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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number:
( www.halladorenergy.com )
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(State of incorporation) |
(IRS Employer Identification No.) |
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(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code:
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
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Trading Symbol |
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Name of each exchange on which registered |
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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.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulations S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
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.
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Large accelerated filer ☐ |
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Non-accelerated filer ☐ |
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Smaller reporting company
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Emerging growth company
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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
As of November 7, 2024, we had
TABLE OF CONTENTS
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1 |
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1 |
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1 |
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2 |
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4 |
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5 |
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6 |
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
20 |
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
31 |
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32 |
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33 |
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33 |
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33 |
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34 |
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Hallador Energy Company
Condensed Consolidated Balance Sheets
(in thousands, except per share data)
(unaudited)
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September 30, |
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December 31, |
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2024 |
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2023 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Restricted cash |
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Accounts receivable |
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Inventory |
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Parts and supplies |
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Prepaid expenses |
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Assets held-for-sale |
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Total current assets |
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Property, plant and equipment: |
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Land and mineral rights |
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Buildings and equipment |
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Mine development |
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Finance lease right-of-use assets |
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Total property, plant and equipment |
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Less - accumulated depreciation, depletion and amortization |
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(
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(
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Total property, plant and equipment, net |
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Investment in Sunrise Energy |
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Other assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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Current liabilities: |
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Current portion of bank debt, net |
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$ |
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$ |
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Accounts payable and accrued liabilities |
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Current portion of lease financing |
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Deferred revenue |
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Contract liability - power purchase agreement and capacity payment reduction |
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Total current liabilities |
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Long-term liabilities: |
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Bank debt, net |
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Convertible notes payable |
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— |
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Convertible notes payable - related party |
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— |
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Long-term lease financing |
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Deferred income taxes |
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Asset retirement obligations |
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Contract liability - power purchase agreement |
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Other |
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Total long-term liabilities |
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Total liabilities |
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Commitments and contingencies |
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Stockholders' equity: |
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Preferred stock, $
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Common stock, $
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Additional paid-in capital |
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Retained earnings |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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See accompanying notes to the condensed consolidated financial statements.
1
Hallador Energy Company
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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2024 |
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2023 |
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2024 |
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2023 |
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SALES AND OPERATING REVENUES: |
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Electric sales |
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$ |
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$ |
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$ |
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$ |
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Coal sales |
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Other revenues |
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Total sales and operating revenues |
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EXPENSES: |
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Fuel |
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Other operating and maintenance costs |
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Cost of purchased power |
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— |
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— |
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Utilities |
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Labor |
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Depreciation, depletion and amortization |
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Asset retirement obligations accretion |
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Exploration costs |
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General and administrative |
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Total operating expenses |
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INCOME FROM OPERATIONS |
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Interest expense (1) |
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(
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(
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(
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(
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Loss on extinguishment of debt |
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— |
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(
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(
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(
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Equity method investment (loss) |
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(
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(
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(
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(
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NET INCOME (LOSS) BEFORE INCOME TAXES |
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(
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INCOME TAX EXPENSE (BENEFIT): |
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Current |
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— |
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(
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— |
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Deferred |
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(
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Total income tax expense (benefit) |
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(
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NET INCOME (LOSS) |
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$ |
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$ |
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$ |
(
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$ |
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NET INCOME (LOSS) PER SHARE: |
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Basic |
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$ |
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$ |
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$ |
(
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$ |
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Diluted |
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$ |
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$ |
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$ |
(
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$ |
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WEIGHTED AVERAGE SHARES OUTSTANDING |
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Basic |
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Diluted |
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2
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(1) Interest Expense: |
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Interest on bank debt |
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$ |
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$ |
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$ |
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$ |
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Other interest |
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Amortization: |
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Amortization of debt issuance costs |
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Total amortization |
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Total interest expense |
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$ |
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$ |
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$ |
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$ |
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See accompanying notes to the condensed consolidated financial statements.
