mine development costs | |
| 110,736 | |
| 104,291 | |
Less: accumulated depreciation and amortization | |
| (87,294) | |
| (80,269) | |
Total property, plant and equipment, net | | $ | 245,930 | | $ | 227,077 | |
Capitalized amounts related to coal reserves at properties where we are not currently developing or actively engaged in mining operations totaled $25.9 million as of March 31, 2022 and $25.1 million as of December 31, 2021.
Depreciation and amortization included:
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | Three months ended September 30, | | Nine months ended September 30, | | Three months ended March 31, | | ||||||||||||
(In thousands) |
| 2021 |
| 2020 |
| 2021 |
| 2020 |
| 2022 |
| 2021 |
| ||||||
Depreciation of plant and equipment | | $ | 4,484 | | $ | 4,326 | | $ | 13,354 | | $ | 12,740 | | $ | 4,754 | | $ | 4,399 | |
Depreciation of right of use assets | | | 413 | | | — | | | 540 | | | — | | | 714 | | | — | |
Amortization of capitalized | | | | | | | | | | | | | | | | | | | |
mine development costs | |
| 1,854 | |
| 932 | |
| 4,967 | |
| 2,861 | |
| 3,212 | |
| 1,756 | |
Total depreciation and amortization | | $ | 6,751 | | $ | 5,258 | | $ | 18,861 | | $ | 15,601 | | $ | 8,680 | | $ | 6,155 | |
NOTE 4—DEBT
Revolving Credit Facility and Term Loan—On November 2, 2018, we entered into a Credit and Security Agreement (as amended or amended and restated the “Revolving Credit Facility” or the “Credit Agreement”) with KeyBank National Association (“KeyBank”)., as the administrative agent, and other lenders party thereto. The Credit Agreement was amended on February 20, 2020 and March 19, 2021. On October 29, 2021, we entered into the Amended and consistsRestated Credit and Security Agreement (the “Amendment and Restatement”) with KeyBank. Prior to the Amendment and Restatement, the Credit Agreement consisted of athe $10.0 million term loan (the “Term Loan”) and up to $30.0 million in the form of a revolving line of credit, (the “Revolving Credit Facility”), including $3.0 million letter of credit availability. The Amendment and Restatement increased the overall availability under the revolving credit line to $40.0 million and extended the maturity date to December 31, 2024. All personal property assets, including, but not limited to accounts receivable, coal inventory and certain mining equipment are pledged to secure the Revolving Credit Agreement.
Facility.
The Revolving Credit Facility has a maturity date of December 31, 2023 and bears interest based on LIBORSecure Overnight Financing Rate (“SOFR”) + 2.0% or Base Rate + 1.5%. Base Rate“Base Rate” is the highest of (i) KeyBank’s prime rate, (ii) Federal Funds Effective Rate + 0.5%, or (iii) LIBORSOFR + 2.0%. Advances under the Revolving Credit Facility are made initially as base rateBase Rate loans but may be converted to LIBORSOFR rate loans at certain times at our discretion. At September 30, 2021,March 31, 2022, there was 0 amount outstanding under the Revolving Credit Facility and we had remaining availability of $27.1$39.6 million.
The Term Loan is secured under a Master Security Agreement with a pledge of certain underground and surface mining equipment, bears interest at LIBOR + 5.15% and is required to be repaid in monthly installments of $278 thousand including accrued interest. The outstanding principal balance of the Term Loan was $4.2$2.5 million at September 30, 2021.
March 31, 2022.
The Credit Agreement contains usual and customary covenants including limitations on liens, additional indebtedness, investments, restricted payments, asset sales, mergers, affiliate transactions and other customary limitations, as well as financial covenants. At September 30, 2021,March 31, 2022, we were in compliance with all debtfinancial covenants inunder the Credit Agreement.
11
Key Equipment Finance Loan—On April 16, 2020, we entered into an equipment loan with Key Equipment Finance, a division of KeyBank, as lender, in the principal amount of approximately $4.7 million for the financing of existing underground and surface equipment (the “Equipment Loan”). The Equipment Loan bears interest at 7.45% per annum and is payable in 36 monthly installments of $147 thousand. There is a 3% premium for prepayment of the note within the first 12 months. This premium declines by 1% during each successive 12-month period. The outstanding principal balance underof the Equipment Loan was $2.6$1.8 million at September 30, 2021.March 31, 2022.
9.00% Senior Unsecured Notes due 20262026——On July 13, 2021, we completed an offering of $34.5 million, in the aggregate, of the Company’s 9.00% Senior Unsecured Notes due 2026 (the “Notes”“Senior Notes”), lessand incurred $2.4 million for note offering costs. The Senior Notes mature on July 30, 2026, unless redeemed prior to maturity. The Senior Notes bear interest at a rate of 9.00% per annum, payable quarterly in arrears on the 30th day of January, April, July and October of each year, commencing on July 30, 2021.year. We may redeem the Senior Notes in whole or in part, at our option, at any time on or after July 30, 2023, or upon certain change of control events, at a redemption price equal to 100% of the principal amount plus accrued and unpaid interest to, but not including, the date of redemption redemption. Issuance costs for the Senior Notes included underwriters’ fees, attorney, accounting and filing costs totaling $2.4 million. These issuance costs are reported as a debt discount which is being amortized over the Senior Notes term using an effective rate method. The outstanding principal balance under the Senior Notes was $34.5 million at September 30, 2021.March 31, 2022 and is presented net of unamortized discounts of $2.0 million. The effective interest rate is approximately 10.45%.
J. H. Fletcher & Co. Loan—On July 23, 2021 and November 24, 2021, we entered into an equipment loanloans with J. H. Fletcher & Co., as lender, in the principal amount of approximately $1.0$0.9 million and $3.9 million, respectively, for the financing of underground equipment (the “Fletcher Equipment Loan”Loans”). The Fletcher Equipment Loan bearsLoans bear 0 interest at 0% per annum and isare payable in 24monthly
11
installments of $40$200 thousand. The outstanding principal balance underof the Fletcher Equipment LoanLoans was approximately $0.8$3.8 million at September 30, 2021.March 31, 2022.
Komatsu Financial Limited Partnership Loan—On August 16, 2021, we entered into an equipment loan with Komatsu Financial Limited Partnership, as lender, in the principal amount of approximately $1.0 million for the financing of surface equipment (the “Komatsu Equipment Loan”). The Komatsu Equipment Loan bears interest at 4.6% per annum and is payable in 36 monthly installments of $36 thousand for the first six months and then at $28 thousand until maturity. The outstanding principal balance underof the Komatsu Equipment Loan was approximately $1.0$0.8 million at September 30, 2021.March 31, 2022.
Brandeis Machinery & Supply Company—On January 11, 2022, we entered into equipment loans with Brandeis Machinery & Supply Company, as lender, in the principal amount of $1.4 million for the financing of surface equipment (the “Brandeis Equipment Loans”). The Brandeis Equipment Loans bear interest at 4.8% per annum and are payable in 48 monthly installments of $24 thousand. The outstanding principal balance of the Brandeis Equipment Loans was $0.9 million at March 31, 2022.
12
NOTE 5—LEASES
The Company has various financing leases for mining equipment which originated in the second and third quarters of 2021.equipment. These leases are generally for terms up to 36 months and expire through 2024.2025. We have 1 operating lease for office space that will expire mid-2022. Operating lease expense for each of the three-month periods ended March 31, 2022 and March 31, 2021 was $20 thousand.
Right-of-use assets and lease liabilities are determined as the present value of the lease payments, discounted using either the implicit interest rate in the lease or our estimated incremental borrowing rate based on similar terms, payments and the economic environment where the leased asset is located. Below is a summary of our leases:
| | | | | | | |
(In thousands) | Classification | | September 30, 2021 | | December 31, 2020 | ||
| | | | | | | |
Right-of-use assets | | | | | | | |
Financing | Financing lease right-of-use assets, net | | $ | 8,897 | | $ | — |
Operating | Other assets | | | 44 | | | 110 |
Total right-of-use assets | | | $ | 8,941 | | $ | 110 |
| | | | | | | |
Current lease liabilities | | | | | | | |
Financing | Current portion of financing lease obligations | | $ | 3,057 | | $ | — |
Operating | Other current liabilities | | | 44 | | | 79 |
Non-current lease liabilities | | | | | | | |
Financing | Long-term portion of financing lease obligations | | $ | 4,847 | | $ | — |
Operating | Other long-term liabilities | | | — | | | 31 |
Total lease liabilities | | | $ | 7,948 | | $ | 110 |
Minimum lease payments for our lease obligations are as follows:
| | | | | | | | | |
| | September 30, 2021 | |||||||
(In thousands) |
| Financing |
| Operating |
| Total | |||
| | | | | | | | | |
Future minimum lease payments: | | | | | | | | | |
2021 | | $ | 731 | | $ | 16 | | $ | 747 |
2022 | | | 3,510 | | | 41 | | | 3,551 |
2023 | | | 3,173 | | | — | | | 3,173 |
2024 | | | 945 | | | — | | | 945 |
Total undiscounted lease payments | | | 8,359 | | | 57 | | | 8,416 |
Less: Amounts representing interest | | | (455) | | | (13) | | | (468) |
Present value of lease obligations | | $ | 7,904 | | $ | 44 | | $ | 7,948 |
| | | | | | | | | |
Weighted average remaining term (years) | | | 2.6 | | | 0.6 | | | |
Weighted average discount rate | | | 4.1% | | | 8.5% | | | |
| | | | | | | |
(In thousands) | Classification | | March 31, 2022 | | December 31, 2021 | ||
| | | | | | | |
Right-of-use assets | | | | | | | |
Financing | Financing lease right-of-use assets, net | | $ | 12,296 | | $ | 9,128 |
Operating | Other assets | | | 6 | | | 25 |
Total right-of-use assets | | | $ | 12,302 | | $ | 9,153 |
| | | | | | | |
Current lease liabilities | | | | | | | |
Financing | Current portion of financing lease obligations | | $ | 4,081 | | $ | 3,461 |
Operating | Other current liabilities | | | 6 | | | 25 |
Non-current lease liabilities | | | | | | | |
Financing | Long-term portion of financing lease obligations | | $ | 5,968 | | $ | 4,599 |
Total lease liabilities | | | $ | 10,055 | | $ | 8,085 |
12
NOTE 6—SBA PAYCHECK PROTECTION PROGRAM LOAN
On April 20, 2020, we received proceeds from the PPP Loan in the amount of approximately $8.4 million from KeyBank, as lender, pursuant to the Paycheck Protection Program (“PPP”) of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The purpose of the PPP was to encourage the continued employment of workers. We used all of the PPP Loan proceeds for eligible payroll expenses, lease, interest and utility payments.
