Company Quick10K Filing
Quick10K
Consol Coal Resources
10-Q 2019-09-30 Quarter: 2019-09-30
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
8-K 2019-11-05 Earnings, Regulation FD, Exhibits
8-K 2019-08-06 Earnings, Regulation FD, Exhibits
8-K 2019-05-08 Earnings, Regulation FD, Exhibits
8-K 2019-03-28 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2019-02-07 Earnings, Regulation FD, Exhibits
8-K 2018-11-01 Earnings, Regulation FD, Exhibits
8-K 2018-08-02 Earnings, Regulation FD, Exhibits
8-K 2018-02-06 Earnings, Regulation FD, Exhibits
ARLP Alliance Resource Partners 1,958
BTU Peabody Energy 1,861
HCC Warrior Met Coal 1,045
CTRA Contura Energy 518
CEIX CONSOL Energy 452
NRP Natural Resource Partners 348
CLD Cloud Peak Energy 251
METC Ramaco Resources 178
FELP Foresight Energy 58
BBL BHP Billiton 0
CCR 2019-09-30
Part I : Financial Information
Item 1. Financial Statements
Note 1-Basis of Presentation:
Note 2-Revenue:
Note 3-Net Income per Limited Partner and General Partner Interest:
Note 4-Inventories:
Note 5-Property, Plant and Equipment:
Note 6-Leases:
Note 7-Other Accrued Liabilities:
Note 8-Long-Term Debt:
Note 9-Components of Coal Workers' Pneumoconiosis (Cwp) and Workers' Compensation Net Periodic Benefit Costs:
Note 10-Fair Value of Financial Instruments:
Note 11-Commitments and Contingent Liabilities:
Note 12-Receivables Financing Agreement
Note 13-Related Party:
Note 14-Long-Term Incentive Plan:
Note 15-Financial Information for Subsidiary Guarantors and Finance Subsidiary of Possible Future Public Debt:
Note 16-Subsequent Events:
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 4. Controls and Procedures
Part Ii: Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 4. Mine Safety Disclosures
Item 6. Exhibits
EX-31.1 exhibit311-93019.htm
EX-31.2 exhibit312-93019.htm
EX-32.1 exhibit321-93019.htm
EX-32.2 exhibit322-93019.htm
EX-95 exhibit95-mshax93019.htm

Consol Coal Resources Earnings 2019-09-30

CCR 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Document
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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 September 30, 2019
OR
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: 001-14901
__________________________________________________
CONSOL Coal Resources LP
(Exact name of registrant as specified in its charter)

Delaware
 
47-3445032
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
1000 CONSOL Energy Drive, Suite 100
Canonsburg, PA 15317-6506
(724) 416-8300
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
__________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
  Title of each class 
Trading Symbol(s)
   Name of each exchange on which registered
Common Units representing limited partner interests
CCR
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  
CONSOL Coal Resources LP had 27,632,824 common units and a 1.7% general partner interest outstanding at October 25, 2019.
 



TABLE OF CONTENTS

 
 
Page
 
Part I. Financial Information
 
 
 
 
Item 1.
Financial Statements
 
 
Consolidated Statements of Operations for the three and nine months ended September 30, 2019 and 2018
 
Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2019 and 2018
 
Consolidated Balance Sheets at September 30, 2019 and December 31, 2018
 
Consolidated Statement of Partners Capital for the three and nine months ended September 30, 2019 and 2018
 
Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 and 2018
 
Notes to the Consolidated Financial Statements
 
 
 
Item 2.
 
 
 
Item 4.
 
 
 
 
Part II. Other Information
 
 
 
 
Item 1.
 
 
 
Item 1A.
 
 
 
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
 
 
 
Item 4.
 
 
 
Item 6.
 
 
 
 


2



Significant Relationships and Other Terms Referenced in this Quarterly Report

“CONSOL Coal Resources LP,” the “Partnership,” “we,” “our,” “us” and similar terms refer to CONSOL Coal Resources LP, a Delaware limited partnership, and its subsidiaries, with common units listed for trading on the New York Stock Exchange under the ticker “CCR”;

“Affiliated Company Credit Agreement” refers to an agreement entered into on November 28, 2017 among the Partnership and certain of its subsidiaries (collectively, the “Credit Parties”), CONSOL Energy, as lender and administrative agent, and PNC Bank, National Association, as collateral agent (“PNC”), as amended by Amendment No. 1 to Affiliated Company Credit Agreement, dated March 28, 2019. The Affiliated Company Credit Agreement provides for a revolving credit facility in an aggregate principal amount of up to $275 million to be provided by CONSOL Energy, as lender;

“common units” refer to the limited partner interests in CONSOL Coal Resources LP. The holders of common units are entitled to participate in partnership distributions and are entitled to exercise the rights or privileges of limited partners under the Partnership Agreement. The common units are listed on the New York Stock Exchange under the symbol “CCR”;

“CONSOL Coal Finance” refers to CONSOL Coal Finance Corporation, a Delaware corporation and a direct, wholly owned subsidiary of the Partnership;

“CONSOL Energy” and our “sponsor” refer to CONSOL Energy Inc., a Delaware corporation and the parent of our general partner, and its subsidiaries other than our general partner, us and our subsidiaries;

“CONSOL Operating” refers to CONSOL Operating LLC, a Delaware limited liability company and a direct, wholly owned subsidiary of the Partnership;

