Company Quick10K Filing
Ramaco Resources
Price3.78 EPS1
Shares41 P/E6
MCap155 P/FCF6
Net Debt11 EBIT32
TEV166 TEV/EBIT5
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-05-12
10-K 2019-12-31 Filed 2020-02-20
10-Q 2019-09-30 Filed 2019-11-05
10-Q 2019-06-30 Filed 2019-08-13
10-Q 2019-03-31 Filed 2019-05-07
10-K 2018-12-31 Filed 2019-03-19
10-Q 2018-09-30 Filed 2018-11-07
10-Q 2018-06-30 Filed 2018-08-06
10-Q 2018-03-31 Filed 2018-05-15
10-K 2017-12-31 Filed 2018-03-21
10-Q 2017-09-30 Filed 2017-11-08
10-Q 2017-06-30 Filed 2017-08-14
10-Q 2017-03-31 Filed 2017-05-10
10-K 2016-12-31 Filed 2017-03-28
8-K 2020-05-12
8-K 2020-04-27
8-K 2020-04-15
8-K 2020-02-20
8-K 2019-12-10
8-K 2019-11-05
8-K 2019-09-24
8-K 2019-08-13
8-K 2019-06-25
8-K 2019-05-07
8-K 2019-04-29
8-K 2019-03-19
8-K 2019-02-20
8-K 2018-12-04
8-K 2018-11-07
8-K 2018-11-05
8-K 2018-11-02
8-K 2018-09-11
8-K 2018-08-06
8-K 2018-06-11
8-K 2018-05-15
8-K 2018-03-21
8-K 2018-02-22
8-K 2018-01-19

METC 10Q Quarterly Report

Part I - Financial Information
Item 1. Financial Statements
Note 1&Mdash;Description of Business
Note 2&Mdash;Summary of Significant Accounting Policies
Note 3&Mdash;Property, Plant and Equipment
Note 4&Mdash;Debt
Note 5&Mdash;Equity
Note 6&Mdash;Commitments and Contingencies
Note 7&Mdash;Revenues
Note 8&Mdash;Income Taxes
Note 9&Mdash;Earnings per Share
Note 10&Mdash;Related Party Transactions
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 4. Mine Safety Disclosures
Item 6. Exhibits
EX-10.1 ex_120199.htm
EX-10.2 ex_120200.htm
EX-10.3 ex_120203.htm
EX-31.1 ex_119117.htm
EX-31.2 ex_119118.htm
EX-32.1 ex_119119.htm
EX-32.2 ex_119120.htm
EX-95.1 ex_119121.htm

Ramaco Resources Earnings 2018-06-30

Balance SheetIncome StatementCash Flow
230184138924602017201820192020
Assets, Equity
705438226-102017201820192020
Rev, G Profit, Net Income
3524132-9-202017201820192020
Ops, Inv, Fin

10-Q 1 metc20180630_10q.htm FORM 10-Q metc20180630_10q.htm
 

 

Table of Contents

 

 



 

 

 

 

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, 2018

 

or

 

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

 

For the transition period from                 to              

 

Commission File Number: 001-38003

 

RAMACO RESOURCES, INC.

(Exact name of registrant as specified in its charter)

 

 


 

 

Delaware

38-4018838

(State or other jurisdiction

of incorporation or organization)

(I.R.S. Employer

Identification No.)

  

  

250 West Main Street, Suite 1800

Lexington, Kentucky

40507

(Address of principal executive offices)

(Zip code)

  

  

(859) 244-7455

(Registrant’s telephone number, including area code)

  

(Former name, former address and former fiscal year, if changed since last report)

 

 

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 August 3, 2018, the registrant had 40,082,467 shares of common stock outstanding.

 



 

 

 
 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q (the “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 revenues, 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” and elsewhere in the Annual Report of Ramaco Resources, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2017 (the “Annual Report”) and other filings with the Securities and Exchange Commission (“SEC”).

 

Forward-looking statements may include statements about:

 

 

anticipated production levels, costs, sales volumes and revenues;

 

timing for completion of major capital projects;

 

economic conditions in the steel industry generally;

 

economic conditions in the metallurgical coal industry generally;

 

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

 

estimated quantities or quality of our metallurgical coal reserves;

 

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

 

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;

 

financial condition and liquidity of our customers;

 

competition in coal markets;

 

the price of metallurgical coal and/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;

 

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 trading, banks and other financial counterparties;

 

geologic, equipment, permitting, site access, 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; and

 

the 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 new risks emerge from time to time. It is not possible for our management to predict all risks, 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 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 report.

 

 

 

 

PART I - FINANCIAL INFORMATION

 

Item 1.            Financial Statements

 

 

Ramaco Resources, Inc. 

Unaudited Condensed Consolidated Balance Sheets

 

   

June 30, 2018

   

December 31, 2017

 

Assets

               

Current assets

               

Cash and cash equivalents

  $ 5,911,310     $ 5,934,043  

Short-term investments

          5,199,861  

Accounts receivable

    28,265,692       7,165,487  

Inventories

    11,294,596       10,057,787  

Prepaid expenses

    2,870,297       1,104,437  

Total current assets

    48,341,895       29,461,615  
                 

Property, plant and equipment, net

    136,574,558       115,450,841  
                 

Advanced coal royalties

    2,785,748       2,867,369  

Other assets

    524,648       318,206  

Total Assets

  $ 188,226,849     $ 148,098,031  
                 

Liabilities and Stockholders' Equity

               

Liabilities

               

Current liabilities

               

Accounts payable

  $ 20,062,221     $ 19,532,531  

Accrued expenses

    8,824,787       2,821,422  

Asset retirement obligations

    512,997       70,616  

Notes payable, net

    14,758,593        

Other

    361,918        

Total current liabilities

    44,520,516       22,424,569  

Deferred tax liability

    1,385,717        

Asset retirement obligations

    12,208,126       12,276,176  

Total liabilities

    58,114,359       34,700,745  
                 

Commitments and contingencies

           
                 

Stockholders' Equity

               

Preferred stock, $0.01 par value, 50,000,000 shares authorized, none issued and outstanding

           

Common stock, $0.01 par value, 260,000,000 shares authorized, 40,082,467 and 39,559,366 shares issued and outstanding, respectively

    400,825       395,594  

Additional paid-in capital

    149,533,523       148,293,263  

Accumulated deficit

    (19,821,858 )     (35,291,571 )

Total stockholders' equity

    130,112,490       113,397,286  

Total Liabilities and Stockholders' Equity

  $ 188,226,849     $ 148,098,031  

 

 

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

 

 

 

Ramaco Resources, Inc.

