Hallador Energy pany(HNRG) - 2025 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION Financial Statements Hallador Energy reported a $18.2 million net income for the six months ended June 30, 2025, reversing a prior-year loss due to higher revenues and operational efficiencies Condensed Consolidated Balance Sheets Total assets increased to $409.5 million and stockholders' equity improved to $122.2 million as of June 30, 2025, reflecting recent profitability Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Current Assets | $139,874 | $104,858 | | Total Assets | $409,513 | $369,120 | | Total Current Liabilities | $209,255 | $152,903 | | Total Liabilities | $287,360 | $264,835 | | Total Stockholders' Equity | $122,153 | $104,285 | Condensed Consolidated Statements of Operations The company achieved profitability in H1 2025 with $18.2 million net income, reversing prior-year losses due to increased revenues and decreased operating expenses Statement of Operations Summary (in thousands, except per share data) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Total sales and operating revenues | $220,676 | $205,619 | | Income (Loss) from Operations | $25,808 | $(4,553) | | Net Income (Loss) | $18,227 | $(11,900) | | Diluted EPS | $0.42 | $(0.32) | Condensed Consolidated Statements of Cash Flows Net cash from operations was $49.8 million for H1 2025, leading to a $20.2 million increase in cash, cash equivalents, and restricted cash Cash Flow Summary (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $49,783 | $39,891 | | Net cash used in investing activities | $(24,897) | $(25,570) | | Net cash used in financing activities | $(4,669) | $(10,716) | | Increase in cash, cash equivalents, and restricted cash | $20,217 | $3,605 | Notes to Condensed Consolidated Financial Statements Key notes detail the company's two operating segments, a $215.1 million impairment charge, a credit agreement amendment, a new $35.0 million prepaid power contract, and a 2024 Coal segment restructuring - The company's business is organized into two reportable segments: Electric Operations (Merom Power Plant) and Coal Operations (Oaktown 1 mining complex)[21][23] - In 2024, the company recorded a $215.1 million non-cash impairment charge in its Coal Operations segment due to lower quality coal at the Oaktown 2 mine, leading to its temporary sealing[32] - On June 27, 2025, the company amended its credit agreement for additional operating flexibility, with total bank debt at $45.0 million as of June 30, 2025[37][38] - During Q2 2025, the company entered into a 17-month, $35.0 million prepaid physically delivered power contract with a significant financing component[59] - In February 2024, the company reorganized its Coal Operations segment, reducing its workforce by approximately 110 employees (12%) and idling higher-cost surface mines to improve efficiency[83] Unsatisfied Performance Obligations as of June 30, 2025 (in thousands) | Revenue Stream | Total Remaining Obligation | | :--- | :--- | | Delivered energy revenues | $436,530 | | Capacity revenues | $183,200 | | Coal Operations revenues | $371,540 | | Total Revenue | $991,270 | Management's Discussion and Analysis (MD&A) Management reported strong Q2 2025 results, pursuing long-term PPAs and strategic acquisitions, benefiting from Coal Operations restructuring, and maintaining $42.0 million total liquidity - Q2 2025 generated $102.9 million in revenue with a $17.6 million EBITDA margin, an improvement of $9.1 million year-over-year[110] - The company is in discussions with data center developers and utilities for a long-term PPA for the Merom plant's capacity and energy[113] - Strategic initiatives include seeking acquisitions of additional dispatchable generation and evaluating natural gas co-firing capability at the Merom plant to enhance flexibility and reliability[114][116] - The 2024 organizational restructuring in the Coal Operations segment has led to improved operational expenses, more efficient recoveries, and accelerating shipments[119] Liquidity Position as of June 30, 2025 | Metric | Amount (in millions) | | :--- | :--- | | Cash provided by operations (YTD) | $49.8 | | Bank Debt | $45.0 | | Additional borrowing capacity | $32.8 | | Total Liquidity | $42.0 | Results of Operations - Electric Operations The Electric Operations segment's income before income taxes increased 41.9% to $30.8 million for H1 2025, driven by new PPA contracts and lower fuel costs Electric Operations Performance (YTD 2025 vs YTD 2024) | Metric | Six Months Ended June 30, 2025 (in millions) | Six Months Ended June 30, 2024 (in millions) | | :--- | :--- | :--- | | Electric Sales | $145.9 | $120.9 | | EBITDA Margin | $41.8 | $31.3 | | Income before Income Taxes | $30.8 | $21.7 | | MWh Sold (thousands) | 2,392 | 1,730 | - The increase in delivered energy revenue for YTD 2025 is attributed to new PPA contracts that started in Q1 2025[149] Results of Operations - Coal Operations The Coal Operations segment significantly reduced its loss before income taxes to $3.7 million for H1 2025, driven by decreased depreciation from the 2024 asset impairment and reduced labor costs Coal Operations Performance (YTD 2025 vs YTD 2024) | Metric | Six Months Ended June 30, 2025 (in millions) | Six Months Ended June 30, 2024 (in millions) | | :--- | :--- | :--- | | Coal Sales | $100.3 | $111.7 | | EBITDA Margin | $8.3 | $(4.0) | | Loss before Income Taxes | $(3.7) | $(29.2) | | Tons Sold (thousands) | 1,961 | 2,063 | - Labor costs decreased by $8.8 million YTD due to the February 2024 restructuring, which reduced the segment's headcount from 924 to 655[162] - Depreciation, depletion, and amortization costs decreased by $9.5 million YTD as a direct result of the $215.1 million non-cash impairment charge recognized in Q4 2024[165] Critical Accounting Estimates The company's critical accounting estimates, requiring significant judgment, include coal reserves, asset retirement obligations, deferred taxes, inventory valuation, and long-lived asset impairment analysis - Key critical accounting estimates include coal reserves, asset retirement obligations, deferred taxes, inventory valuation, and impairment analysis[173] - Asset retirement obligations are discounted using credit-adjusted risk-free rates ranging from 7% to 10%[176] Quantitative and Qualitative Disclosures About Market Risk There have been no material changes to the company's market risk disclosures since its 2024 Annual Report on Form 10-K - There were no material changes from the market risk disclosure in the 2024 Annual Report on Form 10-K[182] Controls and Procedures The CEO and CFO concluded the company's disclosure controls and procedures were effective, with no material changes to internal controls over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures are effective[184] - No changes to internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[185] PART II - OTHER INFORMATION Mine Safety Disclosures Exhibit 95.1 provides a comprehensive listing of the company's mine safety violations - A listing of the company's mine safety violations is provided in Exhibit 95.1 to the Form 10-Q[193] Exhibits This section lists all exhibits filed with the Form 10-Q, including the Third Amendment to the Credit Agreement and required SOX certifications - Key exhibits filed include the Third Amendment to the Fourth Amended and Restated Credit Agreement and SOX 302 and 906 certifications[194]