# Ramaco Resources, Inc.: Form 10-Q for the period ended Jun 30, 2022

- Company: [Ramaco Resources, Inc.](/companies/metc.md) (CIK 1687187)
- Form: 10-Q
- Filed: 2022-08-09
- Accepted by EDGAR: Aug 9, 2022, 16:09 ET
- Period: 2022-06-30
- Accession: 0001558370-22-012874
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1687187/000155837022012874/metc-20220630x10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1687187/000155837022012874/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2022-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2022-04-01 to 2022-06-30 | $138.7m | us-gaap:RevenueFromContractWithCustomerIncludingAssessedTax |
| Revenue | 6 months, 2022-01-01 to 2022-06-30 | $293.5m | us-gaap:RevenueFromContractWithCustomerIncludingAssessedTax |
| Cost of revenue | 3 months, 2022-04-01 to 2022-06-30 | $76.6m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 6 months, 2022-01-01 to 2022-06-30 | $157.9m | us-gaap:CostOfGoodsAndServicesSold |
| Selling, general and administrative | 3 months, 2022-04-01 to 2022-06-30 | $8.8m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 6 months, 2022-01-01 to 2022-06-30 | $20.6m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2022-04-01 to 2022-06-30 | $42.7m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2022-01-01 to 2022-06-30 | $95.6m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2022-04-01 to 2022-06-30 | $9.8m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2022-01-01 to 2022-06-30 | $20.5m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2022-04-01 to 2022-06-30 | $33.3m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2022-01-01 to 2022-06-30 | $74.8m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2022-04-01 to 2022-06-30 | $0.74 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2022-01-01 to 2022-06-30 | $1.66 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2022-04-01 to 2022-06-30 | $0.75 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2022-01-01 to 2022-06-30 | $1.69 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2022-04-01 to 2022-06-30 | 45,135 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2022-01-01 to 2022-06-30 | 45,022 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2022-01-01 to 2022-06-30 | $109.3m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months, 2022-01-01 to 2022-06-30 | $53.8m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2022-06-30 | $43.5m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2022-06-30 | $132.1m | us-gaap:AssetsCurrent |
| Total assets | at 2022-06-30 | $489.7m | us-gaap:Assets |
| Current liabilities | at 2022-06-30 | $110.8m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2022-06-30 | $210.0m | us-gaap:Liabilities |
| Long-term debt | at 2022-06-30 | $1.9m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2022-06-30 | $6.1m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2022-06-30 | $279.7m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 34,124 characters.

*The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in our Annual Report, as well as the financial statements and related notes appearing elsewhere in this Quarterly Report. The following discussion contains forward-looking statements that reflect our future plans, estimates, beliefs and expected performance. The forward-looking statements are dependent upon events, risks and uncertainties that may be outside our control. We caution you that our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences are discussed elsewhere in this Quarterly Report, particularly in the “Cautionary Note Regarding Forward-Looking Statements” and in our Annual Report and in this Quarterly Report under the heading “Item 1A. Risk Factors,” all of which are difficult to predict. In light of these risks, uncertainties and assumptions, the forward-looking events discussed may not occur. We do not undertake any obligation to publicly update any forward-looking statements except as otherwise required by applicable law.*

### Overview

We are an operator and developer of high-quality, low-cost metallurgical coal in southern West Virginia, southwestern Virginia, and southwestern Pennsylvania. Our executive offices are located in Lexington, Kentucky, with operational offices in Charleston, West Virginia and Sheridan, Wyoming. We are a pure play metallurgical coal company with 39 million reserve tons and 769 million resource tons of high-quality metallurgical coal. We believe our advantaged reserve geology provides us with higher productivities and industry leading lower cash costs.

Our development portfolio primarily includes four properties: Elk Creek, Berwind, Knox Creek and RAM Mine. Each of these properties possesses geologic and logistical advantages that make our coal among the lowest delivered-cost U.S. metallurgical coal to our domestic target customer base, North American blast furnace steel mills and coke plants, as well as international metallurgical and thermal coal consumers. In addition, with the Ramaco Coal acquisition, we control coal deposits in Wyoming along with facilities that house research and development activities.

During the first half of 2022, we sold 1.2 million tons of coal. Of this, 51% was sold in North American markets, including Canada, and 49% was sold in export markets, principally to Europe, South America, Asia and Africa. During the same period of 2021, 48% of our sales were sold in North American markets, with the remaining 52% being sold into the export markets.

At June 30, 2022, we had outstanding performance obligations for the remainder of 2022 of approximately 1.1 million tons for contracts with fixed sales prices averaging $196/ton and 0.2 million tons for contracts with index-based pricing mechanisms.