“CONSOL Thermal Holdings” refers to CONSOL Thermal Holdings LLC, a Delaware limited liability company and a direct, wholly owned subsidiary of CONSOL Operating; CONSOL Thermal Holdings owns a 25% undivided interest in the assets, liabilities, revenues and expenses comprising the Pennsylvania Mining Complex;

“CPCC” refers to CONSOL Pennsylvania Coal Company LLC, a Delaware limited liability company and a wholly owned subsidiary of CONSOL Energy;

“general partner” refers to CONSOL Coal Resources GP LLC, a Delaware limited liability company and our general partner;

“Omnibus Agreement” refers to the Omnibus Agreement dated July 7, 2015, as replaced by the First Amended and Restated Omnibus Agreement dated as of September 30, 2016, and as amended by the First Amendment to the First Amended and Restated Omnibus Agreement, dated November 28, 2017;

“Partnership Agreement” refers to the Third Amended and Restated Partnership Agreement dated as of November 28, 2017;

“Pennsylvania Mining Complex” refers to the Bailey, Enlow Fork, and Harvey coal mines, coal reserves and related assets and operations, located primarily in southwestern Pennsylvania. The Pennsylvania Mining Complex is owned 75% by our sponsor and its subsidiaries and 25% by CONSOL Thermal Holdings;

“SEC” refers to the United States Securities and Exchange Commission;

“sponsor” or “our sponsor” refers to CONSOL Energy; and

“subordinated units” refer to limited partner interests in CONSOL Coal Resources LP having the rights and obligations specified with respect to subordinated units in the Partnership Agreement. On August 16, 2019, all 11,611,067 subordinated units, which were owned entirely by CONSOL Energy Inc., were converted into common units on a one-for-one basis. As of the date of this Quarterly Report on Form 10-Q, there are no outstanding subordinated units.

3



PART I : FINANCIAL INFORMATION
ITEM 1.    FINANCIAL STATEMENTS
CONSOL COAL RESOURCES LP
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except unit data)
(unaudited)

 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2019
 
2018
 
2019
 
2018
Coal Revenue
$
75,385

 
$
73,700

 
$
246,166

 
$
254,126

Freight Revenue
900

 
611

 
3,529

 
9,444

Other Income
1,096

 
1,003

 
3,440

 
4,302

Total Revenue and Other Income
77,381

 
75,314

 
253,135

 
267,872

 
 
 
 
 
 
 
 
Operating and Other Costs 1 
53,998

 
49,540

 
164,542

 
159,126

Depreciation, Depletion and Amortization
11,086

 
11,059

 
33,639

 
33,769

Freight Expense
900

 
611

 
3,529

 
9,444

Selling, General and Administrative Expenses 2
2,840

 
3,899

 
10,353

 
10,260

Interest Expense, Net 3
1,587

 
1,560

 
4,495

 
5,295

Total Costs
70,411

 
66,669

 
216,558

 
217,894

Net Income
$
6,970

 
$
8,645

 
$
36,577

 
$
49,978

 


 


 


 


Less: General Partner Interest in Net Income
118

 
146

 
617

 
846

Limited Partner Interest in Net Income
$
6,852

 
$
8,499

 
$
35,960

 
$
49,132

 
 
 
 
 
 
 
 
Net Income per Limited Partner Unit - Basic
$
0.25

 
$
0.31

 
$
1.30

 
$
1.79

Net Income per Limited Partner Unit - Diluted
$
0.25

 
$
0.31

 
$
1.30

 
$
1.78

 
 
 
 
 
 
 
 
Limited Partner Units Outstanding - Basic
27,632,770

 
27,521,519

 
27,618,396

 
27,508,275

Limited Partner Units Outstanding - Diluted
27,667,477

 
27,628,202

 
27,654,684

 
27,592,838

 
 
 
 
 
 
 
 
Cash Distributions Declared per Unit 4
$
0.5125

 
$
0.5125

 
$
1.5375

 
$
1.5375



1 Related Party of $838 and $725 for the three months ended and $2,368 and $2,172 for the nine months ended September 30, 2019 and September 30, 2018, respectively.
2 Related Party of $1,902 and $2,345 for the three months ended and $6,932 and $5,943 for the nine months ended September 30, 2019 and September 30, 2018, respectively.
3Related party of $1,587 and $1,560 for the three months ended and $4,495 and $5,295 nine months ended September 30, 2019 and September 30, 2018, respectively.
4 Represents the cash distributions declared related to the period presented. See Note 16 - Subsequent Events.














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

4



CONSOL COAL RESOURCES LP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in thousands)
(unaudited)

 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2019
 
2018
 
2019
 
2018
Net Income
$
6,970

 
$
8,645

 
$
36,577

 
$
49,978

 
 
 
 
 
 
 
 
Recognized Net Actuarial Gain
(5
)
 
(2
)
 
(11
)
 
(6
)
Other Comprehensive Loss
(5
)
 
(2
)
 
(11
)
 
(6
)
 
 
 
 
 
 
 
 
Comprehensive Income
$
6,965

 
$
8,643

 
$
36,566

 
$
49,972





















































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

5



CONSOL COAL RESOURCES LP
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
 
(unaudited)
 
 
 
September 30,
2019
 
December 31,
2018
ASSETS
 
 
 
Current Assets:
 
 
 
