Ramaco Resources, Inc. [METC] Filings

10-Q 1 metc-20230630x10q.htm 10-Q

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 June 30, 2023


☐	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: 001-38003

RAMACO RESOURCES, INC.

(Exact name of registrant as specified in its charter)


Delaware	38-4018838
(State or other jurisdiction	(I.R.S. Employer
of incorporation or organization)	Identification No.)

250 West Main Street, Suite 1900
Lexington, Kentucky	40507
(Address of principal executive offices)	(Zip code)

(859) 244-7455
(Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, $0.01 par value	METC	NASDAQ Global Select Market
Class B Common Stock, $0.01 par value	METCB	NASDAQ Global Select Market
9.00% Senior Notes due 2026	METCL	NASDAQ Global Select Market

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 during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No ◻

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

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

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

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

As of July 31, 2023, the registrant had 43,902,118 and 8,783,877 outstanding shares of Class A and Class B common stock, respectively.

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TABLE OF CONTENTS


		Page

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	29
Item 4.	Controls and Procedures	29

PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	30
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36
Item 3.	Defaults Upon Senior Securities	36
Item 4.	Mine Safety Disclosures	36
Item 5.	Other Information	36
Item 6.	Exhibits	37

SIGNATURES		38

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “Quarterly Report”) includes “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”). All statements, other than statements of historical fact included in this report, regarding our strategy, future operations, financial position, estimated revenue and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this Quarterly Report, the words “could,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on management’s current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements described under, but not limited to, the heading “Item 1A. Risk Factors” included in this Quarterly Report and elsewhere in the Annual Report of Ramaco Resources, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2022 (the “Annual Report”) filed with the United States Securities and Exchange Commission (the “SEC”) on March 14, 2023 and amended on April 7, 2023, as well as other filings of the Company with the SEC.

Forward-looking statements may include statements about:

●

risks related to the impact of the novel coronavirus “COVID-19” global pandemic, such as the scope and duration of the outbreak, the health and safety of our employees, government actions and restrictive measures implemented in response, delays and cancellations of customer sales, supply chain disruptions and other impacts to the business, or our ability to execute our business continuity plans;

●

anticipated production levels, costs, sales volumes, and revenue;

●

timing and ability to complete major capital projects;

●

economic conditions in the metallurgical coal and steel industries;

●

expected costs to develop planned and future mining operations, including the costs to construct necessary processing, refuse disposal and transport facilities;

●

estimated quantities or quality of our metallurgical coal reserves;

●

our ability to obtain additional financing on favorable terms, if required, to complete the acquisition of additional metallurgical coal reserves as currently contemplated or to fund the operations and growth of our business;

●

maintenance, operating or other expenses or changes in the timing thereof;

●

the financial condition and liquidity of our customers;

●

competition in coal markets;

●

the price of metallurgical coal or thermal coal;

●

compliance with stringent domestic and foreign laws and regulations, including environmental, climate change and health and safety regulations, and permitting requirements, as well as changes in the regulatory environment, the adoption of new or revised laws, regulations and permitting requirements;

●

potential legal proceedings and regulatory inquiries against us;

●

the impact of weather and natural disasters on demand, production, and transportation;

●

purchases by major customers and our ability to renew sales contracts;

●

credit and performance risks associated with customers, suppliers, contract miners, co-shippers and traders, banks, and other financial counterparties;

●

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

●

transportation availability, performance, and costs;

●

availability, timing of delivery and costs of key supplies, capital equipment or commodities such as diesel fuel, steel, explosives, and tires;

●

timely review and approval of permits, permit renewals, extensions, and amendments by regulatory authorities;

●

our ability to comply with certain debt covenants;

●

tax payments to be paid for the current fiscal year;

●

our expectations relating to dividend payments and our ability to make such payments;

●

the anticipated benefits and impacts of previous acquisitions;

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●

risks related to Russia’s invasion of Ukraine and the international community’s response;

●

risks related to weakened global economic conditions and inflation;

●

risks related to the Company’s tracking stock structure and separate performance of its Carbon Ore-Rare Earth (“CORE”) assets; and

●

other risks identified in this Quarterly Report that are not historical.

We caution you that these forward-looking statements are subject to a number of risks, uncertainties, and assumptions, which are difficult to predict and many of which are beyond our control, incident to the development, production, gathering and sale of coal. Moreover, we operate in a very competitive and rapidly changing environment and additional risks may arise from time to time. It is not possible for our management to predict all of the risks associated with our business, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. Although we believe that our plans, intentions and expectations reflected in or suggested by the forward-looking statements we make in this Quarterly Report are reasonable, we can give no assurance that these plans, intentions or expectations will be achieved or occur, and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results.

All forward-looking statements, expressed or implied, included in this Quarterly Report are expressly qualified in their entirety by this cautionary statement and speak only as of the date of this Quarterly Report. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue.

Except as otherwise required by applicable law, we disclaim any duty to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this Quarterly Report.

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Ramaco Resources, Inc.

