Ramaco Resources(METCB) - 2019 Q2 - Quarterly Report

Filing Information Details the company's quarterly report filing, including key identification numbers and stock information - RAMACO RESOURCES, INC. filed its Quarterly Report on Form 10-Q for the period ended June 30, 2019[2] Filing Details | Indicator | Value | | :--- | :--- | | Commission File Number | 001‑38003 | | State of Incorporation | Delaware | | IRS Employer ID No. | 38‑4018838 | | Common Stock Trading Symbol | METC | | Exchange | NASDAQ Global Select Market | | Shares Outstanding (as of Aug 3, 2019) | 40,942,581 | | Filer Status | Smaller reporting company, Emerging growth company | Cautionary Note Regarding Forward-Looking Statements Warns investors about risks in forward-looking statements, as actual results may differ materially - This report contains forward-looking statements subject to risks, uncertainties, and assumptions related to coal development, production, gathering, and sale; investors are cautioned that actual results may differ materially[9][10][11] - Key areas of forward-looking statements include anticipated production levels, costs, sales volumes, revenues, timing of capital projects, economic conditions in the steel and metallurgical coal industries, estimated coal reserves, financing, and compliance with regulations[10] PART I. FINANCIAL INFORMATION Presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis Item 1. Financial Statements Presents Ramaco Resources, Inc.'s unaudited condensed consolidated financial statements and accompanying notes Unaudited Condensed Consolidated Balance Sheets Details the company's financial position, including assets, liabilities, and stockholders' equity at period-end Condensed Consolidated Balance Sheets (In thousands) | (In thousands) | June 30, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Assets | | | | Total current assets | $49,837 | $35,019 | | Property, plant and equipment – net | $164,193 | $149,205 | | Total Assets | $218,137 | $188,244 | | Liabilities and Stockholders' Equity | | | | Total current liabilities | $31,228 | $29,845 | | Long-term debt, net | $10,002 | $4,474 | | Total liabilities | $57,578 | $47,135 | | Total equity | $160,559 | $141,109 | | Total Liabilities and Stockholders' Equity | $218,137 | $188,244 | Unaudited Condensed Consolidated Statements of Operations Presents the company's revenues, costs, expenses, net income, and earnings per share for the periods Condensed Consolidated Statements of Operations (In thousands) | (In thousands) | Three months ended June 30, 2019 | Three months ended June 30, 2018 | Six months ended June 30, 2019 | Six months ended June 30, 2018 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $65,761 | $65,278 | $123,221 | $121,221 | | Total cost and expenses | $52,872 | $54,631 | $102,083 | $104,954 | | Operating income | $12,889 | $10,647 | $21,138 | $16,267 | | Net income | $10,613 | $10,204 | $17,496 | $15,470 | | Basic earnings per share | $0.26 | $0.25 | $0.43 | $0.39 | | Diluted earnings per share | $0.26 | $0.25 | $0.43 | $0.38 | Unaudited Condensed Consolidated Statements of Stockholders' Equity Presents changes in the company's equity, including common stock, paid-in capital, and retained earnings Condensed Consolidated Statements of Stockholders' Equity (In thousands) | (In thousands) | Common Stock | Additional Paid-in Capital | Retained Earnings (Deficit) | Total Equity | | :--- | :--- | :--- | :--- | :--- | | Balance at January 1, 2019 | $401 | $150,926 | $(10,218) | $141,109 | | Equity-based compensation | $8 | $1,946 | — | $1,954 | | Net income | — | — | $17,496 | $17,496 | | Balance at June 30, 2019 | $409 | $152,872 | $7,278 | $160,559 | | Balance at January 1, 2018 | $396 | $148,293 | $(35,292) | $113,397 | | Equity-based compensation | $5 | $1,240 | — | $1,245 | | Net income | — | — | $15,470 | $15,470 | | Balance at June 30, 2018 | $401 | $149,533 | $(19,822) | $130,112 | Unaudited Condensed Consolidated Statements of Cash Flows Reports cash inflows and outflows from operating, investing, and financing activities for the periods Condensed Consolidated Statements of Cash Flows (In thousands) | (In thousands) | Six months ended June 30, 2019 | Six months ended June 30, 2018 | | :--- | :--- | :--- | | Net cash from operating activities | $13,114 | $8,111 | | Net cash from investing activities | $(19,737) | $(22,278) | | Net cash from financing activities | $5,213 | $14,144 | | Net change in cash and cash equivalents | $(1,410) | $(23) | | Cash and cash equivalents, end of period | $5,541 | $5,911 | Notes to Unaudited Condensed Consolidated Financial Statements Detailed explanations and disclosures on accounting policies, significant transactions, and financial balances - Ramaco Resources, Inc. operates as a developer and operator of high-quality, low-cost metallurgical coal in southern West