Unaudited Condensed Consolidated Statements of Operations 

 

   

Three months ended June 30,

   

Six months ended June 30,

 
   

2018

   

2017

   

2018

   

2017

 
                                 

Revenues

  $ 65,278,057     $ 11,073,502     $ 121,221,205     $ 22,611,774  
                                 

Cost and expenses

                               

Cost of sales (exclusive of items shown separately below)

    47,860,149       11,774,961       92,190,994       22,620,873  

Other operating costs and expenses

          96,690             113,990  

Asset retirement obligation accretion

    123,467       101,276       246,935       202,553  

Depreciation and amortization

    2,955,382       310,889       5,392,882       467,016  

Selling, general and administrative

    3,692,254       2,499,280       7,123,398       6,100,643  

Total cost and expenses

    54,631,252       14,783,096       104,954,209       29,505,075  
                                 

Operating income (loss)

    10,646,805       (3,709,594 )     16,266,996       (6,893,301 )
                                 

Interest and dividend income

    1,998       100,343       3,234       216,772  

Other income

    512,693       121,492       1,002,008       118,235  

Interest expense

    (315,761 )     (212 )     (416,919 )     (22,820 )
                                 

Income (loss) before taxes

    10,845,735       (3,487,971 )     16,855,319       (6,581,114 )
                                 

Income tax expense

    642,299             1,385,606        
                                 

Net income (loss)

  $ 10,203,436     $ (3,487,971 )   $ 15,469,713     $ (6,581,114 )
                                 

Basic and diluted earnings (loss) per share

                               

Basic

  $ 0.25     $ (0.09 )   $ 0.39     $ (0.18 )

Diluted

  $ 0.25     $ (0.09 )   $ 0.38     $ (0.18 )
                                 

Weighted average common shares outstanding

                               

Basic

    40,082,467       39,072,394       39,994,386       35,592,366  

Diluted

    40,339,749       39,072,394       40,241,917       35,592,366  

 

 

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

 

 

 

Ramaco Resources, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows 

 

   

Six months ended June 30,

 
   

2018

   

2017

 

Cash flows from operating activities

               

Net income (loss)

  $ 15,469,713     $ (6,581,114 )

Adjustments to reconcile net income (loss) to net cash from operating activities

               

Accretion of asset retirement obligations

    246,935       202,553  

Depreciation and amortization

    5,392,882       467,016  

Amortization of debt issuance costs

    187,133        

Stock-based compensation

    1,245,491       2,145,333  

Deferred income tax expense

    1,385,717        

Changes in operating assets and liabilities

               

Accounts receivable

    (21,100,205 )     (955,189 )

Prepaid expenses

    (976,939 )     (378,068 )

Inventories

    (1,236,809 )     (896,394 )

Advanced coal royalties

    81,621       (732,748 )

Other assets and liabilities

    (206,442 )     (170,396 )

Accounts payable

    1,340,412       7,198,796  

Accrued expenses

    6,281,174       (789,288 )

Net cash from operating activities

    8,110,683       (489,499 )
                 

Cash flow from investing activities

               

Purchases of property, plant and equipment

    (27,477,734 )     (41,735,270 )

Purchase of investment securities

          (14,913,824 )

Proceeds from maturities of investment securities

    5,199,861       25,507,767  

Net cash from investing activities

    (22,277,873 )     (31,141,327 )
                 

Cash flows from financing activities

               

Proceeds from issuance of common stock

          47,709,000  

Payments of equity offering costs

          (1,755,687 )

Repayments to Ramaco Coal, LLC

          (10,629,275 )

Repayments of financed insurance payable

    (427,003 )     (127,048 )

Proceeds from notes payable

    13,000,000        

Proceeds from notes payable to related party

    3,000,000        

Payment of debt issuance costs

    (428,540 )      

Repayment of note payable

    (1,000,000 )     (500,000 )

Payment of distributions

          (5,405,064 )

Net cash from financing activities

    14,144,457       29,291,926  
                 

Net change in cash and cash equivalents

    (22,733 )     (2,338,900 )

Cash and cash equivalents, beginning of period

    5,934,043       5,196,914  
                 

Cash and cash equivalents, end of period

  $ 5,911,310     $ 2,858,014  

 

 

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

 

 

 

 

Ramaco Resources, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows (continued)

 

   

Six months ended June 30,

 
   

2018

   

2017

 
                 

Supplemental cash flow information

               

Cash paid for interest

  $ 339,631     $ 81,303  

Cash paid for taxes

           

Non-cash investing and financing activities

               

Capital expenditures included in accounts payable and accrued expenses

    (1,088,531 )     6,604,365  

Financed insurance

    788,921        

Additional asset retirement obligations acquired or incurred

    127,396       478,921  

Accretion – Series A preferred units

          123,825  

 

 

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

 

 

Ramaco Resources, Inc. 

Notes to Unaudited Condensed Consolidated Financial Statements

      

 

 

NOTE 1DESCRIPTION OF BUSINESS

 

Ramaco Resources, Inc. is a Delaware corporation formed in October 2016. Our principal corporate offices are located in Lexington, Kentucky. Through our wholly-owned subsidiary, Ramaco Development, LLC, we are an operator and developer of high-quality, low-cost metallurgical coal in southern West Virginia, southwestern Virginia, and southwestern Pennsylvania.

 

Pursuant to the terms of a corporate reorganization (“Reorganization”) that was completed in connection with the closing of our initial public offering (“IPO”) on February 8, 2017, all the interests in Ramaco Development, LLC were exchanged for our newly issued common shares and as a result, Ramaco Development, LLC became our wholly-owned subsidiary. The terms “the Company,” “we,” “us,” “our,” and similar terms when used in the present tense, prospectively or for periods since our Reorganization, refer to Ramaco Resources, Inc. and its subsidiaries, and for historical periods prior to our Reorganization refer to Ramaco Development LLC and its subsidiaries. Intercompany balances and transactions between consolidated entities are eliminated. 

  

 

 

NOTE 2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation—These interim financial statements are unaudited and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“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, 2017.

 

In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, necessary to fairly present the financial position as of, and the results of operations 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. Certain reclassifications have been made to the prior period’s consolidated financial statements and related footnotes to conform them to the current period presentation.

 

Revenue Recognition—Our primary source of revenue is from the sale of coal through contracts with steel producers usually having durations of less than one year. In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers. This new standard supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. We adopted ASU 2014-09, Revenue from Contracts with Customers, on January 1, 2018 using the modified retrospective method. Before adoption of the new standard, revenue was recognized when risk of loss passed to our customer. The timing of revenue recognition for our coal sales remained consistent between the new and previous standards. There was no material impact on our consolidated financial statements from adopting the new standard but we have expanded disclosure about our revenues.

 

For periods subsequent to January 1, 2018, revenue is recognized when performance obligations under the terms of a contract with our customers are satisfied. This occurs when control of the coal is transferred to our customers. For coal shipments to domestic customers via rail, control is generally transferred when the railcar is loaded. Control is transferred for export coal shipments to customers via ocean vessel when the vessel is loaded at the port.

 

Our coal sales generally include up to 90-day payment terms following the transfer of control of the goods to our customer. In the case of some of our foreign customers, our contracts also require that letters of credit are posted to secure payment of any outstanding receivable to the Company. We do not include extended payment terms in our contracts. Our contracts with customers typically provide for minimum specifications or qualities of the coal we deliver. Variances from these specifications or qualities are settled by means of price adjustments. Generally, these price adjustments are settled within 30 days of delivery and are small. 