Unaudited Condensed Consolidated Balance Sheets


In thousands, except share and per share information	June 30, 2023		December 31, 2022
Assets
Current assets
Cash and cash equivalents	$	33,883	$	35,613
Accounts receivable		58,973		41,174
Inventories		67,425		44,973
Prepaid expenses and other		17,521		25,729
Total current assets		177,802		147,489
Property, plant, and equipment, net		457,564		429,842
Financing lease right-of-use assets, net		17,363		12,905
Advanced coal royalties		3,464		3,271
Other		4,198		2,832
Total Assets	$	660,391	$	596,339
Liabilities and Stockholders' Equity
Liabilities
Current liabilities
Accounts payable	$	49,781	$	34,825
Accrued liabilities		38,703		41,806
Current portion of asset retirement obligations		29		29
Current portion of long-term debt		25,333		35,639
Current portion of related party debt		20,000		40,000
Current portion of financing lease obligations		7,366		5,969
Insurance financing liability		846		4,577
Total current liabilities		142,058		162,845
Asset retirement obligations, net		29,555		28,856
Long-term debt, net		63,975		18,757
Long-term financing lease obligations, net		8,296		4,917
Senior notes, net		33,061		32,830
Deferred tax liability, net		42,257		35,637
Other long-term liabilities		4,084		3,299
Total liabilities		323,286		287,141
Commitments and contingencies		—		—
Stockholders' Equity
Preferred stock, $0.01 par value, 50,000,000 shares authorized, none issued or outstanding		—		—
Common stock, $0.01 par value, 260,000,000 shares authorized, 44,155,735 shares issued and outstanding at December 31, 2022 *		—		442
Class A common stock, $0.01 par value, 225,000,000 shares authorized, 43,902,118 shares issued and outstanding at June 30, 2023 *		439		—
Class B common stock, $0.01 par value, 35,000,000 shares authorized, 8,783,877 shares issued and outstanding at June 30, 2023		88		—
Additional paid-in capital		272,728		168,711
Retained earnings		63,850		140,045
Total stockholders' equity		337,105		309,198
Total Liabilities and Stockholders' Equity	$	660,391	$	596,339
* Common stock was reclassified to Class A common stock during Q2 2023. Refer to Note 6.

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

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Ramaco Resources, Inc.

Unaudited Condensed Consolidated Statements of Operations


	Three months ended June 30,				Six months ended June 30,
In thousands, except per-share amounts	2023		2022		2023		2022

Revenue	$	137,469	$	138,655	$	303,829	$	293,537

Costs and expenses
Cost of sales (exclusive of items shown separately below)		99,199		76,644		209,748		157,897
Asset retirement obligations accretion		349		755		700		990
Depreciation, depletion, and amortization		13,556		9,783		25,407		18,463
Selling, general, and administrative		14,319		8,786		26,061		20,610
Total costs and expenses		127,423		95,968		261,916		197,960

Operating income		10,046		42,687		41,913		95,577

Other income, net		2,495		2,348		3,742		2,714
Interest expense, net		(2,518)		(1,937)		(4,826)		(3,068)

Income before tax		10,023		43,098		40,829		95,223
Income tax expense		2,467		9,818		8,016		20,472
Net income	$	7,556	$	33,280	$	32,813	$	74,751

Earnings per common share *
Basic - Single class (through 6/20/2023)	$	0.14	$	0.75	$	0.71	$	1.69
Basic - Class A (6/21/2023 - 6/30/2023)	$	0.03	$	—	$	0.03	$	—
Total	$	0.17	$	0.75	$	0.74	$	1.69

Diluted - Single class (through 6/20/23)	$	0.14	$	0.74	$	0.70	$	1.66
Diluted - Class A (6/21/2023 - 6/30/2023)	$	0.03	$	—	$	0.03	$	—
Total	$	0.17	$	0.74	$	0.73	$	1.66

* Refer to Note 10 for earnings per common share calculations

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

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Ramaco Resources, Inc.

Unaudited Condensed Consolidated Statements of Stockholders’ Equity


				Class B		Additional				Total
	Common			Common		Paid-		Retained		Stockholders'
In thousands	Stock *			Stock		in Capital		Earnings		Equity
Balance at January 1, 2023	$	442		$	—	$	168,711	$	140,045	$	309,198
Stock-based compensation		3			—		2,934		—		2,937
Shares surrendered for withholding taxes payable		(1)			—		(114)		—		(115)
Adjustment to cash dividends previously declared		—			—		—		(354)		(354)
Net income		—			—		—		25,257		25,257
Balance at March 31, 2023		444			—		171,531		164,948		336,923
Stock-based compensation		—			—		3,568		—		3,568
Cash dividends declared		—			—		—		(5,734)		(5,734)
Stock dividend declared and distributed		—			89		102,831		(102,920)		—
Shares surrendered for withholding taxes payable		(5)			(1)		(5,202)		—		(5,208)
Net income		—			—		—		7,556		7,556
Balance at June 30, 2023	$	439	*	$	88	$	272,728	$	63,850	$	337,105
* Common stock was reclassified to Class A common stock during Q2 2023. Refer to Note 6.


