Ramaco Resources(METC) - 2023 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the company's unaudited financial statements and management's analysis of financial condition and operations Item 1. Financial Statements This section presents Ramaco Resources' unaudited condensed consolidated financial statements, highlighting the reclassification of common stock and creation of Class B tracking stock Unaudited Condensed Consolidated Balance Sheets Total assets increased to $646.7 million, driven by higher receivables and PPE, with significant equity changes from stock reclassification Condensed Consolidated Balance Sheet Data (in thousands) | | September 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total current assets | $169,222 | $147,489 | | Total Assets | $646,706 | $596,339 | | Total current liabilities | $142,506 | $162,845 | | Total liabilities | $294,108 | $287,141 | | Total stockholders' equity | $352,598 | $309,198 | | Total Liabilities and Stockholders' Equity | $646,706 | $596,339 | Unaudited Condensed Consolidated Statements of Operations Q3 2023 revenue increased to $187.0 million, but net income decreased to $19.5 million due to higher costs, a trend continuing for the nine-month period Condensed Consolidated Statements of Operations (in thousands) | | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $186,966 | $136,925 | $490,795 | $430,461 | | Operating income | $16,081 | $36,689 | $57,994 | $132,266 | | Net income | $19,462 | $26,905 | $52,275 | $101,656 | | Basic EPS (Total) | $0.41 | $0.61 | $1.15 | $2.30 | | Diluted EPS (Total) | $0.40 | $0.60 | $1.14 | $2.27 | Unaudited Condensed Consolidated Statements of Cash Flows Net cash from operations decreased to $119.5 million, with significant cash used for investing activities at $57.8 million and financing activities at $54.4 million Condensed Consolidated Statements of Cash Flows (in thousands) | | Nine months ended September 30, 2023 | Nine months ended September 30, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $119,476 | $158,799 | | Net cash used for investing activities | $(57,766) | $(111,837) | | Net cash used for financing activities | $(54,399) | $(21,866) | | Net change in cash and cash equivalents | $7,311 | $25,096 | | Cash and cash equivalents, end of period | $43,784 | $47,902 | Notes to Unaudited Condensed Consolidated Financial Statements Notes detail accounting policies, the creation of Class B tracking stock for CORE assets generating fees, debt updates, and a favorable legal verdict - On June 12, 2023, the company reclassified its common stock to Class A and created a new Class B common stock to track the performance of its CORE (Carbon Ore-Rare Earth) assets[56] - The initial distribution of Class B stock was a dividend of 0.2 shares of Class B for every one share of existing common stock held. The stock dividend was valued at $102.9 million[57][67] - The company received a favorable court decision reinstating a $7.7 million jury verdict for a 2018 silo failure, which was recognized as a gain in Q3 2023[92][93] CORE Royalty and Infrastructure Fees (in thousands) | | Three months ended Sep 30, 2023 | Three months ended Jun 30, 2023 | | :--- | :--- | :--- | | Total Royalties | $4,199 | $2,103 | | Total Infrastructure Fees | $6,723 | $5,159 | | CORE Royalty and Infrastructure Fees | $10,922 | $7,262 | | 20% of Cash Available for Dividend for Class B | $2,184 | $1,452 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses performance, highlighting increased revenue from higher sales volume, offset by lower revenue per ton and higher costs, impacting profitability, while detailing liquidity and CORE asset initiatives Results of Operations Q3 2023 revenue rose to $187.0 million due to a 64% increase in tons sold, though revenue per ton fell 22%, leading to a decline in operating income Q3 2023 vs Q3 2022 Performance | Metric | Q3 2023 | Q3 2022 | Change | | :--- | :--- | :--- | :--- | | Coal Sales Revenue | $187.0M | $136.9M | +37% | | Tons Sold (thousands) | 996 | 608 | +64% | | Revenue per Ton Sold | $188 | $225 | -17% | | Cost of Sales | $144.6M | $79.6M | +82% | | Cost per Ton Sold | $145 | $131 | +11% | YTD 2023 vs YTD 2022 Performance | Metric | YTD 2023 | YTD 2022 | Change | | :--- | :--- | :--- | :--- | | Coal Sales Revenue | $490.8M | $430.5M | +14% | | Tons Sold (thousands) | 2,467 | 1,775 | +39% | | Revenue per Ton Sold | $199 | $243 | -18% | | Cost of Sales | $354.4M | $237.5M | +49% | | Cost per Ton Sold | $144 | $134 | +7% | - Other income in Q3 2023 was $11.3 million, primarily due to a $7.8 million legal verdict recognition and $3.0 million in insurance proceeds related to the 2022 Berwind methane ignition event[142] Liquidity and Capital Resources The company maintained $42.9 million in cash and $55.3 million available under its Revolving Credit Facility, funding capital expenditures, debt repayments, and dividends - At September 30, 2023, liquidity consisted of $42.9 million in cash and $55.3 million available under the Revolving Credit Facility[153] - Significant uses of cash for the first nine months of 2023 were capital expenditures ($64.9M), debt repayments ($37.2M), and dividend payments ($18.0M)[155] - The company filed a $400.0 million shelf registration statement on September 1, 2023, though there are no specific plans to raise capital at this time[159] Non-GAAP Financial Measures The company utilizes non-GAAP measures like Adjusted EBITDA, which was $45.4 million in Q3 2023, and non-GAAP revenue and cash cost per ton sold to evaluate performance Reconciliation of Net Income to Adjusted EBITDA (in thousands) | | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Net income | $19,462 | $26,905 | $52,275 | $101,656 | | Adjusted EBITDA | $45,407 | $50,705 | $123,675 | $172,622 | Non-GAAP Revenue and Cost Per Ton (FOB Mine) - Total | | Q3 2023 | Q3 2022 | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | :--- | :--- | | Revenue per ton sold (FOB mine) | $157 | $202 | $169 | $217 | | Cash cost per ton sold | $114 | $99 | $112 | $106 | Item 3. Quantitative and Qualitative Disclosures about Market Risk No material changes to market risk disclosures were reported from the prior Annual Report on Form 10-K - Disclosures about market risk are included by reference to the company's Annual Report, with no material changes noted[170] Item 4. Controls and Procedures Management concluded disclosure controls and procedures were effective, with no material changes to internal control over financial reporting 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 reporting period[171] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[172] PART II. OTHER INFORMATION This section provides other required information, including legal proceedings, risk factors, and various disclosures Item 1. Legal Proceedings The company is involved in routine litigation, with no pending claims expected to have a material adverse effect on its financial condition - The company states that there are no pending litigation, disputes, or claims that are expected to have a material adverse effect on its financial condition, cash flows, or results of operations[177] Item 1A. Risk Factors New risk factors relate to the Class B common stock structure, including potential conflicts of interest, discretionary dividends, and the Board's conversion ability - New risk factors have been introduced related to the Class B common stock structure[179] - Holders of Class B stock are subject to risks of the entire company, not just the CORE assets, and have no direct legal rights to CORE assets in a liquidation[179] - The Board has discretion to reattribute assets between classes and determine dividend payments, which may be unequal or not paid at all on a specific class, creating potential conflicts of interest[180][190][191] - The Board has the sole discretion to convert all outstanding Class B common stock into Class A common stock based on a VWAP formula, which could change the nature of the investment[207] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities or use of proceeds were reported during the period - None[211] Item 3. Defaults Upon Senior Securities No defaults upon senior securities were reported during the period - None[211] Item 4. Mine Safety Disclosures Mine safety disclosures, as required by the Dodd-Frank Act, are provided in Exhibit 95.1 of this report - Mine safety disclosures required by Regulation S-K are included in Exhibit 95.1[211] Item 5. Other Information No directors or executive officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter - No director or executive officer has adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarter[212] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including CEO/CFO certifications, Mine Safety Disclosure, and XBRL data files - The report includes standard exhibits such as CEO/CFO certifications under Sarbanes-Oxley Sections 302 and 906, Mine Safety Disclosures, and XBRL files[215]