 

Earnings per Share—Basic earnings per share is calculated using our weighted-average outstanding common shares. Diluted earnings per share is calculated using our weighted-average outstanding common shares including the dilutive effect of stock option awards as determined under the treasury stock method. In periods when we have a net loss, stock option awards are excluded from our calculation of earnings per share as their inclusion would have an antidilutive effect.

 

Financial Instruments—Our financial assets and liabilities consist of cash, accounts receivable, investments, accounts payable and notes payable. The fair values of these instruments approximate their carrying amounts at each reporting date. 

 

 

We invested excess cash amounts before its planned expenditure for capital projects in highly-rated securities with the primary objective of achieving competitive low risk interest rate return, while minimizing the potential risk of principal loss. Fair values were determined for each individual security based on observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the securities.  The difference between the carrying amount and fair value of these securities was not material. 

 

Nonrecurring fair value measurements include asset retirement obligations, the estimated fair value of which is calculated as the present value of estimated cash flows related to its reclamation liabilities using Level 3 inputs. The significant inputs used to calculate such liabilities include estimates of costs to be incurred, the Company’s credit adjusted discount rate, inflation rates and estimated date of reclamation.   

 

Concentrations—During the three and six months ended June 30, 2018, sales to six customers accounted for approximately 79% and 75% of total revenue, respectively. The total balance due from these customers at June 30, 2018 was approximately 71% of total accounts receivable. During the three months ended June 30, 2017, sales to five customers accounted for approximately 87% of total revenue. During the six months ended June 30, 2017, sales to four customers accounted for approximately 73% of total revenue.

 

Recent Accounting Pronouncements—In February 2016, the FASB issued ASU 2016-02, Leases, which aims to make leasing activities more transparent and comparable and requires substantially all leases be recognized by lessees on their balance sheet as a right-of-use asset and corresponding lease liability, including leases currently accounted for as operating leases. This ASU is effective for all interim and annual reporting periods beginning after December 15, 2019, with early adoption permitted. We expect to adopt ASU 2016-02 beginning January 1, 2019 and are assessing the impact that this new guidance is expected to have on our financial statements and related disclosures.

 

In September 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses. ASU 2016-13 was issued to provide more decision-useful information about the expected credit losses on financial instruments and changes the loss impairment methodology. ASU 2016-13 is effective for reporting periods beginning after December 15, 2019 using a modified retrospective adoption method. A prospective transition approach is required for debt securities for which an other-than-temporary impairment had been recognized before the effective date. We are currently assessing the impact this accounting standard will have on our financial statements and related disclosures.

 

In May 2017, the FASB issued ASU 2017-09, Modification Accounting for Share-Based Payment Arrangements. The standard amends the scope of modification accounting for share-based payment arrangements and provides guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting under ASC 718. The new standard is effective for fiscal years beginning after December 15, 2017. There was no impact on the financial statements of adopting this new standard on January 1, 2018.

 

 

 

NOTE 3—PROPERTY, PLANT AND EQUIPMENT 

 

The Company’s property, plant and equipment consist of the following:

 

   

June 30, 2018

   

December 31, 2017

 
                 

Plant and equipment at cost

  $ 97,470,650     $ 80,454,977  

Construction in process

    12,032,525       7,625,855  

Capitalized mine development cost

    35,870,022       30,775,765  

Less accumulated depreciation and amortization

    (8,798,639 )     (3,405,756 )

Total property, plant and equipment, net

  $ 136,574,558     $ 115,450,841  

 

During the three months ended June 30, 2018, depreciation expense related to our plant and equipment totaled $2.3 million and amortization of our capitalized development expenses totaled $0.6 million. During the three months ended June 30, 2017, depreciation expense related to our plant and equipment totaled $0.2 million and amortization of our capitalized development expenses totaled $0.1 million.

 

During the six months ended June 30, 2018, depreciation expense related to our plant and equipment totaled $4.4 million and amortization of our capitalized development expenses totaled $1.0 million. During the six months ended June 30, 2017, depreciation expense related to our plant and equipment totaled $0.4 million and amortization of our capitalized development expenses totaled $0.1 million.

 

Capitalized amounts related to coal reserves at properties where we are not currently engaged in mining operations totaled $6.1 million as of June 30, 2018 and $8.7 million as of December 31, 2017.

  

 

 

NOTE 4DEBT

 

In February 2018, we borrowed $6.0 million under a six-month note from an unrelated third-party lender in order to manage accounts receivable. The note is secured by a portion of our mobile mining equipment (the “Equipment Note”). Interest accrues monthly at 8.5% or 30-day LIBOR plus 6.9%, whichever is greater. The Equipment Note originally had a maturity date of August 31, 2018. During July 2018, the Company secured a four-month extension of the Equipment Note. The outstanding principal balance is due on December 31, 2018 but may be prepaid without penalty at any time. Issuance costs incurred with the Equipment Note totaled $0.3 million and are deferred and amortized over the term of the debt using the interest method. Debt issuance costs are presented in the condensed consolidated balance sheet as a direct deduction from the carrying amount of the liability. During the six months ended June 30, 2018, we repaid $1 million under this note. As of June 30, 2018, the outstanding principle balance was $5.0 million and carrying amount was $4.9 million, net of unamortized debt issuance costs.

 

In May 2018, we borrowed $3.0 million from Ramaco Coal, LLC, a related party, also to manage accounts receivable. Interest accrues monthly at 10.0%. The outstanding principal balance is currently due on August 15, 2018 but may be prepaid without penalty at any time. We are in discussions to extend the maturity of this obligation until November 15, 2018. As of June 30, 2018, the outstanding principal balance and carrying amount was $3.0 million.

 

In June 2018, we borrowed an additional $7.0 million under a six-month note from the same unrelated third-party lender in order to manage accounts receivable (the “Additional Equipment Note”). The Additional Equipment Note is also secured by the same mobile mining equipment as the Equipment Note. Interest accrues monthly at 8.5% or 30-day LIBOR plus 6.9%, whichever is greater. The outstanding principal balance is due on December 31, 2018 but may be prepaid without penalty at any time. Issuance costs incurred with the Additional Equipment Note totaled $0.2 million and are deferred and amortized over the term of the debt using the interest method. As of June 30, 2018, the outstanding principal balance was $7.0 million and carrying amount was $6.8 million, net of unamortized debt issuance costs.

 

 

NOTE 5EQUITY

 

As of June 30, 2018, we had 40,082,467 shares of common stock outstanding.

 

Stock-Based Compensation

 

We have a stock-based compensation plan under which stock options, restricted stock, performance shares and other stock-based awards may be granted. At June 30, 2018, 5.9 million shares were available under the current plan for future awards.

 

Total compensation costs recognized for all stock-based compensation was $0.7 million for the three months ended June 30, 2018. No equity-based compensation expense was recognized for the three months ended June 30, 2017. Total compensation costs recognized for all stock-based compensation was $1.2 million and $2.1 million for the six months ended June 30, 2018 and 2017, respectively.