Balance at January 1, 2022	$	441		$	—	$	163,566	$	47,067	$	211,074
Stock-based compensation		2			—		1,885		—		1,887
Cash dividends declared		—			—		—		(2,497)		(2,497)
Net income		—			—		—		41,471		41,471
Balance at March 31, 2022		443			—		165,451		86,041		251,935
Shares surrendered for withholding taxes payable		(2)			—		(2,819)		—		(2,821)
Stock-based compensation		—			—		2,286		—		2,286
Cash dividends declared		—			—		—		(4,998)		(4,998)
Net income		—			—		—		33,280		33,280
Balance at June 30, 2022	$	441		$	—	$	164,918	$	114,323	$	279,682

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

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Ramaco Resources, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows


	Six months ended June 30,
In thousands	2023		2022
Cash flows from operating activities:
Net income	$	32,813	$	74,751
Adjustments to reconcile net income to net cash from operating activities:
Accretion of asset retirement obligations		700		990
Depreciation, depletion, and amortization		25,407		18,463
Amortization of debt issuance costs		357		243
Stock-based compensation		6,505		4,173
Other income		(1,936)		(2,113)
Deferred income taxes		6,620		6,448
Changes in operating assets and liabilities:
Accounts receivable		(17,799)		(8,293)
Prepaid expenses and other current assets		5,106		1,472
Inventories		(22,452)		(16,597)
Other assets and liabilities		(957)		1,263
Accounts payable		13,030		10,060
Accrued liabilities		2,184		18,441
Net cash provided by operating activities		49,578		109,301

Cash flow from investing activities:
Capital expenditures		(48,016)		(53,807)
Acquisition of Ramaco Coal assets		—		(11,738)
Maben acquisition bond recovery		1,182		—
Other		3,000		2,000
Net cash used for investing activities		(43,834)		(63,545)

Cash flows from financing activities:
Proceeds from borrowings		77,500		1,337
Payment of dividends		(11,108)		(9,996)
Repayment of borrowings		(42,588)		(9,407)
Repayment of Ramaco Coal acquisition financing - related party		(20,000)		—
Repayments of insurance financing		(3,001)		(210)
Repayments of equipment finance leases		(3,098)		(2,718)
Shares surrendered for withholding taxes payable		(5,179)		(2,821)
Net cash used for financing activities		(7,474)		(23,815)

Net change in cash and cash equivalents and restricted cash		(1,730)		21,941
Cash and cash equivalents and restricted cash, beginning of period		36,473		22,806
Cash and cash equivalents and restricted cash, end of period	$	34,743	$	44,747

Non-cash investing and financing activities:
Leased assets obtained under new financing leases		7,874		3,624
Capital expenditures included in accounts payable and accrued liabilities		14,615		15,609
Ramaco Coal acquisition financing		—		56,551
Financed insurance		406		—
Tax liability on shares surrendered by employees		144		—
Accrued dividends payable		504		—

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

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Ramaco Resources, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

NOTE 1—BUSINESS AND BASIS OF PRESENTATION

Ramaco Resources, Inc. (the “Company,” “we,” “us” or “our,”) is a Delaware corporation formed in October 2016. Our principal corporate and executive offices are located in Lexington, Kentucky with operational offices in Charleston, West Virginia and Sheridan, Wyoming. We are an operator and developer of high-quality, low-cost metallurgical coal in southern West Virginia, southwestern Virginia, and southwestern Pennsylvania. We also control mineral deposits near Sheridan, Wyoming as part of the Company’s initiatives regarding the potential recovery of rare earth elements as well as the potential commercialization of coal-to-carbon-based products and materials.

Economic Conditions—Renewed global economic concerns, including those related to the military conflict involving Russia and Ukraine, have caused volatility in the commodity markets. This volatility, including market expectations of potential changes in coal prices and inflationary pressures on steel products, has had a significant effect on market prices and may affect overall demand for our coal as well as the cost of supplies and equipment.

Basis of Presentation—These interim financial statements are unaudited and have been prepared pursuant to the rules and regulations of the SEC regarding interim financial reporting. Certain disclosures have been condensed or omitted from these financial statements. Accordingly, they do not include all the information and notes required by accounting principles generally accepted in the United States of America (“GAAP”) for complete consolidated financial statements and should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2022.

In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of the Company’s financial position as of June 30, 2023, as well as the results of operations and cash flows for all periods presented. In preparing the accompanying financial statements, management has made certain estimates and assumptions that affect reported amounts in the condensed consolidated financial statements and disclosures of contingencies. Actual results may differ from those estimates. The results for interim periods are not necessarily indicative of annual results. Intercompany balances and transactions between consolidated entities have been eliminated.

There were no material changes to the Company’s significant accounting policies during the first six months of 2023.