The PPP Loan was evidenced by a promissory note dated April 16, 2020, which contains customary events of default relating to, among other things, payment defaults and breaches of representations and warranties.
Pursuant to the subsequently enacted Paycheck Protection Flexibility Act of 2020, we were permitted to defer required monthly payments of principal and interest until such time as an approval or denial of forgiveness is received from the U.S. Small Business Administration (“SBA”). In 2020, we recognized $8.4 million as other income in the consolidated statement of operations as we expect the full amount of the PPP Loan principal, together with accrued interest thereon, will be forgiven.
On July 29, 2021, we were notified by KeyBank that full forgiveness had been approved by the SBA.
NOTE 7—6—EQUITY
Stock-Based Compensation—Compensation Awards—We have aOur Long-Term Incentive Plan (“LTIP”) is currently authorized by shareholders for the issuance of awards of up to approximately 10.9 million shares of common stock, and as of March 31, 2022, there were approximately 5.2 million shares of common stock available for grant under the LTIP, which includes 4.0 million authorized shares that became effective on February 23, 2022. Additionally, granted but unvested shares are generally forfeited upon termination of employment, unless an employee enters into another written arrangement, and may not be sold, assigned, transferred, pledged or otherwise encumbered.
As of March 31, 2022, we had four types of stock-based compensation plan under which stockawards outstanding: options, restricted stock, restricted stock units and performance shares and otherstock units. Stock-based compensation expense for all four types of stock-based awards may be granted. At September 30,totaled $1.9 million and $1.1 million for the three months ended March 31, 2022 and March 31, 2021, 1.9 million shares were reserved underrespectively.
The following table summarizes stock-based awards outstanding, as well as activity for the current plan for future awards.period:
| | | | | | | | | | | | | | | | | |
|
| Restricted Stock |
|
| Restricted Stock Units |
|
| Performance Stock Units | |||||||||
| | | | Weighted | | | | | Weighted | | | | | Weighted | |||
| | |
| Average Grant | | | |
| Average Grant | | | |
| Average Grant | |||
| | Shares |
| Date Fair Value | | | Shares |
| Date Fair Value | | | Shares |
| Date Fair Value | |||
Outstanding at December 31, 2021 |
| 3,741,770 | | $ | 3.98 | |
| — | | $ | — | |
| — | | $ | — |
Granted |
| 180,407 | |
| 15.65 | |
| 248,706 | |
| 15.65 | |
| 248,706 | |
| 22.21 |
Outstanding at March 31, 2022 |
| 3,922,177 | | $ | 4.52 | |
| 248,706 | | $ | 15.65 | |
| 248,706 | | $ | 22.21 |
| | | | | | | | | | | | | | | | | |
Options for the purchase of a total of 937,424 shares of our common stock with an exercise price offor $5.34 per share were granted to 2 executives on August 31, 2016. The options have a ten-year term from the grant date and are fully vested. The options remain outstanding and unexercised and the exercise price is less than the average stock price for the threewere in-the-money at March 31, 2022 and nine month periods ended September 30, 2021.had an intrinsic value of $9.8 million.
Restricted Stock—We grant shares of restricted stock to certain senior executives, key employees and directors. These shares vest over approximately one to three and a half years from the date of grant. During the vesting period, the
13
participants have voting rights and may receive dividends, but the shares may not be sold, assigned, transferred, pledged or otherwise encumbered. Additionally, granted but unvested shares are generally forfeited upon termination of employment, unless an employee enters into another written arrangement.dividends. The fair value of the restricted stock on the date of the grant, which was $15.65 per share, is amortized ratably over the service period. Compensation expense related to these awards totaled $1.3 million and $3.9 million for the three and nine months ended September 30, 2021, respectively. At September 30, 2021,March 31, 2022, there was $8.5$8.7 million of total unrecognized compensation cost related to unvested restricted stock to be recognized over a weighted-average period of 1.81.4 years.
Restricted Stock Units—We grant shares of restricted stock units to certain senior executives and key employees. These share units vest ratably over approximately three years from the date of grant. During the vesting period, the participants have no voting rights and no dividend rights; however, participants may receive dividend equivalents, of which none were awarded during the three months ended March 31, 2022. Upon vesting and within 30 days, the recipient will receive one share of common stock for each stock unit.
The following table summarizes248,706 restricted awards outstanding, as well as activitystock units are linked to the Company’s common stock value which was fair valued on the date of grant at $15.65 per share and is recognized ratably over the service period. At March 31, 2022, there was $3.7 million of total unrecognized compensation cost related to unvested restricted stock units to be recognized over a weighted-average period of 2.8years.
Performance Stock Units—We grant shares of performance stock units to certain senior executives and key employees. These share units cliff-vest approximately three years from the date of grant based on the achievement of targeted performance levels related to pre-established relative total shareholder return goals. These performance stock units have the potential to be earned from 0% to 200% of target depending on actual results. During the vesting period, the participants have no voting rights and no dividend rights; however, participants may receive dividend equivalents, of which none were awarded during the three months ended March 31, 2022. Upon vesting and within 30 days, the recipient will receive one share of common stock for each stock unit.
The Company’s 248,706 performance stock units were valued relative to the period:
stock price performance of a peer group of companies at a valuation stock price of $15.65 per share, which was fair valued at $22.21 per share at the date of grant based on a Monte Carlo simulation. The fair value of the performance stock units on the date of the grant is recognized ratably over the service period. At March 31, 2022, there was $5.2 million of total unrecognized compensation cost related to unvested performance stock units to be recognized over a weighted-average period of 2.8
| | | | | |
|
| |
| Weighted | |
| | |
| Average Grant | |
| | Shares |
| Date Fair Value | |
Outstanding at December 31, 2020 |
| 2,845,525 | | $ | 4.28 |
Granted |
| 1,592,659 | |
| 4.37 |
Vested |
| (321,075) | |
| 8.03 |
Forfeited |
| (129,279) | |
| 4.11 |
Outstanding at September 30, 2021 |
| 3,987,830 | | $ | 4.02 |
years.
NOTE 8—7—COMMITMENTS AND CONTINGENCIES
Surety Bonds—At September 30, 2021,March 31, 2022, we had total reclamation bonding requirements of $15.8$20.8 million which were supported by surety bonds. Additionally, we had $0.3 million of surety bonds that secured performance obligations.
13
Contingent Transportation Purchase Commitments—We secure the ability to transport coal through rail contracts and export terminal services contracts that are sometimes funded through take-or-pay arrangements. At September 30, 2021,March 31, 2022, contingent liabilities under these take-or-pay arrangements totaled $4.6$12.8 million under 43 contracts expiring at various dates between December 31, 2021,2022, and March 31, 2024. The level of these take-or-pay liabilities will be reduced at a per ton rate as such rail and export terminal services are utilized against the required minimum tonnage amounts over the contracts term stipulated in such rail and export terminal contracts.
Litigation—From time to time, the Company may be subject to various litigation and other claims in the normal course of business. No amounts have been accrued in the consolidated financial statements with respect to any matters.
OnIn November 5, 2018, one of our three raw coal storage silos that fed our Elk Creek plant experienced a partial structural failure. A temporary conveying system completed in late-November 2018 restored approximately 80% of the plant capacity. We completed a permanent belt workaround and restored the preparation plant to its full processing capacity in mid-2019. Our insurance carrier Federal Insurance Company, disputed our claim for coverage based on certain exclusions to the applicable policy, and therefore, onin August 21, 2019 we filed suit against Federal Insurance Company and Chubb INA Holdings, Inc. in Logan County Circuit Court in West Virginia seeking a declaratory judgment that the partial silo collapse was an insurable event and required coverage under our policy. Defendants removed the case to the United States District Court for the Southern District of West Virginia, and upon removal, we substituted ACE American Insurance Company as a defendant in place of Chubb INA Holdings, Inc.
suit. The case went to trial beginning onin June 29, 2021. On2021 and in July 15, 2021, the jury returned a verdict in our favor of the Company for $7.7 million in compensatory damages and on July 16, 2021, made an additional award of $25.0 million for inconvenience and aggravation. Additionally,In August 2021, the Companydefendants filed a post-trial motion. On March 4, 2022, the court entered its memorandum opinion and order on the motion reducing the jury award to a total of $1.8 million, including pre-judgment interest, based largely on the court’s decision to vacate and set aside, in its entirety, the jury award of damages for inconvenience and aggravation. The same day, the court entered
14
the judgment in accordance with the memorandum opinion and order. No amount is seeking to recover its attorney’s fees and costs. This verdict is not final and may be subject to post-trial motions or appeal. We have, therefore, not recognized any gaincurrently reflected in the financial statements related to this verdict asmatter.
