Hallador Energy pany(HNRG) - 2019 Q3 - Quarterly Report

PART I - FINANCIAL INFORMATION Unaudited condensed consolidated financial statements and management's discussion and analysis for Hallador Energy Company ITEM 1. FINANCIAL STATEMENTS Unaudited condensed consolidated financial statements, including balance sheets, income, cash flow, and equity statements, with detailed accounting notes Consolidated Balance Sheets Presents the company's financial position, detailing assets, liabilities, and equity at specific points in time Consolidated Balance Sheet Highlights (in thousands): | Metric | September 30, 2019 | December 31, 2018 | Change | Percentage Change | | :-------------------------------- | :------------------- | :------------------ | :----- | :---------------- | | Cash and cash equivalents | $6,361 | $15,502 | $(9,141) | -59.0% | | Total current assets | $83,262 | $84,978 | $(1,716) | -2.0% | | Total assets | $508,811 | $515,499 | $(6,688) | -1.3% | | Total current liabilities | $68,439 | $51,813 | $16,626 | 32.1% | | Total liabilities | $252,304 | $256,625 | $(4,321) | -1.7% | | Total stockholders' equity | $252,507 | $254,874 | $(2,367) | -0.9% | Consolidated Statements of Comprehensive Income (Loss) Details the company's financial performance over periods, including revenue, expenses, and net income or loss Consolidated Statements of Comprehensive Income (Loss) Highlights (in thousands, except per share data): | Metric | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | Change (YoY) | Three Months Ended Sep 30, 2019 | Three Months Ended Sep 30, 2018 | Change (QoQ) | | :-------------------------------- | :----------------------------- | :----------------------------- | :----------- | :------------------------------ | :------------------------------ | :----------- | | Total revenue | $244,719 | $203,829 | $40,890 | $83,096 | $79,722 | $3,374 | | Total costs and expenses | $248,104 | $199,352 | $48,752 | $90,292 | $77,397 | $12,895 | | Income (loss) before income taxes | $(3,385) | $4,477 | $(7,862) | $(7,196) | $2,325 | $(9,521) | | Net income (loss) | $(67) | $5,023 | $(5,090) | $(3,723) | $2,914 | $(6,637) | | Basic and diluted EPS | $(0.00) | $0.16 | $(0.16) | $(0.12) | $0.09 | $(0.21) | - Interest expense for the nine months ended September 30, 2019, included $3,018 thousand for the net change in the estimated fair value of interest rate swaps, significantly higher than $136 thousand in the prior year[8] Condensed Consolidated Statements of Cash Flows Summarizes cash inflows and outflows from operating, investing, and financing activities over specific periods Condensed Consolidated Statements of Cash Flows Highlights (in thousands): | Metric | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | Change (YoY) | | :-------------------------------- | :----------------------------- | :----------------------------- | :----------- | | Cash provided by operating activities | $36,323 | $30,295 | $6,028 | | Cash used in investing activities | $(23,946) | $(16,455) | $(7,491) | | Cash used in financing activities | $(21,384) | $(8,728) | $(12,656) | | Increase (decrease) in cash, cash equivalents, and restricted cash | $(9,007) | $5,112 | $(14,119) | | Cash, cash equivalents, and restricted cash, end of period | $11,087 | $21,406 | $(10,319) | - Non-cash investing activities included a change in capital expenditures in accounts payable of $2,018 thousand in 2019, compared to $(8,957) thousand in 2018[12] Consolidated Statements of Stockholders' Equity Outlines changes in the company's equity, including common stock, additional paid-in capital, and retained earnings Consolidated Statements of Stockholders' Equity Highlights (in thousands): | Metric | September 30, 2019 | December 31, 2018 | Change | | :----------------------- | :------------------- | :------------------ | :----- | | Common Stock (Shares) | 30,249 | 30,245 | 4 | | Common Stock (Amount) | $302 | $302 | $0 | | Additional Paid-in Capital | $102,166 | $100,742 | $1,424 | | Retained Earnings | $150,039 | $153,830 | $(3,791) | | Total Stockholders' Equity | $252,507 | $254,874 | $(2,367) | - For the nine months ended September 30, 2019, the company reported a net loss of $67 thousand and paid dividends of $3,724 thousand[14] Notes to Condensed Consolidated Financial Statements Provides detailed explanations and disclosures for the condensed consolidated financial statements (1) GENERAL BUSINESS Overview of Hallador Energy Company's consolidated operations, including subsidiaries Sunrise Coal and Hourglass Sands - Hallador Energy Company's subsidiaries include Sunrise Coal, LLC (steam coal production in western Indiana) and Hourglass Sands, LLC (frac sand industry in Colorado)[18] New Accounting Standards Issued and Adopted Details the adoption of new accounting standards, specifically ASU 2016-02 on Leases, and its impact - Adopted ASU 2016-02 (Leases) effective January 1, 2019, resulting in a $0.5 million right-to-use asset and corresponding lease liability[20] - The adoption of ASU 2016-02 had no impact on the company's consolidated income statement or statement of cash flows[20] New Accounting Standards Issued and Not Yet Adopted Discusses new accounting standards issued but not yet adopted, such as ASU 2016-13 on Credit Losses - Evaluating ASU 2016-13 (Credit Losses), effective after December 15, 2019, and do not anticipate a material impact[21] (2) ASSET IMPAIRMENT REVIEW Details the asset impairment assessment for the Bulldog Mine, confirming no impairment was necessary - Bulldog Mine assets had an aggregate net carrying value of $15 million as of September 30, 2019[22] - A permit for the Bulldog Mine was issued in April 2019, and no impairment was determined to be necessary[22] (3) BANK DEBT Provides details on the amended credit agreement, total bank debt, liquidity, and debt covenant compliance - Credit agreement amended on September 30, 2019, extending maturity to September 2023 and reducing the interest rate by 50 basis points[23] Bank Debt and Liquidity (in thousands): | Metric | September 30, 2019 | December 31, 2018 | | :-------------------------------- | :------------------- | :------------------ | | Total bank debt | $172,000 | $188,463 | | Net bank debt | $165,030 | $181,047 | | Additional borrowing capacity | $58,000 | N/A | | Total liquidity | $67,000 | N/A | Debt Covenants as of September 30, 2019: | Covenant | Required Ratio | Actual Ratio | | :-------------------------------- | :------------- | :----------- | | Maximum Leverage Ratio | 3.25 to 1.00 | 2.43 | | Minimum Debt Service Coverage Ratio | 1.25 to 1.00 | 1.96 | - The interest rate on the facility was LIBOR plus 3.00% (total 5.92%) after the amendment, down from LIBOR plus 3.5% (total 6.42%)[30] (4) EQUITY METHOD INVESTMENTS Details investments accounted for under the equity method, including sales and carrying values - Sold 30.6% interest in Savoy Energy, L.P. for $8 million in March 2018, incurring a $538,000 loss[31] - Investment in Sunrise Energy, LLC (50% interest) had a carrying value of $3.3 million as of September 30, 2019, down from $3.7 million at December 31, 2018[32] (5) OTHER ASSETS Summarizes the composition of other assets, primarily advanced coal royalties and marketable equity securities Other Assets (in thousands): | Asset Type | September 30, 2019 | December 31, 2018 | | :-------------------------------- | :------------------- | :------------------ | | Advanced coal royalties | $10,284 | $10,186 | | Marketable equity securities (restricted) | $2,181 | $1,909 | | Other | $1,952 | $2,122 | | Total other assets | $14,417 | $14,217 | (6) ACCOUNTS PAYABLE AND ACCRUED LIABILITIES Details the changes and composition of accounts payable and accrued liabilities Accounts Payable and Accrued Liabilities (in thousands): | Liability Type | September 30, 2019 | December 