NOTE 2—INVENTORIES

Inventories consisted of the following:


(In thousands)	June 30, 2023		December 31, 2022
Raw coal	$	42,374	$	22,414
Saleable coal		19,788		18,223
Supplies		5,263		4,336
Total inventories	$	67,425	$	44,973

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NOTE 3—PROPERTY, PLANT AND EQUIPMENT

Property, plant, and equipment consisted of the following:



(In thousands)	June 30, 2023		December 31, 2022
Plant and equipment	$	251,002	$	232,885
Mining property and mineral rights		120,533		120,760
Construction in process		35,039		34,698
Capitalized mine development costs		165,812		153,436
Less: accumulated depreciation, depletion, and amortization		(114,822)		(111,937)
Total property, plant and equipment, net	$	457,564	$	429,842

On July 10, 2022, the Company experienced a methane ignition at the Berwind No. 1 mine, which was one of the active mines at our Berwind mining complex. The other mines resumed production while the Berwind No. 1 mine was idled until a full investigation could be conducted. There were no personnel in the mine at the time of the incident and no injuries or fatalities occurred. Production from the Berwind No. 1 mine restarted in the first quarter of 2023.

Depreciation, depletion, and amortization included:



	Three months ended June 30,				Six months ended June 30,
(In thousands)	2023		2022		2023		2022
Depreciation of plant and equipment	$	7,661	$	5,270	$	14,428	$	10,024
Amortization of right of use assets (finance leases)		1,999		1,383		3,881		2,097
Amortization and depletion of capitalized
mine development costs and mineral rights		3,896		3,130		7,098		6,342
Total depreciation, depletion, and amortization	$	13,556	$	9,783	$	25,407	$	18,463

NOTE 4—DEBT

Outstanding debt consisted of the following:


(In thousands)	June 30, 2023		December 31, 2022
Revolving Credit Facility	$	67,500	$	25,000
Equipment loans		5,608		8,396
Senior Notes, net		33,061		32,830
Financing of Ramaco Coal acquisition - Related party debt		20,000		40,000
Financing of Maben Coal acquisition		16,200		21,000
Total debt	$	142,369	$	127,226
Current portion of long-term debt		45,333		75,639
Long-term debt, net	$	97,036	$	51,587

Revolving Credit Facility—On February 15, 2023, the Company entered into the Second Amended and Restated Credit and Security Agreement, which includes multiple lending parties and provides additional borrowing capacity compared to the facility utilized in 2022. The new facility, which has a maturity date of February 15, 2026, provides an initial aggregate revolving commitment of $125.0 million as well as an accordion feature of $50.0 million subject to certain terms and conditions, including the lenders’ consents. The remaining availability under the facility after borrowing base limitations and outstanding borrowings above was $28.9 million at June 30, 2023.

Revolving loans under the new facility bear interest at either the base rate plus 1.50% or the Secured Overnight Financing Rate plus 2.00%. The base rate equals the highest of the administrative agent’s prime rate, the Federal Funds Effective Rate plus 0.5%, or 3%.

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The terms of the new facility include covenants limiting the ability of the Company to incur additional indebtedness, make investments or loans, incur liens, consummate mergers and similar fundamental changes, make restricted payments, and enter into transactions with affiliates. The terms of the new facility also require the Company to maintain certain covenants, including fixed charge coverage ratio and compensating balance requirements, with which the Company was in compliance at June 30, 2023.

Fair Value—The Company’s Senior Notes had an estimated fair value of approximately $36 million at both June 30, 2023 and December 31, 2022. The fair values of the Company’s Senior Notes were based on observable market prices and were considered a Level 2 measurement based on trading volumes. The difference between the fair value and carrying amount of the Company’s remaining debts is not material due to the similarity between the terms of the debt agreements and prevailing market terms available to the Company.

Other—Finance lease obligations and liabilities related to insurance premium financing are excluded from the disclosures above.

NOTE 5—ACCRUED LIABILITIES AND OTHER LONG-TERM LIABILITIES

Accrued liabilities at June 30, 2023 were $38.7 million compared to $41.8 million at December 31, 2022. The year-to-date decrease in accrued liabilities was driven by the payment of cash dividends that were accrued at December 31, 2022 in the estimated amount of $5.5 million.

Self-Insurance—The Company is self-insured for certain losses relating to workers’ compensation claims and occupational disease obligations under the Federal Mine Safety and Health Act of 1969, as amended. Starting in 2023, the Company also elected to self-insure employee medical expenses. The Company purchases insurance coverage to reduce its exposure to significant levels of these claims. Self-insured losses are accrued based upon estimates of the aggregate liability for uninsured claims incurred as of the balance sheet date using current and historical claims experience and certain actuarial assumptions. These estimates are subject to uncertainty due to a variety of factors, including extended lag times in the reporting and resolution of claims, trends or changes in claim settlement patterns, and future cost trends. As a result, actual costs could differ significantly from the estimated amounts.

