hcc-20210930

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 September 30, 2021


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

For the transition period from to

Commission File Number: 001-38061

Warrior Met Coal, Inc.

(Exact name of registrant as specified in its charter)


Delaware		81-0706839
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

16243 Highway 216
Brookwood	Alabama	35444
(Address of Principal Executive Offices)		(Zip Code)

(205) 554-6150

(Registrant's telephone number, including area code)

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


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $.01 per share	HCC	New York Stock Exchange
Rights to Purchase Series A Junior Participating Preferred Stock, par value $0.01 per share	--	New York Stock Exchange

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 ý No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation 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 ý No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or 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. o

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

Number of shares of common stock outstanding as of October 29, 2021: 51,410,971

TABLE OF CONTENTS


Forward-Looking Statements		1
Part I-Financial Information		3
Item 1.	Financial Statements	4
	Condensed Statements of Operations for the three and nine months ended September 30, 2021 (Unaudited) and September 30, 2020 (Unaudited)	4
	Condensed Balance Sheets as of September 30, 2021 (Unaudited) and December 31, 2020	5
	Condensed Statements of Changes in Stockholders' Equity for the three and nine months ended September 30, 2021 (Unaudited) and September 30, 2020 (Unaudited)	6
	Condensed Statements of Cash Flows for the nine months ended September 30, 2021 (Unaudited) and September 30, 2020 (Unaudited)	7
	Notes to Condensed Financial Statements	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34
Item 4.	Controls and Procedures	35
Part II - Other Information		36
Item 1.	Legal Proceedings	36
Item 1A.	Risk Factors	36
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36
Item 3.	Defaults on Senior Securities	37
Item 4.	Mine Safety Disclosures	37
Item 5.	Other Information	37
Item 6.	Exhibits	38
Signatures		39

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this "Form 10-Q") includes statements of our expectations, intentions, plans and beliefs that constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and are intended to come within the safe harbor protection provided by those sections. These statements, which involve risks and uncertainties, relate to analyses and other information that are based on forecasts of future results and estimates of amounts not yet determinable and may also relate to our future prospects, developments and business strategies, including any potential changes to our production and sales volumes as a result of our negotiations with our labor union. We have used the words “anticipate,” “approximately,” “assume,” “believe,” “could,” “contemplate,” “continue,” “estimate,” “expect,” “target,” “future,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should” and similar terms and phrases, including in references to assumptions, in this report to identify forward-looking statements. These forward-looking statements are made based on expectations and beliefs concerning future events affecting us and are subject to uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control, that could cause our actual results to differ materially from those matters expressed in or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to:

•the impact of global pandemics, such as the COVID-19 (as defined below) pandemic, including its impact on our business, employees, suppliers and customers, the metallurgical ("met") coal and steel industries, and global economic markets;

•our relationships with, and other conditions affecting, our customers;

•successful implementation of our business strategies;

•unavailability of, or price increases in, the transportation of our met coal;

•significant cost increases and fluctuations, and delay in the delivery of raw materials, mining equipment and purchased components;

•work stoppages, negotiation of labor contracts, employee relations and workforce availability;

•competition and foreign currency fluctuations;

•litigation, including claims not yet asserted;

•terrorist attacks or security threats, including cybersecurity threats;

•global steel demand and the downstream impact on met coal prices;

•impact of weather and natural disasters on demand and production;

•a substantial or extended decline in pricing or demand for met coal;

•inherent difficulties and challenges in the coal mining industry that are beyond our control;

•our ability to develop or acquire met coal reserves in an economically feasible manner;

•geologic, equipment, permitting, site access, operational risks and new technologies related to mining;

•inaccuracies in our estimates of our met coal reserves;

•costs associated with our workers’ compensation benefits;

•challenges to our licenses, permits and other authorizations;

•challenges associated with environmental, health and safety laws and regulations;

•regulatory requirements associated with federal, state and local regulatory agencies, and such agencies’ authority to order temporary or permanent closure of our mines;

•climate change concerns and our operations’ impact on the environment;

•failure to obtain or renew surety bonds on acceptable terms, which could affect our ability to secure reclamation and coal lease obligations;

•our obligations surrounding reclamation and mine closure;

•our substantial indebtedness and debt service requirements;

•our ability to comply with covenants in our asset-based revolving credit facility (as amended and restated, the "ABL Facility") and the Indenture (as defined below);

•adequate liquidity and the cost, availability and access to capital and financial markets;

•our expectations regarding our future cash tax rate as well as our ability to effectively utilize our net operating loss carry forwards ("NOLs");

•our ability to continue paying our quarterly dividend or pay any special dividend;

•the timing and amount of any stock repurchases we make under our Stock Repurchase Program (as defined below) or otherwise; and

•any consequences related to our transfer restrictions under our certificate of incorporation and our NOL rights agreement.

These forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. Forward-looking statements should, therefore, be considered in light of various factors, including those set forth under “Part II, Item 1A. Risk Factors,” “Part I, Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Form 10-Q, and those set forth from time to time in our other filings with the Securities and Exchange Commission (the “SEC”). These documents are available through our website or through the SEC's Electronic Data Gathering and Analysis Retrieval system at http://www.sec.gov. In light of such risks and uncertainties, we caution you not to place undue reliance on these forward-looking statements.

When considering forward-looking statements made by us in this Form 10-Q, or elsewhere, such statements speak only as of the date on which we make them. New risks and uncertainties arise from time to time, and it is impossible for us to predict these events or how they may affect us. We have no duty to, and do not intend to, update or revise the forward-looking statements in this Form 10-Q after the date of this Form 10-Q, except as may be required by law. In light of these risks and uncertainties, you should keep in mind that any forward-looking statement made in this Form 10-Q or elsewhere might not occur.