Cash
$
10,611

 
$
1,003

Trade Receivables
27,245

 
21,871

Other Receivables
56

 
1,068

Inventories
11,339

 
11,066

Prepaid Expenses
7,094

 
5,096

Total Current Assets
56,345

 
40,104

Property, Plant and Equipment:
 
 
 
Property, Plant and Equipment
977,418

 
946,298

Less—Accumulated Depreciation, Depletion and Amortization
559,538

 
526,747

Total Property, Plant and Equipment—Net
417,880

 
419,551

Other Assets:
 
 
 
Right of Use AssetOperating Leases
16,855

 

Other Assets
13,298

 
14,908

Total Other Assets
30,153

 
14,908

TOTAL ASSETS
$
504,378

 
$
474,563

LIABILITIES AND PARTNERS CAPITAL
 
 
 
Current Liabilities:
 
 
 
Accounts Payable
$
23,405

 
$
24,834

Accounts PayableRelated Party
2,882

 
3,831

Current Portion of Long-Term Debt
4,599

 
3,503

Other Accrued Liabilities
38,192

 
31,916

Total Current Liabilities
69,078

 
64,084

Long-Term Debt:
 
 
 
Affiliated Company Credit AgreementRelated Party
181,400

 
163,000

Finance Lease Obligations
2,085

 
5,067

Total Long-Term Debt
183,485

 
168,067

Other Liabilities:
 
 
 
Pneumoconiosis Benefits
4,897

 
4,260

Workers Compensation
2,914

 
3,119

Asset Retirement Obligations
10,939

 
9,775

Operating Lease Liability
14,224

 

Other
547

 
518

Total Other Liabilities
33,521

 
17,672

TOTAL LIABILITIES
286,084

 
249,823

Partners Capital:
 
 
 
Common Units (27,632,824 Units Outstanding at September 30, 2019; 15,911,211 Units Outstanding at December 31, 2018)
194,378

 
212,122

Subordinated Units (No Units Outstanding at September 30, 2019; 11,611,067 Units Outstanding at December 31, 2018)

 
(11,421
)
General Partner Interest
12,007

 
12,119

Accumulated Other Comprehensive Income
11,909

 
11,920

Total Partners Capital
218,294

 
224,740

TOTAL LIABILITIES AND PARTNERS CAPITAL
$
504,378

 
$
474,563


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

6



CONSOL COAL RESOURCES LP
CONSOLIDATED STATEMENT OF PARTNERS’ CAPITAL
(Dollars in thousands)


 
Limited Partners
 
 
 
 
 
 
 
Common
 
Subordinated
 
General Partner
 
Accumulated Other Comprehensive Income (Loss)
 
Total
Balance at December 31, 2018
$
212,122

 
$
(11,421
)
 
$
12,119

 
$
11,920

 
$
224,740

(unaudited)
 
 
 
 
 
 
 
 
 
Net Income
8,676

 
6,287

 
257

 

 
15,220

Unitholder Distributions
(8,211
)
 
(5,951
)
 
(243
)
 

 
(14,405
)
Unit-Based Compensation
397

 

 

 

 
397

Units Withheld for Taxes
(880
)
 

 

 

 
(880
)
Actuarially Determined Long-Term Liability Adjustments

 

 

 
(3
)
 
(3
)
Balance at March 31, 2019
$
212,104

 
$
(11,085
)
 
$
12,133

 
$
11,917

 
$
225,069

Net Income
8,201

 
5,944

 
242

 

 
14,387

Unitholder Distributions
(8,211
)
 
(5,950
)
 
(243
)
 

 
(14,404
)
Unit-Based Compensation
341

 

 

 

 
341

Actuarially Determined Long-Term Liability Adjustments

 

 

 
(3
)
 
(3
)
Balance at June 30, 2019
$
212,435

 
$
(11,091
)
 
$
12,132

 
$
11,914

 
$
225,390

Net Income
6,852

 

 
118

 

 
6,970

Unitholder Distributions
(8,211
)
 
(5,951
)
 
(243
)
 

 
(14,405
)
Conversion of Subordinated Units to Common Units1
(17,042
)
 
17,042

 

 

 

Unit-Based Compensation
344

 

 

 

 
344

Actuarially Determined Long-Term Liability Adjustments

 

 

 
(5
)
 
(5
)
Balance at September 30, 2019
$
194,378

 
$

 
$
12,007

 
$
11,909

 
$
218,294


1All subordinated units were converted to common units on a one-for-one basis on August 16, 2019. For purposes of calculating net income per common and subordinated unit, the conversion of the subordinated units is deemed to have occurred on July 1, 2019. See Note 3 - Net Income Per Limited Partner and General Partner Interest.


























