ARCH RESOURCES, INC. [ARCH] Filings

10-Q 1 arch-20240630x10q.htm 10-Q

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

☒Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2024

☐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: 1-13105

Arch Resources, Inc.

(Exact name of registrant as specified in its charter)


Delaware		43-0921172
(State or other jurisdiction		(I.R.S. Employer
of incorporation or organization)		Identification Number)


One CityPlace Drive
Suite 300
St. Louis
Missouri		63141
(Address of principal executive offices)		(Zip code)
Registrant’s telephone number, including area code: (314) 994-2700 (Former name, former address and former fiscal year, if changed since last report)

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


Title of each class	Trading symbol	Name of each exchange on which registered
Common stock, $.01 par value	ARCH	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 ☒ No ☐

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 ☒ 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 ☒

At July 22, 2024 there were 18,084,477 shares of the registrant’s common stock outstanding.

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TABLE OF CONTENTS


	Page
Part I FINANCIAL INFORMATION	3
Item 1. Financial Statements	3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3. Quantitative and Qualitative Disclosures About Market Risk	41
Item 4. Controls and Procedures	41
Part II OTHER INFORMATION	42
Item 1. Legal Proceedings	42
Item 1A. Risk Factors	42
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	42
Item 4. Mine Safety Disclosures	42
Item 5. Other Information	43
Item 6. Exhibits	44
Signatures	50

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Part I

FINANCIAL INFORMATION

Item 1.Financial Statements.

Arch Resources, Inc. and Subsidiaries

Condensed Consolidated Income Statements

(in thousands, except per share data)



	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023

	(Unaudited)				(Unaudited)
Revenues	$	608,751	$	757,294	$	1,288,941	$	1,627,225
Costs, expenses and other operating
Cost of sales (exclusive of items shown separately below)		528,684		606,127		1,096,407		1,177,864
Depreciation, depletion and amortization		38,439		36,077		77,259		71,556
Accretion on asset retirement obligations		5,870		5,293		11,739		10,585
Selling, general and administrative expenses		22,518		22,791		48,105		48,813
Other operating income, net		(2,410)		(2,010)		(18,393)		(7,179)
		593,101		668,278		1,215,117		1,301,639

Income from operations		15,650		89,016		73,824		325,586

Interest expense, net
Interest expense		(3,933)		(3,537)		(8,249)		(7,663)
Interest and investment income		5,403		4,201		11,503		7,537
		1,470		664		3,254		(126)

Income before nonoperating expenses		17,120		89,680		77,078		325,460

Nonoperating expense
Non-service related pension and postretirement benefit (costs) credits		(285)		593		(571)		1,185
Net loss resulting from early retirement of debt		—		—		—		(1,126)
		(285)		593		(571)		59

Income before income taxes		16,835		90,273		76,507		325,519
Provision for income taxes		2,002		12,920		5,721		50,058
Net income	$	14,833	$	77,353	$	70,786	$	275,461

Net income per common share
Basic earnings per share	$	0.82	$	4.20	$	3.88	$	15.16
Diluted earnings per share	$	0.81	$	4.04	$	3.82	$	14.16
Weighted average shares outstanding
Basic weighted average shares outstanding		18,097		18,406		18,222		18,165
Diluted weighted average shares outstanding		18,295		19,135		18,535		19,459
Dividends declared per common share	$	1.11	$	2.45	$	2.76	$	5.56

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

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Arch Resources, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

(in thousands)



	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023

	(Unaudited)					(Unaudited)
Net income	$	14,833	$	77,353	$	70,786	$	275,461

Pension, postretirement and other post-employment benefits
Comprehensive loss before tax		(2,006)		(2,895)		(4,012)		(5,790)
Provision for income taxes		427		636		854		1,272
		(1,579)		(2,259)		(3,158)		(4,518)
Available-for-sale securities
Comprehensive income (loss) before tax		13		(24)		9		(39)
Provision for income taxes		(3)		5		(2)		8
		10		(19)		7		(31)

Total other comprehensive loss		(1,569)		(2,278)		(3,151)		(4,549)
Total comprehensive income	$	13,264	$	75,075	$	67,635	$	270,912

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

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Arch Resources, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands, except per share data)


