10-Q 1 hcc-20220930.htm 10-Q hcc-20220930
00016913032022falseQ3--12-31trueP1Yhttp://fasb.org/us-gaap/2022#PropertyPlantAndEquipmentAndFinanceLeaseRightOfUseAssetAfterAccumulatedDepreciationAndAmortizationhttp://fasb.org/us-gaap/2022#PropertyPlantAndEquipmentAndFinanceLeaseRightOfUseAssetAfterAccumulatedDepreciationAndAmortizationP1Y2.412.9300016913032022-01-012022-09-300001691303us-gaap:CommonStockMember2022-01-012022-09-300001691303us-gaap:PreferredStockMember2022-01-012022-09-3000016913032022-10-31xbrli:shares0001691303us-gaap:ProductMember2022-07-012022-09-30iso4217:USD0001691303us-gaap:ProductMember2021-07-012021-09-300001691303us-gaap:ProductMember2022-01-012022-09-300001691303us-gaap:ProductMember2021-01-012021-09-300001691303us-gaap:ProductAndServiceOtherMember2022-07-012022-09-300001691303us-gaap:ProductAndServiceOtherMember2021-07-012021-09-300001691303us-gaap:ProductAndServiceOtherMember2022-01-012022-09-300001691303us-gaap:ProductAndServiceOtherMember2021-01-012021-09-3000016913032022-07-012022-09-3000016913032021-07-012021-09-3000016913032021-01-012021-09-30iso4217:USDxbrli:shares00016913032022-09-3000016913032021-12-310001691303us-gaap:CommonStockMember2022-06-300001691303us-gaap:CommonStockMember2021-06-300001691303us-gaap:CommonStockMember2021-12-310001691303us-gaap:CommonStockMember2020-12-310001691303us-gaap:CommonStockMember2022-07-012022-09-300001691303us-gaap:CommonStockMember2021-07-012021-09-300001691303us-gaap:CommonStockMember2022-01-012022-09-300001691303us-gaap:CommonStockMember2021-01-012021-09-300001691303us-gaap:CommonStockMember2022-09-300001691303us-gaap:CommonStockMember2021-09-300001691303us-gaap:PreferredStockMember2022-06-300001691303us-gaap:PreferredStockMember2021-06-300001691303us-gaap:PreferredStockMember2021-12-310001691303us-gaap:PreferredStockMember2020-12-310001691303us-gaap:PreferredStockMember2022-09-300001691303us-gaap:PreferredStockMember2021-09-300001691303us-gaap:TreasuryStockCommonMember2022-06-300001691303us-gaap:TreasuryStockCommonMember2021-06-300001691303us-gaap:TreasuryStockCommonMember2021-12-310001691303us-gaap:TreasuryStockCommonMember2020-12-310001691303us-gaap:TreasuryStockCommonMember2022-09-300001691303us-gaap:TreasuryStockCommonMember2021-09-300001691303us-gaap:AdditionalPaidInCapitalMember2022-06-300001691303us-gaap:AdditionalPaidInCapitalMember2021-06-300001691303us-gaap:AdditionalPaidInCapitalMember2021-12-310001691303us-gaap:AdditionalPaidInCapitalMember2020-12-310001691303us-gaap:AdditionalPaidInCapitalMember2022-07-012022-09-300001691303us-gaap:AdditionalPaidInCapitalMember2021-07-012021-09-300001691303us-gaap:AdditionalPaidInCapitalMember2022-01-012022-09-300001691303us-gaap:AdditionalPaidInCapitalMember2021-01-012021-09-300001691303us-gaap:AdditionalPaidInCapitalMember2022-09-300001691303us-gaap:AdditionalPaidInCapitalMember2021-09-300001691303us-gaap:RetainedEarningsMember2022-06-300001691303us-gaap:RetainedEarningsMember2021-06-300001691303us-gaap:RetainedEarningsMember2021-12-310001691303us-gaap:RetainedEarningsMember2020-12-310001691303us-gaap:RetainedEarningsMember2022-07-012022-09-300001691303us-gaap:RetainedEarningsMember2021-07-012021-09-300001691303us-gaap:RetainedEarningsMember2022-01-012022-09-300001691303us-gaap:RetainedEarningsMember2021-01-012021-09-300001691303us-gaap:RetainedEarningsMember2022-09-300001691303us-gaap:RetainedEarningsMember2021-09-3000016913032021-09-3000016913032020-12-310001691303hcc:BlackWarriorMethaneBWMMember2022-03-01xbrli:pure0001691303hcc:BlackWarriorTransmissionBWTMember2022-03-010001691303hcc:BlackWarriorTransmissionBWTAndBlackWarriorMethaneBWMMember2022-03-012022-03-010001691303hcc:CashAndFixedIncomeSecuritiesMember2022-09-300001691303hcc:CashAndFixedIncomeSecuritiesMember2021-12-31utr:t0001691303us-gaap:CustomerConcentrationRiskMemberus-gaap:SalesRevenueNetMemberhcc:XcoalEnergyAndResourcesMember2022-07-012022-09-300001691303us-gaap:CustomerConcentrationRiskMemberus-gaap:SalesRevenueNetMemberhcc:XcoalEnergyAndResourcesMember2022-01-012022-09-300001691303us-gaap:CustomerConcentrationRiskMemberus-gaap:SalesRevenueNetMemberhcc:XcoalEnergyAndResourcesMember2021-07-012021-09-300001691303us-gaap:CustomerConcentrationRiskMemberus-gaap:SalesRevenueNetMemberhcc:XcoalEnergyAndResourcesMember2021-01-012021-09-300001691303us-gaap:StateAndLocalJurisdictionMember2021-09-300001691303us-gaap:SeniorNotesMember2022-09-300001691303us-gaap:SeniorNotesMember2021-12-310001691303us-gaap:RevolvingCreditFacilityMember2022-09-300001691303us-gaap:RevolvingCreditFacilityMember2021-12-310001691303us-gaap:SecuredOvernightFinancingRateSofrOvernightIndexSwapRateMemberus-gaap:RevolvingCreditFacilityMembersrt:MinimumMember2022-01-012022-09-300001691303srt:MaximumMemberus-gaap:SecuredOvernightFinancingRateSofrOvernightIndexSwapRateMemberus-gaap:RevolvingCreditFacilityMember2022-01-012022-09-300001691303hcc:CreditAdjustmentSpreadMemberus-gaap:RevolvingCreditFacilityMembersrt:MinimumMember2022-01-012022-09-300001691303srt:MaximumMemberhcc:CreditAdjustmentSpreadMemberus-gaap:RevolvingCreditFacilityMember2022-01-012022-09-300001691303us-gaap:BaseRateMemberus-gaap:RevolvingCreditFacilityMembersrt:MinimumMember2022-01-012022-09-300001691303us-gaap:BaseRateMembersrt:MaximumMemberus-gaap:RevolvingCreditFacilityMember2022-01-012022-09-300001691303hcc:SeniorSecuredNotesDue2028Memberus-gaap:SeniorNotesMember2021-12-060001691303us-gaap:SeniorNotesMemberhcc:SeniorSecuredNotesDue2024ExistingNotesMember2021-12-060001691303hcc:SeniorSecuredNotesDue2028Memberus-gaap:SeniorNotesMember2022-07-012022-09-300001691303hcc:CitibankMemberus-gaap:RevolvingCreditFacilityMember2021-12-060001691303hcc:CitibankMemberus-gaap:RevolvingCreditFacilityMemberhcc:SecondAmendedAndRestatedCreditAgreementMember2021-12-060001691303hcc:CitibankMembersrt:ScenarioForecastMemberus-gaap:RevolvingCreditFacilityMemberhcc:SecondAmendedAndRestatedCreditAgreementMember2023-10-130001691303hcc:ABLFacilityMemberus-gaap:RevolvingCreditFacilityMember2022-09-300001691303srt:MinimumMember2022-09-300001691303srt:MaximumMember2022-09-3000016913032022-01-012022-03-310001691303hcc:TheNewStockRepurchaseProgramMember2019-03-260001691303hcc:TheFirstStockRepurchaseProgramMember2018-05-020001691303hcc:TheNewStockRepurchaseProgramMember2022-01-012022-09-300001691303hcc:TheNewStockRepurchaseProgramMember2022-01-012022-03-310001691303hcc:TheNewStockRepurchaseProgramMember2022-09-300001691303hcc:TheNewStockRepurchaseProgramMember2021-12-3100016913032022-03-102022-03-1000016913032022-05-132022-05-1300016913032022-05-202022-05-2000016913032022-08-182022-08-1800016913032022-08-292022-08-290001691303srt:ScenarioForecastMember2022-11-112022-11-110001691303us-gaap:SwapMembersrt:NaturalGasReservesMemberus-gaap:NondesignatedMember2022-09-30hcc:derivative_instrument0001691303us-gaap:CommodityContractMembersrt:NaturalGasReservesMemberus-gaap:NondesignatedMember2022-01-012022-03-31utr:Btu0001691303us-gaap:CommodityContractMembersrt:NaturalGasReservesMemberus-gaap:NondesignatedMember2022-01-012022-09-300001691303us-gaap:CommodityContractMembersrt:NaturalGasReservesMemberus-gaap:NondesignatedMember2022-07-012022-09-300001691303us-gaap:CommodityContractMembersrt:NaturalGasReservesMemberus-gaap:NondesignatedMember2021-07-012021-09-300001691303us-gaap:CommodityContractMembersrt:NaturalGasReservesMemberus-gaap:NondesignatedMember2021-01-012021-09-300001691303us-gaap:CommodityContractMembersrt:NaturalGasReservesMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2022-09-300001691303us-gaap:CommodityContractMemberus-gaap:FairValueInputsLevel2Membersrt:NaturalGasReservesMemberus-gaap:FairValueMeasurementsRecurringMember2022-09-300001691303us-gaap:FairValueInputsLevel3Memberus-gaap:CommodityContractMembersrt:NaturalGasReservesMemberus-gaap:FairValueMeasurementsRecurringMember2022-09-300001691303us-gaap:CommodityContractMembersrt:NaturalGasReservesMemberus-gaap:FairValueMeasurementsRecurringMember2022-09-300001691303us-gaap:CommodityContractMembersrt:NaturalGasReservesMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2021-12-310001691303us-gaap:CommodityContractMemberus-gaap:FairValueInputsLevel2Membersrt:NaturalGasReservesMemberus-gaap:FairValueMeasurementsRecurringMember2021-12-310001691303us-gaap:FairValueInputsLevel3Memberus-gaap:CommodityContractMembersrt:NaturalGasReservesMemberus-gaap:FairValueMeasurementsRecurringMember2021-12-310001691303us-gaap:CommodityContractMembersrt:NaturalGasReservesMemberus-gaap:FairValueMeasurementsRecurringMember2021-12-310001691303hcc:CitibankMemberus-gaap:RevolvingCreditFacilityMember2022-09-300001691303hcc:CitibankMemberus-gaap:RevolvingCreditFacilityMember2021-12-310001691303hcc:ABLFacilityMemberus-gaap:RevolvingCreditFacilityMember2021-12-310001691303us-gaap:LetterOfCreditMemberhcc:CitibankMemberus-gaap:RevolvingCreditFacilityMember2021-12-310001691303us-gaap:SeniorNotesMemberus-gaap:FairValueInputsLevel2Memberhcc:SeniorSecuredNotesDue2024ExistingNotesMember2022-09-300001691303us-gaap:SeniorNotesMemberus-gaap:FairValueInputsLevel2Memberhcc:SeniorSecuredNotesDue2024ExistingNotesMember2021-12-31hcc:segment0001691303us-gaap:OperatingSegmentsMemberhcc:MiningSegmentMember2022-07-012022-09-300001691303us-gaap:OperatingSegmentsMemberhcc:MiningSegmentMember2021-07-012021-09-300001691303us-gaap:MaterialReconcilingItemsMember2022-07-012022-09-300001691303us-gaap:MaterialReconcilingItemsMember2021-07-012021-09-300001691303us-gaap:MaterialReconcilingItemsMember2022-01-012022-09-300001691303us-gaap:OperatingSegmentsMemberhcc:MiningSegmentMember2022-01-012022-09-300001691303us-gaap:OperatingSegmentsMemberhcc:MiningSegmentMember2021-01-012021-09-300001691303us-gaap:MaterialReconcilingItemsMember2021-01-012021-09-30

