Alpha Metallurgical Resources(AMR) - 2019 Q3 - Quarterly Report

Part I Financial Statements Contura Energy reported a significant net loss for Q3 and the nine-month period of 2019, reversing prior-year net incomes, with total assets slightly decreasing and liabilities increasing Condensed Consolidated Statements of Operations Contura Energy reported a Q3 2019 net loss of $68.5 million and a nine-month net loss of $175.4 million, driven by increased costs despite higher revenues from the Alpha Merger | Financial Metric | Three Months Ended Sep 30, 2019 ($) | Three Months Ended Sep 30, 2018 ($) | Nine Months Ended Sep 30, 2019 ($) | Nine Months Ended Sep 30, 2018 ($) | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $525,864 | $447,871 | $1,791,184 | $1,459,121 | | (Loss) Income from Operations | ($26,211) | $23,848 | $58,519 | $176,389 | | Net (Loss) Income | ($68,532) | $11,894 | ($175,378) | $142,623 | | Diluted (Loss) Income Per Share | ($3.60) | $1.15 | ($9.22) | $13.81 | Condensed Consolidated Balance Sheets As of September 30, 2019, total assets slightly decreased to $2.67 billion, cash declined, total liabilities increased to $1.80 billion, and stockholders' equity decreased | Balance Sheet Item | September 30, 2019 ($) | December 31, 2018 ($) | | :--- | :--- | :--- | | Cash and cash equivalents | $152,638 | $233,599 | | Total current assets | $770,464 | $829,601 | | Total assets | $2,669,888 | $2,746,058 | | Total current liabilities | $330,177 | $355,236 | | Total liabilities | $1,800,950 | $1,674,918 | | Total stockholders' equity | $868,938 | $1,071,140 | Condensed Consolidated Statements of Cash Flows For the nine months ended September 30, 2019, operating cash flow decreased, while investing and financing cash outflows significantly increased, leading to a $94.1 million net decrease in cash | Cash Flow Activity (Nine Months Ended) | September 30, 2019 ($) | September 30, 2018 ($) | | :--- | :--- | :--- | | Net cash provided by operating activities | $137,578 | $176,316 | | Net cash used in investing activities | ($167,579) | ($71,539) | | Net cash used in financing activities | ($64,110) | ($14,873) | | Net (decrease) increase in cash | ($94,111) | $89,904 | Notes to Condensed Consolidated Financial Statements Key notes include the Alpha Merger's goodwill allocation, significant losses from discontinued PRB operations due to Blackjewel's bankruptcy, adoption of ASC 842, and subsequent resolution of PRB liabilities - The company finalized the purchase price allocation for the Alpha Merger, resulting in goodwill of $124.4 million, attributed to anticipated synergies and deferred income taxes[36] - The bankruptcy of Blackjewel, the buyer of the company's former PRB operations, led to the re-recognition of asset retirement obligations and a significant loss from discontinued operations[42][45] - Subsequent to the quarter end, the company entered into the ESM Transaction, paying $90 million to have Eagle Specialty Materials assume the PRB mines and their associated reclamation liabilities, expecting to resolve the issue[159][161] - The company adopted the new lease accounting standard ASC 842 on January 1, 2019, recording operating lease right-of-use assets of $11.8 million and corresponding lease liabilities[31] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q3 2019 revenue growth driven by the Alpha Merger, offset by increased costs, while highlighting strong liquidity and the post-quarter resolution of PRB mine liabilities Results of Operations Q3 2019 revenues increased by 17.4% due to higher volumes from the Alpha Merger, but significant cost increases, including a 446.1% surge in DD&A, resulted in only a slight rise in Adjusted EBITDA | Metric (Q3 2019 vs Q3 2018) | Q3 2019 ($M) | Q3 2018 ($M) | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenues | $525.9M | $447.9M | +17.4% | | Tons Sold (Thousands) | 5,765 | 3,879 | +48.6% | | Cost of Coal Sales | $467.7M | $397.2M | +17.7% | | Depreciation, Depletion & Amortization | $60.8M | $11.1M | +446.1% | | Adjusted EBITDA | $40.0M | $38.8M | +3.1% | - The increase in revenue was primarily driven by a 1.9 million ton increase in coal sales volume, mainly from operations