Financial Data and Key Metrics Changes - Arch Resources reported record earnings for the third consecutive quarter in Q2 2022, with significant cash generation capabilities [7][10] - Cash from operating activities totaled $268 million, despite a $124 million increase in working capital and a $60 million contribution to the thermal reclamation fund [31] - The company reduced total indebtedness by $136 million or 42%, ending the quarter with a net debt positive cash position of approximately $95 million [10][33] Business Line Data and Key Metrics Changes - The metallurgical segment faced challenges due to poor rail service and localized geological issues, which impacted sales volumes and increased operating costs [8][22] - The thermal segment generated around $93 million in EBITDA while expending just $4.6 million in capital expenditures, resulting in a significant cash generation ratio [25] - The company built inventory levels, ending the quarter with approximately 1.1 million tons of coking coal on the ground [21] Market Data and Key Metrics Changes - Coking coal prices have softened, with High-Vol coal assessed at $249 per metric ton, down from $480 per metric ton in April [14] - Year-to-date hot metal production is down about 5.5%, affecting seaborne coking coal demand and pressuring prices [15] - International thermal coal markets are strong, with prices around $415 per metric ton for Australian thermal coal, supporting coking coal prices [17] Company Strategy and Development Direction - The company aims to fortify its financial position while returning excess cash to shareholders through a capital return program [11] - Arch Resources is exploring opportunities to ship uncommitted coking coal volumes into thermal markets due to favorable pricing [17][28] - The company plans to maintain a minimum liquidity level of approximately $250 million to $300 million while executing its capital return program [34] Management's Comments on Operating Environment and Future Outlook - Management expressed frustration over ongoing rail service issues but remains hopeful for improvements as the year progresses [8][40] - The company anticipates significant improvements in productivity at the Leer South mine by late August [9][23] - Despite recent price pullbacks, management sees a constructive and profitable coking coal market in the long term [18] Other Important Information - The company declared a quarterly dividend of $190 million or $6 per share, payable in September [11][32] - Arch Resources has increased its buyback authorization to $500 million as part of its capital return strategy [12][34] - The company expects to maintain a strong cash generation capability from its core coking and thermal portfolios [30] Q&A Session Summary Question: What is the expected cadence of met coal shipments for the remainder of the year? - Management expects modest improvements in Q3, projecting around 2.3 million tons for the quarter, with a target of 2.6 million tons for Q4 [40][41] Question: What are the opportunities for switching met coal into the thermal market? - Management sees significant opportunities to switch met coal into thermal markets due to current pricing dynamics, while still prioritizing metallurgical customers [48][49] Question: What are the other uses being considered for the remaining 50% of discretionary cash flow? - Other uses include addressing dilutive securities and capital preservation, alongside potential buybacks [57][58] Question: What gives confidence that sandstone issues at Leer South will improve after August? - Management indicated that geological mapping suggests reduced sandstone issues in future panels, with favorable cutting conditions reported by continuous miners [63][64] Question: What is the expected cash cost for the metallurgical segment in Q3? - The expected midpoint cash cost is $89, with challenges anticipated but improvements expected in Q4 [66] Question: What is the pricing expectation for thermal coal volumes in 2023? - Management indicated that pricing for 2023 is expected to be above long-term historical averages, with a solid book of business being built [71][72]