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


7



 
Limited Partners
 
 
 
 
 
 
 
Common
 
Subordinated
 
General Partner
 
Accumulated Other Comprehensive Income (Loss)
 
Total
Balance at December 31, 2017
$
205,974

 
$
(15,225
)
 
$
11,964

 
$
10,443

 
$
213,156

(unaudited)
 
 
 
 
 
 
 
 
 
Net Income
12,477

 
9,108

 
372

 

 
21,957

Unitholder Distributions
(8,153
)
 
(5,951
)
 
(242
)
 

 
(14,346
)
Unit-Based Compensation
359

 

 

 

 
359

Units Withheld for Taxes
(899
)
 

 

 

 
(899
)
Actuarially Determined Long-Term Liability Adjustments

 

 

 
(2
)
 
(2
)
Balance at March 31, 2018
$
209,758

 
$
(12,068
)
 
$
12,094

 
$
10,441

 
$
220,225

Net Income
11,013

 
8,035

 
328

 

 
19,376

Unitholder Distributions
(8,153
)
 
(5,950
)
 
(244
)
 

 
(14,347
)
Unit-Based Compensation
508

 

 

 

 
508

Actuarially Determined Long-Term Liability Adjustments

 

 

 
(2
)
 
(2
)
Balance at June 30, 2018
$
213,126

 
$
(9,983
)
 
$
12,178

 
$
10,439

 
$
225,760

Net Income
4,914

 
3,585

 
146

 

 
8,645

Unitholder Distributions
(8,154
)
 
(5,951
)
 
(243
)
 

 
(14,348
)
Unit-Based Compensation
503

 

 

 

 
503

Units Withheld for Taxes
(13
)
 

 

 

 
(13
)
Actuarially Determined Long-Term Liability Adjustments

 

 

 
(2
)
 
(2
)
Balance at September 30, 2018
$
210,376

 
$
(12,349
)
 
$
12,081

 
$
10,437

 
$
220,545






































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

8



CONSOL COAL RESOURCES LP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(unaudited)
 
Nine Months Ended
September 30,
 
2019
 
2018
Cash Flows from Operating Activities:
 
 
 
Net Income
$
36,577

 
$
49,978

Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
 
 
 
Depreciation, Depletion and Amortization
33,639

 
33,769

Loss (Gain) on Sale of Assets
5

 
(62
)
Unit-Based Compensation
1,082

 
1,370

Changes in Operating Assets:
 
 
 
Accounts and Notes Receivable
(4,353
)
 
13,393

Inventories
(273
)
 
278

Prepaid Expenses
(1,998
)
 
(1,708
)
Changes in Other Assets
1,610

 
531

Changes in Operating Liabilities:
 
 
 
Accounts Payable
(2,041
)
 
680

Accounts Payable—Related Party
(949
)
 
(1,498
)
Other Operating Liabilities
3,645

 
(2,483
)
Changes in Other Liabilities
561

 
886

Net Cash Provided by Operating Activities
67,505

 
95,134

Cash Flows from Investing Activities:
 
 
 
Capital Expenditures
(29,354
)
 
(20,256
)
Proceeds from Sales of Assets
4

 
170

Net Cash Used in Investing Activities
(29,350
)
 
(20,086
)
Cash Flows from Financing Activities:
 
 
 
Payments on Finance Leases
(2,853
)
 
(2,125
)
Net Proceeds from (Payments on) Related Party Long-Term Notes
18,400

 
(29,583
)
Payments for Unitholder Distributions
(43,214
)
 
(43,041
)
Units Withheld for Taxes
(880
)
 
(912
)
Net Cash Used in Financing Activities
(28,547
)
 
(75,661
)
Net Increase (Decrease) in Cash
9,608

 
(613
)
Cash at Beginning of Period
1,003

 
1,533

Cash at End of Period
$
10,611

 
$
920

 
 
 
 
Non-Cash Investing and Financing Activities:
 
 
 
Finance Lease
$

 
$
11,495

Longwall Shield Rebuild
959

 







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

9



CONSOL COAL RESOURCES LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per unit amounts)
NOTE 1—BASIS OF PRESENTATION:

The accompanying unaudited Consolidated Financial Statements were prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included.

For the three and nine months ended September 30, 2019 and 2018, the unaudited Consolidated Financial Statements include the accounts of CONSOL Operating and CONSOL Thermal Holdings, wholly owned and controlled subsidiaries.

The Partnership is a master limited partnership formed on March 16, 2015 to manage and further develop all of our sponsor's active coal operations in Pennsylvania. As of September 30, 2019, the Partnership's assets are comprised of a 25% undivided interest in, and operational control over, the Pennsylvania Mining Complex. The Partnership's common units trade on the New York Stock Exchange under the ticker symbol “CCR.”

Recent Accounting Pronouncements:

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-15 - Intangibles - Goodwill and Other - Internal Use Software (Subtopic 350-40) to help entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement (hosting arrangement) by providing guidance for determining when the arrangement includes a software license. The amendments in update 2018-15 align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements of capitalizing implementation costs incurred to develop or obtain internal-use software. These changes will be effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Management does not expect this update to have a material impact on the Partnership's financial statements.

In August 2018, the FASB issued ASU 2018-14 - Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20) to improve the effectiveness of disclosures in the notes to the financial statements by facilitating clear communication of the information required by GAAP. The amendments modify the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. These changes will be effective for fiscal years ending after December 15, 2020, including interim periods within those fiscal years. Management is currently evaluating the impact this guidance may have on the Partnership's financial statements.

In August 2018, the FASB issued ASU 2018-13 - Fair Value Measurement (Topic 820) to improve the effectiveness of disclosures in the notes to the financial statements by facilitating clear communication of the information required by GAAP. The amendments modify the disclosure requirements on fair value measurements, including the consideration of costs and benefits. These changes will be effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Management does not expect this update to have a material impact on the Partnership's financial statements.