31, 2018 | | :-------------------------------- | :------------------- | :------------------ | | Accounts payable | $8,388 | $5,844 | | Goods received not yet invoiced | $10,682 | $6,095 | | Accrued property taxes | $3,156 | $2,763 | | Accrued payroll | $3,535 | $1,825 | | Workers' compensation reserve | $3,985 | $3,670 | | Group health insurance | $2,400 | $2,200 | | Other | $4,960 | $4,024 | | Total | $37,106 | $26,421 | (7) OTHER INCOME Explains the significant increase in other income, primarily from the sale of royalty interests Other Income (in thousands): | Item | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | Three Months Ended Sep 30, 2019 | Three Months Ended Sep 30, 2018 | | :-------------------------------- | :----------------------------- | :----------------------------- | :------------------------------ | :------------------------------ | | Equity loss - Sunrise Energy | $(350) | $(198) | $(184) | $(42) | | Loss on disposal of Savoy | — | $(538) | — | — | | MSHA reimbursements | $450 | $833 | $150 | — | | Gain on sale of royalty interests in oil properties | $2,949 | — | — | $180 | | Miscellaneous | $2,439 | $968 | $247 | $529 | | Total | $5,488 | $1,065 | $213 | $667 | (8) SELF-INSURANCE Describes the company's self-insurance policy for mining equipment and restricted cash for claims - Self-insures underground mining equipment with a historical cost of approximately $275 million as of September 30, 2019[36] - Restricted cash of $4.7 million as of September 30, 2019, is held for future workers' compensation claim payments[37] (9) NET INCOME (LOSS) PER SHARE Explains the computation of net income (loss) per share using the two-class method Net Income (Loss) Allocated to Common Shareholders (in thousands): | Metric | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | Three Months Ended Sep 30, 2019 | Three Months Ended Sep 30, 2018 | | :-------------------------------- | :----------------------------- | :----------------------------- | :------------------------------ | :------------------------------ | | Net income (loss) | $(67) | $5,023 | $(3,723) | $2,914 | | Less loss (earnings) allocated to RSUs | - | $(116) | $93 | $(67) | | Net income (loss) allocated to common shareholders | $(67) | $4,907 | $(3,630) | $2,847 | (10) INCOME TAXES Details the effective tax rate and factors influencing its deviation from the statutory rate Effective Tax Rate (ETR): | Period | ETR | | :----------------------------- | :---- | | Nine Months Ended Sep 30, 2019 | 98% | | Nine Months Ended Sep 30, 2018 | (12)% | - The ETR differs from the statutory rate primarily due to the benefit from statutory percentage depletion in excess of tax basis[39] (11) RESTRICTED STOCK UNITS (RSUs) Provides information on non-vested RSU grants, their value, and future issuance availability Restricted Stock Unit (RSU) Activity: | Item | Number of Grants | | :-------------------------------- | :--------------- | | Non-vested grants at Dec 31, 2018 | 789,250 | | Granted | 8,000 | | Vested | (7,000) | | Forfeited | (13,000) | | Non-vested grants at Sep 30, 2019 | 777,250 | RSU Vesting Schedule: | Vesting Year | RSUs Vesting | | :----------- | :----------- | | 2019 | 294,750 | | 2020 | 176,250 | | 2021 | 306,250 | | Total | 777,250 | - As of September 30, 2019, 1,266,112 RSUs were available for future issuance[41] (12) REVENUE Details revenue recognition policies, geographic sales distribution, and remaining performance obligations - Revenue is recognized at a point in time when title, risk of loss, and control of coal transfer to the customer, typically upon loading at the mine[48] Coal Revenue by Geographic Market: | Period | Indiana Customers | Other States | | :----------------------------- | :---------------- | :----------- | | Nine Months Ended Sep 30, 2019 | 69% | 31% | | Three Months Ended Sep 30, 2019 | 67% | 33% | | Nine Months Ended Sep 30, 2018 | 74% | 26% | | Three