On April 1, 2022, we filed a notice of September 30, 2021.appeal with the U.S. Court of Appeals for the Fourth Circuit.
NOTE 9—8—REVENUE
Our revenue is derived from contracts for the sale of coal which is recognized at the point in time control is transferred to our customer. Generally, domestic sales contracts have terms of about one year and the pricing is typically fixed. Export sales have spot or term contracts and pricing can either be by fixed-price or a price derived against index-based pricing mechanisms. Sales completed with delivery to an export terminal are reported as export revenue. Disaggregated information about our revenue is presented below:
| | | | | | | | | | | | | | | | | | | | |
| | Three months ended September 30, | | Nine months ended September 30, | | | Three months ended March 31, | | ||||||||||||
(In thousands) |
| 2021 |
| 2020 | | 2021 |
| 2020 | |
| 2022 |
| 2021 | | ||||||
Coal Sales |
| |
|
| |
| | |
|
| |
| |
| |
|
| |
| |
North American revenues | | $ | 47,954 | | $ | 27,284 | | $ | 105,611 | | $ | 89,795 | | |||||||
Export revenues, excluding Canada | |
| 28,423 | |
| 12,175 | |
| 90,278 | |
| 27,974 | | |||||||
Total revenues | | $ | 76,377 | | $ | 39,459 | | $ | 195,889 | | $ | 117,769 | | |||||||
North American revenue | | $ | 60,094 | | $ | 20,107 | | |||||||||||||
Export revenue, excluding Canada | |
| 94,788 | |
| 23,348 | | |||||||||||||
Total revenue | | $ | 154,882 | | $ | 43,455 | |
At September 30, 2021,March 31, 2022, we had outstanding performance obligations for the remainder of 20212022 of approximately 0.51.5 million tons for contracts with fixed sales prices averaging $84/$188/ton and 0.10.2 million tons for contracts with index-based pricing mechanisms.
NOTE 10—9—INCOME TAXES
Income tax provisions for interim quarterly periods are generally based on an estimated annual effective income tax rate calculated separately from the effect of significant, infrequent or unusual items related specifically to interim periods. The income tax impact of discrete items are recognized in the period these occur.
The following table summarizes income tax expense, including the impact of discrete items, for each period presented:
14
| | | | | | | | | | | | |
| | Three months ended September 30, | | Nine months ended September 30, | ||||||||
(In thousands) |
| 2021 |
| 2020 |
| 2021 |
| 2020 | ||||
Deferred income tax expense (benefit) | | $ | 1,817 | | $ | (1,407) | | $ | 3,046 | | $ | (473) |
Discrete items: | | | | | | | | | | | | |
State income taxes - West Virginia | | | (229) | | | — | | | (1,615) | | | — |
Stock-based compensation | |
| — | | | — | | | 219 | | | 435 |
Total income tax expense (benefit) | | $ | 1,588 | | $ | (1,407) | | $ | 1,650 | | $ | (38) |
Discrete items includeduring the three months ended March 31, 2021 included the impact of legislative changes in Virginia and West Virginia and tax expense for the excess of book expense over the tax deduction for vested restricted stock awards.Virginia. Excluding these discrete items, our effective tax rate for the three months ended September 30,March 31, 2022 and March 31, 2021 was 19.5% and 2020 was 21% and 23%, respectively. Similarly, our effective tax rate for the nine months ended September 30, 2021 and 2020 was 13% and 19%5%, respectively. The primary difference from the federal statutory rate of 21% in each period is related to state taxes, permanent differences for non-deductible expenses and depletion expense for income tax purposes.
NOTE 11—10—EARNINGS (LOSS) PER SHARE
The following is the computation of basic and diluted EPS:
| | | | | | | | | | | | | | | | | | | | |
|
| Three months ended September 30, | | Nine months ended September 30, | |
| Three months ended March 31, | | ||||||||||||
(In thousands, except per share amounts) |
| 2021 |
| 2020 |
| 2021 |
| 2020 | |
| 2022 |
| 2021 |
| ||||||
Numerator |
| |
|
| |
| | |
|
| |
| |
| |
|
| |
| |
Net income (loss) | | $ | 7,035 | | $ | (4,776) | | $ | 21,120 | | $ | (162) | | |||||||
Net income | | $ | 41,471 | | $ | 4,143 | | |||||||||||||
Denominator | | | | | | | | | | | | | | | | | | | | |
Weighted average shares used to compute basic earnings (loss) per share | |
| 44,109 | |
| 42,647 | |
| 43,915 | |
| 42,373 | | |||||||
Dilutive effect of stock-based awards | |
| 356 | |
| — | |
| 81 | |
| — | | |||||||
Weighted average shares used to compute diluted earnings (loss) per share | |
| 44,465 | |
| 42,647 | |
| 43,996 | |
| 42,373 | | |||||||
Weighted average shares used to compute basic earnings per share | |
| 44,181 | |
| 43,443 | | |||||||||||||
Dilutive effect of stock option awards | |
| 605 | |
| — | | |||||||||||||
Dilutive effect of restricted stock units and performance stock units awards | | | 122 | | | — | | |||||||||||||
Weighted average shares used to compute diluted earnings per share | |
| 44,908 | |
| 43,443 | | |||||||||||||
| | | | | | | | | | | | | | | | | | | | |
Earnings (loss) per share | | | | | | | | | | | | | | | | | | | | |
Basic | | $ | 0.16 | | $ | (0.11) | | $ | 0.48 | | $ | (0.00) | | | $ | 0.94 | | $ | 0.10 | |
Diluted | | $ | 0.16 | | $ | (0.11) | | $ | 0.48 | | $ | (0.00) | | | $ | 0.92 | | $ | 0.10 | |
15
Diluted earnings (loss) per shareEPS in each of the three and nine month periodsmonths ended September 30, 2020 excludesMarch 31, 2021 excluded 937,424 options to purchase our common stock because their effect would be anti-dilutive.
NOTE 12—11—RELATED PARTY TRANSACTIONS
Mineral Lease and Surface Rights Agreements—Much of the coal reserves and surface rights that we control were acquired through a series of mineral leases and surface rights agreements with Ramaco Coal, LLC (“Ramaco Coal”), a related party. Production royalty payables totaling $0.6$0.9 million and $0.4 million at September 30, 2021March 31, 2022 and December 31, 2020,2021, respectively, were included in accounts payable in the consolidated balance sheets. Royalties paid to Ramaco Coal in the three and nine months ended September 30,March 31, 2022 and March 31, 2021 totaled $1.3$2.0. million and $3.9 million, respectively. In the three and nine months ended September 30, 2020, royalties paid to Ramaco Coal totaled $1.0 million and $3.3$1.1 million, respectively.
On-going Administrative Services—Under a Mutual Services Agreement dated December 22, 2017 but effective as of March 31, 2017, the Company and Ramaco Coal agreed to share the services of certain of each company’s employees. Each party will pay the other a fee on a quarterly basis for such services calculated as the annual base salary of each employee providing services multiplied by the percentage of time each employee spent providing services for the other party. The services will be provided for 12-month terms, but may be terminated by either party at the end of any 12-month term by providing written notice at least 30 days prior to the end of the then-current term. Charges to Ramaco Coal were $40$23 thousand and $79 thousand, respectively, for the three and nine months ended
15
September 30, 2021. March 31, 2022. For the three and nine month periodsmonths ended September 30, 2020,March 31, 2021, charges to Ramaco Coal were $16 thousand and $31 thousand, respectively.$9 thousand.
NOTE 13—12—SUBSEQUENT EVENTS
2022 Domestic Sales Contracts—On October 26, 2021, Ramaco announced that it has completed 2022 sales negotiations to its North American steel customers. We have now contracted to sell 1.67 million tons of both low volatile and high volatile coal at an overall average price of roughly $196 per short ton FOB mine. These completed domestic sales represent approximately 54% of Ramaco’s projected 2022 production of 3.1 million tons.
Coronado Asset Purchase Agreement—On October 26, 2021,April 29, the Company entered intoclosed on its previously announced acquisition of 100% of the equity interests of Ramaco Coal, an Asset Purchase Agreement (the “Purchase Agreement”) with Coronado IV LLC, Buchanan Minerals, LLCentity owned by an investment fund managed by Yorktown Partners and Buchanan Mining Company, LLC (collectively,certain members of the “Sellers”), pursuant to whichCompany's management. The consideration for the Companyacquisition will purchase certain assets from Sellers forconsist of (i) an initial payment of $10 million due at closing and (ii) an aggregate cashdeferred purchase price of $30$55 million, (the “Acquisition”). The closingconsisting of the transactions contemplated by the Purchase Agreement is subject to customary closing conditions. The Purchase Agreement contains representations, warranties and covenants from the Company that are customary for transactions of this type. The Acquisition is expected to close in mid-November 2021.