 

Share Options – A total of 937,424 options for the purchase of shares of the Company’s common stock were granted to two executives on August 31, 2016 at a purchase price of $5.34 per share. Stock-based compensation expense totaling $2.1 million was recognized during the six months ended June 30, 2017 for the accelerated vesting of these options in our IPO. The options have a ten-year term from the grant date. The options remain outstanding and unexercised at June 30, 2018 and are in-the-money.

 

Restricted Shares—We grant restricted stock to certain senior executives, key employees and directors. The shares vest over one to three years from the date of grant. During the vesting period, the participants have voting rights and may receive dividends, but the shares may not be sold, assigned, transferred, pledged or otherwise encumbered. Additionally, granted but unvested shares are forfeited upon termination of employment, unless an employee enters into another written arrangement with the Company. The fair value of the restricted shares on the date of the grant is amortized ratably over the service period. Compensation expense related to these awards totaled $0.7 million and $1.2 million for the three and six months ended June 30, 2018, respectively. There was no expense for restricted share awards for the three and six-month periods ended June 30, 2017. As of June 30, 2018, there was $5.2 million of total unrecognized compensation cost related to unvested restricted stock to be recognized over a weighted-average period of 1.9 years.

 

 

The following table summarizes restricted awards outstanding as of June 30, 2018, as well as activity during the period:

 

   

Shares

   

Weighted

Average Grant

Date Fair

Value

 

Outstanding at December 31, 2017

    471,017     $ 5.87  

Granted

    528,683       8.03  

Vested

           

Forfeited

    (5,582 )     6.27  

Outstanding at June 30, 2018

    994,118     $ 7.02  

 

 

 

NOTE 6COMMITMENTS AND CONTINGENCIES

 

Surety Bond

 

As of June 30, 2018, our asset retirement obligations totaled $12.7 million and had total corresponding reclamation bonding requirements of $12.6 million, which were supported by surety bonds.

 

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, 2018, commitments under take-or-pay arrangements totaled $1.9 million through March 31, 2019.

 

Litigation

 

From time to time, the Company is 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.

 

 

 

NOTE 7REVENUES

 

Our revenues are derived from contracts for the sale of coal which is recognized 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 either be by fixed-price or a price derived against index-based pricing mechanisms. Disaggregated information about our revenues is presented below:

 

   

Three months ended June 30,

   

Six months ended June 30,

 
   

2018

   

2017

   

2018

   

2017

 

Coal Sales

                               

Domestic revenues

  $ 34,376,491     $ 4,032,542     $ 60,074,479     $ 7,776,955  

Export revenues

    30,901,566       6,489,580       61,146,726       12,597,145  

Total coal sales

    65,278,057       10,522,122       121,221,205       20,374,100  

Coal Processing

    -       551,380       -       2,237,674  
                                 

Total revenues

  $ 65,278,057     $ 11,073,502     $ 121,221,205     $ 22,611,774  

 

 

As of June 30, 2018, the Company has outstanding performance obligations for the remainder of 2018 of approximately 0.8 million tons for contracts having fixed pricing and 0.3 million tons for contracts to export customers with index-based pricing mechanisms. Additionally, the Company has outstanding performance obligations beyond 2018 of approximately 0.1 million tons for export contracts with index-based pricing mechanisms.

 

 

 

NOTE 8INCOME TAXES

 

Income tax provisions for interim quarterly periods are 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. Income tax expense for the three months ended June 30, 2018 was $0.6 million, an effective tax rate of 5.9%. Income tax expense for the six months ended June 30, 2018 was $1.4 million, an effective tax rate of 8.2%. The Company did not recognize any income tax expense or benefit for the three or six months ended June 30, 2017 because tax losses incurred for the year were fully offset by a valuation allowance against deferred tax assets.

 

 

There were no uncertain tax positions as of June 30, 2018.

 

 

 

NOTE 9EARNINGS PER SHARE

 

The following is the computation of basic and diluted EPS for the three and six months ended June 30, 2018 and 2017. EPS is reported under the treasury stock method.

 

   

Three months ended June 30,

   

Six months ended June 30,

 
   

2018

   

2017

   

2018

   

2017

 

Numerator

                               

Net income (loss)

  $ 10,203,436     $ (3,487,971 )   $ 15,469,713     $ (6,581,114 )

Denominator

                               

Weighted average shares used to compute basic EPS

    40,082,467       39,072,394       39,994,386       35,592,366  

Dilutive effect of share-based awards(a)

    257,282       -       247,531       -  

Weighted average shares used to compute diluted EPS

    40,339,749       39,072,394       40,241,917       35,592,366  
                                 

Earnings per share

                               

Basic

  $ 0.25     $ (0.09 )   $ 0.39     $ (0.18 )

Diluted

  $ 0.25     $ (0.09 )   $ 0.38     $ (0.18 )

 

(a) The 2017 periods exclude the shares issuable under outstanding option awards as their effect would have been antidilutive.

 

 

 

 

NOTE 10—RELATED PARTY TRANSACTIONS

  

Mineral Lease and Surface Rights Agreements

 

Much of the coal reserves and surface rights that we control were acquired through a series of mineral leases and surface rights agreements with Ramaco Coal, LLC, a related party. Payments of minimum royalties and throughput payments commenced in 2017 pursuant to the terms of the agreements. Under these agreements, minimum royalties are paid in arrears each month to the extent that the earned production royalties for such month are less than the required minimums. Amounts due to Ramaco Coal, LLC of $2.6 million and $0.1 million at June 30, 2018 and December 31, 2017, respectively, are included in Accounts Payable in the condensed consolidated balance sheet and represent production royalty payables. It is anticipated that this payment will be made before year end 2018.

 

Related Party Borrowings

 

In May 2018, we borrowed $3.0 million from Ramaco Coal, LLC, a related party. Interest accrues monthly at 10.0%. The outstanding principal balance is due on August 15, 2018 but may be prepaid without penalty at any time. We are in discussions to extend the maturity of this obligation until November 15, 2018. As of June 30, 2018, the outstanding principal balance and carrying amount was $3.0 million.

 

On-going Administrative Services

 

Under a Mutual Services Agreement dated December 22, 2017 but effective as of March 31, 2017, the Company and Ramaco Coal, LLC agreed to share the services of certain of each company’s employees.  Each party will pay the other a fee on a quarterly basis for such services calculated as the annual base salary of each employee providing services multiplied by the percentage of time each employee spent providing services for the other party.  The services will be provided for 12-month terms, but may be terminated by either party at the end of any 12-month term by providing written notice at least 30 days prior to the end of the then-current term. No payments were made under this agreement in the six months ended June 30, 2018 and 2017.

 

* * * * *

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in our Annual Report, as well as the financial statements and related notes appearing elsewhere in this Quarterly Report. The following discussion contains forward-looking statements that reflect our future plans, estimates, beliefs and expected performance. The forward-looking statements are dependent upon events, risks and uncertainties that may be outside our control. We caution you that our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences are discussed elsewhere in this Quarterly Report, particularly in the “Cautionary Note Regarding Forward-Looking Statements” and in our Annual Report under the heading “Item 1A. Risk Factors,” all of which are difficult to predict. In light of these risks, uncertainties and assumptions, the forward-looking events discussed may not occur. We do not undertake any obligation to publicly update any forward-looking statements except as otherwise required by applicable law.

