hnrg20230331

hnrg20230331_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the quarterly period ended March 31, 2023
OR
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number:001-34743

“COAL KEEPS YOUR LIGHTS ON”

HALLADOR ENERGY COMPANY

(www.halladorenergy.com)

Colorado

(State of incorporation)

84-1014610

(IRS Employer Identification No.)

1183 East Canvasback Drive, Terre Haute, Indiana

(Address of principal executive offices)

47802

(Zip Code)

Registrant’s telephone number, including area code: 812.299.2800

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Shares, $.01 par value	HNRG	Nasdaq

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulations S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐		Accelerated filer ☑
Non-accelerated filer ☐		Smaller reporting company ☑
		Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of May 8, 2023, we had 33,137,011 shares of common stock outstanding.

PART I - FINANCIAL INFORMATION	1

ITEM 1. FINANCIAL STATEMENTS (Unaudited)	1

Condensed Consolidated Balance Sheets	1

Condensed Consolidated Statements of Operations	2

Condensed Consolidated Statements of Cash Flows	3

Condensed Consolidated Statements of Stockholders’ Equity	4

Notes to Condensed Consolidated Financial Statements	5

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	16

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	21

ITEM 4. CONTROLS AND PROCEDURES	21

PART II - OTHER INFORMATION	21

ITEM 4. MINE SAFETY DISCLOSURES	21

ITEM 5. OTHER INFORMATION	21

ITEM 6. EXHIBITS	22

SIGNATURES	23

	*March 31,*			*December 31,*
	*2023*			*2022*
ASSETS
Current assets:
Cash and cash equivalents	$	2,441		$	3,009
Restricted cash		3,908			3,417
Accounts receivable		33,158			29,889
Inventory		49,411			49,796
Parts and supplies		31,221			28,295
Contact asset - coal purchase agreement		6,178			19,567
Prepaid expenses		3,377			4,546
Total current assets		129,694			138,519
Property, plant and equipment:
Land and mineral rights		115,506			115,595
Buildings and equipment		541,374			534,129
Mine development		145,200			140,108
Total property, plant and equipment		802,080			789,832
Less - accumulated depreciation, depletion and amortization		(325,860	)		(309,370	)
Total property, plant and equipment, net		476,220			480,462
Investment in Sunrise Energy		3,432			3,988
Other assets		7,281			7,585
Total Assets	$	616,627		$	630,554
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of bank debt, net	$	32,272		$	33,031
Accounts payable and accrued liabilities		84,495			82,972
Deferred revenue		38,474			35,485
Contract liability - power purchase agreement and capacity payment reduction		54,038			88,114
Total current liabilities		209,279			239,602
Long-term liabilities:
Long-term bank debt, excluding current maturities, net		40,071			49,713
Convertible note payable		10,000			10,000
Convertible notes payable - related party		9,000			9,000
Deferred income taxes		7,526			4,606
Asset retirement obligations		17,340			17,254
Contact liability - power purchase agreement		84,825			84,096
Other		1,400			1,259
Total long-term liabilities		170,162			175,928
Total liabilities		379,441			415,530
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.10 par value, 10,000 shares authorized; none issued and outstanding		—			—
Common stock, $.01 par value, 100,000 shares authorized; 33,137 and 32,983 issued and outstanding, at March 31, 2023 and December 31, 2022, respectively		332			330
Additional paid-in capital		118,897			118,788
Retained earnings		117,957			95,906
Total stockholders’ equity		237,186			215,024
Total liabilities and stockholders’ equity	$	616,627		$	630,554

	*Three Months Ended March 31,*
	*2023*			*2022*
SALES AND OPERATING REVENUES:
Coal sales	$	94,602		$	57,010
Electric sales		92,392			—
Other revenues		1,340			1,897
Total revenue		188,334			58,907
EXPENSES:
Operating expenses		133,521			54,601
Depreciation, depletion and amortization		17,976			9,531
Asset retirement obligations accretion		451			246
Exploration costs		206			57
General and administrative		6,947			3,149
Total operating expenses		159,101			67,584

INCOME (LOSS) FROM OPERATIONS		29,233			(8,677	)

Interest expense (1)		(3,899	)		(1,784	)
Equity method investment income		69			150
NET INCOME (LOSS) BEFORE INCOME TAXES		25,403			(10,311	)

INCOME TAX EXPENSE (BENEFIT):
Current		432			—
Deferred		2,920			(177	)
Total income tax expense (benefit)		3,352			(177	)

NET INCOME (LOSS)	$	22,051		$	(10,134	)