Dividend Initiation Authorization—On October 26, 2021, we announced that our Board of Directors (the “Board”) authorized the initiation of a regular quarterly dividend(A) $15 million, to be paid beginningduring the remainder of 2022 in the first quarter of 2022. The amount of the dividend$5 million ratable quarterly installments, and timing of both the record date and payment date will be set at the Company’s Board meeting(B) $40 million, to be heldpaid during 2023 in early December of 2021.
Amendment of Revolving Credit Facility and Term Loan —On October 29, 2021, the Company entered into an Amended and Restated Credit and Security Agreement (“the Credit Agreement Amendment”) with KeyBank, pursuant to which KeyBank agreed to increase the Company’s revolving line of credit under the Credit Agreement by $10 million to an aggregate of $40 million, of which no amounts were outstanding immediately prior to entering into the Credit Agreement Amendment. The Credit Agreement Amendment also extended the maturity date of the Revolving Credit Facility to December 31, 2024.
.ratable quarterly installments.
* * * * *
16
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in our Annual Report, as well as the financial statements and related notes appearing elsewhere in this Quarterly Report. The following discussion contains forward-looking statements that reflect our future plans, estimates, beliefs and expected performance. The forward-looking statements are dependent upon events, risks and uncertainties that may be outside our control. We caution you that our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences are discussed elsewhere in this Quarterly Report, particularly in the “Cautionary Note Regarding Forward-Looking Statements” and in our Annual Report and in this Quarterly Report under the heading “Item 1A. Risk Factors,” all of which are difficult to predict. In light of these risks, uncertainties and assumptions, the forward-looking events discussed may not occur. We do not undertake any obligation to publicly update any forward-looking statements except as otherwise required by applicable law.
Overview
Our primary sourceWe are an operator and developer of revenue is the sale ofhigh-quality, low-cost metallurgical coal. As of September 30, 2021, we hadcoal in southern West Virginia, southwestern Virginia, and southwestern Pennsylvania. We are a 261pure play metallurgical coal company with 39 million ton reserve basetons and 769 million resource tons of high-quality metallurgical coalcoal. We believe our advantaged reserve geology provides us with higher productivities and aindustry leading lower cash costs.
Our development portfolio includingprimarily includes four primary properties. Our plan is to complete developmentproperties: Elk Creek, Berwind, Knox Creek and RAM Mine. Each of these properties possesses geologic and logistical advantages that make our existing properties and grow production to approximately 5 million clean tons ofcoal among the lowest delivered-cost U.S. metallurgical coal subject to market conditions, permittingour domestic target customer base, North American blast furnace steel mills and additional capital deployment. We may make acquisitions of reserves or infrastructure that continue our focus on advantaged geology and lower costs.
The overall outlook of thecoke plants, as well as international metallurgical coal business is dependent on a variety of factors such as pricing, regulatory uncertainties and global economic conditions. Coal consumption and production in the U.S. have been driven in recent periods by several market dynamics and trends, such as the global economy, a strong U.S. dollar and accelerating production cuts.consumers.
During the thirdfirst quarter of 2021,2022, we sold 0.6 million tons of coal. Of this, 75%39% was sold in North American markets, including Canada, and 25%61% was sold in export markets, excluding Canada, principally to Europe, South America, Asia and Africa. During the thirdfirst quarter of 2020, 69%2021, 46% of our sales were sold in North American markets, with the remaining 31%54% being sold into the export markets, excluding Canada.markets.
At September 30, 2021,March 31, 2022, we had outstanding performance obligations for the remainder of 20212022 of approximately 0.51.5 million tons for contracts with fixed sales prices averaging $84/$188/ton and 0.10.2 million tons for contracts with index-based pricing mechanisms.
The Company was adversely affected byCOVID-19 continues to impact countries across the deteriorationworld, and increased uncertainty in the macroeconomic outlook as a resultduration and severity of the impact of COVID-19. After the initial outbreak, we observed a declining demand for, and declines in the spot price of metallurgical coal as business and consumer activity decelerated across the globe. Throughout 2021, weeffects are seeing increases in demand from our primary customers, as the global economic recovery began. U.S. steel prices have also increased significantly due to this recovery and the effects from large-scale government stimulus measures.
currently unknown. We continue to actively monitor the situation and may take further actions altering our business operations that we determine are in the best interests of our employees, customers, suppliers, and stakeholders, or as required by federal, state, or local authorities.
Recent DevelopmentsRegarding the military conflict involving Russia and Ukraine, resulting sanctions and future market or supply disruptions in the region, are impossible to predict, but could be significant and may have a severe adverse effect on the region. Globally, various governments have banned imports from Russia including commodities such as oil, natural gas and coal. These events have caused volatility in the commodity markets. This volatility, including market expectations of potential changes in coal prices and inflationary pressures on steel products, may have a significant effect on market prices and overall demand for our coal and the cost of supplies and equipment. We are closely monitoring the potential effects on the market.
2022 Domestic Sales Contracts—On October 26, 2021, Ramaco announced that it has completed 2022 sales negotiations to its North American steel customers. We have now contractedno meaningful direct financial exposure to sell 1.67 million tonsRussia and Ukraine. As the European Union ban on Russian coal goes into effect in August, it could create further tightness in the metallurgical coal markets as Russia was the third largest exporter of both low volatile and high volatilemetallurgical coal at an overall average pricein 2021 or 10% of roughly $196 per short ton FOB mine. These completed domestic sales represent approximately 54% of Ramaco’s projected 2022 production of 3.1 million tons.global metallurgical coal trade.
17
Coronado Asset Purchase Agreement—Recent Developments
On October 26, 2021,April 29, the Company entered intoclosed on its previously announced acquisition of 100% of the Purchase Agreement withequity interests of Ramaco Coal, an entity owned by an investment fund managed by Yorktown Partners and certain members of the Sellers, pursuant to whichCompany's management. The consideration for the Companyacquisition will purchase certain assets from Sellers forconsist of (i) an initial payment of $10 million due at closing and (ii) an aggregate cashdeferred purchase price of $30 million. The closing$55 million, consisting of the transactions contemplated by the Purchase Agreement is subject to customary closing conditions. The Purchase Agreement contains representations, warranties and covenants from the Company that are customary for transactions of this type. The Acquisition is expected to close in mid-November 2021.
Dividend Initiation Authorization—On October 26, 2021, we announced that our Board of Directors (the “Board”) authorized the initiation of a regular quarterly dividend(A) $15 million, to be paid beginningduring the remainder of 2022 in the first quarter of 2022. The amount of the dividend$5 million ratable quarterly installments, and timing of both the record date and payment date will be set at the Company’s Board meeting(B) $40 million, to be heldpaid during 2023 in early December of 2021.
Amendment of Revolving Credit Facility and Term Loan —On October 29, 2021, the Company entered into an Amended and Restated Credit and Security Agreement (“the Credit Agreement Amendment”) with KeyBank, pursuant to which KeyBank agreed to increase the Company’s revolving line of credit under the Credit Agreement by $10 million to an aggregate of $40 million, of which no amounts were outstanding immediately prior to entering into the Credit Agreement Amendment. The Credit Agreement Amendment also extended the maturity date of the Revolving Credit Facility to December 31, 2024.ratable quarterly installments.