The estimated aggregate liability for these items totaled $4.7 million and $3.6 million as of June 30, 2023 and December 31, 2022, respectively. Of the aggregate liability, the amounts included in other long-term liabilities were $3.1 million and $2.7 million as of June 30, 2023 and December 31, 2022, respectively.

Funds held in escrow for potential future workers’ compensation claims are considered restricted cash and have been included in other current assets on the condensed consolidated balance sheets. Restricted cash balances were $0.9 million at June 30, 2023 and December 31, 2022.

NOTE 6—EQUITY

Common Stock—On June 12, 2023, a charter amendment was approved by shareholder vote to reclassify the Company’s existing common stock as shares of Class A common stock, par value $0.01 per share, and create a separate Class B common stock having a par value of $0.01 per share.

The initial distribution of Class B common stock occurred on June 21, 2023 via a stock dividend to existing holders of common stock as of May 12, 2023. On the date of initial distribution, each holder of common stock received 0.2 shares of Class B common stock for every one share of existing common stock held on the record date. Similar actions occurred for holders of outstanding stock-based awards.

The distribution of the Class B common stock provides existing holders of the Company’s common stock with an opportunity to participate directly in the financial performance of the Company’s CORE assets on a stand-alone basis, separate from the Company’s metallurgical coal operations. CORE assets were acquired initially as part of the

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Company’s acquisition of Ramaco Coal in the second quarter of 2022. The financial performance of CORE assets consists of the following non-cost bearing revenue streams based on the Company’s current expectations:

●

Royalty fees derived from the royalties associated with the Ramaco Coal and Amonate reserves, which we believe approximates 3% of Company-produced coal sales revenue excluding coal sales revenue from Knox Creek,

●

Infrastructure fees based on $5.00 per ton of coal processed at our preparation plants and $2.50 per ton of loaded coal at the Company’s rail load-out facilities, and

●

Future income derived, if and when realized, from advanced carbon products and rare earth elements initiatives.

The Company expects to pay a dividend equal to 20% of the revenues above; however, any dividend amounts declared and paid are subject to the sole discretion of the Company’s Board of Directors.

In addition, the Board of Directors retains the power to change or add expense allocation policies related to CORE, redefine CORE assets, and redetermine CORE’s per-ton usage fees at any time, in its sole discretion, without shareholder approval. Holders of shares of Class A common stock continue to be entitled to receive dividends when and if declared by the Board of Directors subject to any statutory or contractual restrictions on the payment of dividends and to any prior rights and preferences that may be applicable to outstanding preferred stock, if any.

CORE is not a separate legal entity and holders of Class B common stock do not own a direct interest in the assets of CORE. Holders of Class B common stock are stockholders of Ramaco Resources, Inc. and are subject to all risks and liabilities of the Company as a whole.

With respect to voting rights, holders of shares of Class A common stock and Class B common stock are entitled to one vote per share on all matters to be voted upon by shareholders. The holders of Class A common stock and Class B common stock vote together as a single class on all matters submitted to a vote of the stockholders. The holders of Class A common stock and Class B common stock do not have cumulative voting rights in the election of directors. Class B common stock does not have any specific voting rights or governance rights with respect to CORE.

With respect to liquidation rights, holders of common stock are entitled to receive ratably the assets available for distribution to the stockholders after payment of liabilities and the liquidation preference of outstanding preferred stock, if any. That is, the rights to residual net assets upon liquidation are equal between holders of Class A and Class B common stock. Holders of Class B common stock do have specific rights to CORE assets in the event of liquidation.

The Board of Directors also retains the ability, in its sole discretion, to exchange all outstanding shares of Class B common stock into Class A common stock based on an exchange ratio determined by a 20-day trailing volume-weighted average price for each class of stock.

The initial distribution of the tracking stock was recorded as a stock dividend at fair value, which was estimated to be $11.00 per share based on the closing price of Class B shares on the first day of regular-way trading. The effect of the equity restructuring was a $102.9 million reduction in retained earnings and an increase of $102.9 million to Class B common stock and additional paid-in capital during the second quarter of 2023. The Company initially distributed 8,201,956 shares of Class B common shares as well as additional restricted stock, restricted stock units, and performance stock units as discussed below under Effects of Class B Distribution on Outstanding Stock-based Awards.

Stock-Based Awards—Stock-based compensation expense totaled $3.6 million and $2.3 million for the three months ended June 30, 2023 and June 30, 2022, respectively. Stock-based compensation expense totaled $6.5 million and $4.2 million for the six months ended June 30, 2023 and June 30, 2022, respectively. During 2023, the Company granted new stock-based awards and modified certain awards previously granted as discussed below.

Restricted Stock—We granted 296,115 shares of restricted stock to certain senior executives, key employees, and directors during the first quarter of 2023, having a grant-date fair value of $10.61 per share. The aggregate fair value of these awards was $2.5 million, which is recognized ratably as expense over the three-year service period unless forfeited. The aggregate fair value of restricted stock granted to directors during the quarter was $0.6 million, which is

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recognized ratably as expense over 2023 unless forfeited. During the vesting period, the participants have voting rights and receive nonforfeitable dividends on the same basis as fully vested common stockholders.