NET INCOME (LOSS) PER SHARE:
Basic	$	0.67		$	(0.33	)
Diluted	$	0.61		$	(0.33	)

WEIGHTED AVERAGE SHARES OUTSTANDING
Basic		32,983			30,785
Diluted		36,740			30,785

(1) Interest Expense:
Interest on bank debt	$	2,255		$	1,710
Other interest		432
Amortization and swap-related interest:
Payments on interest rate swap, net of changes in value		—			(617	)
Amortization of debt issuance costs		1,212			691
Total amortization and swap related interest		1,212			74
Total interest expense	$	3,899		$	1,784

							*Additional*					*Total*
	*Common Stock Issued*						*Paid-in*			*Retained*		*Stockholders'*
	*Shares*			*Amount*			*Capital*			*Earnings*		*Equity*
Balance, December 31, 2022		32,983		$	330		$	118,788		$	95,906	$	215,024
Stock-based compensation		—			—			1,220			—		1,220
Stock issued on vesting of RSUs		275			3			(3	)		—		—
Taxes paid on vesting of RSUs		(121	)		(1	)		(1,108	)		—		(1,109	)
Net income		—			—			—			22,051		22,051
Balance, March 31, 2023		33,137		$	332		$	118,897		$	117,957	$	237,186

Fiscal Periods Ending		*Ratio*
March 31, 2023, and each fiscal quarter thereafter		2.25 to 1.00

Non-vested grants at December 31, 2022	1,056,937
Awarded - weighted average share price on award date was $9.38	267,000
Vested - weighted average share price on award date was $9.18	(275,221	)
Forfeited	(6,000	)
Non-vested grants at March 31, 2023	1,042,716

Vesting Year	*RSUs Vesting*
2023		201,000
2024		300,608
2025		541,108
		1,042,716

	*Amount*
	(In thousands)
2023	$	147
2024		34
Total minimum lease payments	$	181
Less imputed interest		(2	)

Total operating lease liability	$	179

As reflected within the following balance sheet line items:
Accounts payable and accrued liabilities	$	147
Other long-term liabilities		32

Total operating lease liability	$	179

Consideration:	(in thousands)
Direct transaction costs	$	2,855
Contract liability - PPA		184,500
Contract liability - Capacity payment reduction		11,000
Contract asset - Coal purchase agreement		(34,300	)
Coal inventory purchased		5,400
Deferred coal inventory payment		11,600
Total consideration	$	181,055
Relative fair value of assets acquired:
Plant	$	165,816
Materials and supplies		12,009
Coal inventory		10,460
Amount attributable to assets acquired	$	188,285
Fair value of liabilities assumed:
Asset retirement obligations	$	7,230
Amount attributable to liabilities assumed	$	7,230

	Contracted		Estimated
	tons		price
Year	(millions)*		per ton
2023 (Q2 - Q4)		5.8	$	57.00
2024-2027 (total)		7.5		**
		13.3

	*March 31,*		*December 31,*
	*2023*		*2022*
Accounts payable	$	57,652	$	62,306
Accrued property taxes		2,295		1,917
Accrued payroll		9,991		5,933
Workers' compensation reserve		3,827		3,440
Group health insurance		2,400		2,250
Asset retirement obligation - current portion		3,580		3,580
Other		4,750		3,546
Total accounts payable and accrued liabilities	$	84,495	$	82,972

	*Three Months Ended March 31,*
	*2023*			*2022*
		(in thousands)
Operating Revenues
Coal Operations	$	95,273		$	58,337
Electric Operations		92,494			-
Corporate and Other and Eliminations		567			570
Consolidated Operating Revenues	$	188,334		$	58,907

Income (Loss) from Operations
Coal Operations	$	13,088		$	(7,446	)
Electric Operations		18,705			-
Corporate and Other and Eliminations		(2,560	)		(1,231	)
Consolidated Income (Loss) from Operations	$	29,233		$	(8,677	)

Depreciation, Depletion and Amortization
Coal Operations	$	13,275		$	9,496
Electric Operations		4,675			-
Corporate and Other and Eliminations		26			35
Consolidated Depreciation, Depletion and Amortization	$	17,976		$	9,531

Assets
Coal Operations	$	391,248		$	350,076
Electric Operations		218,132			-
Corporate and Other and Eliminations		7,247			7,800
Consolidated Assets	$	616,627		$	357,876

Capital Expenditures
Coal Operations	$	12,639		$	9,082
Electric Operations		843			-
Corporate and Other and Eliminations		-			-
Consolidated Capital Expenditures	$	13,482		$	9,082

SEC Form 10-Q filed by Hallador Energy Company