3
Hallador Energy Company
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
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Nine Months Ended September 30, |
||||
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2024 |
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2023 |
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CASH FLOWS FROM OPERATING ACTIVITIES: |
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Net income (loss) |
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$ |
(
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$ |
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Adjustments to reconcile net income to net cash provided by operating activities: |
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Deferred income tax (benefit) |
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(
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Equity loss – Sunrise Energy |
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Cash distribution - Sunrise Energy |
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- |
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Depreciation, depletion, and amortization |
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Loss on extinguishment of debt |
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Loss (gain) on sale of assets |
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(
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Amortization of debt issuance costs |
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Asset retirement obligations accretion |
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Cash paid on asset retirement obligation reclamation |
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(
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(
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Stock-based compensation |
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Amortization of contract asset and contract liabilities |
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(
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(
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Other |
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Change in operating assets and liabilities: |
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Accounts receivable |
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Inventory |
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(
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Parts and supplies |
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(
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(
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Prepaid expenses |
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(
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Accounts payable and accrued liabilities |
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(
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(
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Deferred revenue |
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(
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Net cash provided by operating activities |
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CASH FLOWS FROM INVESTING ACTIVITIES: |
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Capital expenditures |
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(
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(
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Proceeds from sale of equipment |
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Net cash used in investing activities |
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(
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(
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CASH FLOWS FROM FINANCING ACTIVITIES: |
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Payments on bank debt |
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(
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(
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Borrowings of bank debt |
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Payments on lease financing |
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(
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— |
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Proceeds from sale and leaseback arrangement |
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— |
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Issuance of related party notes payable |
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— |
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Payments on related party notes payable |
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(
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— |
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Debt issuance costs |
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(
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(
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ATM offering |
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— |
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Taxes paid on vesting of RSUs |
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(
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(
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Net cash provided by (used in) financing activities |
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(
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Increase in cash, cash equivalents, and restricted cash |
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Cash, cash equivalents, and restricted cash, beginning of period |
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Cash, cash equivalents, and restricted cash, end of period |
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$ |
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$ |
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CASH, CASH EQUIVALENTS, AND RESTRICTED CASH: |
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Cash and cash equivalents |
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$ |
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$ |
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Restricted cash |
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$ |
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$ |
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SUPPLEMENTAL CASH FLOW INFORMATION: |
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Cash paid for interest |
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$ |
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$ |
|
|
SUPPLEMENTAL NON-CASH FLOW INFORMATION: |
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Change in capital expenditures included in accounts payable and prepaid expense |
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$ |
(
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|
$ |
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|
Stock issued on redemption of convertible notes and interest |
|
$ |
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$ |
— |
See accompanying notes to the condensed consolidated financial statements.
4
Hallador Energy Company
Condensed Consolidated Statements of Stockholders’ Equity
(in thousands)
(unaudited)
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Additional |
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Total |
||
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Common Stock Issued |
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Paid-in |
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Retained |
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Stockholders’ |
||||||
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Shares |
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Amount |
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Capital |
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Earnings |
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Equity |
||||
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Balance, June 30, 2024 |
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$ |
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$ |
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$ |
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$ |
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Stock-based compensation |
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— |
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— |
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— |
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Net income |
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— |
|
|
— |
|
|
— |
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|
|
|
|
|
|
Balance, September 30, 2024 |
|
|
|
$ |
|
|
$ |
|
|
$ |
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$ |
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2023 |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
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$ |
|
|
Stock-based compensation |
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— |
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— |
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— |
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Stock issued on vesting of RSUs |
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(
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— |
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— |
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Taxes paid on vesting of RSUs |
|
(
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(
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|
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(
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— |
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(
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Stock issued on redemption of convertible notes |
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— |
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Stock issued in ATM offering |
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— |
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Net loss |
|
— |
|
|
— |
|
|
— |
|
|
(
|
|
|
(
|
|
Balance, September 30, 2024 |
|
|
|
$ |
|
|
$ |
|
|
$ |
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$ |
|
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Additional |
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Total |
||
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Common Stock Issued |
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Paid-in |
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Retained |
|
Stockholders’ |
||||||
|
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Shares |
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Amount |
|
Capital |
|
Earnings |
|
Equity |
||||
|
Balance, June 30, 2023 |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Stock-based compensation |
|
— |
|
|
— |
|
|
|
|
|
— |
|
|
|
|
Stock issued on vesting of RSUs |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Taxes paid on vesting of RSUs |
|
(
|
|
|
— |
|
|
(
|
|
|
— |
|
|
(
|
|
Net income |
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
Balance, September 30, 2023 |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2022 |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Stock-based compensation |
|
— |
|
|
— |
|
|
|
|
|
— |
|
|
|
|
Stock issued on vesting of RSUs |
|
|
|
|
|
|
|
(
|
|
|
— |
|
|
— |
|
Taxes paid on vesting of RSUs |
|
(
|
|
|
(
|
|
|
(
|
|
|
— |
|
|
(
|
|
Net income |
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
Balance, September 30, 2023 |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
See accompanying notes to the condensed consolidated financial statements.