Months Ended Sep 30, 2018 | 77% | 23% | Remaining Performance Obligations (as of September 30, 2019): | Contract Type | Amount (millions) | Expected Recognition | | :-------------------------------- | :------------------ | :------------------- | | Fixed-priced contracts | $662 | ~54% through 2020, remainder thereafter | | Contracts with price reopeners | $266 | Beginning in 2021 | (13) LEASES Provides information on operating leases, including lease terms, discount rates, and future payments Operating Lease Information (as of September 30, 2019): | Metric | Nine Months Ended | Three Months Ended | | :-------------------------------- | :---------------- | :----------------- | | Operating cash outflows from operating leases | $234 | $77 | | Weighted average remaining lease term (years) | 4.11 | 4.11 | | Weighted average discount rate | 6.0% | 6.0% | | Total operating lease liability | $882 | $882 | Future Minimum Lease Payments (in thousands): | Year | Amount | | :--- | :----- | | 2019 | $88 | | 2020 | $238 | | 2021 | $201 | | 2022 | $206 | | 2023 | $174 | | 2024 | $59 | | Total minimum lease payments | $966 | | Less imputed interest | $(84) | | Total operating lease liability | $882 | (14) HOURGLASS SANDS Details Hallador Energy's investment in Hourglass Sands, its financial performance, and consolidation - Hallador Energy invested $4 million in Hourglass Sands, LLC in February 2018, owning 100% of Class A units and consolidating its activities[54] Hourglass Sands Condensed Balance Sheet (in thousands): | Metric | September 30, 2019 | December 31, 2018 | | :-------------------------------- | :------------------- | :------------------ | | Current assets | $3,357 | $4,241 | | Property and equipment | $3,049 | $3,092 | | Total assets | $6,406 | $7,333 | | Total liabilities | $13 | $502 | | Redeemable noncontrolling interests | $4,000 | $4,000 | | Members' equity | $2,393 | $2,831 | | Total liabilities and equity | $6,406 | $7,333 | Hourglass Sands Condensed Statement of Operations (in thousands): | Metric | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | Three Months Ended Sep 30, 2019 | Three Months Ended Sep 30, 2018 | | :-------------------------------- | :----------------------------- | :----------------------------- | :------------------------------ | :------------------------------ | | Revenue | $191 | $36 | $86 | $36 | | Expenses | $629 | $907 | $133 | $350 | | Net loss | $(438) | $(871) | $(47) | $(314) | (15) INVENTORY Explains inventory valuation methods and adjustments for net realizable value Coal Inventory NRV Adjustments (in thousands): | Date | NRV Adjustment | | :------------------- | :--------------- | | September 30, 2019 | $2,700 | | December 31, 2018 | $1,100 | (16) SUBSEQUENT EVENTS Reports on significant events occurring after the reporting period, such as dividend declarations - Declared a dividend of $0.04 per share on October 15, 2019, payable November 15, 2019[60] Report of Independent Registered Public Accounting Firm Independent auditors' review of interim financial statements, confirming GAAP conformity - The independent registered public accounting firm, Plante Moran, reviewed the interim financial statements and found no material modifications needed for conformity with GAAP[61] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management's perspective on financial condition, operational results, industry outlook, and key performance drivers I. STRONG SHIPMENTS IN Q3 Highlights strong coal shipment volumes in Q3 2019 and projections for record annual shipments - 2.1 million tons of coal were shipped in Q3 2019, with an anticipated 2.0 million tons in Q4, putting Sunrise Coal on pace to ship a record 8 million tons in 2019[66] II. Q3 2019 NET LOSS OF $3.7 MILLION, ($0.12) PER SHARE, CAUSED BY INCREASED COSTS DUE TO THREE TEMPORARY EVENTS Explains the Q3 2019 net loss due to temporary cost increases from challenging mining