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, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
hcc-20220930_g1.jpg
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)
(205554-6150
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $.01 per shareHCCNew 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 filerýAccelerated filer
Non-accelerated filerSmaller 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 31, 2022: 51,653,568



TABLE OF CONTENTS
 



FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (this "Form 10-Q" or "this report") 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 the United Mine Workers of America (the "UMWA"). 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 novel coronavirus (“COVID-19”) pandemic, including its impact on our business, employees, suppliers and customers, the metallurgical ("met") coal and steel industries, and global economic markets;
the impacts of inflation on our business, including on our costs and our profitability;
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 ABL Facility (as defined below) 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;
any consequences related to our transfer restrictions under our certificate of incorporation and our NOL rights agreement; and
1


geopolitical events, including the effects of the Russia-Ukraine war.
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 at www.warriormetcoal.com 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.
2



PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS
3




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,
2022202120222021
Revenues:
Sales$371,944 $199,745 $1,377,665 $631,493 
Other revenues18,236 2,722 16,323 12,178 
Total revenues390,180 202,467 1,393,988 643,671 
Costs and expenses:
Cost of sales (exclusive of items shown separately below)203,441 91,973 529,869 399,088 
Cost of other revenues (exclusive of items shown separately below)8,417 6,654 26,120 22,792 
Depreciation and depletion30,805 28,967 86,973 102,021 
Selling, general and administrative10,557 7,430 36,985 26,182 
Business interruption 7,106 6,872 20,084 13,892 
Idle mine 5,418 9,327 10,141 20,203 
Total costs and expenses265,744 151,223 710,172 584,178 
Operating income 124,436 51,244 683,816 59,493 
Interest expense, net(5,701)(8,784)(20,706)(25,954)
Other income 1,400 675 1,291 
Income before income tax expense 118,735 43,860 663,785 34,830 
Income tax expense20,332 5,433 122,141 22,439 
Net income $98,403 $38,427 $541,644 $12,391 
Basic and diluted net income per share:
Net income per share—basic $1.91 $0.75 $10.49 $0.24 
Net income per share—diluted$1.90 $0.74 $10.48 $0.24 
Weighted average number of shares outstanding—basic51,654 51,416 51,612 51,315 
Weighted average number of shares outstanding—diluted51,744 51,585 51,699 51,424 
Dividends per share:$0.86 $0.05 $1.48 $0.15 
The accompanying notes are an integral part of these condensed financial statements.

4


WARRIOR MET COAL, INC.
CONDENSED BALANCE SHEETS
(in thousands, except share and per-share data)
 September 30, 2022
(Unaudited)
December 31, 2021
  
ASSETS
Current assets:
Cash and cash equivalents$745,666 $395,839 
Short-term investments8,546 8,505 
Trade accounts receivable215,172 122,150 
Inventories, net143,789 59,619 
Prepaid expenses and other receivables28,390 41,088 
Total current assets1,141,563 627,201 
Mineral interests, net90,502 93,180 
Property, plant and equipment, net677,718 603,412 
Deferred income taxes5,181 125,276 
Other long-term assets20,319 15,142 
Total assets$1,935,283 $1,464,211 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$51,885 $33,829 
Accrued expenses78,797 54,847 
Short-term financing lease liabilities23,083 23,622 
Other current liabilities9,184 9,830 
Total current liabilities162,949 122,128 
Long-term debt303,916 339,806 
Asset retirement obligations69,583 65,536 
Long-term financing lease liabilities15,033 28,434 
Other long-term liabilities36,169 36,324 
Total liabilities587,650 592,228 
Stockholders’ Equity:
Common stock, $0.01 par value, (140,000,000 shares authorized as of September 30, 2022 and December 31, 2021; 53,875,409 issued and 51,653,568 outstanding as of September 30, 2022; 53,659,643 issued and 51,437,802 outstanding as of December 31, 2021)
539 537 
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, 2022 and December 31, 2021)
(50,576)(50,576)
Additional paid in capital266,585 256,059 
Retained earnings1,131,085 665,963 
Total stockholders’ equity1,347,633 871,983 
Total liabilities and stockholders’ equity$1,935,283 $1,464,211 
The accompanying notes are an integral part of these condensed financial statements.
5


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,
2022202120222021
Common Stock
Balance, beginning of period$537 $536 $537 $534 
Issuance of shares2  2 2 
Balance, end of period539 536 539 536 
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 period263,991 253,922 256,059 249,746 
Stock based compensation expense2,599 1,395 14,250 8,377 
Other(5) (3,724)(2,806)
Balance, end of period266,585 255,317 266,585 255,317 
Retained Earnings
Balance, beginning of period1,077,105 494,272 665,963 525,537 
Net income 98,403 38,427 541,644 12,391 
Dividends declared(44,423)(2,613)(76,522)(7,842)
Balance, end of period1,131,085 530,086 1,131,085 530,086 
Total Stockholders' Equity$1,347,633 $735,363 $1,347,633 $735,363 
The accompanying notes are an integral part of these condensed financial statements.