5
Hallador Energy Company
Notes to Condensed Consolidated Financial Statements
(unaudited)
|
(1) |
GENERAL BUSINESS |
The condensed consolidated financial statements include the accounts of Hallador Energy Company (hereinafter known as “we, us, or our”) and its wholly owned subsidiaries Sunrise Coal, LLC (“Sunrise”), Hallador Power Company, LLC (“Hallador Power”), as well as Sunrise and Hallador Power’s wholly owned subsidiaries.
We strategically view and manage our operations through
All significant intercompany accounts and transactions have been eliminated. Certain reclassifications have been made to the Company’s prior period condensed consolidated financial information to conform to the current period presentation. These presentation changes did not impact the Company’s condensed consolidated net income (loss), consolidated cash flows, total assets, total liabilities or total stockholders’ equity.
The interim financial data is unaudited; however, in our opinion, it includes all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the results for the interim periods. The condensed consolidated financial statements included herein have been prepared pursuant to the Securities and Exchange Commission’s (the “SEC”) rules and regulations; accordingly, certain information and footnote disclosures normally included in generally accepted accounting principles (“GAAP”) financial statements have been condensed or omitted.
The results of operations and cash flows for the three and nine months ended September 30, 2024, are not necessarily indicative of the results to be expected for future quarters or for the year ending December 31, 2024.
Our organization and business, the accounting policies we follow, and other information are contained in the notes to our consolidated financial statements filed as part of our 2023 Annual Report on Form 10-K . This quarterly report should be read in conjunction with such Annual Report on Form 10-K.
|
(2) |
RECENT ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED |
In November 2023 , the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07 , Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07 ” ). ASU 2023-07 primarily requires enhanced disclosures about significant segment expenses regularly provided to the chief operating decision maker (“CODM”), the amount and composition of other segment items, and the title and position of the CODM. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023 , and interim periods within fiscal years beginning after December 15, 2024 , with early adoption permitted. We are currently evaluating the impact of adopting ASU 2023-07 , but do not expect it to have a material effect on our consolidated financial statements.
6
In December 2023 , the FASB issued ASU 2023-09 , Income Taxes (Topic 740 ): Improvements to Income Tax Disclosures (“ASU 2023-09 ” ). ASU 2023-09 primarily requires enhanced disclosures to (1) disclose specific categories in the rate reconciliation, (2) disclose the amount of income taxes paid and expensed disaggregated by federal, state, and foreign taxes, with further disaggregation by individual jurisdictions if certain criteria are met, and (3) disclose income (loss) from continuing operations before income tax (benefit) disaggregated between domestic and foreign. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024 , with early adoption permitted. We are currently evaluating the impact of adopting ASU 2023-09 , but do not expect it to have a material effect on our consolidated financial statements.