In June 2016, the FASB issued ASU 2016-13 - Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which provides financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. To achieve this, the amendments in this ASU replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The measurement of expected credit losses will be based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectibility of the reported amount. In May 2019, the FASB updated Topic 326 by issuing ASU 2019-05, Financial Instruments-Credit Losses (Topic 326): Targeted Transition Relief, which provides entities that have certain instruments within the scope of Subtopic 326-20, Financial Instruments-Credit Losses - Measured at Amortized Cost, with an option to irrevocably elect the fair value option in Subtopic 825-10, Financial Instruments-Overall, applied on an instrument-by-instrument basis for eligible instruments, upon adoption of Topic 326. The amendments in these updates will be applied using a modified-retrospective approach and, for public entities, are effective for fiscal years beginning after December 15, 2019 and interim periods within those annual periods. Management does not expect this update to have a material impact on the Partnership's financial statements.

10



Reclassifications:

Certain amounts in prior periods have been reclassified to conform with the report classifications of the current period, including the reclassification of the Current Portion of Long-Term Debt, previously included in Other Accrued Liabilities on the Consolidated Balance Sheets. These reclassifications had no effect on previously reported Total Current Liabilities and are not material to the prior year presentation.

NOTE 2—REVENUE:

The following table disaggregates our revenue by major source for the three and nine months ended September 30, 2019 and September 30, 2018:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Coal Revenue
$
75,385

 
$
73,700

 
$
246,166

 
$
254,126

Freight Revenue
900

 
611

 
3,529

 
9,444

Total Revenue from Contracts with Customers
$
76,285

 
$
74,311

 
$
249,695

 
$
263,570



Our revenue is recognized when title passes to the customer. We have determined that each ton of coal represents a separate and distinct performance obligation. Our coal supply contracts and other sales and operating revenue contracts vary in length from short-term to long-term contracts and do not typically have significant financing components.

The estimated transaction price from each of our contracts is based on the total amount of consideration to which we expect to be entitled under the contract. Included in the transaction price for certain coal supply contracts is the impact of variable consideration, including quality price adjustments, handling services, per-ton price fluctuations based on certain coal sales price indices and anticipated payments in lieu of shipments. The estimated transaction price for each contract is allocated to our performance obligations based on relative standalone selling prices determined at contract inception.

Coal Revenue

Revenues are recognized when title passes to the customers and the price is fixed and determinable. Generally, title passes when coal is loaded at the central preparation facility and, on occasion, at terminal locations or other customer destinations. Our coal contract revenue per ton is fixed and determinable and adjusted for nominal quality adjustments. Some coal contracts also contain positive electric power price-related adjustments in addition to a fixed base-price per ton. None of the Partnership's coal contracts allow for retroactive adjustments to pricing after title to the coal has passed.

Some of our contracts span multiple years and have annual pricing modification provisions, based upon market-driven or inflationary adjustments, where no additional value is exchanged. Also, some of our contracts contain favorable electric power price-related adjustments, which represent market-driven price adjustments, wherein there is no additional value exchanged. Management believes that the invoice price is the most appropriate rate at which to recognize revenue.

While we do, from time to time, experience costs of obtaining coal customer contracts with amortization periods greater than one year, those costs have been immaterial to our net income. As of and for the three and nine months ended September 30, 2019 and September 30, 2018, we do not have any capitalized costs to obtain customer contracts on our balance sheet nor have we recognized any amortization of previously existing capitalized costs of obtaining customer contracts. Further, the Partnership has not recognized any revenue in the current period from performance obligations satisfied (or partially satisfied) in previous periods.

Freight Revenue

Some of our coal contracts require that we sell our coal at locations other than our central preparation plant. The cost to transport our coal to the ultimate sales point is passed through to our customers and we recognize the freight revenue equal to the transportation cost when title of the coal passes to the customer.

Contract Balances

Contract assets are recorded as trade receivables and reported separately in the Partnership's unaudited Consolidated Balance Sheets from other contract assets as title passes to the customer and the Partnership's right to consideration becomes

11



unconditional. Payments for coal shipments are typically due within two to four weeks of the invoice date. The Partnership typically does not have material contract assets that are stated separately from trade receivables as the Partnership's performance obligations are satisfied as control of the goods or services passes to the customer, thereby granting the Partnership an unconditional right to receive consideration. Contract liabilities relate to consideration received in advance of the satisfaction of the Partnership's performance obligations. Contract liabilities are recognized as revenue at the point in time when control of the good or service passes to the customer.
NOTE 3—NET INCOME PER LIMITED PARTNER AND GENERAL PARTNER INTEREST:
The Partnership allocates net income among our general partner and limited partners using the two-class method in accordance with applicable authoritative accounting guidance. Under the two-class method, we allocate our net income to our limited partners and our general partner in accordance with the terms of our Partnership Agreement. We also allocate any earnings in excess of distributions to our limited partners and our general partner in accordance with the terms of our Partnership Agreement. We allocate any distributions in excess of earnings for the period to our general partner and our limited partners based on their respective proportionate ownership interests in us, after taking into account distributions to be paid with respect to the incentive distribution rights, as set forth in the Partnership Agreement.
Diluted net income per limited partner unit reflects the potential dilution that could occur if securities or agreements to issue common units, such as awards under the long-term incentive plan, were exercised, settled or converted into common units. When it is determined that potential common units resulting from an award subject to performance or market conditions should be included in the diluted net income per limited partner unit calculation, the impact is reflected by applying the treasury stock method.