Financial Data and Key Metrics Changes - Arch Resources reported record earnings for the second consecutive quarter, with significant progress against strategic priorities despite rail-related challenges [6][7] - Operating cash flows reached $293 million, nearly double the previous quarter, with discretionary cash flow exceeding $270 million [27][30] - The company reduced total debt to $323 million, achieving a net debt neutral position with total liquidity at $386 million [28][30] Business Line Data and Key Metrics Changes - The metallurgical segment achieved a record gross margin, despite a nearly 25% decline in coking coal shipments quarter-over-quarter [7][17] - The thermal segment generated over $100 million in EBITDA while maintaining low capital expenditures, contributing significantly to cash flow [21][27] Market Data and Key Metrics Changes - Coking coal prices reached $470 per metric ton on the US East Coast, with Arch capturing an average price of nearly $270 per ton [10][22] - Thermal coal prices are currently around $300 per metric ton, supporting the coking coal market due to demand crossover [13][22] Company Strategy and Development Direction - Arch has relaunched its capital return program, committing to return nearly 100% of discretionary cash flow to shareholders, with a dividend of $8.11 per share announced for the second quarter [8][30] - The company is focused on maintaining a strong metallurgical asset base while responsibly winding down its legacy thermal segment [9][15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the coking coal market's fundamentals, despite current geopolitical disruptions and supply constraints [11][12] - The company anticipates a significant increase in financial results in Q2, driven by higher pricing and expected improvements in rail service [14][32] Other Important Information - Arch has established a thermal mine reclamation fund, reaching $100 million, which is expected to match the asset retirement obligation liability [29] - The company received multiple awards for safety and environmental stewardship, reinforcing its commitment to ESG standards [25] Q&A Session Summary Question: Clarification on thermal commentary regarding export market - John Drexler confirmed that the 3.5 million tons for export is included in the overall guidance and pricing commitments [35] Question: Cash cost guidance for Q2 - Management indicated that while costs are expected to decrease, they may still be elevated due to ongoing rail service issues [39][41] Question: Capital returns and potential buybacks - Matt Giljum mentioned that both buybacks and addressing convertibles are options, with no significant difference in their impact [66][67] Question: Rail logistics improvements - Paul Lang expressed confidence in rail service improvements, attributing challenges to labor shortages and COVID impacts [49][51] Question: Impact of natural gas prices on demand - Management noted that high natural gas prices are making coal more competitive, with strong demand anticipated for future years [54][56] Question: Market dynamics and customer outreach - Paul Lang highlighted a shift towards Asian markets for export growth, moving away from traditional European markets [80]

Financial Data and Key Metrics Changes - Arch Resources reported a record quarter in Q4 2021 with record metallurgical segment margins, net income, earnings per share, and EBITDA, despite operational challenges [29][30][34] - Operating cash flows totaled $147 million, the highest level in the last three years, even with a significant increase in trade receivables [30] - Unrestricted cash at the end of Q4 was $340 million, with total liquidity of $390 million, marking a significant increase from Q3 levels [30][33] Business Line Data and Key Metrics Changes - The metallurgical segment achieved a gross margin record, while the average cost for coking coal was reported at $86.38 per ton due to various pressures including inflation and COVID impacts [19][29] - The thermal segment generated over $68 million in EBITDA during Q4, contributing to a total of $904 million since Q4 2016, with a significant reduction in asset retirement obligations [25][26] Market Data and Key Metrics Changes - Coking coal markets remained tight, with Arch's primary metallurgical product, High Vol A coal, assessed at $390 per metric ton on the U.S. East Coast [14] - Global steel output remained strong, particularly outside of China, with indications of a potential expansion in the Chinese steel sector [15] Company Strategy and Development Direction - Arch is pivoting towards steel and metallurgical coal markets, focusing on developing a world-class coking coal portfolio while managing legacy thermal assets [12][13] - The company plans to resume a robust capital return program, allocating 50% of discretionary cash flow to stockholders through fixed and variable dividends, and the other 50% for buybacks and capital preservation [10][11][33] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the coking coal market for 2022, anticipating strong demand and pricing despite potential cost pressures from inflation and rail service issues [16][21][24] - The company is cautiously optimistic about improving rail service and expects to manage challenges effectively moving forward [23][24] Other Important Information - The company completed the year with zero environmental violations, showcasing its commitment to environmental stewardship [18] - Capital expenditures for 2022 are projected at $150 million to $160 million, with a significant portion allocated to maintenance in the metallurgical segment [27][74] Q&A Session Summary Question: Clarification on met coal volume guidance - Management acknowledged the potential for Q1 volumes to be down due to rail issues but expressed confidence in resolving these challenges for the remainder of the year [39][40][41] Question: Domestic net sales expectations - Management indicated that domestic sales are expected to be lower this year, with a focus on seaborne markets due to better pricing opportunities [43][44][46] Question: Thermal side performance and pricing discrepancies - Management clarified the difference in thermal sales numbers and expressed confidence in the overall strength of their thermal sales position [48][49][50] Question: Capital return program specifics - Management discussed the flexibility of the capital return program, emphasizing that the board will consider various options for returning capital to shareholders [67][70][72] Question: Capital expenditures breakdown - Management provided details on the capital expenditure guidance, highlighting the focus on maintenance capital and a new project at the Leer plant to enhance production [73][74]

Financial Data and Key Metrics Changes - Arch Resources reported a gross margin of $118 million in the metallurgical segment, nearly a 100% increase from the prior period [7] - The legacy thermal segment generated approximately $58 million in gross margin, a 43% improvement from the prior quarter [8] - Unrestricted cash at the end of Q3 was $210 million, with total liquidity at $254 million, both slightly higher than June 30 levels [31] Business Line Data and Key Metrics Changes - The metallurgical segment commenced longwall production at the Leer South mine, contributing to strong shipping performance despite a planned outage [7][19] - Thermal shipments increased by 25% sequentially in Q3, with expectations for sustainability into Q4 [25] - The company committed more than 70 million tons of Powder River Basin (PRB) coal for delivery in 2022 at an average price of approximately $16 per ton [26][40] Market Data and Key Metrics Changes - Global steel production was up more than 6% compared to the pre-pandemic year of 2019, driving strong demand for coking coal [13] - The prompt price of High-Vol A coal reached $390 per metric ton FOB the vessel, reflecting significant upward pressure due to supply-demand mismatches [14] - The company expects 75% of its metallurgical output to be exported, with a significant portion directed to Asian markets [23] Company Strategy and Development Direction - Arch Resources is strategically pivoting towards steel and coking coal markets while winding down thermal coal operations [10] - The company plans to prioritize debt reduction and cash building to restore its balance sheet to pre-2020 levels [9] - A quarterly dividend of $0.25 per share has been initiated, with plans for more robust capital return mechanisms in the future [10][36] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ongoing transformation of the metallurgical franchise and the robust outlook for global coking coal markets [29] - The company anticipates significant improvement in cash flows and operating performance in Q4 and 2022, driven by favorable market conditions [33] - Management acknowledged inflationary pressures but believes they can manage costs effectively while ramping up production at Leer South [67] Other Important Information - Arch Resources has committed to reducing its asset retirement obligation (ARO) for the Powder River Basin mine by about 15% during 2021 [10] - The company has established a sinking fund to prefund closure obligations for its thermal mines, with planned contributions of $15 million in Q4 and $30 million in the following year [35] Q&A Session Summary Question: Clarification on thermal coal commitments and pricing - The company confirmed 70 million tons of PRB coal committed at $16 per ton for 2022, with 4 million tons expected from West Elk, split between domestic and export markets [40] Question: Future guidance on thermal coal production - Management indicated that while they will continue to manage the thermal segment responsively, they will not provide specific guidance for years beyond 2022 [42] Question: Expected pricing for export tons in Q4 - Management expects substantial increases in pricing for export tons, with current pricing for High-Vol A coal at $390 per metric ton [60]