6


WARRIOR MET COAL, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
 For the nine months ended
September 30,
20222021
OPERATING ACTIVITIES
Net income $541,644 $12,391 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and depletion86,973 102,021 
Deferred income tax expense 122,208 22,439 
Stock based compensation expense14,250 8,763 
Amortization of debt issuance costs and debt discount, net2,869 1,289 
Accretion of asset retirement obligations2,666 2,416 
Mark-to-market loss on gas hedges4,043 8,661 
Changes in operating assets and liabilities:
Trade accounts receivable(93,022)10,028 
Inventories(73,258)18,703 
Prepaid expenses and other receivables8,879 10,548 
Accounts payable6,609 (16,746)
Accrued expenses and other current liabilities20,044 (10,100)
Other3,005 6,417 
Net cash provided by operating activities646,910 176,830 
INVESTING ACTIVITIES
Purchase of property, plant and equipment(120,022)(34,149)
Deferred mine development costs(35,690)(13,462)
Acquisition of leased mineral rights(3,500) 
Acquisition of Black Warrior Methane and Black Warrior Transmission, net of $2.8 million cash acquired
2,533  
Proceeds from sale of property, plant and equipment 192 
Net cash used in investing activities(156,679)(47,419)
FINANCING ACTIVITIES
Dividends paid(76,522)(7,842)
Repayments under ABL Facility (40,000)
Retirements of debt(37,758) 
Principal repayments of finance lease obligations(22,400)(22,284)
Other(3,724)(2,806)
Net cash used in financing activities(140,404)(72,932)
Net increase in cash and cash equivalents349,827 56,479 
Cash and cash equivalents at beginning of period395,839 211,916 
Cash and cash equivalents at end of period$745,666 $268,395 
The accompanying notes are an integral part of these condensed financial statements.


7


WARRIOR MET COAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 2022 (UNAUDITED)
Note 1. Business and Basis of Presentation
Description of the Business
Warrior Met Coal, Inc. (the "Company") is a U.S.-based environmentally and socially minded supplier to the global steel industry. The Company is dedicated entirely to mining non-thermal met coal used as a critical component of steel production by metal manufacturers in Europe, South America and Asia. The Company is a large-scale, low-cost producer and exporter of premium met coal, also known as hard-coking coal ("HCC"), operating highly efficient longwall operations in its underground mines based in Alabama. The HCC that the Company produces from the Blue Creek coal seam contains very low sulfur, has strong coking properties and is of a similar quality to coal referred to as premium HCC produced in Australia. The Company also generates ancillary revenues from the sale of natural gas extracted as a byproduct from the underground coal mines and royalty revenues from leased properties.
Basis of Presentation
The accompanying financial statements are presented in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In our opinion, the financial statements include all adjustments (consisting of normal recurring accruals) necessary in order to make the financial statements not misleading. For further information, refer to the financial statements and related notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021 (the "2021 Annual Report"). Operating results for the three and nine months ended September 30, 2022 are not necessarily indicative of the final results that may be expected for the year ended December 31, 2022. The balance sheet at December 31, 2021 has been derived from the audited financial statements for the year ended December 31, 2021 included in the 2021 Annual Report.
Collective Bargaining Agreement
The Company's Collective Bargaining Agreement ("CBA") contract with the UMWA expired on April 1, 2021. While the Company continues to engage in good faith negotiations with the UMWA, the Company has not reached a new contract and the UMWA is engaging in a strike. As a result of the strike, the Company initially idled Mine No. 4 and scaled back operations at Mine No. 7. In the first quarter of 2022, the Company restarted operations at Mine No. 4. Due to the reduced operations at Mine No. 4 and Mine No. 7, the Company incurred idle mine expenses of $5.4 million and $10.1 million, for the three and nine months ended September 30, 2022 and $9.3 million and $20.2 million for the three and nine months ended September 30, 2021, respectively. These expenses are reported separately in the Condensed Statements of Operations and represent expenses incurred, such as electricity, insurance and maintenance labor. The Company has also incurred business interruption expenses of approximately $7.1 million and $20.1 million, for the three and nine months ended September 30, 2022 and $6.9 million and $13.9 million for the three and nine months ended September 30, 2021, respectively, which represent non-recurring expenses that are directly attributable to the ongoing UMWA strike for incremental safety and security, labor negotiations and other expenses. These expenses are also presented separately in the Condensed Statements of Operations.
Black Warrior Methane (“BWM”) and Black Warrior Transmission (“BWT”)
On March 1, 2022, the Company acquired the remaining 50% interest in BWM and BWT for $0.3 million. The purchase consideration has been allocated to the assets acquired and liabilities assumed based upon their estimated fair values at the date of acquisition. The acquisition is not deemed to be material to the condensed financial statements.
Note 2. Summary of Significant Accounting Policies
The Company's significant accounting policies are consistent with those disclosed in Note 2 to its audited financial statements included in the 2021 Annual Report, except for changes related to new accounting pronouncements described in "New Accounting Pronouncements."
Cash and Cash Equivalents
Cash and cash equivalents include short-term deposits and highly liquid investments that have original maturities of three months or less when purchased and are stated at cost, which approximates fair value.
8


WARRIOR MET COAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (Continued)
NINE MONTHS ENDED SEPTEMBER 30, 2022 (UNAUDITED)
Short-Term Investments
Instruments with maturities greater than three months, but less than twelve months, are included in short-term investments. The Company purchases United States Treasury bills with maturities ranging from six to twelve months which are classified as held to maturity and are carried at amortized cost, which approximates fair value. The Company also purchases fixed income securities and certificates of deposits with varying maturities that are classified as available for sale and are carried at fair value. Securities classified as held to maturity are those securities that management has the intent and ability to hold to maturity.
As of September 30, 2022 and December 31, 2021, short-term investments consisted of $8.5 million in cash and fixed income securities. The short-term investments are posted as collateral for the self-insured black lung related claims asserted by or on behalf of former employees of Walter Energy, Inc. ("Walter Energy") and its subsidiaries, which were assumed by the Company and relate to periods prior to March 31, 2016.
Revenue Recognition
    Revenue is recognized when performance obligations under the terms of a contract with the Company's customers are satisfied; for all contracts this occurs when control of the promised goods has been transferred to its customers. For coal shipments to domestic customers via rail, control is transferred when the railcar is loaded. For coal shipments to international customers via ocean vessel, control is transferred when the vessel is loaded at the Port of Mobile, Alabama. For natural gas sales, control is transferred when the gas has been transferred to the pipeline. Revenue is disaggregated between coal sales within the Company's mining segment and natural gas sales which is included in all other revenues, as disclosed in Note 13.
Since February 2017, the Company has had an arrangement with XCoal Energy & Resources ("XCoal") to serve as XCoal's strategic partner for exports of low-volatility HCC. Under this arrangement, XCoal takes title to and markets coal that the Company would historically have sold on the spot market, in an amount of the greater of (i) 10% of the Company's total production during the applicable term of the arrangement or (ii) 250,000 metric tons. During the three and nine months ended September 30, 2022, XCoal accounted for approximately $69.8 million, or 20.6% of total sales, and $281.3 million, or 20.7% of total sales, respectively. During the three and nine months ended September 30, 2021, XCoal accounted for approximately $122.3 million, or 61.1% of total sales, and $370.4 million, or 58.5% of total sales, respectively.
Trade Accounts Receivable and Allowance for Credit Losses
    Trade accounts receivable represent customer obligations that are derived from revenue recognized from contracts with customers. Credit is extended based on an evaluation of the individual customer's financial condition. The Company maintains trade credit insurance on the majority of its customers and the geographic regions of coal shipments to these customers. In some instances, the Company requires letters of credit, cash collateral or prepayments from its customers on or before shipment to mitigate the risk of loss. These efforts have consistently resulted in the Company recognizing no historical credit losses. The Company also has never had to have a claim against its trade credit insurance policy.
In order to estimate the allowance for credit losses on trade accounts receivable, the Company utilizes an aging approach in which potential impairment is calculated based on how long a receivable has been outstanding (e.g., current, 1-31 days, 31-60 days, etc.). The Company calculates an expected credit loss rate based on the Company’s historical credit loss rate, the risk characteristics of our customers, and the current met coal and steel market environments. As of September 30, 2022 and December 31, 2021, the estimated allowance for credit losses was immaterial and did not have a material impact on the Company's financial statements.
New Accounting Pronouncements
In November 2021, the Financial Accounting Standards Board ("FASB") issued ASU 2021-10, “Disclosures by Business Entities about Government Assistance,” which requires business entities to make annual disclosures about transactions with a government accounted for by analogizing to a grant or contribution accounting model. The required annual disclosures include the nature of the transaction, the related accounting policy, the financial statement line items affected and the amounts reflected in the current period financial statements, and any significant terms and conditions. The ASU is effective for fiscal years beginning after December 15, 2021. The adoption of this ASU is not expected to have a material impact to the Company's results of operations, financial condition, cash flows or financial statement presentation.
9


