Hallador Energy pany(HNRG) - 2023 Q3 - Quarterly Report

PART I - FINANCIAL INFORMATION Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for Hallador Energy Company as of September 30, 2023, and for the three and nine-month periods then ended - Key Financial Highlights (Nine Months Ended Sep 30, 2023) | Metric | Amount (in thousands) | Change YoY | | :--- | :--- | :--- | | Total Revenue | $515,296 | +145.5% | | Income from Operations | $75,280 | N/A (from loss) | | Net Income | $55,041 | N/A (from loss) | | Diluted EPS | $1.52 | N/A (from -$0.38) | | Cash from Operations | $79,527 | +470.7% | - Following the Merom Power Plant acquisition in October 2022, the company now operates and reports through two segments: Coal Operations and Electric Operations, with prior periods recast to reflect this change[21] Condensed Consolidated Balance Sheets Presents the company's financial position, detailing assets, liabilities, and equity as of September 30, 2023, and December 31, 2022 - Balance Sheet Summary (as of Sep 30, 2023 vs. Dec 31, 2022) | Account | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | | :--- | :--- | :--- | | Total Current Assets | $92,327 | $138,519 | | Total Assets | $585,186 | $630,554 | | Total Current Liabilities | $171,589 | $239,602 | | Total Liabilities | $313,497 | $415,530 | | Total Stockholders' Equity | $271,689 | $215,024 | Condensed Consolidated Statements of Operations Details the company's revenues, expenses, and net income for the three-month periods ended September 30, 2023, and 2022 - Statement of Operations Summary (Q3 2023 vs Q3 2022) | Metric | Q3 2023 (in thousands) | Q3 2022 (in thousands) | | :--- | :--- | :--- | | Total Revenue | $165,768 | $85,084 | | Coal Sales | $97,420 | $83,562 | | Electric Sales | $67,403 | $0 | | Income from Operations | $23,803 | $5,395 | | Net Income | $16,075 | $1,612 | | Diluted EPS | $0.44 | $0.05 | Condensed Consolidated Statements of Cash Flows Summarizes the cash inflows and outflows from operating, investing, and financing activities for the nine-month periods ended September 30, 2023, and 2022 - Cash Flow Summary (Nine Months Ended Sep 30, 2023 vs 2022) | Activity | 2023 (in thousands) | 2022 (in thousands) | | :--- | :--- | :--- | | Net cash from Operating Activities | $79,527 | $13,935 | | Net cash used in Investing Activities | ($48,684) | ($37,586) | | Net cash (used in) provided by Financing Activities | ($30,553) | $28,305 | Condensed Consolidated Statements of Stockholders' Equity Outlines changes in stockholders' equity, including net income and other comprehensive income, for the nine-month periods ended September 30, 2023, and 2022 - Total stockholders' equity increased from $215.0 million at December 31, 2022, to $271.7 million at September 30, 2023, primarily driven by $55.0 million in net income for the nine-month period[14] Notes to Condensed Consolidated Financial Statements Provides detailed explanations of significant accounting policies, financial instruments, and other material disclosures supporting the financial statements - On August 2, 2023, the company amended its credit agreement, resulting in a new term loan of $65 million maturing in March 2026 and a new revolver of $75 million maturing in July 2026, accounted for as a debt extinguishment[27] - As of September 30, 2023, the company had remaining coal sales performance obligations of approximately $426.1 million for fixed-price contracts and electric energy and capacity obligations totaling $312 million and $204 million, respectively, through 2028[47][51] - The Merom Power Plant acquisition was accounted for as an asset acquisition, recording a significant contract liability of $184.5 million for a below-market Power Purchase Agreement, amortized into revenue over the contract term[74][75] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the strong financial performance in the first nine months of 2023, with a net income of $55.0 million and operating cash flow of $79.5 million, highlighting key events including a credit facility amendment, debt repayment, and future energy sales - Net income for Q3 was $16.1 million, contributing to a year-to-date net income of $55.0 million, with operating cash flow of $79.5 million for the nine months used for $48.7 million in capital expenditures and $23.5 million in debt repayment[84] - The company successfully amended its credit facility, extending maturity into 2026 and improving its