COVID-19 continues to impact countries across the world, and the duration and severity of the effects are currently unknown. We continue to actively monitor the situation and may take further actions altering our business operations that we determine are in the best interests of our employees, customers, suppliers, and stakeholders, or as required by federal, state, or local authorities.

Regarding the military conflict involving Russia and Ukraine, resulting sanctions and future market or supply disruptions in the region, are impossible to predict, but could be significant and may have a severe adverse effect on the region. Globally, various governments have banned imports from Russia including commodities such as oil, natural gas and coal. These events have caused volatility in the commodity markets. This volatility, including market expectations of potential changes in coal prices and inflationary pressures on steel products, may have a significant effect on market prices and overall demand for our coal and the cost of supplies and equipment. We are closely monitoring the potential effects on the market.

We have no meaningful direct financial exposure to Russia and Ukraine. As the European Union ban on Russian coal goes into effect in August, it could create further tightness in the metallurgical coal markets as Russia was the third largest exporter of metallurgical coal in 2021 or 10% of global metallurgical coal trade and has already contributed to global thermal coal prices spiking to unprecedented levels.

### Recent Developments

On July 10, 2022, we experienced a material methane ignition at our Berwind mining complex. The cause of the ignition is unknown. We, in conjunction with the appropriate state and federal regulatory authorities, will be conducting a full investigation into the incident. The mine was idle at the time of the incident, and there were no personnel in the mine nor any injuries or fatalities. We are evaluating the extent of the damage. Production from the Berwind Complex is expected to be impacted for an indeterminant period of time. We will provide additional information regarding plans for both the rehabilitation and restarting of the mine as it becomes available.

On August 8, 2022, we entered into a Securities Purchase Agreement with Appleton Coal LLC to acquire 100% of the membership interests in Maben Coal LLC for an aggregate purchase price of $30 million (the “Maben Acquisition”). The purchase price will consist of (i) $9 million to be paid in cash at closing and (ii) $21 million to be paid from the proceeds of a secured note payable to Investec Bank, PLC (the “Investec”) pursuant to a vendor loan facility between the Investec and us. The completion of the Maben Acquisition remains subject to customary closing conditions, including obtaining certain consents and delivery of ancillary transaction documents.

### Results of Operations

*(In thousands)*

| ​ ​ ​ | ​ ​ ​ | ​ ​ Three months ended June 30, 2022 ​ ​ | ​ ​ | ​ ​ 2021 ​ ​ | ​ ​ ​ | ​ ​ Six months ended June 30, 2022 ​ ​ | ​ ​ | ​ ​ 2021 ​ ​ | ​ ​ ​ |
| --- | --- | ---: | --- | --- | --- | --- | --- | --- | --- |
| Revenue | ​ | $138,655 | ​ | $76,057 | ​ | $293,537 | ​ | $119,511 | ​ |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ |
| Costs and expenses | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ |
| Cost of sales (exclusive of items shown separately below) | ​ | 76,644 |  | ​ 57,762 |  | ​ 157,897 |  | ​ 88,958 |  |
| Asset retirement obligations accretion | ​ | ​ 755 |  | ​ 154 |  | ​ 990 |  | ​ 305 |  |
| Depreciation and amortization | ​ | 9,783 | ​ | ​ 5,955 | ​ | ​ 18,463 | ​ | ​ 12,110 | ​ |
| Selling, general and administrative | ​ | 8,786 | ​ | ​ 5,165 | ​ | ​ 20,610 | ​ | ​ 9,873 | ​ |
| Total costs and expenses | ​ | 95,968 | ​ | ​ 69,036 | ​ | ​ 197,960 | ​ | ​ 111,246 | ​ |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ |
| Operating income | ​ | 42,687 |  | ​ 7,021 |  | ​ 95,577 |  | ​ 8,265 |  |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ |
| Other income, net | ​ | 2,348 | ​ | ​ 3,432 | ​ | ​ 2,714 | ​ | ​ 6,367 | ​ |
| Interest expense, net | ​ | (1,937) | ​ | ​ (283) | ​ | ​ (3,068) | ​ | ​ (485) | ​ |
| Income before tax | ​ | ​ 43,098 | ​ | ​ 10,170 | ​ | ​ 95,223 | ​ | ​ 14,147 | ​ |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ |
| Income tax expense | ​ | 9,818 |  | ​ 228 |  | ​ 20,472 |  | ​ 62 |  |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ |
| Net income | ​ | $33,280 | ​ | $9,942 | ​ | $74,751 | ​ | $14,085 | ​ |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ |
| Earnings per common share | **​** | ​ ​ | ​ | ​ ​ | **​** | ​ ​ | ​ | ​ ​ | ​ |
| Basic | ​ | $0.75 | ​ | $0.23 | ​ | $1.69 | ​ | $0.32 | ​ |
| Diluted | ​ | $0.74 | ​ | $0.23 | ​ | $1.66 | ​ | $0.32 | ​ |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ |
| Adjusted EBITDA | ​ | $57,859 | ​ | $18,084 | ​ | $121,917 | ​ | $29,624 | ​ |