conditions - Q3 2019 net loss of $3.7 million, or ($0.12) per share, was attributed to increased costs of $3.86/ton due to three temporary events[67][68] - Temporary events causing increased costs included challenging mining conditions at Oaktown 2, efforts to reduce costs at Carlisle (which improved production in October), and low production at Ace in the Hole Mine due to new box cut development[69] III. 75% SOLD THROUGH 2022 = GREAT CASH FLOW VISABILITY Demonstrates strong cash flow visibility with significant coal sales contracted through 2022 - The company has 19.6 million tons contracted from the remainder of 2019 through 2022, representing approximately 75% of sales at an 8.0 million-ton annualized pace[68] Projected Tons and Prices: | Year | Targeted tons (millions) | Contracted tons (millions) | % Committed | Estimated Price per ton | | :--- | :----------------------- | :------------------------- | :---------- | :---------------------- | | 2019 | 2.0 | 2.0 | 100% | $39.25 | | 2020 | 8.0 | 7.0 | 88% | $40.25 | | 2021 | 8.0 | 5.3 | 66% | N/A | | 2022 | 8.0 | 5.3 | 66% | N/A | | Total | 26.0 | 19.6 | 75% | N/A | - Sunrise Coal subsidiary expanded its customer base from 9 customers in 3 states in 2018 to a peak of 17 customers in 7 states in 2019[69] IV. NEW CREDIT FACILITY IN PLACE FOR NEXT FOUR YEARS Details the establishment of a new credit facility, extending maturity and reducing interest rates - A new credit facility was extended to September 2023, with a 50 basis point reduction in the interest rate, improving the company's capital structure[70] V. 2020 IS A CORRECTION YEAR FOR THE INDUSTRY Discusses the anticipated industry correction in 2020 and the company's strategic positioning - The industry is expected to undergo a 'correction' in 2020, with approximately 10 million tons of production closed in 2019 and an anticipated 6 million more tons offline in 2020[71][74] - Sunrise is well-positioned, being 88% sold for 2020, and anticipates emerging in a stronger market position in 2021 despite low natural gas prices constraining the domestic market[74] ASSET IMPAIRMENT REVIEW Refers to detailed notes regarding the assessment of asset impairment for specific company assets - Refer to Note 2 of the unaudited condensed consolidated financial statements for details on asset impairment review[72] LIQUIDITY AND CAPITAL RESOURCES Analyzes the company's cash flow from operations, capital expenditures, and off-balance sheet arrangements I. CASH PROVIDED BY OPERATIONS Examines the increase in cash generated from operating activities, driven by inventory changes and margins Cash Provided by Operating Activities (in millions): | Period | 2019 | 2018 | Change | | :----------------------------- | :--- | :--- | :----- | | Nine Months Ended Sep 30 | $36.3 | $30.3 | $6.0 | - Coal inventory increased by $6.1 million in the first nine months of 2019, contributing to a $9.8 million increase in cash flow compared to 2018[74] - Operating margins from coal decreased by $5.5 million in the first nine months of 2019 due to increased costs, averaging $30.98 per ton sold in 2019 compared to $28.29 per ton in 2018[74] - The projected capital expenditure budget for the remainder of 2019 is $6 million, mostly for maintenance capex, expected to be funded by cash from operations, debt service, and dividends[74][75] II. MATERIAL OFF-BALANCE SHEET ARRANGEMENTS Discloses the company's off-balance sheet arrangements, primarily surety bonds for reclamation - Surety bonds totaling $27 million are in place for reclamation, presented as asset retirement obligations (ARO)[76] CAPITAL EXPENDITURES (capex) Details capital expenditures by mine and type, including maintenance and investment capex Capital Expenditures for Nine Months Ended September 30, 2019 (in millions): | Mine/Type | Amount | | :-------------------------- | :----- | | Oaktown – maintenance capex | $15.6 | | Oaktown – investment | $6.5 | | Carlisle - maintenance capex | $2.8 | | Ace - investment | $1.6 | | Other | $0.8 | | Total Capex | $27.3 | RESULTS OF OPERATIONS Presents a detailed analysis of the company's operational performance, including sales, costs, and margins Quarterly coal sales and cost data Provides quarterly data on coal production, sales, average prices, operating costs, and margins per ton Quarterly Coal Sales and Cost Data (in thousands, except per ton and percentage data): | Metric | Q4 2018 | Q1 2019 | Q2 2019 | Q3 2019 | T4Qs (2019) | Q4 2017 | Q1 2018 | Q2 2018 | Q3 2018 | T4Qs (2018) | | :-------------------- | :------ | :------ | :------ | :------ | :---------- | :------ | :------ | :------ | :------ | :---------- | | Tons produced | 1,938 | 2,205 | 2,003 | 1,891 | 8,037 | 1,561 | 1,975 | 1,983 | 1,713 | 7,232 | | Tons sold | 2,219 | 2,130 | 1,807 | 2,118 | 8,274 | 1,685 | 1,707 | 1,477 | 1,962 | 6,831 | | Coal sales ($) | 89,019 | 85,235 | 71,113 | 82,883 | 328,250 | 68,922 | 66,787 | 56,922 | 79,055 | 271,686 | | Average price/ton ($) | 40.12 | 40.02 | 39.35 | 39.13 | 39.67 | 40.90 | 39.13 | 38.54 | 40.29 | 39.77 | | Operating costs ($) | 69,364 | 62,271 | 53,915 | 71,372 | 256,922 | 52,025 | 46,640 | 38,809 | 60,132 | 197,606 | | Average cost/ton ($) | 31.26 | 29.24 | 29.84 | 33.70 | 31.05 | 30.88 | 27.32 | 26.28 | 30.65 | 28.93 | | Margin ($) | 19,655 | 22,964 | 17,198 | 11,511 | 71,328 | 16,897 | 20,147 | 18,113 | 18,923 | 74,080 | | Margin/ton ($) | 8.86 | 10.78 | 9.52 | 5.43 | 8.62 | 10.03 | 11.80 | 12.26 | 10.00 | 10.84 | | Capex ($) | 8,996 | 8,840 | 9,448 | 8,981 | 36,265 | 7,294 | 10,428 | 7,784 | 5,856 | 31,362 | | Maintenance capex ($) | 7,186 | 6,672 | 6,164 | 5,537 | 25,559 | 2,520 | 5,772 | 5,058 | 4,639 | 17,989 | | Maintenance capex/ton ($) | 3.24 | 3.13 | 3.41 | 2.61 | 3.09 | 1.50 | 3.38 | 3.42 | 2.36 | 2.63 | 2019 v. 2018 (first nine months) Compares financial performance for the first nine months of 2019 against 2018, highlighting key changes - Tons sold increased to 6,055,000 in 2019 from 5,146,000 in 2018, with the average price per ton slightly increasing from $39.40 to $39.51[81] - Operating costs averaged $30.98/ton in 2019, up from $28.29/ton in 2018, primarily due to challenging mining conditions at Oaktown 2 and the re-opening of the Carlisle Mine[82] - Other income increased by $4.4 million, largely due to a $2.9 million gain from the sale of overriding royalty interests in oil properties[84] - DD&A increased by approximately $2.8 million, driven by increased raw production and the depreciation of assets related to the Carlisle Mine[85] - Interest expense increased by $3.3 million, with $3.0 million attributed to the net change in the fair value of interest rate swaps[87] - Employee headcount at Sunrise Coal increased to 923 at September 30, 2019, from 803 at September 30, 2018, in preparation for increased shipments and the re-start of the Carlisle Mine[88] 2019 v. 2018 (third quarter) Compares third-quarter financial performance between 2019 and 2018, focusing on sales, costs, and expenses - Tons sold increased to 2,118,000 in Q3 2019 from 1,962,000 in Q3 2018, while the average price per ton decreased from $40.29 to $39.13[89] - Operating costs averaged $33.70/ton in Q3 2019, up from $30.65/ton in Q3 2018, exceeding prior guidance due to challenging conditions at Oaktown 2 and poor recovery at Carlisle[90] - DD&A increased by approximately $1.0 million in Q3 2019 due to increased raw production and significant asset additions in 2018[91] - SG&A expenses increased by approximately $0.4 million in Q3 2019 due to additional hiring and business development activities[92] EARNINGS (LOSS) PER SHARE Presents basic and diluted earnings per share data for various quarters Basic and Diluted Earnings (Loss) Per Share: | Quarter | 2019 EPS | 2018 EPS | | :------ | :------- | :------- | | Q1 | $0.23 | $0.07 | | Q2 | $(0.11) | $(0.00) | | Q3 | $(0.12) | $0.09 | | Q4 | N/A | $0.09 | INCOME TAXES Details the effective tax rate and factors contributing to its difference from the statutory rate Effective Tax Rate (ETR): | Period | ETR | | :----------------------------- | :---- | | Nine Months Ended Sep 30, 2019 | 98% | | Nine Months Ended Sep 30, 2018 | (12)% | - The ETR differs from the statutory rate primarily due to statutory depletion in excess of tax basis, a permanent difference[94] MSHA REIMBURSEMENTS Discusses the recognition policy for reimbursements related to MSHA compliance costs - Unreimbursed costs from customers related to MSHA compliance are not considered material and are recognized when estimable with reasonable certainty[95] RESTRICTED STOCK GRANTS Refers to financial statement notes for details on Restricted Stock Units (RSUs) - Refer to Note 11 of the financial statements for a discussion of Restricted Stock Units (RSUs)[96] CRITICAL ACCOUNTING ESTIMATES Outlines key accounting estimates, including coal reserves, business acquisitions, and interest rate swaps - Critical accounting estimates include coal reserves, business acquisitions, interest rate swaps, deferred tax accounts, and impairment analysis[97] - Estimates for coal reserves impact DD&A calculation and cash flow projections[97] - Business combinations require judgment in determining fair value of acquired assets and liabilities, often involving significant estimates and assumptions[98] - Fair value of interest rate swaps is determined using a discounted future cash flow model based on anticipated future interest rates[99] YORKTOWN DISTRIBUTIONS Reports on the distribution of Hallador common stock by Yorktown Energy Partners - Yorktown Energy Partners VIII, L.P. distributed 450,000 shares of Hallador common stock to its partners[101] - Yorktown limited partnerships now hold 965,998 shares, representing 3.2% of total shares outstanding[101] NEW ACCOUNTING PRONOUNCEMENTS Refers to financial statement notes for information on recently adopted and issued accounting standards - Refer to Note 1 of the financial statements for a discussion of new accounting standards[102] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Confirms no material changes to market risk disclosures from the previous annual report - No material changes from the disclosure in the 2018 Form 10-K regarding market risk[103] ITEM 4. CONTROLS AND PROCEDURES Assesses the effectiveness of disclosure controls and internal control over financial reporting - Disclosure controls and procedures were evaluated and deemed effective by the CEO and CFO as of September 30, 2019[105] - No material changes to internal control over financial reporting occurred during the quarter ended September 30, 2019[106] PART II - OTHER INFORMATION Contains additional information not covered in the financial statements, including mine safety and exhibits ITEM 4. MINE SAFETY DISCLOSURES Highlights the company's commitment to safety and details mine safety performance and achievements - Sunrise Coal's mine rescue team placed 2nd overall in the National Mine Rescue contest in September 2019[107] - Mine safety violations are detailed in Exhibit 95 to this Form 10-Q[108] ITEM 6. EXHIBITS Lists all exhibits filed with the Form 10-Q, including agreements and certifications List of Exhibits: | Exhibit No. | Description | | :---------- | :---------------------------------------------------- | | 10.1 | Second Amendment To The Third Amended And Restated Credit Agreement | | 15.1 | Letter Regarding Unaudited Interim Financial Information – Plante Moran | | 31.1 | SOX 302 Certification | | 31.2 | SOX 302 Certification | | 32 | SOX 906 Certification | | 95 | Mine Safety Disclosures | | 101 i | Interactive Files | SIGNATURES Confirms the official signing of the report by authorized financial officers - The report was signed by Lawrence D. Martin, CFO, and R. Todd Davis, CAO, on November 4, 2019[113]