leverage ratio to 0.71x, well within the 2.25x covenant[85][93] - Secured $325 million of new energy and capacity sales for the years 2024-2028, including 3.3 million MWh of energy at an average of $56/MWh and $139 million in capacity sales[88] Overview and Forward Sales Position Provides an overview of the company's financial performance for Q3 2023 and outlines its forward sales position for coal and power segments through 2026 - Q3 2023 Key Metrics | Metric | Value | Note | | :--- | :--- | :--- | | Net Income | $16.1 million | - | | Coal Shipped | 2.1 million tons | Avg. price $65.43/ton (segment) | | Coal Operating Costs | $46.54 per ton | +$5.02/ton vs Q2 2023 | | Operating Cash Flow | $35.3 million | - | | Bank Debt Reduction | $12.5 million | - | | Power Production | 1.3 million MWh | - | - Forward Sales Position Summary (Segment Basis) | Segment | 2024 | 2025 | 2026 | | :--- | :--- | :--- | :--- | | Coal (% Sold) | 90% | 74% | 63% | | Power - Energy (% Sold) | 27% | 28% | 27% | | Power - Capacity (% Contracted) | 78% | 52% | 59% | Liquidity and Capital Resources Analyzes the company's cash flow generation, debt levels, and capital expenditure plans, highlighting its financial flexibility - Cash provided by operations was $79.5 million for the first nine months of 2023, a significant increase from $13.9 million in the same period of 2022, driven by higher coal sales margins[98] - As of September 30, 2023, bank debt was reduced to $61.8 million, and the company had an additional borrowing capacity of $63.8 million[98] - The projected capital expenditure budget for the remainder of 2023 is $30 million[98] Results of Operations by Segment Details the financial performance of the Coal Operations and Electric Operations segments, including revenue, income, and key operational metrics - Coal Operations Performance (Q3 2023 vs Q3 2022) | Metric | Q3 2023 | Q3 2022 | | :--- | :--- | :--- | | Operating Revenues | $134.9M | $84.5M | | Income from Operations | $24.8M | $6.1M | | Average Price/Ton | $65.43 | $49.01 | | Average Cost/Ton | $46.54 | $37.46 | - Coal operations revenue increased 60% in Q3 2023 vs Q3 2022 due to a $16/ton increase in average sales price and 0.3 million additional tons sold, while operating expenses rose by $9.08/ton due to higher-cost mines and inflation[101][102] - The Electric Operations segment, which began in Q4 2022, generated $67.5 million in revenue in Q3 2023 but had a loss from operations of ($2.7) million, impacted by the amortization of contract liabilities and assets from the Merom acquisition[109][110][111] Quantitative and Qualitative Disclosures About Market Risk This section states that there have been no material changes from the market risk disclosures provided in the company's 2022 Annual Report on Form 10-K - There were no material changes to the company's market risk disclosures compared to the 2022 Annual Report on Form 10-K[122] Controls and Procedures Management, including the CEO, CFO, and CAO, evaluated the company's disclosure controls and procedures and concluded that they were effective as of the end of the period - An evaluation of disclosure controls and procedures, supervised by the CEO, CFO, and CAO, concluded that these controls are effective[124] - No changes were made to the internal control over financial reporting during the quarter ended September 30, 2023, that have materially affected, or are reasonably likely to materially affect, these controls[125] PART II - OTHER INFORMATION Mine Safety Disclosures This section directs readers to Exhibit 95.1 of the Form 10-Q for a detailed listing of the company's mine safety violations - A listing of the company's mine safety violations is provided in Exhibit 95.1 to this Form 10-Q[126] Exhibits This section provides a list of all exhibits filed with the Form 10-Q, including the amended loan agreement, CEO/CFO/CAO certifications, mine safety disclosures, and various XBRL data files - Key exhibits filed include the Amended and Restated Loan Agreement dated August 2, 2023 (Exhibit 10.1), SOX 302 and 906 certifications, and Mine Safety Disclosures (Exhibit 95.1)[127] Signatures Signatures The report is duly signed and authorized by Lawrence D. Martin, Chief Financial Officer, and R. Todd Davis, Chief Accounting Officer, on behalf of Hallador Energy Company, dated November 6, 2023 - The Form 10-Q was signed on November 6, 2023, by Lawrence D. Martin (CFO) and R. Todd Davis (CAO)[131]