|
(3) |
LONG-LIVED ASSET IMPAIRMENTS |
Long-lived assets are reviewed for impairment whenever events or changes in circumstance indicate that the carrying amount of the assets may not be recoverable. For the three and nine months ended September 30, 2024 and 2023,
|
(4) |
INVENTORY |
Inventory is valued at a lower of cost or net realizable value (NRV). As of September 30, 2024, and December 31, 2023, coal inventory includes NRV adjustments of $
|
(5) |
BANK DEBT |
On September 27, 2024,
the Company executed the First Amendment (“First Amendment”) to the Fourth Amended and Restated Credit Agreement, dated as of August 2, 2023 (as amended, the “Credit Agreement”), with PNC Bank, National Association (in its capacity as administrative agent, "PNC"), which was accounted for as a debt modification. The primary purpose of the First Amendment was to provide the Company with short-term covenant relief to pursue additional liquidity. The First Amendment provides for additional flexibility for the Company to enter into prepaid forward power sale contracts, provided that the Company repays outstanding term loans under the Credit Agreement (“Term Loan”) with proceeds received from certain eligible power purchase agreements, up to a maximum of $
Bank debt was reduced by $
Liquidity
As of September 30, 2024, we had additional borrowing capacity of $
Fees
Unamortized bank fees and other costs incurred in connection with our initial facility totaled $
7
Bank debt, less debt issuance costs, is presented below (in thousands):
|
|
|
September 30, |
|
December 31, |
|
||
|
|
|
2024 |
|
2023 |
|
||
|
Current bank debt |
|
$ |
|
|
$ |
|
|
|
Less unamortized debt issuance cost |
|
|
(
|
|
|
(
|
|
|
Net current portion |
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
Long-term bank debt |
|
$ |
|
|
$ |
|
|
|
Less unamortized debt issuance cost |
|
|
(
|
|
|
(
|
|
|
Net long-term portion |
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
Total bank debt |
|
$ |
|
|
$ |
|
|
|
Less total unamortized debt issuance cost |
|
|
(
|
|
|
(
|
|
|
Net bank debt |
|
$ |
|
|
$ |
|
|
|
Future Maturities (in thousands): |
|
|
|
|
2024 |
|
$ |
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
Total |
|
$ |
|
Covenants
The First Amendment, among other things, provided the Company with short-term covenant relief to pursue additional liquidity. The First Amendment waived the Company’s Leverage Ratio requirement for the third and fourth quarters of 2024, increased the threshold to
Interest Rate
The interest rate on the facility ranges from SOFR plus
8
|
(6) |
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES |
Accounts payable and accrued liabilities consist of the following for the indicated dates (in thousands):
|
|
|
September 30, |
|
December 31, |
|
||
|
|
|
2024 |
|
2023 |
|
||
|
Accounts payable |
|
$ |
|
|
$ |
|
|
|
Accrued property taxes |
|
|
|
|
|
|
|
|
Accrued payroll |
|
|
|
|
|
|
|
|
Workers' compensation reserve |
|
|
|
|
|
|
|
|
Group health insurance |
|
|
|
|
|
|
|
|
Asset retirement obligation - current portion |
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
Total accounts payable and accrued liabilities |
|
$ |
|
|
$ |
|
|
|
(7) |
REVENUE |
Revenue from Contracts with Customers
We account for a contract with a customer when the parties have approved the contract and are committed to performing their respective obligations, the rights of each party are identified, payment terms are identified, the contract has commercial substance, and it is probable substantially all the consideration will be collected. We recognize revenue when we satisfy a performance obligation by transferring control of a good or service to a customer.
Electric operations
We concluded that for a Power Purchase Agreement (“PPA”) that is not determined to be a lease or derivative, the definition of a contract and the criteria in ASC 606, Revenue from Contracts with Customers (“ASC 606”), is met at the time a PPA is executed by the parties, as this is the point at which enforceable rights and obligations are established. Accordingly, we concluded that a PPA that is not determined to be a lease or derivative constitutes a valid contract under ASC 606.
We recognize revenue daily, based on an output method of capacity made available as part of any stand-ready obligations for contract capacity performance obligations and daily, based on an output method of MWh of electricity delivered.
For the delivered energy performance obligation in the PPA with Hoosier, we recognize revenue daily for actual delivered electricity plus the amortization of the contract liability as a result of the Asset Purchase Agreement with Hoosier. For delivered energy to all other customers, we recognize revenue daily for the actual delivered electricity.