On August 16, 2019, all 11,611,067 subordinated units were converted into common units on a one-for-one basis. For purposes of calculating net income per common and subordinated unit, the conversion of the subordinated units is deemed to have occurred on July 1, 2019. The conversion did not impact the amount of the cash distribution paid or the total number of the Partnership’s outstanding units representing limited partner interests. Upon payment of the cash distribution for the second quarter of 2019, the financial requirements for the conversion of all subordinated units were satisfied.

The following table illustrates the Partnership’s calculation of net income per unit for common units and subordinated units (in thousands, except for per unit information):
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Net Income
$
6,970

 
$
8,645

 
$
36,577

 
$
49,978

Less: General Partner Interest in Net Income
118

 
146

 
617

 
846

Net Income Allocable to Limited Partner Units
$
6,852

 
$
8,499

 
$
35,960

 
$
49,132

 
 
 
 
 
 
 
 
Limited Partner Interest in Net Income - Common Units
$
6,852

 
$
4,914

 
$
23,729

 
$
28,404

Limited Partner Interest in Net Income - Subordinated Units

 
3,585

 
12,231

 
20,728

Limited Partner Interest in Net Income - Basic & Diluted
$
6,852

 
$
8,499

 
$
35,960

 
$
49,132

 
 
 
 
 
 
 
 
Weighted Average Limited Partner Units Outstanding - Basic
27,632,770

 
27,521,519

 
27,618,396

 
27,508,275

 
 
 
 
 
 
 
 
Weighted Average Limited Partner Units Outstanding - Diluted
27,667,477

 
27,628,202

 
27,654,684

 
27,592,838

 
 
 
 
 
 
 
 
Net Income Per Limited Partner Unit - Basic
 
 
 
 
 
 
 
 Common Units
$
0.25

 
$
0.31

 
$
1.30

 
$
1.79

 Subordinated Units
$

 
$
0.31

 
$
1.05

 
$
1.79

Net Income Per Limited Partner Unit - Basic
$
0.25

 
$
0.31

 
$
1.30

 
$
1.79

 
 
 
 
 
 
 
 
Net Income Per Limited Partner Unit - Diluted
 
 
 
 
 
 
 
 Common Units
$
0.25

 
$
0.31

 
$
1.30

 
$
1.78

 Subordinated Units
$

 
$
0.31

 
$
1.05

 
$
1.79

Net Income Per Limited Partner Unit - Diluted
$
0.25

 
$
0.31

 
$
1.30

 
$
1.78



12


There were zero phantom units excluded from the computation of the diluted earnings per unit, because their effect would be anti-dilutive for the three and nine months ended September 30, 2019 and 2018.
NOTE 4—INVENTORIES:
 
September 30,
2019
 
December 31,
2018
Coal
$
993

 
$
1,160

Supplies
10,346

 
9,906

      Total Inventories
$
11,339

 
$
11,066



Inventories are stated at the lower of cost or net realizable value. The cost of coal inventories is determined by the first-in, first-out (FIFO) method. Coal inventory costs include labor, supplies, equipment costs, operating overhead, depreciation, depletion and amortization, and other related costs. The cost of supplies inventory is determined by the average cost method and includes operating and maintenance supplies to be used in our coal operations.
NOTE 5—PROPERTY, PLANT AND EQUIPMENT:

 
September 30,
2019
 
December 31,
2018
Coal and Other Plant and Equipment
$
663,048

 
$
636,105

Coal Properties and Surface Lands
123,933

 
122,679

Airshafts
105,148

 
102,275

Mine Development
81,538

 
81,538

Advance Mining Royalties
3,751

 
3,701

Total Property, Plant and Equipment
977,418

 
946,298

Less: Accumulated Depreciation, Depletion and Amortization
559,538

 
526,747

Total Property, Plant and Equipment, Net
$
417,880

 
$
419,551



Coal reserves are controlled either through fee ownership or by lease. The duration of the leases vary; however, the lease terms generally are extended automatically to the exhaustion of economically recoverable reserves, as long as active mining continues. Coal interests held by lease provide the same rights as fee ownership for mineral extraction and are legally considered real property interests.

As of September 30, 2019 and December 31, 2018, property, plant and equipment includes gross assets under finance lease of $11,879 and $11,919, respectively. Accumulated amortization for finance leases was $6,380 and $3,529 at September 30, 2019 and December 31, 2018, respectively. Amortization expense for assets under finance leases approximated $966 and $967 for the three months ended and $2,899 and $2,262 for the nine months ended September 30, 2019 and September 30, 2018, respectively, and is included in Depreciation, Depletion and Amortization in the accompanying unaudited Consolidated Statements of Operations.
NOTE 6—LEASES:
        
On January 1, 2019, the Partnership adopted Accounting Standards Codification (“ASC”) Topic 842 using the transition option, “Comparatives Under 840 Option,” established by ASU 2018-11, Leases (Topic 842), Targeted Improvements. As allowed under this guidance, the Partnership elected not to recast the comparative periods presented when transitioning to ASC 842. As most of the Partnership's leases do not provide an implicit rate, the Partnership has taken a portfolio approach of applying its incremental borrowing rate based on the information available at the adoption date to calculate the present value of lease payments over the lease term. The Partnership has elected the package of practical expedients permitted under the transition guidance within the standard, which allows the Partnership (1) to not reassess whether any expired or existing contracts are or contain leases, (2) to not reassess the lease classification for any expired or existing leases, and (3) to not reassess initial direct costs for any existing leases. The Partnership has also elected the practical expedient to not evaluate land easements that existed or expired before its adoption of Topic 842 and the practical expedient to not separate lease and non-lease components; that is, to account lease and non-lease components in a contract as a single lease component for all classes of underlying assets. Further, the Partnership made an accounting policy election to keep leases with an initial term of twelve

13



months or less off the Consolidated Balance Sheets. The Partnership will recognize those lease payments in the unaudited Consolidated Statements of Operations over the lease term. For the three and nine months ended September 30, 2019, these short term lease expenses were not material to the Partnership's financial statements.