WARRIOR MET COAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (Continued)
NINE MONTHS ENDED SEPTEMBER 30, 2022 (UNAUDITED)
Note 3. Inventories, net
Inventories, net summarized as of September 30, 2022 and December 31, 2021 are as follows (in thousands):
 September 30, 2022December 31, 2021
Coal$101,144 $24,185 
Raw materials, parts, supplies and other, net42,645 35,434 
Total inventories, net$143,789 $59,619 
Note 4. Income Taxes
For the three and nine months ended September 30, 2022, the Company estimated its annual effective tax rate and applied this effective tax rate to its year-to-date pretax income at the end of the interim reporting period. The tax effect of unusual or infrequently occurring items, including the effects of changes in tax laws or rates and changes in judgment about the realizability of deferred tax assets, are reported in the interim period in which they occur. For the three and nine months ended September 30, 2022, the Company had an income tax expense of $20.3 million and $122.1 million, respectively.
For the three and nine months ended September 30, 2021, the Company utilized a discrete period method to calculate taxes, as it did not believe that the annual effective tax rate method represented a reliable estimate given the uncertainty at the time surrounding the COVID-19 pandemic, the Chinese ban on Australian coal, the CBA contract negotiations with the UMWA and other potentially disruptive factors and its impact on the Company's annual guidance. For the three and nine months ended September 30, 2021, the Company had an income tax expense of $5.4 million and $22.4 million, respectively. The income tax expense of $5.4 million for the three months ended September 30, 2021, was primarily due to a pre-tax operating income combined with the Internal Revenue Code Section 45I Marginal Well Credit ("Section 45I Credit"). The Section 45I Credit is a production-based tax credit that provides a credit for qualified natural gas production. The $22.4 million of income tax expense for the nine months ended September 30, 2021 was primarily due to the establishment of a non-cash $47.8 million state deferred income tax asset valuation allowance offset partially by a net non-cash income tax benefit of $22.9 million due to the remeasurement of state deferred income tax assets and liabilities and $2.5 million of net income tax expense due to pre-tax operating income for the period, the Section 45I Credit, depletion and other adjustments.
On August 16, 2022, President Biden signed the Inflation Reduction Act of 2022 (“IRA”) into law. The IRA contains a number of revisions to the Internal Revenue Code, including a 15% corporate minimum income tax and a 1% excise tax on corporate stock repurchases in tax years beginning after December 31, 2022. While these tax law changes have no immediate effect and are not expected to have a material adverse effect on our results of operations going forward, we will continue to evaluate its impact as further information becomes available.
Note 5. Debt
The Company's debt consisted of the following (in thousands):
September 30, 2022December 31, 2021Weighted Average Interest RateFinal Maturity
Senior Secured Notes$312,242 $350,000 7.875%December 2028
ABL Borrowings  
Varies(1)
December 2026
Debt discount(8,326)(10,194)
Total debt303,916 339,806 
Less: current debt  
Total long-term debt$303,916 $339,806 
(1) Borrowings under the ABL Facility bear interest at a rate equal to Secured Overnight Financing Rate ("SOFR") ranging from 1.5% to 2.0%, plus a credit adjustment spread, ranging currently from 0.11448% to 0.42826%, or an alternate base rate plus an applicable margin, which is determined based on the average availability of the commitments under the ABL Facility, ranging from 0.5% to 1.0%.

10


WARRIOR MET COAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (Continued)
NINE MONTHS ENDED SEPTEMBER 30, 2022 (UNAUDITED)
Senior Secured Notes
On December 6, 2021, the Company issued $350.0 million in aggregate principal amount of 7.875% senior secured notes due 2028 (the “Notes”) at an initial price of 99.343% of their face amount. The Notes were issued to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and to certain non-U.S. persons in transactions outside the United States in accordance with Regulation S under the Securities Act. The Company used the net proceeds of the offering of the Notes, together with cash on hand, to fund the redemption of all of the Company’s outstanding 8.00% senior secured notes due 2024 (the “Existing Notes”), including payment of the redemption premium in connection with such redemption. The Notes will mature on December 1, 2028.
During the three months ended September 30, 2022, the Company repurchased in the open market and extinguished approximately $37.8 million principal amount of our Notes. In connection with the extinguishment of our Notes, we recognized a loss on early extinguishment of debt of $0.5 million which is included in interest expense, net in the Condensed Statements of Operations.
ABL Facility
On December 6, 2021, the Company entered into the Second Amended and Restated Asset-Based Revolving Credit Agreement (the “Second Amended and Restated Credit Agreement”), by and among the Company and certain of its subsidiaries, as borrowers, the guarantors party thereto, the lenders from time to time party thereto and Citibank, as administrative agent (in such capacity, the "Agent"), which amends and restates in its entirety the then existing Amended and Restated Asset-Based Revolving Credit Agreement (as amended, the “ABL Facility”). The Second Amended and Restated Credit Agreement, among other things, (i) extended the maturity date of the ABL Facility to December 6, 2026; (ii) changed the calculation of the interest rate payable on borrowings from being based on a London Inter-Bank Offered Rate to be based on a SOFR, with corresponding changes to the applicable interest rate margins with respect to such borrowings, (iii) amended certain definitions related to the calculation of the borrowing base; (iv) increased the commitments that may be used to issue letters of credit to $65.0 million; and (v) amended certain baskets contained in the covenants to conform to the baskets contained in the indenture governing the Notes (the "Indenture"). The Second Amended and Restated Credit Agreement also allows the Company to borrow up to $132.0 million through October 13, 2023, decreasing to $116.0 million through November 2026, subject to availability under the borrowing base and other conditions.
As of September 30, 2022, no loans were outstanding under the ABL Facility and there were $8.7 million of letters of credit issued and outstanding under the ABL Facility. At September 30, 2022, the Company had $123.3 million of availability under the ABL Facility (calculated net of $8.7 million of letters of credit outstanding at such time).
Note 6. Other Long-Term Liabilities
Other long-term liabilities are summarized as follows (in thousands):
 September 30, 2022December 31, 2021
Black lung obligations$34,345 $34,482 
Other1,824 1,842 
Total other long-term liabilities$36,169 $36,324 

Note 7. Leases
The Company primarily enters into rental agreements for certain mining equipment that are for periods of 12 months or less, some of which include options to extend the leases. Leases that are for periods of 12 months or less are not recorded on the balance sheet. The Company recognizes lease expense on these agreements on a straight-line basis over the lease term. Additionally, the Company has certain finance leases for mining equipment that expire over various contractual periods. These leases have remaining lease terms of one to five years and do not include an option to renew. Amortization expense for finance leases is included in depreciation and depletion expense.
11


