Ramaco Resources(METC) - 2022 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements Unaudited financial statements reflect significant growth in assets, revenue, and net income, driven by acquisitions and higher metallurgical coal prices Unaudited Condensed Consolidated Balance Sheets Total assets grew 70.8% to $562.1 million, driven by increased property and equipment, while liabilities rose due to acquisition-related debt Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | September 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total Current Assets | $141,956 | $86,761 | | Property, plant and equipment, net | $403,130 | $227,077 | | Total Assets | $562,132 | $329,033 | | Total Current Liabilities | $150,438 | $46,660 | | Total Liabilities | $263,463 | $117,959 | | Total Stockholders' Equity | $298,669 | $211,074 | Unaudited Condensed Consolidated Statements of Operations Revenue and net income surged for the nine-month period, reflecting significantly stronger coal pricing and operational performance Statement of Operations Summary (in thousands, except per-share amounts) | Metric | Q3 2022 | Q3 2021 | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $136,925 | $76,377 | $430,461 | $195,889 | | Operating Income | $36,689 | $8,767 | $132,266 | $17,032 | | Net Income | $26,905 | $7,035 | $101,656 | $21,120 | | Diluted EPS | $0.60 | $0.16 | $2.27 | $0.48 | Unaudited Condensed Consolidated Statements of Cash Flows Net cash from operations increased significantly, funding capital expenditures and acquisitions, while financing activities reflected debt and dividend payments Cash Flow Summary for Nine Months Ended September 30 (in thousands) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash from operating activities | $158,799 | $37,757 | | Net cash from investing activities | ($111,837) | ($17,642) | | Net cash from financing activities | ($21,866) | $20,847 | | Net change in cash | $25,096 | $40,962 | Notes to Financial Statements Key disclosures include the market impact of the Russia/Ukraine conflict, two major acquisitions, a mine ignition incident, and significant customer concentration - The European Union ban on Russian coal has put upward pressure on international thermal coal prices, potentially diverting coking coal to thermal markets[34] - On July 10, 2022, a material methane ignition occurred at the Berwind mining complex; the financial impact and restart plan have not yet been determined[47] - The company completed two major acquisitions in 2022: Ramaco Coal for approximately $65 million and Maben Coal for approximately $30 million[93][98] - For the nine months ended September 30, 2022, sales to the top two customers accounted for 40% of total revenue (23% and 17% respectively)[43] Management's Discussion and Analysis of Financial Condition and Results of Operations Higher coal sales pricing drove significant increases in net income and Adjusted EBITDA, despite rising costs, while liquidity remains strong Results of Operations Revenue per ton increased over 90% in Q3 and 121% year-to-date, offsetting higher costs per ton and driving profitability Q3 2022 vs Q3 2021 Performance | Metric | Q3 2022 | Q3 2021 | Change | | :--- | :--- | :--- | :--- | | Revenue | $136.9M | $76.4M | +79% | | Tons Sold (thousands) | 608 | 644 | -6% | | Revenue per ton (FOB mine) | $202 | $105 | +92% | | Cash cost per ton (FOB mine) | $99 | $72 | +37.5% | Nine Months 2022 vs 2021 Performance | Metric | Nine Months 2022 | Nine Months 2021 | Change | | :--- | :--- | :--- | :--- | | Revenue | $430.5M | $195.9M | +120% | | Tons Sold (thousands) | 1,775 | 1,751 | +1.4% | | Revenue per ton (FOB mine) | $217 | $98 | +121% | | Cash cost per ton (FOB mine) | $106 | $68 | +55.9% | Liquidity and Capital Resources The company maintained strong liquidity with $46.6 million in cash, primarily using funds for capital expenditures, acquisitions, and dividends - At September 30, 2022, the company had $46.6 million of cash and cash equivalents and $22.6 million available under its credit agreements[140] - Significant uses of cash in the first nine months of 2022 included $91.4 million in capital expenditures, $22.4 million for acquisitions, and $15.0 million in dividend payments[143] Non-GAAP Financial Measures Adjusted EBITDA, a key non-GAAP metric, increased substantially to $50.7 million in Q3 and $172.6 million for the nine-month period Reconciliation of Net Income to Adjusted EBITDA (in thousands) | Metric | Q3 2022 | Q3 2021 | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Net income | $26,905 | $7,035 | $101,656 | $21,120 | | Depreciation and amortization | $11,435 | $6,751 | $29,898 | $18,861 | | Interest expense, net | $2,255 | $933 | $5,323 | $1,418 | | Income tax expense | $6,596 | $1,588 | $27,068 | $1,650 | | Other adjustments | $3,514 | $1,498 | $8,677 | $4,380 | | Adjusted EBITDA | $50,705 | $17,805 | $172,622 | $47,429 | Quantitative and Qualitative Disclosures about Market Risk No material changes to the company's market risk profile were reported during the period - Disclosures about market risk are included in Item 7A of the company's Annual Report, with no new information presented in this quarterly report[158] Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no significant changes to internal controls during the quarter - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by this report[159] - No significant changes were made to the internal control over financial reporting during the quarter ended September 30, 2022[160] PART II. OTHER INFORMATION Legal Proceedings The company is appealing a reduced court award of $1.8 million related to a silo failure lawsuit - In a lawsuit over a silo failure, a jury awarded the company $7.7 million in compensatory damages and $25.0 million for inconvenience, which a court later reduced to a total award of $1.8 million; the company has appealed this reduction[81][82] Risk Factors No material changes to risk factors were reported since the last annual and quarterly filings - The company states there have been no material changes in its risk factors from those previously disclosed in its Annual Report and prior Form 10-Q[166] Unregistered Sales of Equity Securities and Use of Proceeds This item is not applicable for the reporting period - Not applicable[167] Mine Safety Disclosures Required mine safety information is provided in Exhibit 95.1 of the report - Mine safety disclosures required by Section 1503(a) of the Dodd-Frank Act are provided in Exhibit 95.1[169] Exhibits This section lists all filed exhibits, including credit agreements, officer certifications, and mine safety disclosures - Key exhibits filed include the Second Amendment to the Credit and Security Agreement, CEO/CFO certifications, and Mine Safety Disclosures (Exhibit 95.1)[174]