	June 30, 2024		December 31, 2023
Assets
Current assets
Cash and cash equivalents	$	243,707	$	287,807
Short-term investments		35,583		32,724
Restricted cash		1,100		1,100
Trade accounts receivable (net of $0 allowance at June 30, 2024 and December 31, 2023)		241,910		273,522
Other receivables		6,005		13,700
Inventories		249,865		244,261
Other current assets		52,621		64,653
Total current assets		830,791		917,767
Property, plant and equipment, net		1,244,597		1,228,891
Other assets
Deferred income taxes		119,310		124,024
Equity investments		22,861		22,815
Fund for asset retirement obligations		146,010		142,266
Other noncurrent assets		46,999		48,410
Total other assets		335,180		337,515
Total assets	$	2,410,568	$	2,484,173

Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable	$	186,549	$	205,001
Accrued expenses and other current liabilities		111,062		127,617
Current maturities of debt		29,721		35,343
Total current liabilities		327,332		367,961
Long-term debt		101,661		105,252
Asset retirement obligations		263,098		255,740
Accrued pension benefits		832		878
Accrued postretirement benefits other than pension		46,800		47,494
Accrued workers’ compensation		157,663		154,650
Other noncurrent liabilities		62,617		72,742
Total liabilities		960,003		1,004,717
Stockholders' equity
Common stock, $0.01 par value, authorized 300,000 shares, issued 30,786 and 30,557 shares at June 30, 2024 and December 31, 2023, respectively		308		306
Paid-in capital		758,880		720,029
Retained earnings		1,849,622		1,830,018
Treasury stock, 12,701 and 12,197 shares at June 30, 2024 and December 31, 2023, respectively, at cost		(1,193,876)		(1,109,679)
Accumulated other comprehensive income		35,631		38,782
Total stockholders’ equity		1,450,565		1,479,456
Total liabilities and stockholders’ equity	$	2,410,568	$	2,484,173

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

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Arch Resources, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)


	Six Months Ended June 30,
	2024		2023

Operating activities
Net income	$	70,786	$	275,461
Adjustments to reconcile to cash from operating activities:
Depreciation, depletion and amortization		77,259		71,556
Accretion on asset retirement obligations		11,739		10,585
Deferred income taxes		5,567		49,824
Employee stock-based compensation expense		10,445		13,206
Amortization relating to financing activities		1,441		884
Gain on disposals and divestitures, net		(150)		(393)
Reclamation work completed		(4,451)		(11,757)
Contribution to fund for asset retirement obligations		(3,745)		(2,664)
Changes in:
Receivables		39,306		(13,057)
Inventories		(5,604)		(40,295)
Accounts payable, accrued expenses and other current liabilities		(29,223)		(53,729)
Income taxes, net		(45)		(828)
Other		14,121		24,093
Cash provided by operating activities		187,446		322,886
Investing activities
Capital expenditures		(92,366)		(76,606)
Minimum royalty payments		(988)		(1,113)
Proceeds from disposals and divestitures		199		439
Purchases of short-term investments		(30,535)		(13,772)
Proceeds from sales of short-term investments		27,846		17,488
Investments in and advances to affiliates, net		(6,516)		(9,927)
Cash used in investing activities		(102,360)		(83,491)
Financing activities
Proceeds from issuance of term loan due 2025		20,000		—
Payments on term loan due 2025		(3,333)		—
Payments on term loan due 2024		(3,502)		(1,500)
Payments on convertible debt		—		(58,430)
Net payments on other debt		(21,992)		(24,849)
Debt financing costs		(1,516)		—
Purchases of treasury stock		(30,747)		(93,803)
Dividends paid		(63,757)		(111,913)
Payments for taxes related to net share settlement of equity awards		(24,339)		(27,217)
Proceeds from warrants exercised		—		43,750
Cash used in financing activities		(129,186)		(273,962)
Decrease in cash and cash equivalents, including restricted cash		(44,100)		(34,567)
Cash and cash equivalents, including restricted cash, beginning of period	$	288,907	$	237,159
Cash and cash equivalents, including restricted cash, end of period	$	244,807	$	202,592
Cash and cash equivalents, including restricted cash, end of period
SUPPLEMENTAL CASH FLOW INFORMATION
Cash and cash equivalents	$	243,707	$	201,492
Restricted Cash		1,100		1,100
Cash and cash equivalents, including restricted cash, end of period	$	244,807	$	202,592