 

Overview

 

Our revenue producing activities consist principally of the sale of coal we produce and coal we purchase from third parties for our own account. We began commercial production of coal in January 2017. Starting as new mine projects, we developed and opened four mines during 2017 and through the first six months of 2018 at our Elk Creek mining complex. Our surface mine utilizes the contour and highwall mining methods. We completed construction of the preparation plant and rail loadout facility in February of 2018. We also began development mining in late 2017 at our Berwind property.

 

Results for our second quarter of 2018 reflect the continued increase in production and sales volumes.  During the second quarter of 2018, we sold 0.6 million tons of metallurgical coal, including 0.1 million tons of purchased low volatile metallurgical coal. Of this, 53% was sold in domestic markets and 47% was sold in export markets, principally to Europe. Our second quarter revenues increased $9.3 million or 17% from the first quarter of 2018. Revenues per ton sold (FOB mine) for our produced coal remained stable at approximately $91 per ton in both the first and second quarters of 2018.

 

Global steel production remains strong with continued growth in metallurgical demand from Europe and Asia. Our price realizations were higher in the second quarter of 2018 as compared with the first quarter of 2018. Sequentially, cash costs of approximately $56 per ton for our produced coal was down from approximately $65 in the first quarter of 2018. This cost improvement illustrates the impact of more favorable weather conditions, a fully operational preparation plant, cost improvements at our surface mine and a full quarter of production from our new No. 2 Gas mine.

 

In March 2018, President Trump signed a proclamation imposing a 25% global tariff on imports of certain steel products, effective March 31, 2018. Generally, we are experiencing signs of some increase in domestic demand for metallurgical coal as a result of the proclamations. Our export customers also include foreign steel producers who may be negatively affected by the tariffs to the extent their production is imported into the U.S. Some countries have also threatened retaliatory tariffs on U.S. products including metallurgical coal. At this time, it is too early to know the impact these tariffs will have on longer-term demand or pricing, if any.

 

Our capital expenditures totaled approximately $27.5 million during the first half of 2018. We expect to incur approximately $36 to $40 million of capital expenditures for full year 2018.

 

 

Results of Operations

 

   

Three months ended June 30,

   

Six months ended June 30,

 
   

2018

   

2017

   

2018

   

2017

 

Consolidated statement of operations data

                               

Revenues

  $ 65,278,057     $ 11,073,502     $ 121,221,205     $ 22,611,774  

Cost and expenses

                               

Cost of sales (exclusive of items shown separately below)

    47,860,149       11,774,961       92,190,994       22,620,873  

Other operating costs and expenses

          96,690             113,990  

Asset retirement obligation accretion

    123,467       101,276       246,935       202,553  

Depreciation and amortization

    2,955,382       310,889       5,392,882       467,016  

Selling, general and administrative

    3,692,254       2,499,280       7,123,398       6,100,643  

Total cost and expenses

    54,631,252       14,783,096       104,954,209       29,505,075  
                                 

Operating income (loss)

    10,646,805       (3,709,594 )     16,266,996       (6,893,301 )
                                 

Interest and dividend income

    1,998       100,343       3,234       216,772  

Other income

    512,693       121,492       1,002,008       118,235  

Interest expense

    (315,761 )     (212 )     (416,919 )     (22,820 )

Income (loss) before taxes

    10,845,735       (3,487,971 )     16,855,319       (6,581,114 )
                                 

Income tax expense

    642,299             1,385,606        
                                 

Net income (loss)

  $ 10,203,436     $ (3,487,971 )   $ 15,469,713     $ (6,581,114 )
                                 

Adjusted EBITDA

  $ 14,933,033     $ (3,175,937 )   $ 24,154,312     $ (3,960,164 )

 

 

Three Months Ended June 30, 2018 Compared to Three Months Ended June 30, 2017

 

Revenues. Our revenues include sales to customers of Company produced coal and coal purchased from third parties. We include amounts billed by us for transportation to our customers within revenues and transportation costs incurred within cost of sales. Coal sales information is summarized as follows:

 

   

Three months ended June 30,

 
   

2018

   

2017

   

Increase

 

Company Produced

                       

Coal sales revenue

  $ 52,050,730     $ 4,431,178     $ 47,619,552  

Tons sold

    492,603       56,857       435,746  

Purchased from Third Parties

                       

Coal sales revenue

  $ 13,227,327     $ 6,090,944     $ 7,136,383  

Tons sold

    122,544       39,637       82,907  

 

 

Coal sales in the second quarter of 2018 were approximately $54.8 million higher than in the second quarter of 2017 due to substantially higher volumes sold and higher realized prices. In the quarter ended June 30, 2017, we also recognized $0.6 million of revenue for the processing of coal for third parties. We ceased processing third-party coal in April 2017 and have no current plans to begin those operations again. 

 

Cost of sales. Our cost of sales totaled $47.9 million for the three months ended June 30, 2018 as compared with $11.8 million for the same period in 2017. Cost of sales for the three months ended June 30, 2017 included $0.7 million of costs associated with the processing of coal for third parties.

 

The total cash cost per ton sold (FOB mine) for the second quarter of 2018 was approximately $56 for our own produced coal and approximately $100 for coal we purchased from third parties. Cash costs per ton for our produced coal in the second quarter of 2018 were down from approximately $84 in the second quarter of 2017 due in part to higher costs incurred during the second quarter of 2017 as our second operating mine, the Rockhouse Eagle Mine, began production.

 

Other operating costs and expenses. This includes costs and expenses which are not directly related to a specific mining operation. It typically includes general land management costs and some permit and license fees. The Company did not incur any of these costs in the three months ended June 30, 2018.

 

 

Asset retirement obligation accretion. Asset retirement obligation accretion was $0.1 million in both of the three-month periods ended June 30, 2018 and 2017.

 

Depreciation and amortization. Our depreciation and amortization costs for the second quarter of 2018 were $3.0 million as compared with $0.3 million for the second quarter of 2017. Increased depreciation and amortization costs result from our significantly expanded operations over the past year.

 

Selling, general and administrative. Selling, general and administrative expenses were $3.7 million for the quarter ended June 30, 2018 as compared with $2.5 million for the same period in 2017. This increase reflected the growth of our organization as we began producing and selling coal and fulfilling our responsibilities as a publicly-traded company.

 

Interest and dividend income. Interest and dividend income decreased by $0.1 million in the three months ended June 30, 2018 as compared with the prior year period.

 

Other income. Other income was $0.5 million for the three months ended June 30, 2018 as compared with $0.1 million for the same period in 2017. This increase was primarily driven by rail rebates received during the second quarter of 2018.

 

Interest expense. Interest expense increased by $0.3 million in the three months ended June 30, 2018 as compared with the prior year period. This increase was driven by the increase in the Company’s outstanding debt during the current year.