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

WARRIOR MET COAL, INC.

CONDENSED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(Unaudited)


	For the three months ended September 30,				For the nine months ended September 30,
	2021		2020		2021		2020
Revenues:
Sales	$	199,745	$	175,229	$	631,493	$	555,610
Other revenues	2,722		4,835		12,178		14,875
Total revenues	202,467		180,064		643,671		570,485
Costs and expenses:
Cost of sales (exclusive of items shown separately below)	91,973		151,370		399,088		433,661
Cost of other revenues (exclusive of items shown separately below)	6,654		7,064		22,792		22,267
Depreciation and depletion	28,967		27,965		102,021		78,813
Selling, general and administrative	7,430		8,192		26,182		25,105
Business interruption	6,872		—		13,892		—
Idle mine	9,327		—		20,203		—
Total costs and expenses	151,223		194,591		584,178		559,846
Operating income (loss)	51,244		(14,527)		59,493		10,639
Interest expense, net	(8,784)		(8,059)		(25,954)		(23,847)

Other income	1,400		—		1,291		1,822
Income (loss) before income tax expense (benefit)	43,860		(22,586)		34,830		(11,386)
Income tax expense (benefit)	5,433		(8,152)		22,439		(9,336)
Net income (loss)	38,427		$	(14,434)	$	12,391	$	(2,050)
Basic and diluted net income (loss) per share:
Net income (loss) per share—basic	$	0.75	$	(0.28)	$	0.24	$	(0.04)
Net income (loss) per share—diluted	$	0.74	$	(0.28)	$	0.24	$	(0.04)
Weighted average number of shares outstanding—basic	51,416		51,190		51,315		51,161
Weighted average number of shares outstanding—diluted	51,585		51,190		51,424		51,161
Dividends per share:	$	0.05	$	0.05	$	0.15	$	0.15

The accompanying notes are an integral part of these condensed financial statements.

WARRIOR MET COAL, INC.

CONDENSED BALANCE SHEETS

(in thousands)


	September 30, 2021 (Unaudited)		December 31, 2020

ASSETS
Current assets:
Cash and cash equivalents	$	268,395	$	211,916
Short-term investments	8,505		8,504
Trade accounts receivable	73,270		83,298

Inventories, net	94,026		118,713
Prepaid expenses and other receivables	35,034		45,052
Total current assets	479,230		467,483
Mineral interests, net	94,894		100,855
Property, plant and equipment, net	606,750		637,108

Deferred income taxes	151,934		174,372
Other long-term assets	11,799		14,118
Total assets	$	1,344,607	$	1,393,936
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	39,138	$	59,110
Accrued expenses	58,114		86,108
Short term financing lease liabilities	22,421		14,385
Other current liabilities	14,721		10,715

Total current liabilities	134,394		170,318
Long-term debt	340,491		379,908
Asset retirement obligations	62,340		57,553
Long term financing lease liabilities	34,805		24,091
Other long-term liabilities	37,214		36,825
Total liabilities	609,244		668,695

Stockholders’ Equity:
Common stock, $0.01 par value per share (Authorized -140,000,000 shares as of September 30, 2021 and December 31, 2020, 53,632,812 issued and 51,410,971 outstanding as of September 30, 2021 and 53,408,040 issued and 51,186,199 outstanding as of December 31, 2020)	536		534
Preferred stock, $0.01 par value per share (10,000,000 shares authorized, no shares issued and outstanding)	—		—
Treasury stock, at cost (2,221,841 shares as of September 30, 2021 and December 31, 2020)	(50,576)		(50,576)
Additional paid in capital	255,317		249,746
Retained earnings	530,086		525,537
Total stockholders’ equity	735,363		725,241
Total liabilities and stockholders’ equity	$	1,344,607	$	1,393,936

The accompanying notes are an integral part of these condensed financial statements.

WARRIOR MET COAL, INC.

CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(in thousands)

(Unaudited)


	For the three months ended September 30,				For the nine months ended September 30,
	2021		2020		2021		2020

Common Stock
Balance, beginning of period	$	536	$	533	$	534	$	533
Issuance of shares	—		—		2		—
Balance, end of period	536		533		536		533
Preferred Stock
Balance, beginning of period	—		—		—		—
Balance, end of period	—		—		—		—
Treasury Stock
Balance, beginning of period	(50,576)		(50,576)		(50,576)		(50,576)

Balance, end of period	(50,576)		(50,576)		(50,576)		(50,576)
Additional Paid in Capital
Balance, beginning of period	253,922		246,126		249,746		243,932
Stock compensation	1,395		1,781		8,377		5,247

Other	—		—		(2,806)		(1,272)
Balance, end of period	255,317		247,907		255,317		247,907
Retained Earnings
Balance, beginning of period	494,272		578,880		525,537		571,693
Net income (loss)	38,427		(14,434)		12,391		(2,050)
Dividends paid	(2,613)		(2,599)		(7,842)		(7,796)

Balance, end of period	530,086		561,847		530,086		561,847
Total Stockholders' Equity	$	735,363	$	759,711	$	735,363	$	759,711

The accompanying notes are an integral part of these condensed financial statements.

WARRIOR MET COAL, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)


	For the nine months ended September 30,
		2021		2020

OPERATING ACTIVITIES
Net income (loss)		$	12,391	$	(2,050)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and depletion		102,021		78,813
Deferred income tax expense (benefit)

SEC Form 10-Q filed by Warrior Met Coal, Inc.