Coal operations
Our coal revenue is derived from sales to customers of coal produced at our facilities. Our customers typically purchase coal directly from our mine sites where the sale occurs and where title, risk of loss, and control pass to the customer at that point. Our customers arrange for and bear the costs of transporting their coal from our mines to their plants or other specified discharge points. Our customers are typically domestic utility companies. Our coal sales agreements with our customers are fixed-priced, fixed-volume supply contracts, or include a pre-determined escalation in price for each year. Price re-opener and index provisions may allow either party to commence a renegotiation of the contract price at a pre-determined time. Price re-opener provisions may automatically set a new price based on the prevailing market price or, in some instances, require us to negotiate a new price, sometimes within specified ranges of prices. The terms of our coal sales agreements result from competitive bidding and extensive negotiations with customers. Consequently, the terms of these contracts vary by customer.
9
Coal sales agreements will typically contain coal quality specifications. With coal quality specifications in place, the raw coal sold by us to the customer at the delivery point must be substantially free of magnetic material and other foreign material impurities and crushed to a maximum size as set forth in the respective coal sales agreement. Price adjustments are made and billed in the month the coal sale was recognized based on quality standards that are specified in the coal sales agreement, such as Btu factor, moisture, ash, and sulfur content, and can result in either increases or decreases in the value of the coal shipped.
Disaggregation of Revenue
Revenue is disaggregated by revenue source for our electric operations and by primary geographic markets for our coal operations, as we believe this best depicts how the nature, amount, timing, and uncertainty of our revenue and cash flows are affected by economic factors.
Electric operations
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
||||||||
|
|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
||||
|
Delivered energy (including contract liability amortization) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Capacity |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Electric Operations sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
Coal operations
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
||||||||
|
|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
||||
|
Outside third-party Indiana customers |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Customers in Florida, North Carolina, Alabama and Georgia |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Coal Operations sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
Performance Obligations
Electric operations
We concluded that each megawatt-hour (“MWh”) of delivered energy is capable of being distinct as a customer could benefit from each on its own by using/consuming it as a part of its operations. We also concluded that the stand-ready obligation to be available to provide electricity is capable of being distinct as each unit of capacity provides an economic benefit to the holder and could be sold by the customer.
During 2022, we entered into an Asset Purchase Agreement (“APA”) with Hoosier (“Hoosier APA”) in which Hallador Power shall sell, and Hoosier shall buy, delivered energy quantities through 2025 at the contract price, which is $
In addition to delivered energy, under the Hoosier APA, Hallador Power shall provide a stand-ready obligation to provide electricity to MISO, also known as contract capacity. The contract capacity that Hallador Power shall provide to Hoosier is
10
During the second quarter 2024, the Company entered into an 11-month, $
Coal operations
A performance obligation is a promise in a contract with a customer to provide distinct goods or services. Performance obligations are the unit of account for purposes of applying the revenue recognition standard and therefore determine when and how revenue is recognized. In most of our coal contracts, the customer contracts with us to provide coal that meets certain quality criteria. We consider each ton of coal a separate performance obligation and allocate the transaction price based on the base price per the contract, increased or decreased for quality adjustments.
We recognize revenue at a point in time as the customer does not have control over the asset at any point during the fulfillment of the contract. For substantially all our customers, this is supported by the fact that title and risk of loss transfer to the customer upon loading of the truck or railcar at the mine. This is also the point at which physical possession of the coal transfers to the customer, as well as the right to receive substantially all benefits and the risk of loss in ownership of the coal.
We have remaining coal sales performance obligations relating to fixed priced contracts to third-party customers of approximately $
We have remaining volume performance obligations relating to coal contracts with price reopeners of
The coal tons used to determine the remaining performance obligations are subject to adjustment in instances of force majeure and exercise of customer options to either take additional tons or reduce tonnage if such an option exists in the customer contract.
Contract Balances
Under ASC 606, the timing of when a performance obligation is satisfied can affect the presentation of accounts receivable, contract assets, and contract liabilities. The main distinction between accounts receivable and contract assets is whether consideration is conditional on something other than the passage of time. A receivable is an entity’s right to consideration that is unconditional.