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

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Arch Resources, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)


							Treasury		Accumulated Other
	Common		Paid-In		Retained		Stock at		Comprehensive
	Stock		Capital		Earnings		Cost		Income		Total

	(In thousands, except per share data)
Balances at January 1, 2024	$	306	$	720,029	$	1,830,018	$	(1,109,679)	$	38,782	$	1,479,456
Dividends on common shares		—		—		(30,671)		—		—		(30,671)
Dividend Equivalents earned on RSU grants		—		72		(679)		—		—		(607)
Purchase of 94,701 shares of common stock under share repurchase program		—		—		—		(16,432)		—		(16,432)
Receipt of 315,721 shares from the exercise of capped call		—		52,624		—		(52,624)		—		—
Employee stock-based compensation		—		5,588		—		—		—		5,588
Common stock withheld related to net share settlement of equity awards		—		(24,259)		—		—		—		(24,259)
Issuance of 227,981 shares of common stock under long-term incentive plan		2		—		—		—		—		2
Total comprehensive income (loss)		—		—		55,953		—		(1,582)		54,371
Balances at March 31, 2024	$	308	$	754,054	$	1,854,621	$	(1,178,735)	$	37,200	$	1,467,448

Dividends on common shares		—		—		(20,072)		—		—		(20,072)
Dividend equivalents earned on RSU grants		—		49		240		—		—		289
Purchase of 94,367 shares of common stock under share repurchase program		—		—		—		(15,141)		—		(15,141)
Employee stock-based compensation		—		4,857		—		—		—		4,857
Common stock withheld related to net share settlement of equity awards		—		(80)		—		—		—		(80)
Total comprehensive income (loss)		—		—		14,833		—		(1,569)		13,264
Balances at June 30, 2024	$	308	$	758,880	$	1,849,622	$	(1,193,876)	$	35,631	$	1,450,565

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Arch Resources, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)


							Treasury		Accumulated Other
	Common		Paid-In		Retained		Stock at		Comprehensive
	Stock		Capital		Earnings		Cost		Income		Total

	(In thousands, except per share data)
Balances at January 1, 2023	$	288	$	724,660	$	1,565,374	$	(986,171)	$	61,429	$	1,365,580
Dividends on common shares		—		—		(55,140)		—		—		(55,140)
Dividend Equivalents earned on RSU grants		—		120		(2,354)		—		—		(2,234)
Purchase of 131,156 shares of common stock under share repurchase program		—		(13)		—		(18,994)		—		(19,007)
Employee stock-based compensation		—		6,767		—		—		—		6,767
Cash paid for convertible debt repurchased		—		(44,486)		—		—		—		(44,486)
Issuance of 275,053 shares of common stock under long-term incentive plan		3		—		—		—		—		3
Common stock withheld related to net share settlement of equity awards		—		(27,055)		—		—		—		(27,055)
Issuance of 1,037,679 shares of common stock for warrants exercised		10		43,719		—		—		—		43,729
Total comprehensive income		—		—		198,108		—		(2,271)		195,837
Balances at March 31, 2023	$	301	$	703,712	$	1,705,988	$	(1,005,165)	$	59,158	$	1,463,994

Dividends on common shares		—		—		(45,011)		—		—		(45,011)
Dividend equivalents earned on RSU grants		—		98		(669)		—		—		(571)
Purchase of 623,304 shares of common stock under share repurchase program		—		—		—		(74,231)		—		(74,231)
Employee stock-based compensation		—		6,439		—		—		—		6,439
Common stock withheld related to net share settlement of equity awards		—		(162)		—		—		—		(162)
Issuance of 29,487 shares of common stock for warrants exercised		—		31		—		—		—		31
Total comprehensive income (loss)		—		—		77,353		—		(2,278)		75,075
Balances at June 30, 2023	$	301	$	710,118	$	1,737,661	$	(1,079,396)	$	56,880	$	1,425,564

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

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Arch Resources, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(unaudited)