Based on the Partnership's lease portfolio, the standard had a material impact on the Partnership’s unaudited Consolidated Balance Sheets, but did not have a significant impact on the Partnership’s consolidated net earnings and cash flows. The most significant impact was the recognition of Right of Use (“ROU”) assets and lease liabilities for operating leases, while the accounting for finance leases remained substantially unchanged. The Partnership's bank covenants were not affected by this update. The Partnership recorded operating lease ROU assets and operating lease liabilities of approximately $20 million as of January 1, 2019, primarily related to mining equipment, based on the present value of the future lease payments on the date of adoption.

The Partnership determines if an arrangement is an operating or finance lease at inception of the applicable lease. For leases where the Partnership is the lessee, ROU assets represent the Partnership’s right to use an underlying asset for the lease term and lease liabilities represent an obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. As most of the Partnership’s leases do not provide an implicit interest rate, the Partnership uses its incremental borrowing rate based on the information available on the commencement date in determining the present value of lease payments. The ROU asset also consists of any prepaid lease payments, lease incentives received, and costs which will be incurred in exiting a lease. The lease terms used to calculate the ROU asset and related lease liability include options to extend or terminate the lease when it is reasonably certain that the Partnership will exercise that option. Lease expense for operating leases is recognized on a straight-line basis over the lease term as an operating expense while the expense for finance leases is recognized as depreciation expense and interest expense using the interest method of recognition.

The Partnership has operating leases for mining or other equipment used in operations and office space. Many leases include one or more options to renew, some of which include options to extend the leases, and some leases include options to terminate or buy out the leases within a set period of time. In some of the Partnership’s lease agreements, the rental payments are adjusted periodically to reflect actual charges incurred for inflation and/or changes in other indexes. Many of our operating lease payments for mining equipment contain a variable component which is calculated based upon production metrics such as feet of advance or raw tonnage mined. While most of our leases contain clauses regarding the general condition of the equipment upon lease termination, they do not contain residual value guarantees.

For the three and nine ended September 30, 2019, the components of operating lease expense were as follows:
 
Three Months Ended
September 30, 2019
 
Nine Months Ended
September 30, 2019
Fixed Operating Lease Expense
$
1,494

 
$
4,674

Variable Operating Lease Expense
711

 
2,303

Total Operating Lease Expense
$
2,205

 
$
6,977

Supplemental cash flow information related to the Partnership’s operating leases for the nine months ended September 30, 2019 was as follows:
Cash Paid for Amounts Included in the Measurement of Operating Lease Liabilities
$
2,367

ROU Assets Obtained in Exchange for Operating Lease Obligations
$


    
The following table presents the lease balances within the unaudited Consolidated Balance Sheets, weighted average lease term, and weighted average discount rates related to the Partnership’s operating leases as of September 30, 2019:

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Lease Assets and Liabilities
Classification
Amount
Assets:
 
 
Operating Lease ROU Assets
Other Assets
$
16,855

 
 
 
Liabilities:
 
 
Current:
 
 
     Operating Lease Liabilities
Other Accrued Liabilities
$
3,829

Long-Term:
 
 
     Operating Lease Liabilities
Operating Lease Liabilities
$
14,224

Total Operating Lease Liabilities
 
$
18,053

 
 
 
Weighted Average Remaining Lease Term (in Years)
 
4.10

Weighted Average Discount Rate
 
6.7
%

The Partnership also enters into finance leases for mining equipment and automobiles. Assets arising from finance leases are included in Property, Plant and Equipment, Net and the liabilities are included in Other Accrued Liabilities and Long-Term Debt in the Partnership's unaudited Consolidated Balance Sheets.

For the three and nine months ended September 30, 2019, the components of finance lease expense were as follows:
 
Three Months Ended
September 30, 2019
 
Nine Months Ended
September 30, 2019
Amortization of Right of Use Assets
$
966

 
$
2,899

Interest Expense
$
83

 
$
288

The following table presents the weighted average lease term and weighted average discount rates related to the Partnership’s finance leases as of September 30, 2019:
Weighted Average Remaining Lease Term (in Years)
1.45

Weighted Average Discount Rate
5.24
%

The following table presents the future maturities of the Partnership’s operating and finance lease liabilities, together with the present value of the net minimum lease payments, at September 30, 2019:

Finance Leases
Operating Leases
Remainder of 2019
$
700

$
2,114

2020
4,179

5,722

2021
1,054

5,483

2022
14

3,029

2023
11

1,314

Thereafter

2,941

Total minimum lease payments
$
5,958

$
20,603

Less amount representing interest
233

2,550

Present value of minimum lease payments
$
5,725

$
18,053


As of September 30, 2019, the Partnership had no additional significant operating or finance leases that had not yet commenced.