During the three and six months ended June 30, 2022, our net income and Adjusted EBITDA were significantly higher compared to the same periods in 2021. Sales pricing was higher by 122% and 141%, respectively, during the three and six months ended June 30, 2022 than the same periods during 2021, which was primarily due to the global rebound of metallurgical demand from the previous effects of COVID-19. Other income for the three and six months ended June 30, 2022 included $2.0 million related to the sale of mineral rights. In the three and six months ended June

30, 2021, we recognized a total of $2.9 million and $5.3 million, respectively, in other income for the CARES Act Employee Retention Tax Credit.

#### Three Months Ended June 30, 2022 Compared to Three Months Ended June 30, 2021

*Revenue*. Our revenue includes sales of Company produced coal and coal purchased from third parties. We include amounts billed by us for transportation to our customers within revenue and transportation costs incurred within cost of sales. Revenue per ton sold (FOB mine) and cash cost per ton sold (FOB mine) each exclude the impact of transportation billings and costs.

Coal sales information is summarized as follows:

*(In thousands)*

| ​ ​ Company Produced | ​ ​ | ​ ​ Three months ended June 30, 2022 ​ | ​ | ​ ​ 2021 ​ | ​ | ​ ​ Increase (Decrease) ​ |
| --- | --- | ---: | --- | ---: | --- | ---: |
| Coal sales revenue | ​ | $137,714 | ​ | $73,211 | ​ | $64,503 |
| Tons sold | ​ | 578 | ​ | 664 | ​ | (86) |
| Purchased from Third Parties | ​ |  | ​ |  | ​ |  |
| Coal sales revenue | ​ | $941 | ​ | $2,846 | ​ | $(1,905) |
| Tons sold | ​ | 5 | ​ | 21 | ​ | (16) |

Coal sales revenue in the second quarter of 2022 was $138.7 million, 82% higher than in the second quarter of 2021 primarily due to increased revenue per tons sold (FOB Mine) in the second quarter of 2022. Revenue per ton sold (FOB mine) increased 122% from $97/ton in the second quarter of 2021 to $215/ton in the second quarter of 2022. We sold 584 thousand tons of coal in the second quarter of 2022, a 15% decrease over the same period in 2021 due to rail-related constraints. We benefited from improved domestic, spot and index pricing for metallurgical coal in 2022. Additionally, favorable conditions in the steel and metallurgical markets contributed to an increase demand for metallurgical coal and stronger pricing.

*Cost of sales.* Our cost of sales totaled $76.6 million for the three months ended June 30, 2022 as compared with $57.8 million for the same period in 2021 due to higher sales-related costs directly associated with higher revenue per ton sold in 2022 and inflationary pressures on overall costs. The cash cost per ton sold (FOB mine) for the second quarter of 2022 was $108/ton, compared with $70/ton in the second quarter of 2021. Our cash cost per ton sold in the 2022 period was primarily due to higher sales-related costs directly associated with higher revenue per ton sold in 2022 and inflationary pressures on overall costs.

*Asset retirement obligation accretion.* Asset retirement obligation accretion was $0.8 million for the three month period ended June 30, 2022 and $0.2 million for the three month period ended June 30, 2021.

*Depreciation and amortization.* Depreciation and amortization expense was $9.8 million and $6.0 million for the three month periods ended June 30, 2022 and June 30, 2021, respectively, primarily due to additional mining equipment placed in service in recent periods over the past year.

*Selling, general and administrative.* Selling, general and administrative expenses were $8.8 million for the three months ended June 30, 2022 and $5.2 million for the three months ended June 30, 2021 primarily due to higher stock compensation, incentives and professional services in 2022, related to the Company’s production growth profile.

*Other income.* Other income was $2.3 million for the three months ended June 30, 2022, which includes a gain of $2.1 million on the sale of mineral rights. For the three months ended June 30, 2021, other income was $3.4 million which includes $2.9 million for the CARES Act Employee Retention Tax Credit.

*Interest expense, net.* Interest expense, net was approximately $1.9 million during the three months ended June 30, 2022. Interest expense, net was approximately $0.3 million in the three months ended June 30, 2021. Interest expense, net was higher from the prior period primarily due to the issuance of the Senior Notes in July 2021.

*Income tax expense.* The effective tax rate for the three months ended June 30, 2022, excluding discrete items, was 22.8%. The effective tax rate for the three months ended June 30, 2021, excluding discrete items, was 10%. Discrete items during the three months ended June 30, 2021 included the impact of legislative changes in West Virginia for which we recognized a tax benefit of $1.0 million. The primary difference from the federal statutory rate of 21% is related to state taxes, permanent differences for non-deductible expenses and the difference in depletion expense between GAAP and federal income tax purposes.

#### Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021

*Revenue*. Coal sales information is summarized as follows:

*(In thousands)*

| ​ ​ Company Produced | ​ ​ | ​ ​ Six months ended June 30, 2022 ​ | ​ | ​ ​ 2021 ​ | ​ | ​ ​ Increase (Decrease) ​ |
| --- | --- | ---: | --- | ---: | --- | ---: |
| Coal sales revenue | ​ | $288,643 | ​ | $115,004 | ​ | $173,639 |
| Tons sold | ​ | 1,151 | ​ | 1,071 | ​ | 80 |
| Purchased from Third Parties | ​ |  | ​ |  | ​ |  |
| Coal sales revenue | ​ | $4,894 | ​ | $4,507 | ​ | $387 |
| Tons sold | ​ | 16 | ​ | 37 | ​ | (21) |

Coal sales revenue in the six months ended June 30, 2022 was $293.5 million, 146% higher than in the same period in 2021 principally due to 5% higher volume of tons sold in 2022 and revenue per ton sold (FOB mine) increasing 142% from $93/ton in the six months ended June 30, 2021 to $225/ton in the same period in 2022. We sold 1.2 million tons of coal in the six month period ended June 30, 2022, a 5% increase over the same period in 2021.

*Cost of sales.* Our cost of sales totaled $157.9 million for the six months ended June 30, 2022 as compared with $89.0 million for the same period in 2021 due to higher tons sold, higher sales-related costs directly associated with higher revenue per ton sold in 2022 and inflationary pressures on overall costs. The cash cost per ton sold (FOB mine) for the first half of 2022 was $109, compared with $66 in the same period in 2021.

*Asset retirement obligation accretion.* Asset retirement obligation accretion was $1.0 million for the six months ended June 30, 2022 and $0.3 million for the six months ended June 30, 2021.

*Depreciation and amortization.* Depreciation and amortization expense was $18.5 million and $12.1 million for the six month periods ended June 30, 2022 and June 30, 2021, respectively, principally due to higher production volumes in the first half of 2022 and depreciation on capital equipment placed in service.

*Selling, general and administrative.* Selling, general and administrative expenses were $20.6 million for the six months ended June 30, 2022 and $9.9 million for the six months ended June 30, 2021 primarily due to higher stock compensation, incentives and professional services in 2022, related to the Company’s production growth profile.

*Other income.* Other income was $2.7 million for the six months ended June 30, 2022 due to a gain of $2.1 million on the sale of mineral rights. For the six months ended June 30, 2021, other income was $6.4 million principally due to the recognition of $5.3 million for the CARES Act Employee Retention Tax Credit

*Interest expense, net.* Interest expense, net was approximately $3.1 million in the six month period ended June 30, 2022 and $0.5 million for the same period in 2021. Interest expense, net was higher from the prior period primarily due to the issuance of the Senior Notes in July 2021.

*Income tax expense.* During the six months ended June 30, 2021, we recognized a tax benefit of $1.4 million for legislative changes in West Virginia. The effective tax rate for this period, excluding discrete items, was 9%. The effective tax rate for the six months ended June 30, 2022 was 21.5%. The primary difference from the federal statutory rate of 21% is related to state taxes, permanent differences for non-deductible expenses and the difference in depletion expense between U.S. GAAP and federal income tax purposes.

### Liquidity and Capital Resources

At June 30, 2022, we had $43.5 million of cash and cash equivalents and $39.6 million available under our existing credit agreements for future borrowings.

#### Significant sources and uses of cash during the first six months of 2022

Sources of cash:

- Cash flows from operating activities were $109.3 million. This included the negative impact of an increase in inventories of $16.6 million, primarily due to rail-related constraints, offset by an increase in accrued expenses of $18.4 million, principally due to accrued purchases, income taxes and payroll and related items.

Uses of cash:

- Capital expenditures were $53.8 million, which were primarily for growth projects at the Berwind and Elk Creek mining complexes, excluding the acquisition of the Ramaco Coal assets.
- We made net repayments of $11.0 million primarily for the Ramaco Coal acquisition note (see Note 12), certain equipment purchases and management of our normal operating cash position.
- We paid dividends of $10.0 million.
- We paid for the acquisition of Ramaco Coal for $11.7 million, including transaction costs.

At June 30, 2022, we also had $1.3 million of restricted cash, classified in other current assets in the condensed consolidated balance sheet, for potential future workers’ compensation claims.