Part I FINANCIAL INFORMATION This section presents Arch Resources' unaudited financial statements, notes, and management's discussion and analysis [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Arch Resources' unaudited financial statements and notes show a significant net income turnaround for Q3 and 9M 2021 [Condensed Consolidated Statements of Operations](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section details the company's revenues, income, net income, and EPS for Q3 and 9M ended September 30 Three Months Ended September 30, 2021 vs. 2020 (in thousands) | Metric | 2021 | 2020 | Change (2021 vs 2020) | | :---------------------------------- | :--------- | :--------- | :-------------------- | | Revenues | $594,412 | $382,261 | +$212,151 | | Income (loss) from operations | $95,398 | $(187,680) | +$283,078 | | Net income (loss) | $89,143 | $(191,467) | +$280,610 | | Basic earnings (loss) per share | $5.83 | $(12.64) | +$18.47 | | Diluted earnings (loss) per share | $4.92 | $(12.64) | +$17.56 | Nine Months Ended September 30, 2021 vs. 2020 (in thousands) | Metric | 2021 | 2020 | Change (2021 vs 2020) | | :---------------------------------- | :--------- | :--------- | :-------------------- | | Revenues | $1,402,345 | $1,107,014 | +$295,331 | | Income (loss) from operations | $128,266 | $(256,857) | +$385,123 | | Net income (loss) | $110,967 | $(266,090) | +$377,057 | | Basic earnings (loss) per share | $7.26 | $(17.57) | +$24.83 | | Diluted earnings (loss) per share | $6.49 | $(17.57) | +$24.06 | - Asset impairment and restructuring costs were **$0** for both three and nine months ended September 30, 2021, a significant decrease from **$163,106 thousand** and **$176,371 thousand** respectively in 2020[9](index=9&type=chunk) [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) This section presents total comprehensive income (loss) for Q3 and 9M ended September 30 Total Comprehensive Income (Loss) (in thousands) | Period | 2021 | 2020 | | :---------------------------------- | :--------- | :--------- | | Three Months Ended September 30 | $91,766 | $(187,082) | | Nine Months Ended September 30 | $119,511 | $(280,548) | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's assets, liabilities, and equity at September 30, 2021 and December 31, 2020 Balance Sheet Highlights (in thousands) | Metric | Sep 30, 2021 (Unaudited) | Dec 31, 2020 | | :---------------------------------- | :----------------------- | :------------------ | | Total current assets | $648,639 | $588,140 | | Property, plant and equipment, net | $1,135,399 | $1,007,303 | | Total assets | $1,930,949 | $1,722,472 | | Total current liabilities | $438,880 | $290,096 | | Long-term debt | $416,446 | $477,215 | | Total liabilities | $1,516,306 | $1,438,911 | | Total stockholders' equity | $414,643 | $283,561 | - Trade accounts receivable increased from **$110,869 thousand** at December 31, 2020, to **$226,206 thousand** at September 30, 2021[16](index=16&type=chunk) - Current maturities of debt significantly increased from **$31,097 thousand** to **$138,587 thousand**[16](index=16&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section summarizes cash flows from operating, investing, and financing activities for the nine months ended September 30 Cash Flow Summary (Nine Months Ended September 30, in thousands) | Activity | 2021 | 2020 | | :---------------------------------- | :--------- | :--------- | | Cash provided by operating activities | $91,582 | $55,914 | | Cash used in investing activities | $(132,834) | $(111,945) | | Cash provided by financing activities | $38,615 | $73,585 | | (Decrease) increase in cash and cash equivalents, including restricted cash | $(2,637) | $17,554 | - Capital expenditures increased to **$212,046 thousand** in 2021 from **$205,661 thousand** in 2020[19](index=19&type=chunk) - Net income (loss) improved from **$(266,090) thousand** in 2020 to **$110,967 thousand** in 2021, contributing to operating cash flow[19](index=19&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) This section outlines changes in stockholders' equity, including comprehensive income, paid-in capital, and retained earnings Total Stockholders' Equity (in thousands) | Date | Amount | | :---------------------------------- | :--------- | | January 1, 2021 | $283,561 | | September 30, 2021 | $414,643 | - Total comprehensive income (loss) for the nine months ended September 30, 2021, was **$119,511 thousand**, compared to **$(280,548) thousand** for the same period in 2020[11](index=11&type=chunk)[21](index=21&type=chunk) - Paid-in capital increased from **$767,484 thousand** to **$779,013 thousand**, and retained earnings increased from **$378,906 thousand** to **$489,914 thousand** from January 1, 2021, to September 30, 2021[21](index=21&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements [1. Basis of Presentation](index=11&type=section&id=1.%20Basis%20of%20Presentation) This note describes the company's primary business and the accounting principles used for interim financial reporting - The Company's primary business is the production of metallurgical and thermal coal from underground and surface mines in West Virginia, Wyoming, and Colorado[28](index=28&type=chunk) - Financial statements are unaudited and prepared in accordance with U.S. GAAP for interim financial reporting[29](index=29&type=chunk) [2. Accounting Policies](index=11&type=section&id=2.