Results of Operations
| | | | | | | | | | | | | | | | | | | | | |
| | Three months ended September 30, | | Nine months ended September 30, | | | Three months ended March 31, | | | ||||||||||||
(In thousands) |
| 2021 |
| 2020 |
| 2021 |
| 2020 |
|
| 2022 |
| 2021 |
|
| ||||||
| | | | | | | | | | | | | | | | | | | | | |
Consolidated statement of operations data (unaudited) |
| |
|
| |
| | |
|
| |
| | ||||||||
Revenue | | $ | 154,882 | | $ | 43,455 | | | |||||||||||||
| | | | | | | | | | | | | | | | | | | | | |
Revenue | | $ | 76,377 | | $ | 39,459 | | $ | 195,889 | | $ | 117,769 | | ||||||||
Costs and expenses | | | | | | | | | | | | | | | | | | | | | |
Cost of sales (exclusive of items shown separately below) | |
| 54,808 |
| | 35,689 |
| | 143,768 |
| | 96,758 |
| |
| 81,253 |
| | 31,198 |
|
|
Asset retirement obligations accretion | | | 156 |
| | 128 |
| | 461 |
| | 428 |
| | | 235 |
| | 151 |
|
|
Depreciation and amortization | |
| 6,751 | | | 5,258 | | | 18,861 | | | 15,601 | | |
| 8,680 | | | 6,155 | | |
Selling, general and administrative | |
| 5,895 | | | 5,966 | | | 15,767 | | | 15,723 | | |
| 11,824 | | | 4,707 | | |
Total costs and expenses | |
| 67,610 | | | 47,041 | | | 178,857 | | | 128,510 | | |
| 101,992 | | | 42,211 | | |
| | | | | | | | | | | | | | | | | | | | | |
Operating income (loss) | |
| 8,767 |
| | (7,582) |
| | 17,032 |
| | (10,741) |
| ||||||||
Operating income | |
| 52,890 |
| | 1,244 |
|
| |||||||||||||
| | | | | | | | | | | | | | | | | | | | | |
Other income | |
| 789 | | | 1,743 | | | 7,156 | | | 11,456 | | |
| 366 | | | 2,935 | | |
Interest expense, net | |
| (933) | | | (344) | | | (1,418) | | | (915) | | |
| (1,130) | | | (202) | | |
Income (loss) before tax | | | 8,623 | | | (6,183) | | | 22,770 | | | (200) | | ||||||||
Income before tax | | | 52,126 | | | 3,977 | | | |||||||||||||
| | | | | | | | | | | | | | | | | | | | | |
Income tax expense (benefit) | |
| 1,588 |
| | (1,407) |
| | 1,650 |
| | (38) |
| |
| 10,655 |
| | (166) |
|
|
| | | | | | | | | | | | | | | | | | | | | |
Net income (loss) | | $ | 7,035 | | $ | (4,776) | | $ | 21,120 | | $ | (162) | | ||||||||
Net income | | $ | 41,471 | | $ | 4,143 | | | |||||||||||||
| | | | | | | | | |||||||||||||
Earnings per common share | | | | | | | | | |||||||||||||
Basic | | $ | 0.94 | | $ | 0.10 | | | |||||||||||||
Diluted | | $ | 0.92 | | $ | 0.10 | | | |||||||||||||
| | | | | | | | | | | | | | | | | | | | | |
Adjusted EBITDA | | $ | 17,805 | | $ | 637 | | $ | 47,429 | | $ | 19,863 | | | $ | 64,058 | | $ | 11,540 | | |
In each ofDuring the three and nine month periodsthree-month period ended September 30, 2021,March 31,2022, our net income and Adjusted EBITDA were significantly higher compared to the same periodsperiod in 2020.2021. Sales pricing and volumes were 45% higher by 163% and 38%, respectively, during the ninethree months ended September 30, 2021March 31, 2022 than the same period during 2020,2021, which was primarily a resultdue to the global rebound of metallurgical demand from the previous effects of COVID-19. In the first ninethree months of 2021, we recognized a total of $5.4$2.5 million in other income for the CARES Act Employee Retention Tax Credit. The Company does not expect to qualify for the CARES Act Employee Retention Tax Credit in the fourth quarter of 2021. In the first nine months of 2020, we recognized $8.4 million in other income for the anticipated forgiveness of the PPP Loan.
18
Three Months Ended September 30, 2021March 31, 2022 Compared to Three Months Ended September 30, 2020March 31, 2021
Revenue. Our revenue includes sales to customers of Company produced coal and coal purchased from third parties. We include amounts billed by us for transportation to our customers within revenue and transportation costs incurred within cost of sales. Revenue per ton sold (FOB mine) and cash cost per ton sold (FOB mine) each exclude the impact of transportation billings and costs.
18
Coal sales information is summarized as follows:
| | | | | | | | | | | | | | | | | | |
| | Three months ended September 30, | | Three months ended March 31, | ||||||||||||||
(In thousands) |
| 2021 |
| 2020 |
| Increase (Decrease) |
| 2022 |
| 2021 |
| Increase (Decrease) | ||||||
Company Produced |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Coal sales revenue | | $ | 75,207 | | $ | 39,459 | | $ | 35,748 | | $ | 150,929 | | $ | 41,794 | | $ | 109,135 |
Tons sold | |
| 637 | |
| 430 | |
| 207 | |
| 573 | |
| 406 | |
| 166 |
Purchased from Third Parties | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Coal sales revenue | | $ | 1,170 | | $ | — | | $ | 1,170 | | $ | 3,953 | | $ | 1,661 | | $ | 2,292 |
Tons sold | |
| 7 | |
| — | |
| 7 | |
| 10 | |
| 16 | |
| (5) |
Coal sales revenue in the thirdfirst quarter of 20212022 was $76.4$154.9 million, 94%256% higher than in the thirdfirst quarter of 20202021 primarily due to increased tons sold in the thirdfirst quarter of 20212022 and increased revenue per tons sold (FOB Mine). Revenue per ton sold (FOB mine) increased 35%168% from $78/$88/ton in the thirdfirst quarter of 20202021 to $105/$236/ton in the thirdfirst quarter of 2021.2022. We sold 644583 thousand tons of coal in the thirdfirst quarter of 2021,2022, a 50%38% increase over the same period of 2020.2021. We benefited from improved domestic, spot and index pricing for metallurgical coal in 2021.2022. Additionally, favorable conditions in the steel and metallurgical markets contributed to an increasedincrease demand for metallurgical coal.coal and stronger pricing. We expect these conditions to continue in the next quarter.
Cost of sales. Our cost of sales totaled $54.8$81.3 million for the three months ended September 30, 2021March 31, 2022 as compared with $35.7$31.2 million for the same period in 20202021 due to significantly higher tons sold.sold and higher sales-related costs. The cash cost per ton sold (FOB mine) for the thirdfirst quarter of 20212022 was $72/$110/ton, compared with $69/$59/ton in the thirdfirst quarter of 2020.2021. Our cash cost per ton sold in the 20212022 period was primarily due to higher sales-related costs directly associated with higher revenue per ton sold in 2021. Our cash cost per ton sold (FOB mine) of company produced tons for the third quarter of 2021 was $71/ton, compared with $69/ton in the third quarter of 2020.2022.
Asset retirement obligation accretion. Asset retirement obligation accretion was $0.2 million for each of the three monthsthree-month periods ended September 30, 2021March 31, 2022 and $0.1 million for the three months ended September 30, 2020.March 31, 2021.
Depreciation and amortization. Depreciation and amortization expense was $6.8$8.7 million and $5.3$6.2 million for the periods ended September 30,March 31, 2022 and March 31, 2021, and September 30, 2020, respectively, primarily due to higher production volumes in the thirdfirst quarter of 2021.2022 and additional mining equipment placed in service in recent periods over the past year.
Selling, general and administrative. Selling, general and administrative expenses were $5.9$11.8 million for the three months ended September 30, 2021March 31, 2022 and $6.0$4.7 million for the three months ended September 30, 2020.March 31, 2021 primarily due to higher stock compensation, incentives and professional services in 2022, related to the Company’s production growth profile.
Other income. Other income was $0.8$0.4 million for the three months ended September 30, 2021.March 31, 2022. For the three months ended September 30, 2020,March 31, 2021, other income was $1.7$2.9 million which includes $1.1$2.5 million for the PPP Loan forgiveness.CARES Act Employee Retention Tax Credit.
Interest expense, net. Interest expense, net was approximately $0.9$1.1 million during the three months ended September 30, 2021.March 31, 2022. Interest expense, net was approximately $0.3$0.2 million in the three months ended September 30, 2020.March 31, 2021. Interest expense, net was higher from the prior period primarily due to the issuance of the Senior Notes in July 2021.
Income tax expense. DuringThe effective tax rate for the three months ended September 30, 2021, we recognized a tax benefit of $0.2 million for legislative changes in Virginia and West Virginia March 31, 2022, excluding discrete items, was 19.5%. The effective tax rate for the three months ended September 30,March 31, 2021, excluding discrete items, was 21%5%. The effective tax rate forDiscrete items during the three months ended September 30, 2020, excluding
19
discrete items, was 23%.legislative changes in West Virginia. The primary difference from the federal statutory rate of 21% is related to state taxes, permanent differences for non-deductible expenses and the difference in depletion expense between U.S. GAAP and federal income tax purposes.
Cash taxes paid for 2021 are expected to be less than $25 thousand.
Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020
Revenue. Coal sales information is summarized as follows:
| | | | | | | | | |
| | Nine months ended September 30, | |||||||
(In thousands) |
| 2021 |
| 2020 |
| Increase (Decrease) | |||
Company Produced |
| |
|
| |
|
| |
|
Coal sales revenue | | $ | 190,211 | | $ | 117,769 | | $ | 72,442 |
Tons sold | |
| 1,707 | |
| 1,208 | |
| 499 |
Purchased from Third Parties | |
|
| |
|
| |
|
|
Coal sales revenue | | $ | 5,678 | | $ | — | | $ | 5,678 |
Tons sold | |
| 44 | |
| — | |
| 44 |
Coal sales revenue in the nine months ended September 30, 2021 was $195.9 million, 66% higher than in the same period of 2020 primarily due to increased tons sold in the third quarter of 2021 and increased revenues per ton sold (FOB mine). Revenue per ton sold (FOB mine) increased 13% from $87/ton in the nine months ended September 30, 2020 to $98/ton in the same period of 2021. We sold 1.8 million tons of coal in the nine month period ended September 30, 2021, a 45% increase over the same period of 2020.
Cost of sales. Our cost of sales totaled $143.8million for the nine months ended September 30, 2021 as compared with $96.8 million for the same period in 2020 due to significantly higher tons sold. The cash cost per ton sold (FOB mine) for the first nine months of 2021 was $68/ton, compared with $70/ton in the same period of 2020. Improvement in our cash cost per ton sold in the nine months ended September 30, 2021 was primarily due to higher production volumes which better leveraged our fixed costs. Our cash cost per ton sold (FOB mine) of company produced tons for the nine months ended September 30, 2021 was $67/ton, compared with $70/ton in the nine months ended September 30, 2020.