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of Arch Resources, Inc. (“Arch Resources”) and its subsidiaries and controlled entities (“Arch” or the “Company”). Unless the context indicates otherwise, the terms “Arch” and the “Company” are used interchangeably in this Quarterly Report on Form 10-Q. The Company’s primary business is the production of metallurgical and thermal coal from underground and surface mines located throughout the United States, for sale to steel producers, utility companies, and industrial accounts both in the United States and around the world. The Company currently operates mining complexes in West Virginia, Wyoming and Colorado. All subsidiaries are wholly owned. Intercompany transactions and accounts have been eliminated in consolidation.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial reporting and U.S. Securities and Exchange Commission regulations. In the opinion of management, all adjustments, consisting of normal, recurring accruals considered necessary for a fair presentation, have been included. Results of operations for the three and six months ended June 30, 2024 are not necessarily indicative of results to be expected for the year ending December 31, 2024. These financial statements should be read in conjunction with the audited financial statements and related notes as of and for the year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 filed with the U.S. Securities and Exchange Commission.

2. Accounting Policies

Recently Adopted Accounting Guidance

There is no recently issued accounting guidance effective that is expected to have a material impact on the Company’s financial position, results of operations, or liquidity.

Recent Accounting Guidance Issued Not Yet Effective

In November 2023, the FASB issued ASU 2023-07 Segment Reporting – Improving Reportable Segment Disclosures (Topic 280). The update is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant expenses. The ASU requires disclosure to include significant segment expenses that are regularly provided to the chief operating decision maker (CODM), a description of other segment items by reportable segment, and any additional measures of a segment’s profit or loss used by the CODM when deciding how to allocate resources. The ASU also requires all annual disclosures currently required by Topic 280 to be included in interim periods. The update is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted and requires retrospective application to all prior periods presented in the financial statements. The Company is currently assessing the timing and impact of adopting the updated provisions.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which includes amendments that further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. The amendments are effective for the Company’s annual periods beginning June 1, 2025, with early adoption permitted, and should be applied either prospectively or retrospectively. The Company is currently evaluating the ASU to determine its impact on the Company’s disclosures.

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3. Accumulated Other Comprehensive Income (Loss)

The following items are included in accumulated other comprehensive income (loss) (“AOCI”), net of tax:


	Pension,
	Postretirement				Accumulated
	and Other Post-				Other
	Employment		Available-for-		Comprehensive
	Benefits		Sale Securities		Income (loss)

Balances at December 31, 2023	$	38,783	$	(1)	$	38,782
Unrealized gains		—		17		17
Amounts reclassified from accumulated other comprehensive income		(4,012)		(8)		(4,020)
Tax effect		854		(2)		852
Balances at June 30, 2024	$	35,625	$	6	$	35,631

The following amounts were reclassified out of AOCI:


	Three Months Ended June 30,				Six Months Ended June 30,				Line Item in the Condensed Consolidated
Details About AOCI Components	2024		2023		2024		2023		Income Statements

	(In thousands)
Pension, postretirement and other post-employment benefits
Amortization of actuarial gains, net ¹	$	2,006	$	2,858	$	4,012	$	5,717	Non-service related pension and postretirement benefit credits
Amortization of prior service credits		—		37		—		73	Non-service related pension and postretirement benefit credits
		2,006		2,895		4,012		5,790	Total before tax
		(427)		(636)		(854)		(1,272)	Provision for income taxes
	$	1,579	$	2,259	$	3,158	$	4,518	Net of tax

Available-for-sale securities ²	$	(1)	$	1	$	8	$	(21)	Interest and investment income
		3		3		2		8	Provision for income taxes
	$	2	$	4	$	10	$	(13)	Net of tax

¹ Production-related benefits and workers’ compensation costs are included in costs of sales.

² The gains and losses on sales of available-for-sale-securities are determined on a specific identification basis.

4. Inventories

Inventories consist of the following:


	June 30,		December 31,
	2024		2023

	(In thousands)
Coal	$	99,776	$	99,174
Repair parts and supplies		150,089		145,087
	$	249,865	$	244,261

The repair parts and supplies are stated net of an allowance for slow-moving and obsolete inventories of $1.6 million at June 30, 2024 and December 31, 2023, respectively.

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5. Investments in Available-for-Sale Securities

The Company has invested in marketable debt securities, primarily highly liquid U.S. Treasury securities and investment grade corporate bonds. These investments are held in the custody of a major financial institution. These securities are classified as available-for-sale securities and, accordingly, the unrealized gains and losses are recorded through other comprehensive income.

The Company’s investments in available-for-sale marketable securities are as follows:

June 30, 2024