WARRIOR MET COAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (Continued)
NINE MONTHS ENDED SEPTEMBER 30, 2022 (UNAUDITED)
Supplemental balance sheet information related to leases was as follows (in thousands):
September 30, 2022December 31, 2021
Finance lease right-of-use assets, net(1)
$71,508$75,692 
Finance lease liabilities
Current23,08323,622 
Noncurrent15,03328,434 
Total finance lease liabilities$38,116$52,056 
Weighted average remaining lease term - finance leases (in months)28.9 35.1 
Weighted average discount rate - finance leases(2)
5.90 %6.11 %
(1) Finance lease right-of-use assets are recorded net of accumulated amortization of $25.9 million and $17.7 million and are included in property, plant and equipment, net in the Condensed Balance Sheets as of September 30, 2022 and the Condensed Balance Sheets as of December 31, 2021, respectively.
(2) When an implicit discount rate is not readily available in a lease, the Company uses its incremental borrowing rate based on information available at the commencement date when determining the present value of lease payments.
The components of lease expense were as follows (in thousands):
For the three months ended
September 30,
For the nine months ended
September 30,
2022202120222021
Operating lease cost(1):
$11,187 $782 $29,759 $3,572 
Finance lease cost:
Amortization of leased assets5,426 3,389 12,737 10,222 
Interest on lease liabilities764 1,019 2,557 2,935 
Net lease cost$17,377 $5,190 $45,053 $16,729 
(1) Includes leases that are for periods of 12 months or less.
Maturities of lease liabilities for the Company's finance leases as of September 30, 2022 were as follows (in thousands):
Finance Leases(1)
2022$6,315 
202328,507 
20243,923 
20251,918 
2026207 
Thereafter 
Total40,870 
Less: amount representing interest(2,754)
Present value of lease liabilities$38,116 
(1) Finance lease payments include $4.9 million of future payments required under signed lease agreements that have not yet commenced.
12


WARRIOR MET COAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (Continued)
NINE MONTHS ENDED SEPTEMBER 30, 2022 (UNAUDITED)
Supplemental cash flow information related to the Company's leases was as follows (in thousands):
For the nine months ended
September 30,
20222021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases$2,557 $2,935 
Financing cash flows from finance leases$22,400 $22,284 
Non-cash right-of-use assets obtained in exchange for lease obligations:
Finance leases$2,011 $42,842 
As of September 30, 2022, the Company had additional commitments for finance leases, primarily for mining equipment, that have not yet commenced of $4.9 million. These finance leases will commence during the fiscal year 2022 and 2023 with lease terms of one to two years.
Note 8. Net Income per Share
Basic and diluted net income per share was calculated as follows (in thousands, except per share data):
 For the three months ended
September 30,
For the nine months ended
September 30,
2022202120222021
Numerator:
Net income$98,403 $38,427 $541,644 $12,391 
Denominator:
Weighted-average shares used to compute net income per share—basic51,654 51,416 51,612 51,315 
Dilutive restrictive stock awards90 169 87 109 
Weighted-average shares used to compute net income per share—diluted51,744 51,585 51,699 51,424 
Net income per share—basic $1.91 $0.75 $10.49 $0.24 
Net income per share—diluted$1.90 $0.74 $10.48 $0.24 
Note 9. Commitments and Contingencies
Environmental Matters
The Company is subject to a wide variety of laws and regulations concerning the protection of the environment, both with respect to the construction and operation of its plants, mines and other facilities and with respect to remediating environmental conditions that may exist at its own and other properties.
The Company believes it is in compliance with federal, state and local environmental laws and regulations. The Company accrues for environmental expenses resulting from existing conditions that relate to past operations when the costs are probable and can be reasonably estimated. As of September 30, 2022 and December 31, 2021, there were no accruals for environmental matters other than asset retirement obligations for mine reclamation.
Miscellaneous Litigation
From time to time, the Company is party to lawsuits arising in the ordinary course of its businesses. The Company records costs relating to these matters when a loss is probable and the amount can be reasonably estimated. The effect of the outcome of these matters on the Company’s future results of operations cannot be predicted with certainty as any such effect depends on future results of operations and the amount and timing of the resolution of such matters. As of September 30, 2022
13


WARRIOR MET COAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (Continued)
NINE MONTHS ENDED SEPTEMBER 30, 2022 (UNAUDITED)
and December 31, 2021, there were no items accrued for miscellaneous litigation. For the three months ended September 30, 2021, the Company received $1.4 million upon the settlement of a lawsuit which is reflected as other income in the Condensed Statement of Operations.
On July 15, 2015, Walter Energy and certain of its wholly owned U.S. subsidiaries, including Jim Walter Resources, Inc. (“JWR”) filed voluntary petitions for relief under Chapter 11 of Title 11 of the U.S. Bankruptcy Code (the “Chapter 11 Cases”) in the Northern District of Alabama, Southern Division. On December 7, 2015, Walter Energy Canada Holdings, Inc., Walter Canadian Coal Partnership and their Canadian affiliates (collectively “Walter Canada”) applied for and were granted protection under the Companies’ Creditors Arrangement Act (the “CCAA”) pursuant to an Initial Order of the Supreme Court of British Columbia. As a result of the Company’s acquisition of certain core operating assets of Walter Energy during the Chapter 11 Cases, in the first quarter of 2022 the Company received $0.7 million, from the Chapter 11 Cases which is reflected as other income in the Condensed Statement of Operations for the nine months ended September 30, 2022. The Company received no payments for the three and nine months ended September 30, 2021 from the Chapter 11 Cases.
Other Commitments and Contingencies
The Company is party to various transportation and throughput agreements with rail and barge transportation providers and the Alabama State Port Authority. These agreements contain annual minimum tonnage guarantees with respect to coal transported from the mine sites to the Port of Mobile, Alabama, the unloading of rail cars or barges, and the loading of vessels. If the Company does not meet its minimum throughput obligations, which are based on annual minimum amounts, it is required to pay the transportation providers or the Alabama State Port Authority a contractually specified amount per metric ton for the difference between the actual throughput and the minimum throughput requirement. At September 30, 2022 and December 31, 2021, the Company had no liability recorded for minimum throughput requirements.
Royalty Obligations
A substantial amount of the coal that the Company mines is produced from mineral reserves leased from third-party landowners. These leases convey mining rights to the Company in exchange for royalties to be paid to the landowner as either a fixed amount per ton or as a percentage of the sales price. Although coal leases have varying renewal terms and conditions, they generally last for the economic life of the reserves. Coal royalty expense was $42.4 million and $116.3 million for the three and nine months ended September 30, 2022, respectively, and $13.2 million and $41.6 million for the three and nine months ended September 30, 2021, respectively. Coal royalty expense has increased in the current year as compared to the prior year periods due to the increase in the average net selling price of our coal.
Note 10. Stockholders' Equity
Common Shares
The Company is authorized to issue up to 140,000,000 common shares, $0.01 par value per share. Holders of common shares are entitled to receive dividends when authorized by the Company's Board of Directors (the "Board").
Stock Repurchase Program
On March 26, 2019, the Board approved the Company's second stock repurchase program (the “Stock Repurchase Program”) that authorizes repurchases of up to an aggregate of approximately $70.0 million of the Company's outstanding common stock. The Company fully exhausted its previous stock repurchase program of $40.0 million of its outstanding common stock. The Stock Repurchase Program does not require the Company to repurchase a specific number of shares or have an expiration date. The Stock Repurchase Program may be suspended or discontinued by the Board at any time without prior notice.
Under the Stock Repurchase Program, the Company may repurchase shares of its common stock from time to time, in amounts, at prices and at such times as the Company deems appropriate, subject to market and industry conditions, share price, regulatory requirements as determined from time to time by the Company and other considerations. The Company’s repurchases may be executed using open market purchases or privately negotiated transactions in accordance with applicable securities laws and regulations, including Rule 10b-18 of the Exchange Act and repurchases may be executed pursuant to Rule
14