Asset retirement obligation accretion. Asset retirement obligation accretion was $0.5 million for the nine months ended September 30, 2021 and $0.4 million for the nine months ended September 30, 2020.
Depreciation and amortization. Depreciation and amortization expense was $18.9 million and $15.6 million for the periods ended September 30, 2021 and September 30, 2020, respectively, primarily due to higher production volumes in the first nine months of 2021 and depreciation on capital equipment placed in service.
Selling, general and administrative. Selling, general and administrative expenses were $15.8million for the nine months ended September 30, 2021 and $15.7 million for the nine months ended September 30, 2020.
Other income. Other income was $7.2 million for the nine months ended September 30, 2021 primarily due to the recognition of $5.4 million for the CARES Act Employee Retention Tax Credit. For the nine months ended September 30, 2020, other income was $11.5 million, which includes recognition of $8.4 million for the anticipated forgiveness of the PPP Loan.
Interest expense, net. Interest expense, net was approximately $1.4 million in the nine month period ended September 30, 2021 and $0.9 million for the same period in 2020.
Income tax expense. During the nine months ended September 30, 2021, we recognized a tax benefit of $1.6 million for legislative changes in Virginia and West Virginia and tax expense of $0.2 million for the excess of book expense over the tax deduction for vested restricted stock awards. The effective tax rate for the nine months ended September 30,
20
2021, excluding discrete items, was 13% as compared with 19% in the comparable period of 2020. The primary difference from the federal statutory rate of 21% is related to state taxes, permanent differences for non-deductible expenses and the difference in depletion expense between U.S. GAAP and federal income tax purposes.
Cash taxes paid for 2021 are expected to be less than $25 thousand.
2119
Liquidity and Capital Resources
At September 30, 2021,March 31, 2022, we had $46.7$71.5 million of cash and cash equivalents and $27.1$39.6 million available under our existing credit agreements for future borrowings.
Significant sources and uses of cash during the first ninethree months of 20212022
Sources of cash:
● | Cash flows from operating activities were |
Uses of cash:
● | Capital expenditures were |
● | We made net |
● | We paid dividends of $5.0 million. |
At September 30, 2021,March 31, 2022, we also had $1.0 million of restricted cash, balances, classified in other current assets in the condensed consolidated balance sheets, for potential future workers’ compensation claims.
Future sources and uses of cash
Our primary use of cash includes capital expenditures for mine development, and for ongoing operating expenses.expenses and deferred cash payments in connection with the Ramaco Coal acquisition. We expect to fund our capital and liquidity requirements with cash on hand, anticipated cash flows from operations and borrowings discussed in more detail below. We believe that current cash on hand, cash flow from operations and available liquidity under our existing credit agreements will be sufficient to meet our capital expenditure and operating plans.
Additional factors that could adversely impact our future liquidity and ability to carry out our capital expenditure program include:
● | Timely delivery of our product by rail and other transportation carriers; |
● | Late payments of accounts receivable by our customers; |
● | Cost overruns in our purchases of equipment needed to complete our mine development plans; |
● | Delays in completion of development of our various mines, processing plants and refuse disposal facilities, which would reduce the coal we would have available to sell and our cash flow from operations; and |
● | Adverse changes in the metallurgical coal markets that would reduce the expected cash flow from operations. |
If future cash flows are insufficient to meet our liquidity needs or capital requirements, we may reduce our expected level of capital expenditures and/or fund a portion of our capital expenditures through the issuance of debt or equity securities, the entry into debt arrangements or from other sources, such as asset sales.
Indebtedness
Revolving Credit Facility and Term Loan—On November 2, 2018, we entered into a Credit and Security Agreement (as amended or amended and restated the “Revolving Credit AgreementFacility” or the “Credit Agreement”) with KeyBank.KeyBank National Association (“KeyBank”), as the administrative agent, and other lenders party thereto. The Credit Agreement was amended on February 20, 2020 and on March 19, 2021. On October 29, 2021, and consists of Term Loanwe entered into the Amended
2220
and Restated Credit and Security Agreement (the “Amendment and Restatement”) with KeyBank. Prior to the RevolvingAmendment and Restatement, the Credit Facility.Agreement consisted of the $10.0 million term loan (the “Term Loan”) and up to $30.0 million revolving line of credit, including $3.0 million letter of credit availability. The Amendment and Restatement increased the overall availability under the revolving credit line to $40.0 million and extended the maturity date to December 31, 2024. All personal property assets, including, but not limited to accounts receivable, coal inventory and certain mining equipment are pledged to secure the Revolving Credit Agreement.Facility.
The Revolving Credit Facility has a maturity date of December 31, 2023 and bears interest based on LIBORSecure Overnight Financing Rate (“SOFR”) + 2.0% or Base Rate + 1.5%. Base Rate“Base Rate” is the highest of (i) KeyBank’s prime rate, (ii) Federal Funds Effective Rate + 0.5%, or (iii) LIBORSOFR + 2.0%. Advances under the Revolving Credit Facility are made initially as base rateBase Rate loans but may be converted to LIBORSOFR rate loans at certain times at our discretion. At September 30, 2021,March 31, 2022, there was no amount outstanding under the Revolving Credit Facility and we had remaining availability of $27.1$39.6 million.
The Term Loan is secured under a Master Security Agreement with a pledge of certain underground and surface mining equipment, bears interest at LIBOR + 5.15% and is required to be repaid in monthly installments of $278 thousand including accrued interest. The outstanding principal balance underof the Term Loan was $4.2$2.5 million at September 30, 2021.March 31, 2022.
The Credit Agreement contains usual and customary covenants including limitations on liens, additional indebtedness, investments,, restricted payments, asset sales, mergers, affiliate transactions and other customary limitations, as well as financial covenants. At September 30, 2021,March 31, 2022, we were in compliance with all debtfinancial covenants under the Credit Agreement.
Key Equipment Finance Loan—On April 16, 2020, we entered into an equipment loan with Key Equipment Finance, a division of KeyBank, as lender, in the principal amount of approximately $4.7 million for the financing of existing underground and surface equipment (the “Equipment Loan”). The Equipment Loan bears interest at 7.45% per annum and is payable in 36 monthly installments of $147 thousand. There is a 3% premium for prepayment of the note within the first 12 months. This premium declines by 1% during each successive 12-month period. The outstanding principal balance underof the Equipment Loan was $2.6$1.8 million at September 30, 2021.March 31, 2022.
9.00% Senior Unsecured Notes due 20262026——On July 13, 2021, we completed an offering of $34.5 million, in the aggregate, of the Company’s 9.00% Senior Unsecured Notes due 2026 (the “Notes”“Senior Notes”), lessand incurred $2.4 million for note offering costs. The Senior Notes mature on July 30, 2026, unless redeemed prior to maturity. The Senior Notes bear interest at a rate of 9.00% per annum, payable quarterly in arrears on the 30th day of January, April, July and October of each year, commencing on July 30, 2021.year. We may redeem the Senior Notes in whole or in part, at our option, at any time on or after July 30, 2023, or upon certain change of control events, at a redemption price equal to 100% of the principal amount plus accrued and unpaid interest to, but not including, the date of redemption redemption. Issuance costs for the Senior Notes included underwriters’ fees, attorney, accounting and filing costs totaling $2.4 million. These issuance costs are reported as a debt discount which is being amortized over the Senior Notes term using an effective rate method. The outstanding principal balance under the Senior Notes was $34.5 million at September 30, 2021.March 31, 2022 and is presented net of unamortized discounts of $2.0 million. The effective interest rate is approximately 10.45%.
J. H. Fletcher & Co. Loan—On July 23, 2021 and November 24, 2021, we entered into an equipment loanloans with J. H. Fletcher & Co., as lender, in the principal amount of approximately $1.0$0.9 million and $3.9 million, respectively, for the financing of underground equipment (the “Fletcher Equipment Loan”Loans”). The Fletcher Equipment Loan bearsLoans bear no interest at 0% per annum and isare payable in 24 monthlyinstallments of $40$200 thousand. The outstanding principal balance underof the Fletcher Equipment LoanLoans was approximately $0.8$3.8 million at September 30, 2021.March 31, 2022.
Komatsu Financial Limited Partnership Loan—On August 16, 2021, we entered into an equipment loan with Komatsu Financial Limited Partnership, as lender, in the principal amount of approximately $1.0 million for the financing of surface equipment (the “Komatsu Equipment Loan”). The Komatsu Equipment Loan bears interest at 4.6% per annum and is payable in 36 monthly installments of $36 thousand for the first six months and then at $28 thousand until maturity. The outstanding principal balance underof the Komatsu Equipment Loan was approximately $1.0$0.8 million at September 30, 2021.
SBA Paycheck Protection Program Loan— On April 20, 2020, we received proceeds from the PPP Loan in the amount of approximately $8.4 million from KeyBank, as lender, pursuant to the PPP of the CARES Act. The purpose of the PPP is to encourage the continued employment of workers. We used all of the PPP Loan proceeds for eligible payroll expenses, lease, interest and utility payments.
On July 29, 2021, we were notified by KeyBank that full forgiveness had been approved by the SBA.March 31, 2022.
