CONSOL Energy (CEIX) - 2021 Q1 - Quarterly Report

Part I. Financial Information Financial Statements This section presents the unaudited Consolidated Statements of Income, Comprehensive Income, Balance Sheets, Stockholders' Equity, and Cash Flows for the three months ended March 31, 2021, and 2020, along with detailed notes covering key accounting policies and events Consolidated Statements of Income The company's net income attributable to shareholders significantly increased to $26.4 million in Q1 2021 from $2.4 million in Q1 2020, driven by higher total revenues and a gain on asset sales, despite an increase in operating costs. Diluted earnings per share rose to $0.75 from $0.09 year-over-year Consolidated Statements of Income (Q1 2021 vs. Q1 2020) | Metric | Three Months Ended March 31, 2021 (in millions) | Three Months Ended March 31, 2020 (in millions) | | :--- | :--- | :--- | | Total Revenue and Other Income | $342.151 | $291.256 | | Total Costs and Expenses | $310.562 | $286.873 | | Net Income | $26.404 | $2.475 | | Net Income Attributable to Shareholders | $26.404 | $2.367 | | Total Basic Earnings per Share | $0.77 | $0.09 | | Total Diluted Earnings per Share | $0.75 | $0.09 | Consolidated Balance Sheets As of March 31, 2021, total assets were $2.521 billion, a slight decrease from $2.523 billion at year-end 2020. Total liabilities decreased to $1.937 billion from $1.970 billion, while total equity increased to $583 million from $554 million over the same period, primarily due to retained earnings Consolidated Balance Sheet Highlights | Metric | March 31, 2021 (in millions) | December 31, 2020 (in millions) | | :--- | :--- | :--- | | Total Current Assets | $336.742 | $292.941 | | Total Assets | $2.521 billion | $2.523 billion | | Total Current Liabilities | $371.194 | $368.470 | | Total Liabilities | $1.937 billion | $1.970 billion | | Total Equity | $583.065 | $553.519 | Consolidated Statements of Cash Flows For the first quarter of 2021, net cash provided by operating activities increased to $78.0 million from $51.4 million in the prior-year period. Net cash used in investing activities decreased significantly to $5.5 million from $27.2 million, while cash used in financing activities increased to $31.9 million from $25.7 million. The company ended the period with a higher cash and cash equivalents balance of $91.5 million Consolidated Cash Flow Summary (Q1 2021 vs. Q1 2020) | Metric | Three Months Ended March 31, 2021 (in millions) | Three Months Ended March 31, 2020 (in millions) | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $78.0 | $51.4 | | Net Cash Used in Investing Activities | ($5.5) | ($27.2) | | Net Cash Used in Financing Activities | ($31.9) | ($25.7) | | Cash and Cash Equivalents at End of Period | $91.5 | $78.8 | Notes to Consolidated Financial Statements The notes detail the basis of accounting, major transactions including the merger with CONSOL Coal Resources LP, revenue streams, debt structure, segment performance, and subsequent events. Key disclosures include the reclassification of the CONSOL Marine Terminal as a separate reportable segment, details on the company's various credit facilities and debt repurchases, and the issuance of new revenue bonds after the quarter's end - On December 30, 2020, the company completed its merger with CONSOL Coal Resources LP (CCR), acquiring all outstanding common units not previously owned. The transaction was accounted for as an equity transaction with no gain or loss recognized[48][50] - Effective December 31, 2020, the CONSOL Marine Terminal was reclassified as a separate reportable segment due to its increased contribution to Adjusted EBITDA and reliance on coal exports. Prior period segment information has been restated to conform to this presentation[46][128] - Subsequent to the quarter end, on April 13, 2021, the company issued $75 million in tax-exempt solid waste disposal revenue bonds with a 30-year maturity and a 9.0% interest rate for the initial 7-year term. The proceeds will finance the expansion of coal refuse disposal areas[141] - On April 28, 2021, the Board of Directors expanded the stock and debt repurchase program by $50 million, bringing the total authorization to $320 million, and extended its termination date to December 31, 2022[142] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the impact of COVID-19, business operations, and financial performance for Q1 2021. Key highlights include a significant improvement in coal shipments to 6.9 million tons, net income of $26.4 million, and Adjusted EBITDA of $106.7 million. The company provides an outlook for 2021, expecting sales of 22-24 million tons. The analysis details the performance of its two main segments, PAMC and CONSOL Marine Terminal, and discusses liquidity, capital resources, and debt management strategies Overview and Outlook The company highlights strong Q1 2021 performance with coal shipments reaching 6.9 million tons, the highest since Q2 2019, resulting in net income of $26.4 million and Adjusted EBITDA of $106.7 million. For the full year 2021, the company expects to sell 22-24 million tons of coal, with 20.5 million tons already contracted. Capital expenditures are projected to be between $100 million and $125 million - Q1 2021 coal shipments improved to 6.9 million tons, the highest level since Q2 2019[157] Q1 2021 Financial Highlights | Metric | Value | | :--- | :--- | | Net Income | $26.4 million | | Adjusted EBITDA | $106.7 million | | Debt Repayments | $29.8 million | 2021 Outlook | Metric | Guidance | | :--- | :--- | | PAMC Sales Volume | 22 - 24 million tons | | Contracted Position (as of May 4, 2021) | 20.5 million tons | | Average Cash Cost of Coal Sold per Ton | $27.00 - $29.00 | | Capital Expenditures (ex-Itmann) | $100 - $125 million | Results of Operations The company's net income attributable to shareholders rose to $26 million in Q1 2021 from $2 million in Q1 2020. The Pennsylvania Mining Complex (PAMC) segment's earnings before tax surged to $42 million from $11 million, driven by a 1.0 million ton increase in sales and a significant reduction in average cost of coal sold per ton from $40.04 to $31.85. The CONSOL Marine Terminal segment's earnings remained stable at $9 million - PAMC coal production increased to 7.0 million tons in Q1 2021 from 6.0 million tons in Q1 2020, reflecting improved demand. The Bailey and Harvey mines saw increased production, while the Enlow Fork mine's output decreased as it operated only one longwall[179][180] PAMC Segment Performance per Ton (Q1 2021 vs. Q1 2020) | Metric | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Total Tons Sold (millions) | 6.9 | 5.9 | | Average Revenue per Ton Sold | $41.39 | $43.16 | | Average Cost of Coal Sold per Ton | $31.85 | $40.04 | | Average Margin per Ton Sold | $9.54 | $3.12 | - The decrease in the average cost of coal sold per ton was driven by tight cost controls, no longwall moves in Q1 2021 (compared to one in Q1 2020), and improved operating leverage from higher production volumes[187] Liquidity and Capital Resources The company's liquidity is supported by cash from operations, which increased to $78 million in Q1 2021. The company made $29.8 million in principal debt repayments and repurchases during the quarter. As of March 31, 2021, the $400 million revolving credit facility had no borrowings and $146 million in letters of credit outstanding. Subsequent to the quarter, the company issued $75 million in revenue bonds to fund capital projects and expanded its stock/debt repurchase program to $320 million Cash Flow Summary (in millions) | Metric | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Cash Provided by Operating Activities | $78 | $51 | | Cash Used in Investing Activities | ($5) | ($27) | | Cash Used in Financing Activities | ($32) | ($26) | - During Q1 2021, the company made principal repayments and repurchases totaling $29.8 million across its finance leases, Term Loan A, Term Loan B, and Second Lien Notes[157][209] - As of March 31, 2021, the company was in compliance with all financial covenants under its Senior Secured Credit Facilities. The maximum first lien gross leverage ratio was 1.37 to 1.00, and the maximum total net leverage ratio was 1.97 to 1.00[95][224] - During Q1 2021, the company spent approximately $9 million to retire $10 million of its 11.00% Senior Secured Second Lien Notes. No common shares were repurchased[247] Quantitative and Qualitative Disclosures About Market Risk This section states that there have been no material changes to the company's exposures to market risk since the disclosures made in its Annual Report on Form 10-K for the year ended December 31, 2020 - There have been no material changes to the Company's exposures to market risk since December 31, 2020[257] Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of March 31, 2021. There were no changes in internal controls over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, these controls - Based on an evaluation as of the end of the period, the principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures are effective[259] - No changes in the company's internal controls over financial reporting occurred during the fiscal quarter that materially affected, or are reasonably likely to materially affect, the controls[260] Part II. Other Information Legal Proceedings The company is involved in various legal proceedings incidental to its business. No material litigation is currently pending, except for matters disclosed in Note 14 of the financial statements, which include disputes over retiree health care benefits and potential liabilities under the Coal Act - The company is not currently subject to any material litigation, except as disclosed in Note 14 - Commitments and Contingent Liabilities[262] Risk Factors This section highlights a specific risk factor concerning the dependency on key executives and the potential adverse effects of being unable to attract and retain them. It notes that factors like commodity price volatility and ESG-related pressures on the coal industry could impact retention. For a comprehensive list of risks, the report refers to the company's 2020 Form 10-K - The company's future success depends on the continued services of its key executive officers. The inability to retain senior management could be impacted by commodity price volatility and negative sentiment towards the fossil fuel industry, potentially having a material adverse effect on the business[264][265] Unregistered Sales of Equity Securities and Use of Proceeds No repurchases of the company's equity securities occurred during the three months ended March 31, 2021. The company's stock and debt repurchase program, which was expanded subsequent to the quarter, had approximately $132 million remaining available as of May 4, 2021 - There were no repurchases of the Company's equity securities during the three months ended March 31, 2021[268] - As of May 4, 2021, approximately $132 million remained available under the expanded $320 million stock and debt repurchase program, which terminates on December 31, 2022[268] Mine Safety Disclosures Information regarding mine safety violations and other regulatory matters as required by the Dodd-Frank Act is provided in Exhibit 95 of this quarterly report - Information concerning mine safety violations required by Section 1503(a) of the Dodd-Frank Act is included in Exhibit 95 to this Quarterly Report on Form 10-Q[271]