WARRIOR MET COAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (Continued)
NINE MONTHS ENDED SEPTEMBER 30, 2022 (UNAUDITED)
10b5-1 under the Exchange Act. Repurchases will be subject to limitations in the ABL Facility and the Indenture. The Company intends to fund repurchases under the Stock Repurchase Program from cash on hand and/or other sources of liquidity.
As of September 30, 2022 and December 31, 2021, the Company has repurchased 500,000 shares for approximately $10.6 million, leaving approximately $59.4 million of share repurchases authorized under the Stock Repurchase Program.
Dividends
The Company declared the following dividends on common shares as of the filing date of this Form 10-Q:
Dividend per ShareDividends PaidDividend TypeDeclaration DateRecord DatePayable Date
(in millions)
$0.06 $3.1 QuarterlyFebruary 18, 2022March 3, 2022March 10, 2022
$0.06 $3.1 QuarterlyApril 26, 2022May 6, 2022May 13, 2022
$0.50 $25.8 

SpecialMay 3, 2022May 13, 2022May 20, 2022
$0.06 $3.1 QuarterlyAugust 1, 2022August 11, 2022August 18, 2022
$0.80 $41.3 SpecialAugust 1, 2022August 22, 2022August 29, 2022
$0.06 $ QuarterlyOctober 24, 2022November 4, 2022November 11, 2022
Preferred Shares
The Company is authorized to issue up to 10,000,000 shares of preferred stock, $0.01 par value per share.
Note 11. Derivative Instruments
The Company enters into natural gas swap contracts from time to time to hedge the exposure to variability in expected future cash flows associated with the fluctuations in the price of natural gas related to the Company’s forecasted sales. As of September 30, 2022, the Company had no natural gas swap contracts outstanding as all swap contracts scheduled to mature in early 2023 were settled during the quarter ended June 30, 2022. As of December 31, 2021, the Company had 6,100,000 metric million British thermal unit natural gas swap contracts outstanding.
The Company’s natural gas swap contracts economically hedge certain risks but are not designated as hedges for financial reporting purposes. All changes in the fair value of these derivative instruments are recorded as other revenues in the Condensed Statements of Operations. The Company recognized a loss related to natural gas swap contracts of $27.7 million, for the nine months ended September 30, 2022 and recognized no gains or losses for the three months ended September 30, 2022. For the three and nine months ended September 30, 2021, the Company recognized a loss of $5.8 million and $8.7 million, respectively related to natural gas swap contracts. The Company records all derivative instruments at fair value and had no asset or liability recorded as of September 30, 2022 and had an asset of $4.0 million as of December 31, 2021 in prepaid expenses and other in the accompanying Condensed Balance Sheets.
Note 12. Fair Value of Financial Instruments
The following table presents information about the Company’s financial liabilities measured at fair value on a recurring basis and indicates the level of the fair value hierarchy utilized to determine such fair value (in thousands):

 Fair Value Measurements as of September 30, 2022 Using:
Level 1Level 2Level 3Total
Assets/Liabilities:
Natural gas swap contracts$ $ $ $ 
15


WARRIOR MET COAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (Continued)
NINE MONTHS ENDED SEPTEMBER 30, 2022 (UNAUDITED)
 Fair Value Measurements as of December 31, 2021 Using:
Level 1Level 2Level 3Total
Assets:
Natural gas swap contracts$ $4,043 $ $4,043 
The Company had no significant assets or any other liabilities measured at fair value on a recurring basis as of September 30, 2022 or December 31, 2021. During the nine months ended September 30, 2022, there were no transfers between Level 1, Level 2 and Level 3. The Company uses quoted dealer prices for similar contracts in active over-the-counter markets for determining fair value of Level 2 liabilities. There were no changes to the valuation techniques used to measure liability fair values on a recurring basis during the nine months ended September 30, 2022.
 The following methods and assumptions were used to estimate the fair value for which the fair value option was not elected:
Cash and cash equivalents, short-term investments, receivables and trade accounts payable — The carrying amounts reported in the Condensed Balance Sheets approximate fair value due to the short-term nature of these assets and liabilities.
Debt — The Company's outstanding debt is carried at cost. As of September 30, 2022, there were no borrowings outstanding under the ABL Facility, with $123.3 million available, net of outstanding letters of credit of $8.7 million. As of December 31, 2021, the Company had no borrowings outstanding under the ABL Facility, with $83.2 million available, net of outstanding letters of credit of $9.4 million. As of September 30, 2022 and December 31, 2021, the estimated fair value of the Notes based upon observable market data (Level 2) was approximately $298.2 million and $359.6 million, respectively.
Note 13. Segment Information
The Company identifies a business as an operating segment if: (i) it engages in business activities from which it may earn revenues and incur expenses; (ii) its operating results are regularly reviewed by the Chief Operating Decision Maker (“CODM”), who is the Company’s Chief Executive Officer, to make decisions about resources to be allocated to the segment and assess its performance; and (iii) it has available discrete financial information. The Company has determined that its two underground mining operations are its operating segments. The CODM reviews financial information at the operating segment level to allocate resources and to assess the operating results and financial performance for each operating segment. Operating segments are aggregated into a reportable segment if the operating segments have similar quantitative economic characteristics and if the operating segments are similar in the following qualitative characteristics: (i) nature of products and services; (ii) nature of production processes; (iii) type or class of customer for their products and services; (iv) methods used to distribute the products or provide services; and (v) if applicable, the nature of the regulatory environment.
The Company has determined that the two operating segments are similar in both quantitative and qualitative characteristics and thus the two operating segments have been aggregated into one reportable segment. The Company has determined that its natural gas and royalty businesses and the Blue Creek mine development did not meet the criteria in ASC 280 to be considered as operating or reportable segments. Therefore, the Company has included their results in an “all other” category as a reconciling item to consolidated amounts.
The Company does not allocate all of its assets, or its depreciation and depletion expense, selling, general and administrative expenses, transactions costs, interest expense, and income tax expense or benefit by segment.
The following tables include reconciliations of segment information to consolidated amounts (in thousands):
 For the three months ended
September 30,
For the nine months ended
September 30,
2022202120222021
Revenues
Mining$371,944 $199,745 $1,377,665 $631,493 
All other18,236 2,722 16,323 12,178 
Total revenues$390,180 $202,467 $1,393,988 $643,671 
16


WARRIOR MET COAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (Continued)
NINE MONTHS ENDED SEPTEMBER 30, 2022 (UNAUDITED)
 
 For the three months ended
September 30,
For the nine months ended
September 30,
2022202120222021
Capital Expenditures
Mining$28,031 $9,785 $94,921 $32,277 
All other13,289 713 25,101 1,872 
Total capital expenditures$41,320 $10,498 $120,022 $34,149 
The Company evaluates the performance of its segment based on Segment Adjusted EBITDA, which is defined as net income adjusted for other revenues, cost of other revenues, depreciation and depletion, selling, general and administrative, business interruption, idle mine, other income, interest expense, net, income tax expense, and certain transactions or adjustments that the CODM does not consider for the purposes of making decisions to allocate resources among segments or assessing segment performance. Segment Adjusted EBITDA does not represent and should not be considered as an alternative to cost of sales under GAAP and may not be comparable to other similarly titled measures used by other companies. Below is a reconciliation of Segment Adjusted EBITDA to net income, which is its most directly comparable financial measure calculated and presented in accordance with GAAP (in thousands): 
 For the three months ended
September 30,
For the nine months ended
September 30,
2022202120222021
Segment Adjusted EBITDA$168,503 $107,772 $847,796 $232,405 
Other revenues18,236 2,722 16,323 12,178 
Cost of other revenues(8,417)(6,654)(26,120)(22,792)
Depreciation and depletion(30,805)(28,967)(86,973)(102,021)
Selling, general and administrative(10,557)(7,430)(36,985)(26,182)
Business interruption (7,106)(6,872)(20,084)(13,892)
Idle mine (5,418)(9,327)(10,141)(20,203)
Other income 1,400 675 1,291 
Interest expense, net(5,701)(8,784)(20,706)(25,954)
Income tax expense(20,332)(5,433)(122,141)(22,439)
Net income$98,403 $38,427 $541,644 $12,391 