Restricted Stock Units—We granted 518,348 restricted stock units to certain senior executives and key employees during the first quarter of 2023, having a grant-date fair value of $10.61 per share. The aggregate fair value of these awards was $5.5 million, which is recognized ratably as expense over the three-year service period unless forfeited. During the vesting period, the participants have no voting rights and no dividend rights; however, participants are entitled to receive dividend equivalents, which shall be subject to the same conditions applicable to the units and payable at the time the units vest. Upon vesting and within 30 days thereafter, the recipient will receive one share of common stock for each stock unit.

Performance Stock Units—We granted performance stock units to certain senior executives and key employees during the first quarter of 2023. These awards cliff-vest approximately three years from the date of grant based on the achievement of targeted performance levels related to pre-established relative total shareholder return goals. These performance stock units have the potential to be earned from 0% to 200% of target depending on actual results. During the vesting period, the participants have no voting rights and no dividend rights; however, participants are entitled to receive dividend equivalents, which shall be subject to the same conditions applicable to the units and payable at the time the units vest. Upon vesting and within 30 days thereafter, the recipient will receive one share of common stock for each stock unit.

The target number of performance stock units granted during the first quarter of 2023, or 518,348 units, were valued relative to the total shareholder return of a peer group based on a Monte Carlo simulation, which resulted in a grant date fair value of $18.09 per unit. The aggregate fair value of these awards was $9.4 million, which is recognized ratably as expense over the three-year period.

In addition, performance stock units granted in 2022, or 248,706 units at target, were modified during the first quarter of 2023. Modifications to these awards were made up primarily of changes in the composition of the peer group as well as changes in the way relative total shareholder return is evaluated against the updated peer group. The modification resulted in incremental fair value of $1.2 million, which is recognized as expense over 2023 and 2024.

Effects of Class B Distribution on Outstanding Stock-based Awards—Outstanding stock-based awards, including those discussed above, were reclassified to Class A common stock as part of the equity restructuring. In addition, the terms of the Company’s outstanding stock-based awards contained anti-dilution provisions before the contemplation of the equity restructuring. Equitable adjustments were made in accordance with such terms and the Company initially distributed 680,718 of Class B restricted stock as well as 473,707 of Class B stock-based awards (183,484 stock options, 136,819 restricted stock units, and 153,404 performance stock units at target) based on the same factor of 0.2 for every outstanding award. Since there were no changes in fair value, vesting conditions, or classification, no incremental compensation expense resulted.

Dividends–On December 8, 2022, the Company announced that its Board of Directors declared a quarterly cash dividend of approximately $0.125 per share of common stock. Estimated dividends of $5.5 million were accrued in December 2022 and were paid on March 15, 2023 to shareholders of record on March 1, 2023 in the amount of $5.6 million.

Dividends in the amount of $5.6 million, or approximately $0.125 per share of common stock, were paid on June 15, 2023, to shareholders of record on June 1, 2023, bringing the total cash dividends paid for the six months ended June 30, 2023 to $11.1 million.

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No dividends were declared on the tracking stock during the second quarter of 2023. CORE financial performance is shown in the table below.


	Three months ended June 30,
(In thousands)	2023

Royalty Revenue
Ramaco Coal	$	1,351
Amonate Assets		752
Other		—
Total Royalty Revenue	$	2,103

Infrastructure Revenue
Preparation Plants (Processing at $5.00/ton)	$	3,433
Rail Load-outs (Loading at $2.50/ton)		1,726
Total Infrastructure Revenue (at $7.50/ton)	$	5,159

CORE Revenue	$	7,262

Total Cash Available for Dividend for Class B Common Stock	$	7,262

20% of Cash Available for Dividend for Class B Common Stock	$	1,452

Refer to Note 12 for information regarding cash dividends declared after the date of the financial statements for holders of Class A and Class B common stock.

On February 18, 2022, the Company announced that its Board of Directors approved an increase in its initial quarterly cash dividend to $5.0 million from the formerly approved $2.5 million that was declared and accrued in December 2021. Dividends in the amount of $5.0 million, or approximately $0.11 per share of common stock, were paid on March 15, 2022 to shareholders of record on March 1, 2022.

Dividends in the amount of $5.0 million, or approximately $0.11 per share of common stock, were paid on June 15, 2022, to shareholders of record on June 1, 2022, bringing the total cash dividends paid for the six months ended June 30, 2022 to $10.0 million.

NOTE 7—COMMITMENTS AND CONTINGENCIES

Environmental Liabilities—Environmental liabilities are recognized when the expenditures are considered probable and can be reasonably estimated. Measurement of liabilities is based on currently enacted laws and regulations, existing technology, and undiscounted site-specific costs. Generally, such recognition would coincide with a commitment to a formal plan of action. No amounts have been recognized for environmental liabilities.