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NOTE 7—OTHER ACCRUED LIABILITIES:

 
September 30,
2019
 
December 31, 2018
Subsidence Liability
$
23,301

 
$
20,883

Accrued Payroll and Benefits
3,677

 
2,693

Accrued Interest (Related Party)
2,300

 
1,767

Accrued Other Taxes
534

 
1,071

Other
1,345

 
2,440

Current Portion of Long-Term Liabilities:
 
 
 
Operating Lease Liability
3,829

 

Workers’ Compensation
1,985

 
1,554

Asset Retirement Obligations
954

 
1,202

Pneumoconiosis Benefits
146

 
165

Long-Term Disability
121

 
141

Total Other Accrued Liabilities
$
38,192

 
$
31,916


NOTE 8—LONG-TERM DEBT:

 
September 30,
2019
 
December 31,
2018
Affiliated Company Credit Agreement (4.00% and 3.75% interest rate at September 30, 2019 and December 31, 2018, respectively)
$
181,400

 
$
163,000

Other Asset-Backed Financing Maturing in December 2020, 6.35% Weighted Average Interest Rate at September 30, 2019
959

 

 
182,359

 
163,000

Less: Amounts Due in One Year*
959

 

Long-Term Debt
$
181,400

 
$
163,000



* Excludes current portion of Finance Lease Obligations of $3,640 and at $3,503 at September 30, 2019 and December 31, 2018, respectively.
    
On November 28, 2017, the Partnership and the other Credit Parties entered into the Affiliated Company Credit Agreement by and among the Credit Parties, CONSOL Energy, as lender and administrative agent, and PNC. On March 28, 2019, the Affiliated Company Credit Agreement was amended to extend the maturity date from February 27, 2023 to December 28, 2024. The Affiliated Company Credit Agreement provides for a revolving credit facility in an aggregate principal amount of up to $275,000 to be provided by CONSOL Energy, as lender. In connection with the Partnership’s entry into the Affiliated Company Credit Agreement, the Partnership made an initial draw of $200,583, the net proceeds of which were used to repay the amounts outstanding under the Partnership's prior credit facility. Additional drawings under the Affiliated Company Credit Agreement are available for general partnership purposes. The obligations under the Affiliated Company Credit Agreement are guaranteed by the Partnership’s subsidiaries and secured by substantially all of the assets of the Partnership and its subsidiaries pursuant to the security agreement and various mortgages.

Interest on outstanding obligations under our Affiliated Company Credit Agreement accrues at a fixed rate ranging from 3.75% to 4.75%, depending on the total net leverage ratio. The unused portion of our Affiliated Company Credit Agreement is subject to a commitment fee of 0.50% per annum.

The Partnership had available capacity under the Affiliated Company Credit Agreement of $93,600 and $112,000 as of September 30, 2019 and December 31, 2018, respectively. Interest on outstanding borrowings under the Affiliated Company Credit Agreement was accrued at a rate of 4.00% and 3.75% as of September 30, 2019 and December 31, 2018, respectively. The Affiliated Company Credit Agreement contains certain covenants and conditions that, among other things, limit the Partnership’s ability to: (i) incur or guarantee additional debt; (ii) make cash distributions (subject to certain limited exceptions); provided that we will be able to make cash distributions of available cash to partners so long as no event of default

16



is continuing or would result therefrom; (iii) incur certain liens or permit them to exist; (iv) make particular investments and loans; provided that we will be able to increase our ownership percentage of our undivided interest in the Pennsylvania Mining Complex and make investments in the Pennsylvania Mining Complex in accordance with our ratable ownership; (v) enter into certain types of transactions with affiliates; (vi) merge or consolidate with another company; and (vii) transfer, sell or otherwise dispose of assets. The Partnership is also subject to covenants that require the Partnership to maintain certain financial ratios.

For example, the Partnership is obligated to maintain at the end of each fiscal quarter (a) maximum first lien gross leverage ratio of 2.75 to 1.00 and (b) a maximum total net leverage ratio of 3.25 to 1.00, each of which will be calculated on a consolidated basis for the Partnership and its restricted subsidiaries at the end of each fiscal quarter. At September 30, 2019, the Partnership was in compliance with its debt covenants with the first lien gross leverage ratio at 1.73 to 1.00 and the total net leverage ratio at 1.64 to 1.00.

During the nine months ended September 30, 2019, the Partnership entered into an asset-backed financing arrangement related to certain equipment. The equipment, which has an approximate value of $959, fully collateralizes the loan.
NOTE 9—COMPONENTS OF COAL WORKERS’ PNEUMOCONIOSIS (CWP) AND WORKERS’ COMPENSATION NET PERIODIC BENEFIT COSTS:

The Partnership is obligated to CONSOL Energy for medical and disability benefits to certain CPCC employees and their dependents resulting from occurrences of coal workers’ pneumoconiosis disease and is also obligated to CONSOL Energy to compensate certain individuals who are entitled benefits under workers’ compensation laws.

 
CWP
 
Workers Compensation
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2019
 
2018
 
2019
 
2018
 
2019
 
2018
 
2019
 
2018
Service Cost
$
200

 
$
372

 
$
600

 
$
1,117

 
$
349

 
$
366

 
$
1,046

 
$
1,098

Interest Cost
49

 
36

 
146

 
108

 
41

 
35

 
124

 
105

Amortization of Actuarial (Gain) Loss
6

 
(5
)
 
19

 
(16
)
 
(12
)
 
(1
)
 
(37