17


ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis provides a narrative of our results of operations and financial condition for the three and nine months ended September 30, 2022 and September 30, 2021. You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and related notes appearing in this Form 10-Q and the audited financial statements for the year ended December 31, 2021 included in our Annual Report on Form 10-K for the year ended December 31, 2021 (the "2021 Annual Report"). Some of the information contained in this discussion and analysis or set forth elsewhere in this Form 10-Q, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, our actual results could differ materially from the results described in, or implied by, the forward-looking statements contained in the following discussion and analysis. Please see Forward-Looking Statements.
Overview
We are a U.S.-based, environmentally and socially minded supplier to the global steel industry. We are dedicated entirely to mining non-thermal metallurgical ("met") coal used as a critical component of steel production by metal manufacturers in Europe, South America and Asia. We are a large-scale, low-cost producer and exporter of premium met coal, also known as hard coking coal (“HCC”), operating highly-efficient longwall operations in our underground mines based in Alabama, Mine No. 4 and Mine No. 7.
As of December 31, 2021, based on a reserve report prepared by Marshall Miller & Associates, Inc. ("Marshall Miller"), Mine No. 4 and Mine No. 7, our two operating mines, had approximately 90.2 million metric tons of recoverable reserves and our undeveloped Blue Creek mine contained 63.3 million metric tons of recoverable reserves and 44.9 million metric tons of coal resources exclusive of reserves, which total 108.2 million metric tons. As a result of our high quality coal, our realized price has historically been in line with, or at a slight discount to, the Platts Premium Low Volatility ("LV") Free On Board ("FOB") Australia Index Price ("Platts Index"). Our HCC, mined from the Southern Appalachian portion of the Blue Creek coal seam, is characterized by low sulfur, low-to-medium ash, and LV to mid-volatility ("MV"). These qualities make our coal ideally suited as a coking coal for the manufacture of steel.
We sell substantially all of our met coal production to steel producers. Met coal, which is converted to coke, is a critical input in the steel production process. Met coal is both consumed domestically in the countries where it is produced and exported by several of the largest producing countries, such as China, Australia, the United States, Canada and Russia. Therefore, demand for our coal will be highly correlated to conditions in the global steelmaking industry. The steelmaking industry’s demand for met coal is affected by a number of factors, including the cyclical nature of that industry’s business, technological developments in the steelmaking process and the availability of substitutes for steel such as aluminum, composites and plastics. A significant reduction in the demand for steel products would reduce the demand for met coal, which would have a material adverse effect upon our business. Similarly, if alternative ingredients are used in substitution for met coal in the integrated steel mill process, the demand for met coal would materially decrease, which could also materially adversely affect demand for our met coal.
The global steelmaking industry's demand for met coal is also affected by pandemics, epidemics or other public health emergencies, such as the outbreak of the novel coronavirus ("COVID-19"). As of the filing of this Form 10-Q, we have not had to idle or temporarily idle our mines as a result of COVID-19.
In addition, future governmental policy changes in foreign countries may be detrimental to the global coal market and could thus impact our business, financial condition or results of operation. For example, the Chinese government has from time to time implemented regulations and promulgated new laws or restrictions, such as the unofficial ban on Australian coal in November 2020, on their domestic coal industry, sometimes with little advance notice, which has impacted worldwide coal demand, supply and prices. The ban on Australian coal has significantly impacted the global met coal market in recent years. During the past several years, the Chinese government has initiated a number of anti-smog measures aimed at reducing hazardous air emissions through temporary production capacity restrictions with the steel, coal and coal-fired power sectors.
In February 2022, the war in Ukraine pushed seaborne met coal export prices to record levels. After the invasion began, spot cargo requests for Australian met coals could not be filled. The U.S., Canada and Indonesia were also not able to step up at short notice. These supply shortages combined with the urgent purchases of non-Russian coal against a backdrop of mounting sanctions, trade finance problems and seaborne logistical constraints pushed the Queensland PLV HCC index price to over $660.00 per metric ton by mid-March. On August 10, 2022, the European Union ban on the importation of Russian coal became effective which significantly impacted coking coal markets by disrupting previously existing trading patterns. The Queensland PLV HCC index price started the quarter at approximately $302.00 per metric ton falling to a floor of $188.00 per
18


metric ton on August 2, 2022 and finishing the quarter at $270.50. The resulting volatility, including market expectations of potential changes in coal prices and inflationary pressures on steel products, may significantly affect prices for our coal or the cost of supplies and equipment.
U.S. inflation surged to a new four decade record high of 9.1% in July 2022 and remained at 8.2% in September 2022, driven by increased energy and food costs, supply constraints and strong consumer demand. High inflation has been driven by growth in the economy as it bounces back from COVID-19, powered in part by low interest rates and government stimulus to counter the pandemic's impact. We expect COVID-19 to continue to impact global supply markets and supply chains, resulting in shortages, extended lead times and increased inflation impacting our operations and profitability. We are applying a number of different strategies to mitigate the impact of these challenges on our operations, including placing purchase orders earlier, utilizing short term contracts and leveraging our supplier relationships. In 2022, we expect inflation to have a larger negative impact on our profitability, as we expect increases in steel prices, freight rates, labor and other materials and supplies. These increases affect, among others, the costs of belt structure, roof bolts, cable, magnetite, rock dust and other supplies, plus labor and parts on equipment repair and rebuilds.
Within the seaborne metallurgical coal market, the three months ended September 30, 2022 were characterized by significant volatility, primarily driven by a weakening global macroeconomic environment, inflation and trade disruptions following the previously mentioned sanctions imposed on Russian coal imports. The Chinese ban on Australian coal, the ongoing war in Ukraine, additional sanctions against Russia and a broader economic weakening as inflation rises and stimulus falls are all likely to continue to impact the global met coal market and impact our business, financial condition or results of operations.
Collective Bargaining Agreement
Our Collective Bargaining Agreement ("CBA") with the United Mine Workers of America (the "UMWA") expired on April 1, 2021, and the UMWA initiated a strike which continues through today. We continue to negotiate in good faith to reach a new union contract. During the strike, we continue to successfully execute our business continuity plans, allowing us to meet the needs of our valued customers. As a result of the strike, we initially idled Mine No. 4 and scaled back operations at Mine No. 7. In the first quarter of 2022, we restarted operations at Mine No. 4. Due to the reduced operations at Mine No. 4 and Mine No. 7, we incurred idle mine expenses of $5.4 million and $10.1 million, for the three and nine months ended September 30, 2022, respectively, and $9.3 million and $20.2 million for the three and nine months ended September 30, 2021, respectively. These expenses are reported separately in the Condensed Statements of Operations and represent expenses incurred, such as electricity, insurance and maintenance labor. We have also incurred business interruption expenses of approximately $7.1 million and $20.1 million, for the three and nine months ended September 30, 2022, respectively, and $6.9 million and $13.9 million for the three and nine months ended September 30, 2021, respectively, which represent non-recurring expenses that are directly attributable to the ongoing UMWA strike for incremental safety and security, labor negotiations and other expenses. These expenses are also presented separately in the Condensed Statements of Operations. Despite incurring costs associated with the strike, we have been able to manage our working capital and spending to deliver strong results in the current markets. While we have business continuity plans in place, the strike may still cause disruption to production and shipping activities, and our plans may vary significantly from quarter to quarter in 2022.
How We Evaluate Our Operations
Our primary business, the mining and exporting of met coal for the steel industry, is conducted in one reportable business segment: mining. All other operations and results are reported under the “All Other” category as a reconciling item to consolidated amounts, which includes the business results from our sale of natural gas extracted as a byproduct from our underground coal mines and royalties from our leased properties. Our natural gas and royalty businesses do not meet the criteria in ASC 280, Segment Reporting, to be considered as operating or reportable segments.
Our management uses a variety of financial and operating metrics to analyze our performance. These metrics are significant factors in assessing our operating results and profitability and include: (i) Segment Adjusted EBITDA (as defined below), a non-GAAP financial measure; (ii) sales volumes and average net selling price, which drive coal sales revenue; (iii) cash cost of sales, a non-GAAP financial measure; and (iv) Adjusted EBITDA, a non-GAAP financial measure. The following table presents supplementary data on a historical basis for each of the periods indicated.
19