Virginia, southwestern Virginia, and southwestern Pennsylvania[22] - The company adopted ASU 2016-02, Leases, on January 1, 2019, resulting in the recognition of $0.3 million in right-of-use assets and lease liabilities[35] Property, Plant and Equipment (In thousands) | Category | June 30, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Plant and equipment | $130,218 | $109,911 | | Construction in process | $10,252 | $12,066 | | Capitalized mine development cost | $48,413 | $43,037 | | Less accumulated depreciation and amortization | $(24,690) | $(15,809) | | Total property, plant and equipment, net | $164,193 | $149,205 | - The company entered into a Credit Facility on November 2, 2018, consisting of a $10.0 million term loan and a $30.0 million revolving line of credit; as of June 30, 2019, the outstanding principal balance of the Term Loan was $7.1 million, and $8.0 million was outstanding on the Revolving Credit Facility[40][42] - Total compensation costs recognized for stock-based compensation were $1.1 million for the three months ended June 30, 2019, and $2.0 million for the six months ended June 30, 2019[45][46] Revenue Disaggregation (In thousands) | Category | Three months ended June 30, 2019 | Three months ended June 30, 2018 | Six months ended June 30, 2019 | Six months ended June 30, 2018 | | :--- | :--- | :--- | :--- | :--- | | Domestic revenues | $39,544 | $34,376 | $76,116 | $60,074 | | Export revenues | $26,217 | $30,902 | $47,105 | $61,147 | | Total revenues | $65,761 | $65,278 | $123,221 | $121,221 | - Income tax expense for the three months ended June 30, 2019, was $2.2 million (17.0% effective rate), up from $0.6 million (5.9% effective rate) in the prior year; for the six months, it was $3.5 million (16.8%) compared to $1.4 million (8.2%)[55] - The company has related party transactions including mineral lease and surface rights agreements with Ramaco Coal, LLC, and a Mutual Services Agreement for shared employee services[58][60] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's discussion and analysis of financial performance, operations, liquidity, and capital resources Business Overview Provides an overview of the company's core metallurgical coal business and relevant market conditions - Ramaco Resources, Inc. primarily sells metallurgical coal, with a 248-million-ton reserve base as of December 31, 2018, and plans to grow production to over 4.0 million clean tons in the next 3-4 years[62] - Metallurgical coal markets were strong in Q2 2019 but faced uncertainty in Q3 2019 due to China port restrictions and trade disputes, leading to a meaningful drop in prices[63] Second Quarter 2019 Overview Summarizes key operational achievements and financial highlights for the second quarter of 2019 - The company completed remediation work on its Elk Creek plant silos, returning to full processing capacity by early August 2019[65] Q2 2019 Performance Highlights (In millions) | Metric | Q2 2019 | Q1 2019 Change | | :--- | :--- | :--- | | Revenue | $65.8 | +14% | | Clean Tons Produced | 476,000+ | N/A | | Net Income | $10.6 | +4% (YoY) | | EBITDA | $19.1 | +28% (YoY) | Results of Operations Analyzes the company's revenue, cost of sales, operating income, and net income for the periods Consolidated Statement of Operations Data (In thousands) | Metric | 3 Months Ended June 30, 2019 | 3 Months Ended June 30, 2018 | 6 Months Ended June 30, 2019 | 6 Months Ended June 30, 2018 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $65,761 | $65,278 | $123,221 | $121,221 | | Cost of coal sales | $43,219 | $47,860 | $84,225 | $92,191 | | Operating income | $12,889 | $10,647 | $21,138 | $16,267 | | Net income | $10,613 | $10,204 | $17,496 | $15,470 | | Adjusted EBITDA | $19,093 | $14,933 | $32,778 | $24,154 | - For the three months ended June 30, 2019, revenue increased by approximately $0.5 million year-over-year due to higher realized prices, despite decreased sales of purchased coal; cost of sales decreased by $4.7 million primarily due to lower purchased-coal sales volume[67][68] - Cash cost per ton sold for company-produced coal increased to approximately $71 in Q2 2019 from $56 in Q2 2018, driven by higher sales-related costs and adverse roof conditions at the Eagle mine[69] - For the six months ended June 30, 2019, revenue increased by approximately $2.0 million year-over-year; cost of sales decreased by $8.0 million due to lower purchased-coal sales volume; cash cost per ton for produced coal rose to $69 from $60[75][76][77] - Depreciation and amortization costs increased for both periods due to growth and expanded operations; selling, general and administrative expenses also rose, mainly due to increased stock-based compensation[71][72][78][79] Non-GAAP Financial Measures Presents and reconciles non-GAAP financial measures, including Adjusted EBITDA, revenues, and cash cost per ton - Adjusted EBITDA is presented as a supplemental non-GAAP measure to evaluate operating performance, defined as net income (loss) plus net interest expense, stock-based compensation, depreciation and amortization, and transaction-related costs[83][84] Adjusted EBITDA Reconciliation (In thousands) | Metric | 3 Months Ended June 30, 2019 | 3 Months Ended June 30, 2018 | 6 Months Ended June 30, 2019 | 6 Months Ended June 30, 2018 | | :--- | :--- | :--- | :--- | :--- | | Net income | $10,613 | $10,204 | $17,496 | $15,470 | | EBITDA | $17,905 | $14,115 | $30,568 | $22,662 | | Adjusted EBITDA | $19,093 | $14,933 | $32,778 | $24,154 | Non-GAAP Revenues per Ton Sold (FOB mine) | Category | 3 Months Ended June 30, 2019 | 3 Months Ended June 30, 2018 | 6 Months Ended June 30, 2019 | 6 Months Ended June 30, 2018 | | :--- | :--- | :--- | :--- | :--- | | Company Produced | $116 | $91 | $110 | $91 | | Purchased Coal | $123 | $101 | $125 | $101 | | Total | $116 | $93 | $111 | $93 | Non-GAAP Cash Cost per Ton Sold (FOB mine) | Category | 3 Months Ended June 30, 2019 | 3 Months Ended June 30, 2018 | 6 Months Ended June 30, 2019 | 6 Months Ended June 30, 2018 | | :--- | :--- | :--- | :--- | :--- | | Company Produced | $70.76 | $56 | $69 | $60 | | Purchased Coal | $122 | $100 | $114 | $95 | | Total | $73 | $64 | $72 | $67 | Liquidity and Capital Resources Assesses the company's cash flow, capital expenditures, debt, and ability to meet financial obligations Cash Flow Data (In thousands) | Metric | Six months ended June 30, 2019 | Six months ended June 30, 2018 | | :--- | :--- | :--- | | Cash flows from operating activities | $13,114 | $8,111 | | Cash flows from investing activities | $(19,737) | $(22,278) | | Cash flows from financing activities | $5,213 | $14,144 | | Net change in cash and cash equivalents | $(1,410) | $(23) | - Net cash from operating activities increased due to changes in operating assets and liabilities; net cash used in investing activities decreased, with capital expenditures totaling $19.7 million in H1 2019[90][91] - Cash flows from financing activities in H1 2019 were $5.2 million, primarily from net borrowings of $5.5 million; the company's liquidity as of June 30, 2019, was $26.7 million[92][95] - Management believes current cash, operating cash flow, and the Revolving Credit Facility will be sufficient for capital expenditures and operating plans, but future liquidity could be impacted by various market and operational risks[96][97][98] Off-Balance Sheet Arrangements Confirms the absence of any material off-balance sheet arrangements impacting the company's financial position - As of June 30, 2019, the company had no material off-balance sheet arrangements[100] Item 3. Quantitative and Qualitative Disclosures about Market Risk The company's exposure to market risk has not materially changed since December 31, 2018, as referenced in its Annual Report on Form 10-K - The company's market risk exposure has not materially changed since December 31, 2018[101] Item 4. Controls and Procedures Management concluded disclosure controls were effective as of June 30, 2019; no material internal control changes - The company's disclosure controls and procedures were effective as of June 30, 2019, providing reasonable assurance for timely and accurate reporting[102] - No significant changes in internal control over financial reporting occurred during the quarter ended June 30, 2019[104] PART II. OTHER INFORMATION Provides additional information not in financial statements, covering legal proceedings, risk factors, and exhibits Item 1. Legal Proceedings Management believes no pending litigation or claims will materially affect the company's financial condition - Management believes no pending litigation, disputes, or claims will have a material adverse effect on the company's financial condition, cash flows, or results of operations[107] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K - No material changes to risk factors have occurred since those described in the Annual Report[108] Item 4. Mine Safety Disclosures Information regarding mine safety violations and regulatory matters is included in Exhibit 95.1 of this Quarterly Report - Mine safety disclosures are provided in Exhibit 95.1 of this report[109] Item 6. Exhibits Lists all exhibits filed with the Quarterly Report, including certifications, mine safety, and XBRL documents - Exhibits include certifications from the CEO and CFO (Sections 302 and 906 of Sarbanes-Oxley Act), Mine Safety Disclosure (Exhibit 95.1), and various XBRL Taxonomy Extension Documents[111][112] SIGNATURES Confirms the official signing and submission of the quarterly report by executive and financial officers - The report was signed on August 13, 2019, by Michael D. Bauersachs, President and Chief Executive Officer, and Jeremy R. Sussman, Chief Financial Officer[114][116]