 

Income tax expense. For the three months ended June 30, 2018, we recognized income tax expense of $0.6 million, or an effective income tax rate of 5.9%. Our estimated full year effective tax rate for 2018 is comprised of the expected statutory tax expense offset by changes in valuation allowance and tax benefits for percentage depletion. Cash taxes paid for 2018 are expected to be less than $0.4 million. Significant depletion and depreciation expense and utilization of net operating loss carryforwards combine to substantially reduce our expected cash taxes.

 

We did not recognize any income tax expense or benefit for the three months ended June 30, 2017 because tax losses incurred for the year were fully offset by a valuation allowance against deferred tax assets.

 

 

Six Months Ended June 30, 2018 Compared to Six Months Ended June 30, 2017

 

Revenues. Our revenues include sales to customers of Company produced coal and coal purchased from third parties. We include amounts billed by us for transportation to our customers within revenues and transportation costs incurred within cost of sales. Coal sales information is summarized as follows:

 

   

Six months ended June 30,

 
   

2018

   

2017

   

Increase

 

Company Produced

                       

Coal sales revenue

  $ 95,009,476     $ 8,175,591     $ 86,833,885  

Tons sold

    895,921       109,159       786,762  

Purchased from Third Parties

                       

Coal sales revenue

  $ 26,211,729     $ 12,198,509     $ 14,013,220  

Tons sold

    241,361       74,918       166,443  

 

 

Coal sales in the six months ended June 30, 2018 were approximately $100.8 million higher than in the six months ended June 30, 2017 due to substantially higher volumes sold and higher realized prices on company produced coal. In the six months ended June 30, 2017, we also recognized $2.2 million of revenue for the processing of coal for third parties. We ceased processing third-party coal in April 2017 and have no current plans to begin those operations again. 

 

Cost of sales. Our cost of sales totaled $92.2 million for the six months ended June 30, 2018 as compared with $22.6 million for the same period in 2017. Cost of sales for the six months ended June 30, 2017 includes $1.7 million of costs associated with the processing of coal for third parties.

 

 

The total cash cost per ton sold (FOB mine) for the first half of 2018 was approximately $60 for our own produced coal and approximately $95 for coal we purchased from third parties. Cash costs per ton for our produced coal during the six months ended June 30, 2018 was down from approximately $76 during the six months ended June 30, 2017. Our cost of sales in the six months ended June 30, 2017 reflect the costs incurred at our first two operating mines, the Alma Mine and the Rockhouse Eagle Mine, which began commercial mining activities in that period.

 

Other operating costs and expenses. This includes costs and expenses which are not directly related to a specific mining operation. It typically includes general land management costs and some permit and license fees. The Company did not incur any of these costs during the six months ended June 30, 2018.

 

Asset retirement obligation accretion. Asset retirement obligation accretion was relatively flat at $0.2 million in both the six-month periods ended June 30, 2018 and 2017.

 

Depreciation and amortization. Our depreciation and amortization costs for the first half of 2018 were $5.4 million as compared with $0.5 million for the first half of 2017. Increased depreciation and amortization costs resulted from our significantly expanded operations over the past year.

 

Selling, general and administrative. Selling, general and administrative expenses were $7.1 million during the six months ended June 30, 2018 as compared with $6.1 million for the same period in 2017. The total for the six months ended June 30, 2017 includes $2.1 million of equity-based compensation expense for the accelerated vesting of stock options which became fully vested upon our initial public offering. Equity-based compensation expense for the six months ended June 30, 2018 totaled $1.2 million.

 

The increase exclusive of the change in equity-based compensation expense reflected the growth of our organization as we began producing and selling coal and fulfilling our responsibilities as a publicly-traded company.

 

Interest and dividend income. Interest and dividend income decreased by $0.2 million in the three months ended June 30, 2018 as compared with the prior year period. This decrease was primarily due to interest earned on investment securities held by the Company during the 2017 period, which did not recur during the 2018 period.

 

Other income. Other income was $1.0 million for the six months ended June 30, 2018 as compared with $0.1 million for the same period in 2017. This increase was primarily driven by rail rebates during the six months ended June 30, 2018.

 

Interest expense. Interest expense increased by $0.4 million during the six months ended June 30, 2018 as compared with the prior year period. This increase was driven by the increase in the Company’s outstanding debt during the current year.

 

Income tax expense. For the six months ended June 30, 2018, we recognized income tax expense of $1.4 million, or an effective income tax rate of 8.2%. Our estimated full year effective tax rate for 2018 is comprised of the expected statutory tax expense offset by changes in valuation allowance and tax benefits for percentage depletion. Cash taxes paid for 2018 are expected to be less than $0.4 million. Significant depletion and depreciation expense and utilization of net operating loss carryforwards combine to substantially reduce our expected cash taxes.

 

We did not recognize any income tax expense or benefit for the six months ended June 30, 2017 because tax losses incurred for the year were fully offset by a valuation allowance against deferred tax assets.

  

Non-GAAP Financial Measures

 

Adjusted EBITDA

 

Adjusted EBITDA is used as a supplemental non-GAAP financial measure by management and external users of our financial statements, such as industry analysts, investors, lenders and rating agencies. We believe Adjusted EBITDA is useful because it allows us to more effectively evaluate our operating performance.

 

 

We define Adjusted EBITDA as net income (loss) plus net interest expense, equity-based compensation, depreciation and amortization expenses and any transaction related costs. A reconciliation of income (loss), net of income taxes, to Adjusted EBITDA is included below. Adjusted EBITDA is not intended to serve as an alternative to U.S. GAAP measures of performance and may not be comparable to similarly-titled measures presented by other companies. The table below shows how we calculate Adjusted EBITDA:

 

   

Three months ended June 30,

   

Six months ended June 30,

 
   

2018

   

2017

   

2018

   

2017

 
                                 

Reconciliation of Net Income (Loss) to Adjusted EBITDA

                               

Net income (loss)

  $ 10,203,436     $ (3,487,971 )   $ 15,469,713     $ (6,581,114 )

Depreciation and amortization

    2,955,382       310,889       5,392,882       467,016  

Interest and dividend income, net

    313,763       (100,131 )     413,685       (193,952 )

Income taxes

    642,299             1,385,606        

EBITDA

    14,114,880       (3,277,213 )     22,661,886       (6,308,050 )

Equity-based compensation

    694,686             1,245,491       2,145,333  

Accretion of asset retirement obligation

    123,467       101,276       246,935       202,553  

Adjusted EBITDA

  $ 14,933,033     $ (3,175,937 )   $ 24,154,312     $ (3,960,164 )

 

 

Non-GAAP revenue per ton  

 

Non-GAAP revenue per ton (FOB mine) is calculated as coal sales revenues less transportation costs, divided by tons sold. We believe revenue per ton (FOB mine) provides useful information to investors as it enables investors to compare revenue per ton generated by the Company against similar measures made by other publicly-traded coal companies and more effectively monitor changes in coal prices from period to period excluding the impact of transportation costs which are beyond our control. The adjustments made to arrive at these measures are significant in understanding and assessing the Company’s financial condition. Revenue per ton sold (FOB mine) is not a measure of financial performance in accordance with U.S. GAAP and therefore should not be considered as an alternative to revenues under U.S. GAAP. The table below shows how we calculate Non-GAAP revenue per ton:

 

   

Three Months Ended June 30, 2018

   

Three Months Ended June 30, 2017

 
   

Company

Produced

   

Purchased

Coal

   

Total

   

Company

Produced

   

Purchased

Coal

   

Total

 
                                                 

Revenues (a)

  $ 52,050,730     $ 13,227,327     $ 65,278,057     $ 4,431,178     $ 6,090,944     $ 10,522,122  

Less: Adjustments to reconcile to Non-GAAP revenues (FOB mine)

                                               

Transportation costs

    7,118,210       807,669       7,925,879       1,220,720       693,648       1,914,368  

Non-GAAP revenues (FOB mine)

  $ 44,932,520     $ 12,419,658     $ 57,352,178     $ 3,210,458     $ 5,397,296     $ 8,607,754  

Tons sold

    492,603       122,544       615,147       56,857       39,637       96,494  

Revenues per ton sold (FOB mine)

  $ 91.21     $ 101.35     $ 93.23     $ 56.47     $ 136.17     $ 89.21  

 

   

Six Months Ended June 30, 2018

   

Six Months Ended June 30, 2017

 
   

Company

Produced

   

Purchased

Coal

   

Total

   

Company

Produced

   

Purchased

Coal

   

Total

 
                                                 

Revenues (a)

  $ 95,009,476     $ 26,211,729     $ 121,221,205     $ 8,175,591     $ 12,198,509     $ 20,374,100  

Less: Adjustments to reconcile to Non-GAAP revenues (FOB mine)

                                               

Transportation costs

    13,224,024       1,955,251       15,179,275       2,344,173       1,310,959       3,655,132  

Non-GAAP revenues (FOB mine)

  $ 81,785,452     $ 24,256,478     $ 106,041,930     $ 5,831,418     $ 10,887,550     $ 16,718,968  

Tons sold

    895,921       241,361       1,137,282       109,159       74,918       184,077  

Revenues per ton sold (FOB mine)

  $ 91.29     $ 100.50     $ 93.24     $ 53.42     $ 145.33     $ 90.83  

 

(a) The three and six months ended June 30, 2017 exclude coal processing revenue of $0.6 million and $2.2 million, respectively.

 

 

 

 

Non-GAAP cash cost per ton sold

 

Non-GAAP cash cost per ton sold is calculated as cash cost of coal sales less transportation costs, divided by tons sold. We believe cash cost per ton sold provides useful information to investors as it enables investors to compare the cash cost per ton by the Company against similar measures made by other publicly-traded coal companies and more effectively monitor changes in coal cost from period to period excluding the impact of transportation costs which are beyond our control. The adjustments made to arrive at these measures are significant in understanding and assessing the Company’s financial condition. Cash cost per ton sold is not a measure of financial performance in accordance with U.S. GAAP and therefore should not be considered as an alternative to cost of sales under U.S. GAAP. The table below shows how we calculate Non-GAAP cash cost per ton:

 

   

Three Months Ended June 30, 2018

   

Three Months Ended June 30, 2017

 

Three Months Ended June 30, 2018

 

Company

Produced

   

Purchased

Coal

   

Total

   

Company

Produced

   

Purchased

Coal

   

Total

 
                                                 

Cost of sales (a)

  $ 34,739,384     $ 13,120,765     $ 47,860,149     $ 5,975,121     $ 5,112,689     $ 11,087,810  

Less: Adjustments to reconcile to Non-GAAP cash cost of coal sales

                                               

Transportation costs

    7,360,223       867,874       8,228,097       1,220,720       693,648       1,914,368  

Non-GAAP cash cost of coal sales

  $ 27,379,161     $ 12,252,891     $ 39,632,052     $ 4,754,401     $ 4,419,041     $ 9,173,442  

Tons sold

    492,603       122,544       615,147       56,857       39,637       96,494  

Cash cost per ton sold

  $ 55.58     $ 99.99     $ 64.43     $ 83.62     $ 111.49     $ 95.07  

 

   

Six Months Ended June 30, 2018

   

Six Months Ended June 30, 2017

 

Six Months Ended June 30, 2018

 

Company

Produced

   

Purchased

Coal

   

Total

   

Company

Produced

   

Purchased

Coal

   

Total

 
                                                 

Cost of sales (a)

  $ 67,174,343     $ 25,016,651     $ 92,190,994     $ 10,641,143     $ 10,284,280     $ 20,925,423  

Less: Adjustments to reconcile to Non-GAAP cash cost of coal sales

                                               

Transportation costs

    13,721,505       2,089,273       15,810,778       2,344,173       1,310,959       3,655,132  

Non-GAAP cash cost of coal sales

  $ 53,452,838     $ 22,927,378     $ 76,380,216     $ 8,296,970     $ 8,973,321     $ 17,270,291  

Tons sold

    895,921       241,361       1,137,282       109,159       74,918       184,077  

Cash cost per ton sold

  $ 59.66     $ 94.99     $ 67.16     $ 76.01     $ 119.78     $ 93.82  

 

(a) The three and six months ended June 30, 2017 exclude cost of sales related to coal processing of $0.7 million and $1.7 million, respectively.

 

 

Liquidity and Capital Resources

 

Our primary source of cash is proceeds from the sale of our coal production to customers. Our primary uses of cash include the cash costs of coal production, capital expenditures, royalty payments and other operating expenditures.

 

Cash flow information is as follows:

 

   

Six months ended June 30,

 
   

2018

   

2017

 

Consolidated statement of cash flow data:

               

Cash flows from operating activities

  $ 8,110,683     $ (489,499 )

Cash flows from investing activities

    (22,277,873 )     (31,141,327 )

Cash flows from financing activities

    14,144,457       29,291,926  

Net change in cash and cash equivalents

  $ (22,733 )   $ (2,338,900 )

 

Cash flows from operating activities during the six months ended June 30, 2018 increased from the six months ended June 30, 2017 principally due to increases in our earnings. Significantly increased operations in the first half of 2018 required a greater investment in working capital.

 

 

Net cash used in investing activities was $22.3 million for the six months ended June 30, 2018 as compared with $31.1 million for the same period of 2017. Our capital expenditures totaled $27.5 million and $41.7 million in the 2018 and 2017 periods, respectively. We received proceeds of $5.2 million from maturing investments during the 2018 period, as compared with net proceeds from investments of $10.6 million in the 2017 period.

 

Cash flows from financing activities were $14.1 million for the six months ended June 30, 2018, which was primarily due to net short-term borrowings of $15.6 million, partially offset by repayments on borrowings and insurance financing of $1.4 million. Cash flows from financing activities were $29.3 million for the six months ended June 30, 2017, which was primarily due to net proceeds from our initial public offering of $46.0 million, partially offset by repayments on borrowings and insurance financing of $11.3 million and distributions to owners of $5.4 million.