 For the three months ended
September 30,
For the nine months ended
September 30,
(in thousands)2022202120222021
Segment Adjusted EBITDA$168,503 $107,772 $847,796 $232,405 
Metric tons sold1,360 961 3,782 4,385 
Metric tons produced1,490 1,024 4,397 4,079 
Average net selling price per metric ton$273.49 $207.85 $364.27 $144.01 
Cash cost of sales per metric ton$148.56 $94.68 $139.15 $90.37 
Adjusted EBITDA$171,612 $104,942 $846,680 $216,823 
Segment Adjusted EBITDA
We define Segment Adjusted EBITDA as net income adjusted for other revenues, cost of other revenues, depreciation and depletion, selling, general and administrative, business interruption, idle mine expense, interest expense, net, income tax expense, other income and certain transactions or adjustments that the Chief Executive Officer, our Chief Operating Decision Maker, does not consider for the purposes of making decisions to allocate resources among segments or assessing segment performance. Segment Adjusted EBITDA is used as a supplemental financial measure by management and by external users of our financial statements, such as investors, industry analysts, lenders and ratings agencies, to assess: 
our operating performance as compared to the operating performance of other companies in the coal industry, without regard to financing methods, historical cost basis or capital structure;
the ability of our assets to generate sufficient cash flow to pay dividends;
our ability to incur and service debt and fund capital expenditures; and
the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities.
Sales Volumes and Average Net Selling Price
We evaluate our operations based on the volume of coal we can safely produce and sell in compliance with regulatory standards, and the prices we receive for our coal. Our sales volume and sales prices are largely dependent upon the terms of our annual coal sales contracts, for which prices generally are set on daily index averages. The volume of coal we sell is also a function of the pricing environment in the international met coal markets and the amounts of LV and MV coal that we sell. We evaluate the price we receive for our coal based on our average net selling price per metric ton.
Our average net selling price per metric ton represents our coal net sales revenue divided by total metric tons of coal sold. In addition, our average net selling price per metric ton is net of demurrage and quality specification adjustments.
Cash Cost of Sales
We evaluate our cash cost of sales on a cost per metric ton basis. Cash cost of sales is based on reported cost of sales and includes items such as freight, royalties, manpower, fuel and other similar production and sales cost items, and may be adjusted for other items that, pursuant to accounting principles generally accepted in the United States ("GAAP"), are classified in the Condensed Statements of Operations as costs other than cost of sales, but relate directly to the costs incurred to produce met coal and sell it FOB at the Port of Mobile, Alabama. Our cash cost of sales per metric ton is calculated as cash cost of sales divided by the metric tons sold. Cash cost of sales is used as a supplemental financial measure by management and by external users of our financial statements, such as investors, industry analysts, lenders and ratings agencies, to assess: 
our operating performance as compared to the operating performance of other companies in the coal industry, without regard to financing methods, historical cost basis or capital structure; and
the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities.
20


We believe that this non-GAAP financial measure provides additional insight into our operating performance, and reflects how management analyzes our operating performance and compares that performance against other companies for purposes of business decision making by excluding the impact of certain items that management does not believe are indicative of our core operating performance. We believe that cash cost of sales presents a useful measure of our controllable costs and our operational results by including all costs incurred to produce met coal and sell it FOB at the Port of Mobile, Alabama. Period-to-period comparisons of cash cost of sales are intended to help management identify and assess additional trends that potentially impact us and that may not be shown solely by period-to-period comparisons of cost of sales. Cash cost of sales should not be considered an alternative to cost of sales or any other measure of financial performance or liquidity presented in accordance with GAAP. Cash cost of sales excludes some, but not all, items that affect cost of sales, and our presentation may vary from the presentations of other companies. As a result, cash cost of sales as presented below may not be comparable to similarly titled measures of other companies.
The following table presents a reconciliation of cash cost of sales to total cost of sales, the most directly comparable GAAP financial measure, on a historical basis for each of the periods indicated.
(in thousands)For the three months ended
September 30,
For the nine months ended
September 30,
2022202120222021
Cost of sales (exclusive of depreciation and depletion)$203,441 $91,973 $529,869 $399,088 
Asset retirement obligation accretion(493)(432)(1,480)(1,297)
Stock compensation expense(909)(555)(2,136)(1,536)
Cash cost of sales$202,039 $90,986 $526,253 $396,255 
Adjusted EBITDA
We define Adjusted EBITDA as net income before interest expense, net, income taxes, depreciation and depletion, non-cash asset retirement obligation accretion, non-cash stock compensation expense, other non-cash accretion, mark-to-market loss on gas hedges, business interruption, idle mine and other income. Adjusted EBITDA is used as a supplemental financial measure by management and by external users of our financial statements, such as investors, industry analysts, lenders and ratings agencies, to assess: 
our operating performance as compared to the operating performance of other companies in the coal industry, without regard to financing methods, historical cost basis or capital structure; and
the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities.
We believe that the presentation of Adjusted EBITDA in this report provides information useful to investors in assessing our financial condition and results of operations. The GAAP measure most directly comparable to Adjusted EBITDA is net income. Adjusted EBITDA should not be considered an alternative to net income or any other measure of financial performance or liquidity presented in accordance with GAAP. Adjustments exclude some, but not all, items that affect net income and our presentation of Adjusted EBITDA may vary from that presented by other companies.
The following table presents a reconciliation of Adjusted EBITDA to net income, the most directly comparable GAAP financial measure, on a historical basis for each of the periods indicated.
21


 For the three months ended
September 30,
For the nine months ended
September 30,
2022202120222021
Net income$98,403 $38,427 $541,644 $12,391 
Interest expense, net5,701 8,784 20,706 25,954 
Income tax expense 20,332 5,433 122,141 22,439 
Depreciation and depletion30,805 28,967 86,973 102,021 
Asset retirement obligation accretion (1)
900 805 2,666 2,416 
Stock compensation expense (2)
2,599 1,524 14,250 8,763 
Other non-cash accretion (3)
348 360 1,042 1,081 
Mark-to-market loss on gas hedges (4)
— 5,843 27,708 8,661 
Business interruption (5)
7,106 6,872 20,084 13,892 
Idle mine expense (6)
5,418 9,327 10,141 20,203 
Other income (7)
— (1,400)(675)(998)
Adjusted EBITDA$171,612 $104,942 $846,680 $216,823 
(1)Represents non-cash accretion expense associated with our asset retirement obligations.
(2)Represents non-cash stock compensation expense associated with equity awards.
(3)Represents non-cash accretion expense associated with our black lung obligations.
(4)Represents mark-to-market loss recognized on gas hedges.
(5)Represents business interruption expenses associated with the ongoing UMWA strike.
(6)Represents idle mine expenses incurred in connection with reduced operations at Mine No. 4 and Mine No. 7.
(7)Represents proceeds received upon settlement of a lawsuit, COVID-19 pandemic related expenses and settlement proceeds received for the Shared Services Claim and Hybrid Debt Claim associated with the Walter Canada CCAA proceedings (discussed below).
Results of Operations
Three Months Ended September 30, 2022 and 2021
The following table summarizes certain unaudited financial information for these periods.
For the three months ended
September 30,
($ in thousands)2022% of Total Revenues2021% of Total Revenues
Revenues:
Sales$371,944 95.3 %$199,745 98.7 %
Other revenues18,2364.7 %2,722 1.3 %
Total revenues390,180 100.0 %202,467 100.0 %
Costs and expenses:
Cost of sales (exclusive of items shown separately below)203,44152.1 %91,973 45.4 %
Cost of other revenues (exclusive of items shown separately below)8,4172.2 %6,654 3.3 %
Depreciation and depletion30,8057.9 %28,967 14.3 %
Selling, general and administrative10,5572.7 %7,430 3.7 %
Business interruption 7,1061.8 %6,872 3.4 %
Idle mine 5,4181.4 %9,327 4.6 %
Total costs and expenses265,744 68.1 %151,223 74.7 %
Operating income124,436 31.9 %51,244 25.3 %
Interest expense, net(5,701)(1.5)%(8,784)(4.3)%
Other income— — %1,400 0.7 %
Income before income tax expense118,735 30.4 %43,860 21.7 %
Income tax expense20,332 5.2 %5,433 2.7 %
Net income$98,403 25.2 %$38,427 19.0 %
22


Sales and cost of sales components on a per unit basis were as follows: 
 For the three months ended
September 30,
 20222021
Met Coal (metric tons in thousands)
Metric tons sold 1,360 961 
Metric tons produced1,490 1,024 
Average net selling price per metric ton$273.49