Surety Bond—In accordance with state laws, we are required to post reclamation bonds to assure that reclamation work is completed. We also have a smaller amount of surety bonds that secure performance obligations. Bonds outstanding at June 30, 2023 totaled approximately $26.1 million.

Coal Leases and Associated Royalty Commitments—We lease coal reserves under agreements that require royalties to be paid as the coal is mined and sold. Many of these agreements require minimum annual royalties to be paid regardless of the amount of coal mined and sold. Total royalty expense was $7.0 million for both the three months ended June 30, 2023 and June 30, 2022, and $16.0 million and $17.2 million for the six months ended June 30, 2023 and June 30, 2022, respectively. These agreements generally have terms running through exhaustion of all the mineable and merchantable coal covered by the respective lease. Royalties or throughput payments are based on a percentage of the gross selling price received for the coal we mine.

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Contingent Transportation Purchase Commitments—We secure the ability to transport coal through rail contracts and export terminals that are sometimes funded through take-or-pay arrangements. As of June 30, 2023, the Company’s remaining commitments under take-or-pay arrangements totaled $36.0 million, the majority of which relates to a five-year contract entered into during 2023 with a total remaining commitment of $22.2 million. The level of these commitments will be reduced at a per ton rate as such rail and export terminal services are utilized against the required minimum tonnage amounts over the contract term stipulated in such rail and export terminal contracts. No amounts have been recognized as contingent liabilities related to take-or-pay arrangements.

Litigation—From time to time, we are subject to various litigation and other claims in the normal course of business. No amounts have been accrued in the consolidated financial statements with respect to any matters.

On November 5, 2018, one of our three raw coal storage silos that fed our Elk Creek plant experienced a partial structural failure. A temporary conveying system completed in late-November 2018 restored approximately 80% of our plant capacity. We completed a permanent belt workaround and restored the preparation plant to its full processing capacity in mid-2019. Our insurance carrier, Federal Insurance Company, disputed our claim for coverage based on certain exclusions to the applicable policy and, therefore, on August 21, 2019, we filed suit against Federal Insurance Company and Chubb INA Holdings, Inc. in Logan County Circuit Court in West Virginia seeking a declaratory judgment that the partial silo collapse was an insurable event and to require coverage under our policy. Defendants removed the case to the United States District Court for the Southern District of West Virginia, and upon removal, we substituted ACE American Insurance Company as a defendant in place of Chubb INA Holdings, Inc. The trial in the matter commenced on June 29, 2021, in Charleston, West Virginia. On July 15, 2021, the jury returned a verdict in our favor for $7.7 million in compensatory damages and on July 16, 2021, made an additional award of $25.0 million for inconvenience and aggravation. On August 12, 2021, the defendants filed a post-trial motion for judgment as a matter of law or in the alternative to alter or amend the judgment or for a new trial. The parties fully briefed the motion, and it stood submitted on August 31, 2021. On March 4, 2022, the court entered its memorandum opinion and order on the motion reducing the jury award to a total of $1.8 million, including pre-judgment interest, and also vacated and set aside, in its entirety, the jury award of damages for inconvenience and aggravation. The same day, the court entered the judgment in accordance with the memorandum opinion and order.

On April 1, 2022, we filed a notice of appeal with the U.S. Court of Appeals for the Fourth Circuit. On July 20, 2023, the court rendered a decision reinstating the jury’s $7.7 million verdict. The court further determined that we are entitled to attorney’s fees in an amount to be determined on remand. Finally, the court held that we are entitled to damages for inconvenience and aggravation but remanded for a new trial on the amount of such damages after affirming that the original $25 million award was excessive. On August 3, 2023, the Defendants-Appellees filed a Petition of Rehearing and Rehearing En Banc with the Fourth Circuit. The Petition is now pending before the court. No amounts have been recorded for this matter based on the accounting guidance for gain contingencies.

NOTE 8—REVENUE

Our revenue is derived from contracts for the sale of coal and is recognized when the performance obligations under the contract are satisfied, which is at the point in time control is transferred to our customer. Generally, domestic sales contracts have terms of about one year and the pricing is typically fixed. Export sales have spot or term contracts, and pricing can be either fixed or derived against index-based pricing mechanisms. Sales completed with delivery to an export terminal are reported as export revenue.

Disaggregated information about our revenue is presented below:


	Three months ended June 30,				Six months ended June 30,
(In thousands)	2023		2022		2023		2022
Coal Sales
North American revenue	$	53,401	$	91,397	$	93,428	$	150,629
Export revenue, excluding Canada		84,068		47,258		210,401		142,908
Total revenue	$	137,469	$	138,655	$	303,829	$	293,537

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As of June 30, 2023, the Company had outstanding performance obligations of approximately 0.9 million tons for contracts with fixed sales prices averaging $198 per ton, excluding freight, which will generally be satisfied in the second half of 2023, and 0.7 million tons for contracts with index-based pricing mechanisms. Index-based prices have not been estimated for the purpose of disclosing remaining performance obligations as permitted under the revenue recognition guidance when variable consideration is allocated entirely to a wholly unsatisfied performance obligation.