2321
Brandeis Machinery & Supply Company—On January 11, 2022, we entered into equipment loans with Brandeis Machinery & Supply Company, as lender, in the principal amount of $1.4 million for the financing of surface equipment (the “Brandeis Equipment Loans”). The Brandeis Equipment Loans bear interest at 4.8% per annum and are payable in 48 monthly installments of $24 thousand. The outstanding principal balance of the Brandeis Equipment Loans was $0.9 million at March 31, 2022.
Critical Accounting Estimates
A discussion of our critical accounting policies is included in the Annual Report. There were no material changes to our critical accounting policies during the three months ended March 31, 2022.
Off-Balance Sheet Arrangements
At September 30, 2021,March 31, 2022, we had no material off-balance sheet arrangements.
Non-GAAP Financial Measures
Adjusted EBITDA - Adjusted EBITDA is used as a supplemental non-GAAP financial measure by management and external users of our financial statements, such as industry analysts, investors, lenders and rating agencies. We believe Adjusted EBITDA is useful because it allows us to more effectively evaluate our operating performance.
We define Adjusted EBITDA as net income plus net interest expense, stock-based compensation, depreciation and amortization expenses and any transaction related costs. A reconciliation of net income to Adjusted EBITDA is included below. Adjusted EBITDA is not intended to serve as an alternative to U.S. GAAP measures of performance and may not be comparable to similarly-titled measures presented by other companies.
| | | | | | | | | | | | | | | | | | | | | |
| | Three months ended September 30, | | Nine months ended September 30, | | | Three months ended March 31, | | | ||||||||||||
(In thousands) |
| 2021 |
| 2020 |
| 2021 |
| 2020 |
|
| 2022 |
| 2021 |
|
| ||||||
Reconciliation of Net Income (Loss) to Adjusted EBITDA |
| |
|
| |
| | |
|
| |
|
| ||||||||
Net income (loss) | | $ | 7,035 | | $ | (4,776) | | $ | 21,120 | | $ | (162) | | ||||||||
Reconciliation of Net Income to Adjusted EBITDA |
| |
|
| |
| |
| |||||||||||||
Net income | | $ | 41,471 | | $ | 4,143 | | | |||||||||||||
Depreciation and amortization | |
| 6,751 | |
| 5,258 | |
| 18,861 | |
| 15,601 | | |
| 8,680 | |
| 6,155 | | |
Interest expense, net | |
| 933 | |
| 344 | |
| 1,418 | |
| 915 | | |
| 1,130 | |
| 202 | | |
Income tax expense (benefit) | |
| 1,588 | |
| (1,407) | |
| 1,650 | |
| (38) | | |
| 10,655 | |
| (166) | | |
EBITDA | |
| 16,307 | |
| (581) | |
| 43,049 | |
| 16,316 | | |
| 61,936 | |
| 10,334 | | |
Stock-based compensation | |
| 1,342 | |
| 1,090 | |
| 3,919 | |
| 3,119 | | |
| 1,887 | |
| 1,055 | | |
Accretion of asset retirement obligation | |
| 156 | |
| 128 | |
| 461 | |
| 428 | | |
| 235 | |
| 151 | | |
Adjusted EBITDA | | $ | 17,805 | | $ | 637 | | $ | 47,429 | | $ | 19,863 | | | $ | 64,058 | | $ | 11,540 | | |
22
Non-GAAP revenue per ton - Non-GAAP revenue per ton (FOB mine) is calculated as coal sales revenue less transportation costs, divided by tons sold. We believe revenue per ton (FOB mine) provides useful information to investors as it enables investors to compare revenue per ton we generate against similar measures made by other publicly-traded coal companies and more effectively monitor changes in coal prices from period to period excluding the impact of transportation costs which are beyond our control. The adjustments made to arrive at these measures are significant in understanding and assessing our financial condition. Revenue per ton sold (FOB mine) is not a measure of financial performance in accordance with U.S. GAAP and therefore should not be considered as an alternative to revenue under U.S. GAAP.
| | | | | | | | | | | | | | | | | | |
| | Three months ended September 30, 2021 | | Three months ended September 30, 2020 | ||||||||||||||
| | Company | | Purchased | | | | | Company | | Purchased | | | | ||||
(In thousands, except per ton amounts) |
| Produced |
| Coal |
| Total |
| Produced |
| Coal |
| Total | ||||||
| | | | | | | | | | | | | | | | | | |
Revenue | | $ | 75,207 | | $ | 1,170 | | $ | 76,377 | | $ | 39,459 | | $ | — | | $ | 39,459 |
Less: Adjustments to reconcile to Non-GAAP revenue (FOB mine) | | | | | | | | | | | | | | | | | | |
Transportation costs | |
| (8,549) | |
| (209) | |
| (8,758) | |
| (6,051) | |
| — | |
| (6,051) |
Non-GAAP revenue (FOB mine) | | $ | 66,658 | | $ | 961 | | $ | 67,619 | | $ | 33,408 | | $ | — | | $ | 33,408 |
Tons sold | |
| 637 | |
| 7 | |
| 644 | |
| 430 | |
| — | |
| 430 |
Revenue per ton sold (FOB mine) | | $ | 105 | | $ | 138 | | $ | 105 | | $ | 78 | | $ | — | | $ | 78 |
24
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine months ended September 30, 2021 | | Nine months ended September 30, 2020 | | Three months ended March 31, 2022 | | Three months ended March 31, 2021 | ||||||||||||||||||||||||||||
|
| Company |
| Purchased |
| | |
| Company |
| Purchased |
| | | | Company | | Purchased | | | | | Company | | Purchased | | | | ||||||||
(In thousands, except per ton amounts) |
| Produced |
| Coal | | Total |
| Produced |
| Coal | | Total |
| Produced |
| Coal |
| Total |
| Produced |
| Coal |
| Total | ||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Revenue | | $ | 190,211 | | $ | 5,678 | | $ | 195,889 | | $ | 117,769 | | $ | — | | $ | 117,769 | | $ | 150,929 | | $ | 3,953 | | $ | 154,882 | | $ | 41,794 | | $ | 1,661 | | $ | 43,455 |
Less: Adjustments to reconcile to Non-GAAP revenue (FOB mine) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Transportation costs | |
| (23,624) | |
| (1,180) | |
| (24,804) | |
| (12,611) | |
| — | |
| (12,611) | |
| (17,131) | |
| (239) | |
| (17,370) | |
| (5,803) | |
| (421) | |
| (6,224) |
Non-GAAP revenue (FOB mine) | | $ | 166,587 | | $ | 4,498 | | $ | 171,085 | | $ | 105,158 | | $ | — | | $ | 105,158 | | $ | 133,798 | | $ | 3,714 | | $ | 137,512 | | $ | 35,991 | | $ | 1,240 | | $ | 37,231 |
Tons sold | |
| 1,707 | |
| 44 | |
| 1,751 | |
| 1,208 | |
| — | |
| 1,208 | |
| 573 | |
| 10 | |
| 583 | |
| 406 | |
| 16 | |
| 422 |
Revenue per ton sold (FOB mine) | | $ | 98 | | $ | 103 | | $ | 98 | | $ | 87 | | $ | — | | $ | 87 | | $ | 234 | | $ | 354 | | $ | 236 | | $ | 89 | | $ | 79 | | $ | 88 |
Non-GAAP cash cost per ton sold - Non-GAAP cash cost per ton sold is calculated as cash cost of sales less transportation costs, divided by tons sold. We believe cash cost per ton sold provides useful information to investors as it enables investors to compare our cash cost per ton against similar measures made by other publicly-traded coal companies and more effectively monitor changes in coal cost from period to period excluding the impact of transportation costs which are beyond our control. The adjustments made to arrive at these measures are significant in understanding and assessing our financial condition. Cash cost per ton sold is not a measure of financial performance in accordance with U.S. GAAP and therefore should not be considered as an alternative to cost of sales under U.S. GAAP.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended September 30, 2021 | | Three months ended September 30, 2020 | | Three months ended March 31, 2022 | | Three months ended March 31, 2021 | ||||||||||||||||||||||||||||
| | Company | | Purchased | | | | | Company | | Purchased | | | | | Company | | Purchased | | | | | Company | | Purchased | | | | ||||||||
(In thousands, except per ton amounts) |
| Produced |
| Coal |
| Total |
| Produced |
| Coal |
| Total |
| Produced |
| Coal |
| Total |
| Produced |
| Coal |
| Total | ||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cost of sales | | $ | 53,928 | | $ | 880 | | $ | 54,808 | | $ | 35,689 | | $ | — | | $ | 35,689 | | $ | 77,863 | | $ | 3,390 | | $ | 81,253 | | $ | 29,636 | | $ | 1,562 | | $ | 31,198 |
Less: Adjustments to reconcile to Non-GAAP cash cost of sales | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Transportation costs | |
| (8,548) | |
| (210) | |
| (8,758) | |
| (6,031) | |
| — | |
| (6,031) | |
| (17,134) | |
| (239) | |
| (17,373) | |
| (5,803) | |
| (421) | |
| (6,224) |
Non-GAAP cash cost of sales | | $ | 45,380 | | $ | 670 | | $ | 46,050 | | $ | 29,658 | | $ | — | | $ | 29,658 | | $ | 60,729 | | $ | 3,151 | | $ | 63,880 | | $ | 23,833 | | $ | 1,141 | | $ | 24,974 |
Tons sold | |
| 637 | |
| 7 | |
| 644 | |
| 430 | |
| — | |
| 430 | |
| 573 | |
| 10 | |
| 583 | |
| 406 | |
| 16 | |
| 422 |
Cash cost per ton sold | | $ | 71 | | $ | 97 | | $ | 72 | | $ | 69 | | $ | — | | $ | 69 | | $ | 106 | | $ | 300 | | $ | 110 | | $ | 59 | | $ | 72 | | $ | 59 |
| | | | | | | | | | | | | | | | | | |
| | Nine months ended September 30, 2021 | | Nine months ended September 30, 2020 | ||||||||||||||
|
| Company |
| Purchased |
| | |
| Company |
| Purchased |
| | | ||||
(In thousands, except per ton amounts) |
| Produced |
| Coal | | Total |
| Produced |
| Coal | | Total | ||||||
| | | | | | | | | | | | | | | | | | |
Cost of sales | | $ | 138,863 | | $ | 4,905 | | $ | 143,768 | | $ | 96,758 | | $ | — | | $ | 96,758 |
Less: Adjustments to reconcile to Non-GAAP cash cost of sales | | | | | | | | | | | | | | | | | | |
Transportation costs | |
| (23,625) | |
| (1,179) | |
| (24,804) | |
| (12,338) | |
| — | |
| (12,338) |
Non-GAAP cash cost of sales | | $ | 115,238 | | $ | 3,726 | | $ | 118,964 | | $ | 84,420 | | $ | — | | $ | 84,420 |
Tons sold | |
| 1,707 | |
| 44 | |
| 1,751 | |
| 1,208 | |
| — | |
| 1,208 |
Cash cost per ton sold | | $ | 67 | | $ | 85 | | $ | 68 | | $ | 70 | | $ | — | | $ | 70 |
2523
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Quantitative and qualitative disclosures about market risk are included in Item 7A, “Quantitative and Qualitative Disclosures about Market Risk,” of our Annual Report.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15(b) of the Exchange Act, we have evaluated, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, the effectiveness of ourWe maintain disclosure controls and procedures (asas that term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this quarterly report. Our disclosure controls and proceduresAct that are designed to provide reasonable assuranceensure that the information required to be disclosed by usthe Company in reports that we fileit files or submits under the Exchange Act, is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure, and 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 SEC.Exchange Act, we have evaluated, under the supervision of our CEO and our CFO, the effectiveness of disclosure controls and procedures as of March 31, 2022. Based upon thaton this evaluation, our principal executive officer and principal financial officerthe Company concluded that our disclosure controls and procedures were effectiveineffective as of March 31, 2022 due to the end of the period covered by this quarterly report, at the reasonable assurance level.material weakness previously identified as described below.