#### Future sources and uses of cash

Our primary use of cash includes capital expenditures for mine development, ongoing operating expenses and deferred cash payments in connection with the Ramaco Coal acquisition. We expect to fund our capital and liquidity requirements with cash on hand, anticipated cash flows from operations and borrowings discussed in more detail below. We believe that current cash on hand, cash flow from operations and available liquidity under our existing credit agreements will be sufficient to meet our capital expenditure and operating plans.

Additional factors that could adversely impact our future liquidity and ability to carry out our capital expenditure program include:

- Timely delivery of our product by rail and other transportation carriers;
- Late payments of accounts receivable by our customers;
- Cost overruns in our purchases of equipment needed to complete our mine development plans;
- Delays in completion of development of our various mines, processing plants and refuse disposal facilities, which would reduce the coal we would have available to sell and our cash flow from operations; and
- Adverse changes in the metallurgical coal markets that would reduce the expected cash flow from operations.

If future cash flows are insufficient to meet our liquidity needs or capital requirements, we may reduce our expected level of capital expenditures and/or fund a portion of our capital expenditures through the issuance of debt or equity securities, the entry into debt arrangements or from other sources, such as asset sales.

#### Indebtedness

*Revolving Credit Facility and Term Loan—*On November 2, 2018, we entered into a Credit and Security Agreement (as amended or amended and restated the “Revolving Credit Facility” or the “Credit Agreement”) with KeyBank National Association (“KeyBank”), as the administrative agent, and other lenders party thereto. The Credit Agreement was amended on February 20, 2020 and March 19, 2021. On October 29, 2021, we entered into the Amended and Restated Credit and Security Agreement (the “Amendment and Restatement”) with KeyBank. Prior to the Amendment and Restatement, the Credit Agreement consisted of the $10.0 million term loan (the “Term Loan”) and up to $30.0 million revolving line of credit, including $3.0 million letter of credit availability. The Amendment and Restatement increased the overall availability under the revolving credit line to $40.0 million and extended the maturity date to December 31, 2024. All personal property assets, including, but not limited to accounts receivable, coal inventory and certain mining equipment are pledged to secure the Revolving Credit Facility. On April 29, 2022, we entered into the First Amendment to Amended and Restated Credit and Security Agreement with KeyBank to allow for the Ramaco Coal asset acquisition.

The Revolving Credit Facility bears interest based on Secure Overnight Financing Rate (“SOFR”) + 2.0% or Base Rate + 1.5%. “Base Rate” is the highest of (i) KeyBank’s prime rate, (ii) Federal Funds Effective Rate + 0.5%, or (iii) SOFR + 2.0%. Advances under the Revolving Credit Facility are made initially as Base Rate loans but may be converted to SOFR rate loans at certain times at our discretion. At June 30, 2022, there was $0.4 million drawn in the form of a letter of credit under the Revolving Credit Facility and we had remaining availability of $39.6 million.

The Term Loan is secured under a Master Security Agreement with a pledge of certain underground and surface mining equipment, bears interest at LIBOR + 5.15% and is required to be repaid in monthly installments of $278 thousand including accrued interest. The outstanding principal balance of the Term Loan was $1.7 million at June 30, 2022.

The Credit Agreement contains usual and customary covenants including limitations on liens, additional indebtedness, investments, restricted payments, asset sales, mergers, affiliate transactions and other customary limitations, as well as financial covenants. At June 30, 2022, we were in compliance with all financial covenants under the Credit Agreement.

*Key Equipment Finance Loan—*On April 16, 2020, we entered into an equipment loan with Key Equipment Finance, a division of KeyBank, as lender, in the principal amount of $4.7 million for the financing of existing underground and surface equipment (the “Equipment Loan”). The Equipment Loan bears interest at 7.45% per annum and is payable in 36 monthly installments of $147 thousand. There is a 3% premium for prepayment of the note within the first 12 months. This premium declines by 1% during each successive 12-month period. The outstanding principal balance of the Equipment Loan was $1.4 million at June 30, 2022.

*9.00% Senior Unsecured Notes due 2026—*On July 13, 2021, we completed an offering of $34.5 million, in the aggregate, of the Company’s 9.00% Senior Unsecured Notes due 2026 (the “Senior Notes”), and incurred $2.4 million for note offering costs. The Senior Notes mature on July 30, 2026, unless redeemed prior to maturity. The Senior Notes bear interest at a rate of 9.00% per annum, payable quarterly in arrears on the 30th day of January, April, July and October of each year. We may redeem the Senior Notes in whole or in part, at our option, at any time on or after July 30, 2023, or upon certain change of control events, at a redemption price equal to 100% of the principal amount plus accrued and unpaid interest to, but not including, the date of redemption. Issuance costs for the Senior Notes included underwriters’ fees, attorney, accounting and filing costs totaling $2.4 million. These issuance costs are reported as a debt discount which is being amortized over the Senior Notes term using an effective rate method. The outstanding principal balance under the Senior Notes was $34.5 million at June 30, 2022 and is presented net of unamortized discounts of $1.9 million. The effective interest rate is approximately 10.45%.