acquired in the Alpha Merger[196] - The CAPP - Met segment's Adjusted EBITDA increased by $10.9 million (22.8%) due to higher sales volumes and an improved coal margin per ton[233] Liquidity and Capital Resources As of September 30, 2019, total liquidity stood at $354.1 million, with operating cash flow at $137.6 million, and future capital expenditures are expected to increase due to a $61 million Cumberland mine project - Total liquidity was $354.1 million as of September 30, 2019, comprising cash, investments, and available credit[276] - The company accelerated a $61 million capital project for a new impoundment at its Cumberland mine, increasing estimated capital expenditures by $29 million in 2020 and $17 million in 2021[279] - Cash, cash equivalents, and restricted cash decreased by $94.1 million during the first nine months of 2019, driven by increased capital expenditures, debt refinancing, and stock repurchases[281] Contractual Obligations Contractual obligations significantly increased due to the Alpha Merger and Blackjewel bankruptcy, with asset retirement obligations totaling $933.0 million and black lung benefit obligations at $250.1 million | Obligation (Undiscounted) | Total Estimated Cash Flow ($) | | :--- | :--- | | Asset Retirement Obligation | $933,024 | | Black Lung Benefit Obligation | $250,140 | | Contingent Revenue Obligation | $61,966 | Critical Accounting Policies and Estimates An interim goodwill impairment test was performed due to market decline, concluding no impairment as of August 31, 2019, but management warns of future risk if conditions worsen - An interim goodwill impairment test was conducted as of August 31, 2019, due to market capitalization decline and lower coal prices. No impairment was recorded, but goodwill may be at risk if market conditions worsen[298] Quantitative and Qualitative Disclosures about Market Risk The company manages market risks from commodity prices, credit exposure, and interest rates, with 32% of 2020 CAPP-Met coal production committed and priced, and interest rate sensitivity of $2.8 million for a 50 basis point change - As of November 4, 2019, 32% of the company's 13.0 million tons of CAPP-Met coal for 2020 is committed and priced[300] - The company is exposed to variable interest rates on its Term Loan Credit Facility. A 50 basis point (0.50%) change in interest rates would alter annual interest expense by approximately $2.8 million[305] Controls and Procedures The CEO and CFO concluded that disclosure controls and procedures were effective as of September 30, 2019, with no material changes to internal control over financial reporting during Q3 2019 - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of September 30, 2019[306] - No changes occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[307] Part II Legal Proceedings The company is involved in various legal proceedings, with detailed information available in Note 18(d) of the Condensed Consolidated Financial Statements - For details on legal proceedings, the company directs readers to Note 18(d) in the financial statements[309] Risk Factors The company faces significant customer concentration risk, with its ten largest customers accounting for approximately 60.1% of total coal revenues in 2018 - The company's 10 largest customers accounted for approximately 60.1% of total coal revenues for the year ended December 31, 2018, posing a significant customer concentration risk[311] Share Repurchases During Q3 2019, Contura Energy repurchased 1,029,303 shares of common stock at an average price of $31.54 per share as part of its capital return program | Period | Total Shares Purchased | Average Price Paid per Share ($) | | :--- | :--- | :--- | | Q3 2019 Total | 1,029,303 | $31.54 | Mine Safety Disclosures Mine safety disclosures, as required by the Dodd-Frank Act, are provided in Exhibit 95 of this quarterly report - Mine safety disclosures required by the Dodd-Frank Act are included in Exhibit 95 of the Form 10-Q[316] Exhibits A complete list of documents filed as part of this Quarterly Report on Form 10-Q is available in the Exhibit Index - A full list of exhibits filed with the report is available in the Exhibit Index[317]