Concentrations—During the three months ended June 30, 2023, sales to our top two customers accounted for approximately 35% of our total revenue. During the six months ended June 30, 2023, sales to our top four customers accounted for approximately 49% of our total revenue. During the three months ended June 30, 2022, sales to our top four customers accounted for approximately 65% of total revenue. During the six months ended June 30, 2022, sales to our top three customers accounted for approximately 53% of total revenue. The number of customers comprising the concentrations above is based on a threshold of 10% or more of total revenues. Three customers with individual accounts receivable balances equal to 10% or more of total accounts receivable made up approximately 61% of the Company’s accounts receivable balance at June 30, 2023.

Segments—CORE represents a separate operating segment and has economic and geographic differences compared to the Company’s metallurgical operations in the Appalachian basin; however, CORE does not meet the significance tests for separate disclosure as a reportable segment at this time. In addition, reconciling items of the metallurgical coal segment to the Company’s consolidated results are not yet material. CORE revenues disclosed in Note 6 are primarily intracompany revenues eliminated upon consolidation and are not included in the disaggregated revenue table above.

NOTE 9—INCOME TAXES

Income tax provisions for interim periods are generally based on an estimated annual effective income tax rate calculated separately from the effect of significant, infrequent, or unusual items related specifically to interim periods. The income tax impacts of discrete items are recognized in the period these occur.

Our effective tax rate for the three months ended June 30, 2023 and June 30, 2022 was 24.6% and 22.8%, respectively. Our effective tax rate for the six months ended June 30, 2023 and June 30, 2022 was 19.6% and 21.5%, respectively. The primary difference from the federal statutory rate of 21% in each period is related to state taxes, non-deductible expenses, the foreign-derived intangible income deduction, and depletion expense for income tax purposes.

NOTE 10—EARNINGS PER SHARE

Earnings per share (“EPS”) is not presented retrospectively for periods prior to the issuance of the tracking stock as the tracking stock was not a part of the Company’s capital structure during those periods and the issuance of the tracking stock changes the common shareholders’ relative residual interest in the Company. Therefore, EPS is presented for the Company’s single common stock up to the time the tracking stock was issued. EPS is presented prospectively under the two-class method starting on the date of initial distribution of the tracking stock. Refer to Note 6 for information related to the Company’s tracking stock.

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The following is the computation of basic and diluted EPS:


(In thousands, except per share amounts)	Three months ended June 30,				Six months ended June 30,
	2023		2022		2023		2022

Earnings attribution
Single class of common stock (through 6/20/2023) *	$	6,125	$	33,280	$	31,382	$	74,751
Class A common stock (6/21/2023 - 6/30/2023)		1,326		—		1,326		—
Class A restricted stock awards (6/21/2023 - 6/30/2023)		105		—		105		—
Class B common stock (6/21/2023 - 6/30/2023)		—		—		—		—
Class B restricted stock awards (6/21/2023 - 6/30/2023)		—		—		—		—
Net income	$	7,556	$	33,280	$	32,813	$	74,751

* Common stock and restricted stock participated in earnings 1:1 and are shown on a combined basis through 6/20/2023 consistent with historical presentation
	Three months ended June 30,				Six months ended June 30,
	2023 **		2022		2023 **		2022
EPS data for single class of common stock through 6/20/2023
Numerator
Net earnings	$	6,125	$	33,280	$	31,382	$	74,751
Denominator
Weighted average shares used to compute basic earnings per share *		44,414		44,271		44,344		44,226
Dilutive effect of stock option awards		350		615		381

Ramaco Resources, Inc. [METC] Filings
Ramaco Resources, Inc. [METCB] Filings
Ramaco Resources, Inc. [METCL] Filings
10-Q	[2023-08-09]
10-Q	[2023-05-09]
10-K	[2023-03-14]
10-Q	[2022-11-09]
10-Q	[2022-08-09]
10-Q	[2022-05-13]
10-K	[2022-04-01]
10-Q	[2021-11-02]
10-Q	[2021-08-02]
S-1	[2021-06-17]
10-Q	[2021-05-12]
10-K	[2021-02-18]
10-Q	[2020-11-03]
10-Q	[2020-08-06]
10-Q	[2020-05-12]
10-K	[2020-02-20]
10-Q	[2019-11-05]
10-Q	[2019-08-13]
10-Q	[2019-05-07]
10-K	[2019-03-19]
10-Q	[2018-11-07]
10-Q	[2018-08-06]
10-Q	[2018-05-15]
10-K	[2018-03-21]
10-Q	[2017-11-08]
10-Q	[2017-08-14]
10-Q	[2017-05-10]
10-K	[2017-03-28]
S-1	[2016-12-29]

Ramaco Resources, Inc. [METC] Filings

Ramaco Resources, Inc. [METCB] Filings

Ramaco Resources, Inc. [METCL] Filings