*J. H. Fletcher & Co. Loan—*On July 23, 2021 and November 24, 2021, we entered into equipment loans with J. H. Fletcher & Co., as lender, in the principal amount of $0.9 million and $3.9 million, respectively, for the financing of underground equipment (the “Fletcher Equipment Loans”). The Fletcher Equipment Loans bear no interest and are payable in 24 monthly installments of $200 thousand. The outstanding principal balance of the Fletcher Equipment Loans was $3.3 million at June 30, 2022.

*Komatsu Financial Limited Partnership Loan—*On August 16, 2021, we entered into an equipment loan with Komatsu Financial Limited Partnership, as lender, in the principal amount of $1.0 million for the financing of surface equipment (the “Komatsu Equipment Loan”). The Komatsu Equipment Loan bears interest at 4.6% per annum and is payable in 36 monthly installments of $36 thousand for the first six months and then at $28 thousand until maturity. The outstanding principal balance of the Komatsu Equipment Loan was $0.7 million at June 30, 2022.

*Brandeis Machinery & Supply Company—*On January 11, 2022, we entered into equipment loans with Brandeis Machinery & Supply Company, as lender, in the principal amount of $1.4 million for the financing of surface equipment (the “Brandeis Equipment Loans”). The Brandeis Equipment Loans bear interest at 4.8% per annum and are payable in 48 monthly installments of $24 thousand. The outstanding principal balance of the Brandeis Equipment Loans was $0.9 million at June 30, 2022.

*Ramaco Coal Deferred Purchase Price—*On April 29, 2022, we acquired Ramaco Coal (see Note 12) and entered into an agreement whereby an investment fund managed by Yorktown Partners, as lender, providing financing for the acquisition in the principal amount of $55.0 million (the “Ramaco Coal Loan”). The Ramaco Coal Loan bears interest at 9% per annum and is payable in seven quarterly installments of $5 million for each quarter in 2022 and $10 million for each quarter in 2023 until maturity. The outstanding principal balance of the Ramaco Coal Loan was $50.0 million at June 30, 2022 and is secured by the membership interests of Ramaco Coal, LLC. In the event we make an initial public offering of the equity interests of all or substantially all of the acquired assets of Ramaco Coal, the seller shall have the option to convert up to fifty percent of the then outstanding principal balance, not to exceed $30 million, into a proportionate equity ownership in such initial public offering.

### Critical Accounting Estimates

A discussion of our critical accounting policies is included in the Annual Report. There were no material changes to our critical accounting policies during the six months ended June 30, 2022.

### Off-Balance Sheet Arrangements

At June 30, 2022, we had no material off-balance sheet arrangements.

### Non-GAAP Financial Measures

*Adjusted EBITDA -* Adjusted EBITDA is used as a supplemental non-GAAP financial measure by management and external users of our financial statements, such as industry analysts, investors, lenders and rating agencies. We believe Adjusted EBITDA is useful because it allows us to more effectively evaluate our operating performance.

We define Adjusted EBITDA as net income plus net interest expense, stock-based compensation, depreciation and amortization expenses, income taxes and accretion of asset retirement obligations. A reconciliation of net income to Adjusted EBITDA is included below. Adjusted EBITDA is not intended to serve as an alternative to GAAP measures of performance and may not be comparable to similarly-titled measures presented by other companies.

*(In thousands)*

| ​ ​ Reconciliation of Net Income to Adjusted EBITDA | ​ ​ | ​ ​ Three months ended June 30, 2022 ​ | ​ | ​ ​ 2021 ​ | ​ ​ ​ | ​ ​ Six months ended June 30, 2022 ​ | ​ | ​ ​ 2021 ​ | ​ ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- |
| Net income | ​ | $33,280 | ​ | $9,942 | ​ | $74,751 | ​ | $14,085 | ​ |
| Depreciation and amortization | ​ | 9,783 | ​ | 5,955 | ​ | 18,463 | ​ | 12,110 | ​ |
| Interest expense, net | ​ | 1,937 | ​ | 283 | ​ | 3,068 | ​ | 485 | ​ |
| Income tax expense (benefit) | ​ | 9,818 | ​ | 228 | ​ | 20,472 | ​ | 62 | ​ |
| EBITDA | ​ | 54,818 | ​ | 16,408 | ​ | 116,754 | ​ | 26,742 | ​ |
| Stock-based compensation | ​ | 2,286 | ​ | 1,522 | ​ | 4,173 | ​ | 2,577 | ​ |
| Accretion of asset retirement obligation | ​ | 755 | ​ | 154 | ​ | 990 | ​ | 305 | ​ |
| Adjusted EBITDA | ​ | $57,859 | ​ | $18,084 | ​ | $121,917 | ​ | $29,624 | ​ |