Changes in Internal Control over Financial ReportingPreviously Reported Material Weakness
We regularly reviewpreviously identified a material weakness in our system ofinternal control over financial reporting. Based on our assessment for the year ended December 31, 2021, we identified a material weakness in internal control over financial reporting related to information technology general controls (“ITGCs”) in the areas of user access and make changescertain automated and manual business process controls that are dependent on the affected ITGCs. This material weakness did not result in any material misstatements of the Company’s financial statements or disclosures for the quarter ended March 31, 2022 and the year ended December 31, 2021.
Remediation Plans
During the first fiscal quarter of 2022, management implemented enhancements within the ITGC areas of user access and certain automated and manual business process controls that are dependent on the affected ITGCs for the year ended December 31, 2021. However, additional time is needed to our processesdemonstrate the sustainability and systemsoperating effectiveness of these controls before fully concluding on remediation of the material weakness. The remediation plan includes the following:
● | Modifying information technology general controls over user access; |
● | Implementation of additional controls designed to detect issues that may arise over user access; and, |
● | Resolution of segregation of duties conflicts. |
While we believe that these efforts will improve controls and increase efficiency, while ensuring that we maintain an effective internal control environment. Changes may include such activities as implementing new, more efficient systems, consolidating activities and migrating processes.
There were no significant changes in our system of internal control over financial reporting, the implementation of our remediation is ongoing and will require validation and testing of the design and operating effectiveness of internal controls. The actions that we are taking are subject to ongoing senior management review, as well as audit committee oversight. We will not be able to conclude whether the steps we are taking will fully remediate the remaining material weakness in our internal control over financial reporting until we have completed our remediation efforts and subsequent evaluation of their effectiveness. We may also conclude that additional measures may be required to remediate the material weakness in our internal control over financial reporting.
Changes in Internal Control Over Financial Reporting
We are taking actions to remediate the material weakness relating to our internal control over financial reporting, as described above. Except as otherwise described herein, there were no changes in our internal control over financial
24
reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during the quarter ended September 30, 2021,period covered by this Quarterly Report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Disclosure Controls and Procedures
Our senior 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.
2625
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Due to the nature of our business, we may become, from time to time, involved in routine litigation or subject to disputes or claims related to our business activities. While the outcome of these proceedings cannot be predicted with certainty, in the opinion of our management, there are no pending litigation, disputes or claims against us which, if decided adversely, individually or in the aggregate, will have a material adverse effect on our financial condition, cash flows or results of operations. For a description of our legal proceedings, see Note 87 to the Condensed Consolidated Financial Statements included in Part I of this Quarterly Report.
Item 1A. Risk Factors
In addition to the other information set forth in this Quarterly Report, you should carefully consider the risk factors and other cautionary statements described under the heading “Item 1A. Risk Factors” included in our Annual Report and the risk factors and other cautionary statements contained in our other SEC filings, which could materially affect our business, financial condition, cash flows or future results of operations.
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 or future results. There have been no material changes in our risk factors from those described in our Annual Report.Report, other than as described below:
Russia’s recent invasion of Ukraine and the international community’s response have created substantial political and economic disruption, uncertainty and risk.
U.S. and global markets are experiencing volatility and disruption following the escalation of geopolitical tensions and the military conflict between Russia and Ukraine. Although the length and impact of the ongoing military conflict is highly unpredictable, the conflict in Ukraine could lead to market disruptions, including significant volatility in commodity prices, credit and capital markets, as well as supply chain interruptions, increased cyber-attacks and social unrest in certain regions in which we operate. Although we do not have operations in Russia or Ukraine, we are continuing to monitor the situation and assessing its potential impact on our business.
Weakened global economic conditions may harm our industry, business and results of operations.
Our overall performance depends in part on worldwide economic conditions. The U.S. and other key international economies have been affected from time to time by falling demand for a variety of goods and services, restricted credit, poor liquidity, reduced corporate profitability, volatility in credit, equity and foreign exchange markets, bankruptcies, inflation and overall uncertainty with respect to the economy, including with respect to tariff and trade issues. In particular, the economies of countries in Europe have been experiencing weakness associated with high sovereign debt levels, weakness in the banking sector, uncertainty over the future of the Euro zone and volatility in the value of the pound sterling and the Euro, including instability surrounding Brexit, and instability resulting from the ongoing conflict between Russia and Ukraine. The effect of the conflict between Russia and Ukraine, including any resulting sanctions, export controls or other restrictive actions that may be imposed against governmental or other entities in, for example, Russia, have in the past contributed and may in the future contribute to disruption, instability and volatility in the global markets. We have current and potential new customers in Europe.
More recently, inflation rates in the U.S. have increased to levels not seen in several years, which may result in decreased demand for our products, increases in our operating costs including our labor costs, constrained credit and liquidity, reduced government spending and volatility in financial markets. The Federal Reserve has raised, and may again raise, interest rates in response to concerns over inflation risk. There continues to be uncertainty in the changing market and economic conditions, including the possibility of additional measures that could be taken by the Federal Reserve and other government agencies, related to the COVID-19 pandemic and concerns over inflation risk.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Not applicable.
26
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
The 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 95.1 to this Quarterly Report.
Item 5. Other Information
Not applicable.
27
Item 6. Exhibits
| | ||
|
| ||
| |||
| | ||
| |||
|
| ||
| |||
| | ||
*31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||
| | ||
*31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||
| | ||
**32.1 | |||
| | ||
**32.2 | |||
| | ||
*95.1 | |||
| | ||
*101.INS | Inline XBRL Instance Document | ||
| | ||
*101.SCH | XBRL Taxonomy Extension Schema Document | ||
| | ||
*101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | ||
| | ||
*101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | ||
| | ||
*101.LAB | XBRL Taxonomy Extension Labels Linkbase Document | ||
| | ||
*101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | ||
| | ||
104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
* Exhibit filed herewith.
** Furnished herewith. Pursuant to SEC Release No. 33-8212, this certification will be treated as “accompanying” this Quarterly Report and not “filed” as part of such report for purposes of Section 18 of the Exchange Act or otherwise subject to the liability under Section 18 of the Exchange Act, and this certification will not be deemed to be incorporated by reference into any filing under the Securities Act, except to the extent that the registrant specifically incorporates it by reference.
28
SIGNATURES
Pursuant to the requirements 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.
| | |
| RAMACO RESOURCES, INC. | |
| | |
| | |
| By: | /s/ Randall W. Atkins |
| | Randall W. Atkins |
| | Chairman, Chief Executive Officer and Director |
| | (Principal Executive Officer) |
| | |
| | |
| By: | /s/ Jeremy R. Sussman |
| | Jeremy R. Sussman |
| | Chief Financial Officer |
| | (Principal Financial Officer) |
29