 

Indebtedness

 

In February 2018, we borrowed $6.0 million under a six-month note from an unrelated third-party lender in order to manage accounts receivable. The note is secured by a portion of our mobile mining equipment (“the Equipment Note”). Interest accrues monthly at 8.5% or 30-day LIBOR plus 6.9%, whichever is greater. The Equipment Note originally had a maturity date of August 31, 2018. During July 2018, the Company secured a four-month extension of the Equipment Note. The outstanding principal balance is due on December 31, 2018 but may be prepaid without penalty at any time. During the six months ended June 30, 2018, we repaid $1.0 million under the Equipment Note. As of June 30, 2018, the outstanding principal balance was $5.0 million.

 

In May 2018, we borrowed $3.0 million from Ramaco Coal, LLC, a related party secured by certain inventory. Interest accrues monthly at 10.0%. The outstanding principal balance is due on August 15, 2018 but may be prepaid without penalty at any time. We are in discussions to extend the maturity of this obligation until November 15, 2018. As of June 30, 2018, the outstanding principal balance was $3.0 million.

 

In June 2018, we borrowed an additional $7.0 million under a six-month note from the same unrelated third-party lender in order to manage accounts receivable (the “Additional Equipment Note”). The Additional Equipment Note is also secured by the same mobile mining equipment as the Equipment Note. Interest accrues monthly at 8.5% or 30-day LIBOR plus 6.9%, whichever is greater. The outstanding principal balance is due on December 31, 2018 but may be prepaid without penalty at any time. We anticipate securing a comprehensive asset base credit facility before the maturity of the Additional Equipment Note. As of June 30, 2018, the outstanding principal balance was $7.0 million.

 

Liquidity

 

As of June 30, 2018, our available cash was $5.9 million. We expect to fund our capital and liquidity requirements with cash on hand, borrowings discussed above and projected cash flow from operations. Factors that could adversely impact our future liquidity and ability to carry out our capital expenditure program include the following:

 

 

Timely delivery of our product by rail and other transportation carriers;

 

Timely payment of accounts receivable by our customers;

 

Cost overruns in our purchases of equipment needed to complete our mine development plans;

 

Delays in completion of development of our various mines which would reduce the coal we would have available to sell and our cash flow from operations; and

 

Adverse changes in the metallurgical coal markets that would reduce the expected cash flow from operations.

 

Capital Requirements

 

Our primary use of cash currently includes capital expenditures for mine development and for ongoing operating expenses. During the first six months of 2018, our capital expenditures totaled approximately $27.5 million. We expect that we will be required to spend another $59 million through 2022 to fully develop our current projects.

 

Management believes that current cash on hand, along with cash flow from operations, will be sufficient to meet its capital expenditure and operating plans through 2020. We expect to fund any additional capital expenditures from cash on hand, cash from operations or potential future issuances of equity securities or debt.

 

If future cash flows are insufficient to meet our liquidity needs or capital requirements, we may reduce our expected level of capital expenditures and/or fund a portion of our capital expenditures through the issuance of debt or equity securities, the entry into debt arrangements or from other sources, such as asset sales.

 

Off-Balance Sheet Arrangements

 

As of June 30, 2018, we had no material off-balance sheet arrangements.

 

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

 

For quantitative and qualitative disclosures about market risk affecting the Company, see Item 7A, “Quantitative and Qualitative Disclosures about Market Risk,” of our Annual Report on Form 10-K for the year ended December 31, 2017. The Company’s exposure to market risk has not changed materially since December 31, 2017.

 

Item 4.

Controls and Procedures

 

Disclosure Controls and Procedures

 

As required by Rule 13a-15(b) of the Exchange Act, we have evaluated, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this quarterly report. Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by us in reports that we file under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure, and is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Based upon that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this quarterly report, at the reasonable assurance level.

 

Changes in Internal Control over Financial Reporting

 

We regularly review our system of internal control over financial reporting and make changes to our processes and systems to improve controls and increase efficiency, while ensuring that we maintain an effective internal control environment. Changes may include such activities as implementing new, more efficient systems, consolidating activities and migrating processes.

 

There were no significant changes in our system of internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the quarter ended June 30, 2018, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 

PART II.   OTHER INFORMATION

 

Item 1.

Legal Proceedings

 

Due to the nature of our business, we may become, from time to time, involved in routine litigation or subject to disputes or claims related to our business activities. While the outcome of these proceedings cannot be predicted with certainty, in the opinion of our management, there are no pending litigation, disputes or claims against us which, if decided adversely, individually or in the aggregate, will have a material adverse effect on our financial condition, cash flows or results of operations.

 

Item 1A.

 Risk Factors

 

In addition to the other information set forth in this Quarterly Report, you should carefully consider the risk factors and other cautionary statements described under the heading “Item 1A. Risk Factors” included in our Annual Report and the risk factors and other cautionary statements contained in our other SEC filings, which could materially affect our businesses, financial condition or future results. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results. There have been no material changes in our risk factors from those described in our Annual Report.

 

Item 4.

Mine Safety Disclosures

 

The information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in Exhibit 95.1 to this Quarterly Report.

 

Item 6.

Exhibits

 

  *10.1   Loan and Security Agreement, dated June 11, 2018, by and between Ramaco Resources, LLC and Maxus Capital Group, LLC.
       
  *10.2   Promissory Note dated June 11, 2018, by Ramaco Resources, LLC.
       
  *10.3   Corporate Guaranty dated June 11, 2018, by Ramaco Resources, Inc.
       

 

*31.1

 

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

  

 

  

 

*31.2

 

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

  

 

  

 

**32.1

 

Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

  

 

  

 

**32.2

 

Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

  

 

  

 

*95.1

 

Mine Safety Disclosure

 

  

 

  

 

*101.INS

 

XBRL Instance Document

 

  

 

  

 

*101.SCH

 

XBRL Taxonomy Extension Schema Document

 

  

 

  

 

*101.CAL

 

XBRL Taxonomy Extension Calculation Linkbase Document

 

  

 

  

 

*101.DEF

 

XBRL Taxonomy Extension Definition Linkbase Document

 

  

 

  

 

*101.LAB

 

XBRL Taxonomy Extension Labels Linkbase Document

 

  

 

  

 

*101.PRE

 

XBRL Taxonomy Extension Presentation Linkbase Document

 

                                         

*

Exhibit filed herewith.

**

Furnished herewith. Pursuant to SEC Release No. 33-8212, this certification will be treated as “accompanying” this Quarterly Report on Form 10-Q and not “filed” as part of such report for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of Section 18 of the Exchange Act, and this certification will not be deemed to be incorporated by reference into any filing under the Securities Act, except to the extent that the registrant specifically incorporates it by reference.

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. 

 

 

 

RAMACO RESOURCES, INC.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

August 6, 2018

  

By:

/s/ Michael D. Bauersachs

  

  

  

Michael D. Bauersachs

  

  

  

President and Chief Executive Officer and Director

  

  

  

(Principal Executive Officer)

 

 

 

August 6, 2018

  

By:

/s/ Randall W. Atkins

  

  

  

Randall W. Atkins

  

  

  

Executive Chairman and Chief Financial Officer

  

  

  

(Principal Financial Officer)

 

 

20