*Non-GAAP revenue per ton -* Non-GAAP revenue per ton (FOB mine) is calculated as coal sales revenue less transportation costs, divided by tons sold. We believe revenue per ton (FOB mine) provides useful information to investors as it enables investors to compare revenue per ton we generate against similar measures made by other publicly-traded coal companies and more effectively monitor changes in coal prices from period to period excluding the impact of transportation costs which are beyond our control. The adjustments made to arrive at these measures are significant in understanding and assessing our financial condition. Revenue per ton sold (FOB mine) is not a measure of financial performance in accordance with GAAP and therefore should not be considered as an alternative to revenue under GAAP.

*(In thousands, except per ton amounts)*

| ​ ​ ​ ​ | ​ ​ ​ ​ | ​ ​ Three months ended June 30, 2022 Company Produced ​ ​ | ​ ​ ​ | ​ ​ Purchased Coal ​ ​ | ​ ​ ​ | ​ ​ ​ ​ Total ​ ​ | ​ ​ ​ ​ | ​ ​ Three months ended June 30, 2021 Company Produced ​ ​ | ​ ​ ​ | ​ ​ Purchased Coal ​ ​ | ​ ​ ​ | ​ ​ ​ ​ Total ​ ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| Revenue | ​ | $137,714 | ​ | $941 | ​ | $138,655 | ​ | $73,211 | ​ | $2,846 | ​ | $76,057 |
| Less: Adjustments to reconcile to Non-GAAP revenue (FOB mine) | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Transportation costs | ​ | (13,461) | ​ | — | ​ | (13,461) | ​ | (9,273) | ​ | (549) | ​ | (9,822) |
| Non-GAAP revenue (FOB mine) | ​ | $124,253 | ​ | $941 | ​ | $125,194 | ​ | $63,938 | ​ | $2,297 | ​ | $66,235 |
| Tons sold | ​ | 578 | ​ | 5 | ​ | 584 | ​ | 664 | ​ | 21 | ​ | 686 |
| Revenue per ton sold (FOB mine) | ​ | $215 | ​ | $186 | ​ | $215 | ​ | $96 | ​ | $109 | ​ | $97 |

*(In thousands, except per ton amounts)*

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ Six months ended June 30, 2022 Company Produced ​ ​ | ​ ​ | ​ ​ Purchased Coal ​ ​ | ​ ​ ​ | ​ ​ ​ ​ Total ​ ​ | ​ ​ ​ | ​ ​ Six months ended June 30, 2021 Company Produced ​ ​ | ​ ​ | ​ ​ Purchased Coal ​ ​ | ​ ​ ​ | ​ ​ ​ ​ Total ​ ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| Revenue | ​ | $288,643 | ​ | $4,894 | ​ | $293,537 | ​ | $115,004 | ​ | $4,507 | ​ | $119,511 |
| Less: Adjustments to reconcile to Non-GAAP revenue (FOB mine) | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Transportation costs | ​ | (30,593) | ​ | (239) | ​ | (30,832) | ​ | (15,077) | ​ | (969) | ​ | (16,046) |
| Non-GAAP revenue (FOB mine) | ​ | $258,050 | ​ | $4,655 | ​ | $262,705 | ​ | $99,927 | ​ | $3,538 | ​ | $103,465 |
| Tons sold | ​ | 1,151 | ​ | 16 | ​ | 1,167 | ​ | 1,071 | ​ | 37 | ​ | 1,108 |
| Revenue per ton sold (FOB mine) | ​ | $224 | ​ | $299 | ​ | $225 | ​ | $93 | ​ | $96 | ​ | $93 |

26

*Non-GAAP cash cost per ton sold -* Non-GAAP cash cost per ton sold is calculated as cash cost of sales less transportation costs, divided by tons sold. We believe cash cost per ton sold provides useful information to investors as it enables investors to compare our cash cost per ton against similar measures made by other publicly-traded coal companies and more effectively monitor changes in coal cost from period to period excluding the impact of transportation costs which are beyond our control. The adjustments made to arrive at these measures are significant in understanding and assessing our financial condition. Cash cost per ton sold is not a measure of financial performance in accordance with GAAP and therefore should not be considered as an alternative to cost of sales under GAAP.