%20Accounting%20Policies) This note details the adoption of new accounting standards and the evaluation of potential impacts from upcoming pronouncements - Adopted ASU 2019-12, 'Income Taxes,' with minimal impact[31](index=31&type=chunk) - Evaluating ASU 2020-06, 'Accounting for Convertible Instruments,' effective for fiscal years beginning after December 15, 2021, for potential impact[32](index=32&type=chunk)[34](index=34&type=chunk) [3. Joint Venture with Peabody Energy](index=13&type=section&id=3.%20Joint%20Venture%20with%20Peabody%20Energy) This note outlines expenses related to the proposed joint venture with Peabody Energy, which were incurred only in 2020 - No expenses related to the proposed joint venture with Peabody Energy were incurred in 2021[35](index=35&type=chunk) - In 2020, expenses were **$4.4 million** (three months) and **$15.9 million** (nine months) before termination[35](index=35&type=chunk) [4. Gain on Property Insurance Recovery Related to Mountain Laurel Longwall](index=13&type=section&id=4.%20Gain%20on%20Property%20Insurance%20Recovery%20Related%20to%20Mountain%20Laurel%20Longwall) This note details the property insurance recovery gain recorded in 2020, with no related amounts in 2021 - A gain of **$23.5 million** was recorded in the nine months ended September 30, 2020, for property insurance recovery[36](index=36&type=chunk) - No amounts related to this recovery were incurred in 2

Financial Data and Key Metrics Changes - The company reported a nearly 50% increase in gross margin, generating more than $61 million in the metallurgical segment [6] - In the thermal segment, the gross margin was nearly $40 million, with a nearly 25% increase in sales volumes [7][13] - Operating cash flows totaled $20 million, with a significant build in working capital due to increased accounts receivable [28] Business Line Data and Key Metrics Changes - The metallurgical segment achieved a 20% increase in sales volume and a 25% increase in per ton margin [6][18] - The thermal segment expanded its sales commitments by approximately 7.6 million tons and increased per ton cash margin nearly threefold from $0.98 to $2.62 [7][23] Market Data and Key Metrics Changes - Global steel output is on pace to return to or exceed 2019 levels, driving strong demand for coking coal [14] - Thermal coal demand and pricing have strengthened due to natural gas prices trading above $4 and a robust global economic expansion [15] Company Strategy and Development Direction - The company is focused on a strategic pivot towards steel and coking coal markets while implementing a harvest strategy for legacy thermal assets [11][12] - The Leer South project is expected to enhance cash-generating capabilities and solidify the company's position as a low-cost coking coal supplier [9][10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in a strong second half of the year, driven by improved market dynamics in both coking and thermal coal markets [8][14] - The company anticipates strong cash generation for the remainder of the year, supported by current market conditions and reduced capital spending [33] Other Important Information - The company became the first U.S. metallurgical coal producer to join ResponsibleSteel, an ESG-driven standard and certification initiative [26] - The company is exploring strategic alternatives for its thermal assets to maximize cash flows while managing long-term closure obligations [12] Q&A Session Summary Question: Can you comment on the incremental pricing on the metallurgical side? - Management noted that market price movements significantly influenced pricing, and they expect significant improvement in market pricing in the second half of the year [36][39] Question: What is the outlook for direct sales into China? - The company has seen growing opportunities to export volumes into China, with several vessels expected to be shipped in Q3 and Q4 [41][45] Question: What is the expected maintenance CapEx moving forward? - The expected maintenance CapEx is around $100 million annually, with the company generating substantial cash flow to cover this [46][52] Question: What is the current status of the thermal asset retirement obligation (ARO)? - The ARO is approximately $200 million, with expectations to reduce it to around $160 million by year-end through ongoing reclamation efforts [55][57] Question: How does the company plan to utilize free cash flow? - The company plans to fortify its balance sheet, reduce debt, and potentially initiate a capital return program, including share buybacks or dividends [47][48]