*(In thousands, except per ton amounts)*

| ​ ​ ​ ​ | ​ ​ ​ ​ | ​ ​ Three months ended June 30, 2022 Company Produced ​ ​ | ​ ​ ​ | ​ ​ Purchased Coal ​ ​ | ​ ​ ​ | ​ ​ ​ ​ Total ​ ​ | ​ ​ ​ ​ | ​ ​ Three months ended June 30, 2021 Company Produced ​ ​ | ​ ​ ​ | ​ ​ Purchased Coal ​ ​ | ​ ​ ​ | ​ ​ ​ ​ Total ​ ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| Cost of sales | ​ | $75,857 | ​ | $787 | ​ | $76,644 | ​ | $55,298 | ​ | $2,464 | ​ | $57,762 |
| Less: Adjustments to reconcile to Non-GAAP cash cost of sales | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Transportation costs | ​ | (13,459) | ​ | — | ​ | (13,459) | ​ | (9,274) | ​ | (549) | ​ | (9,823) |
| Non-GAAP cash cost of sales | ​ | $62,398 | ​ | $787 | ​ | $63,185 | ​ | $46,024 | ​ | $1,915 | ​ | $47,939 |
| Tons sold | ​ | 578 | ​ | 5 | ​ | 584 | ​ | 664 | ​ | 21 | ​ | 686 |
| Cash cost per ton sold | ​ | $108 | ​ | $155 | ​ | $108 | ​ | $69 | ​ | $91 | ​ | $70 |

*(In thousands, except per ton amounts)*

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ Six months ended June 30, 2022 Company Produced ​ ​ | ​ ​ | ​ ​ Purchased Coal ​ ​ | ​ ​ ​ | ​ ​ ​ ​ Total ​ ​ | ​ ​ ​ | ​ ​ Six months ended June 30, 2021 Company Produced ​ ​ | ​ ​ | ​ ​ Purchased Coal ​ ​ | ​ ​ ​ | ​ ​ ​ ​ Total ​ ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| Cost of sales | ​ | $153,720 | ​ | $4,177 | ​ | $157,897 | ​ | $84,932 | ​ | $4,026 | ​ | $88,958 |
| Less: Adjustments to reconcile to Non-GAAP cash cost of sales | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Transportation costs | ​ | (30,595) | ​ | (238) | ​ | (30,833) | ​ | (15,074) | ​ | (970) | ​ | (16,044) |
| Non-GAAP cash cost of sales | ​ | $123,125 | ​ | $3,939 | ​ | $127,064 | ​ | $69,858 | ​ | $3,056 | ​ | $72,914 |
| Tons sold | ​ | 1,151 | ​ | 16 | ​ | 1,167 | ​ | 1,071 | ​ | 37 | ​ | 1,108 |
| Cash cost per ton sold | ​ | $107 | ​ | $253 | ​ | $109 | ​ | $65 | ​ | $83 | ​ | $66 |

## Market risk

As filed, 167 characters.

Quantitative and qualitative disclosures about market risk are included in Item 7A, “Quantitative and Qualitative Disclosures about Market Risk,” of our Annual Report.

## Controls and procedures

As filed, 3,463 characters.

### Disclosure Controls and Procedures

As required by Rule 13a-15(b) of the Exchange Act, we have evaluated, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this quarterly report. Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by us in reports that we file under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure, and is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Based upon that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this quarterly report, at the reasonable assurance level.

### Remediation of Previously Reported Material Weaknesses

As described in “Item 9A. Controls and Procedures” in our Annual Report on Form 10-K for the year ended December 31, 2021, we previously identified a material weakness in our internal controls relating to information technology systems that support the Company’s financial reporting process. We executed a remediation plan to address the control deficiency that led to this material weakness. The remediation actions were as follows:

#### Information technology general controls

- Modified controls over user access;
- Implemented additional controls designed to detect issues that may arise over user access and segregation of duties conflicts.

As of June 30, 2022, we concluded that the control modifications and additional controls related to user access to information technology systems have been satisfactorily implemented and has operated effectively for a sufficient period of time. Therefore, we concluded that the previously identified material weakness has been remediated as of June 30, 2022.

### Changes in Internal Control over Financial Reporting

Except as otherwise described herein, there were no significant changes in our system of internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the quarter ended June 30, 2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

### Inherent Limitations on Effectiveness of Disclosure Controls and Procedures

Our senior members of management do not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

## Risk factors

As filed, 816 characters.

In addition to the other information set forth in this Quarterly Report, you should carefully consider the risk factors and other cautionary statements described under the heading “Item 1A. Risk Factors” included in our Annual Report and the risk factors and other cautionary statements contained in our other SEC filings, which could materially affect our business, financial condition, cash flows or future results of operations.

Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results. There have been no material changes in our risk factors from those described in our Annual Report and our Form 10-Q for the quarter ended March 31, 2022, filed with the SEC on May 13, 2022.

Filed Aug 9, 2022.
Source: SEC EDGAR, the filing index for accession 0001558370-22-012874. Last ingested by Listed: Oct 24, 2026, 15:07 ET. No prices; not investment advice.