Under the typical payment terms of our contracts with customers, the customer pays us a base price for the coal, increased or decreased for any quality adjustments, electricity, or capacity. Amounts billed and due are recorded as trade accounts receivable and included in accounts receivable in our condensed consolidated balance sheets. As of January 1, 2023, accounts receivable for coal sales billed to customers was $
|
(8) |
INCOME TAXES |
For the nine months ended September 30, 2024 and 2023, we recorded income taxes using an estimated annual effective tax rate based upon projected annual income (loss), forecasted permanent tax differences, discrete items, and statutory rates in states in which we operate. The effective tax rate for the nine months ended September 30, 2024 and 2023, was ~
11
|
(9) |
STOCK COMPENSATION PLANS |
|
Non-vested grants as of December 31, 2023 |
|
|
|
Awarded - weighted average share price on award date was $
|
|
|
|
Vested - weighted average share price on vested date was $
|
|
(
|
|
Forfeited |
|
(
|
|
Non-vested grants as of September 30, 2024 |
|
|
For the three and nine months ended September 30, 2024, our stock compensation was $
Non-vested RSU grants will vest as follows:
|
Vesting Year |
|
RSUs Vesting |
|
2024 |
|
|
|
2025 |
|
|
|
2026 |
|
|
|
2027 |
|
|
|
|
|
|
The outstanding RSUs have a value of $
As of September 30, 2024, unrecognized stock compensation expense is $
|
(10) |
LEASES |
We have operating leases for office space with remaining lease terms ranging from
During the nine months ended September 30, 2024, we entered into
12
The following information relates to our leases (dollar amounts in thousands):
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
|
||||||||
|
|
|
2024 |
|
2023 |
|
|
2024 |
|
2023 |
|
|
||||
|
Operating lease information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating cash outflows from operating leases |
|
$ |
|
|
$ |
|
|
|
$ |
|
|
$ |
|
|
|
|
Weighted average remaining lease term in years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average discount rate |
|
|
|
% |
|
|
% |
|
|
|
% |
|
|
% |
|
|
Finance lease information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing cash outflows from finance leases |
|
$ |
|
|
|
— |
|
|
$ |
|
|
|
— |
|
|
|
Proceeds from sale and leaseback arrangement |
|
$ |
— |
|
|
— |
|
|
$ |
|
|
|
— |
|
|
|
Weighted average remaining lease term in years |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
Weighted average discount rate |
|
|
|
% |
|
— |
|
|
|
|
% |
|
— |
|
|
Future minimum lease payments under non-cancellable leases as of September 30, 2024, were as follows:
|
|
|
Operating Leases |
|
Finance Leases |
||
|
|
|
(In thousands) |
||||
|
2024 |
|
$ |
— |
|
$ |
|
|
2025 |
|
|
|
|
|
|
|
2026 |
|
|
|
|
|
|
|
2027 |
|
|
|
|
|
|
|
2028 |
|
|
|
|
|
|
|
Thereafter |
|
|
|
|
|
|
|
Total minimum lease payments |
|
$ |
|
|
$ |
|
|
Less imputed interest and deferred finance fees |
|
|
(
|
|
|
(
|
|
Total lease liability |
|
$ |
|
|
$ |
|
The following are reflected within the indicated condensed consolidated balance sheet line items:
|
|
|
|
|
For the Nine Months Ended September 30, |
|
For the Year Ended December 31, |
|
||
|
|
|
|
|
2024 |
|
2023 |
|
||
|
|
|
|
|
(In thousands) |
|
||||
|
Operating lease assets |
|
|
|
$ |
|
|
$ |
|
|
|
Operating lease liabilities: |
|
|
|
|
|
|
|
|
|
|
Current operating lease liabilities |
|
|
|
$ |
- |
|
$ |
|
|
|
Non-current operating lease liabilities |
|
|
|
|
|
|
|
|
|
|
Total operating lease liability |
|
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance lease assets |
|
Finance lease right-of-use assets |
|
$ |
|
|
$ |
|
|
|
Finance lease liabilities: |
|
|
|
|
|
|
|
|
|
|
Current finance lease liabilities |
|
Current portion of lease financing |
|
$ |
|
|
$ |
|
|
|
Non-current finance lease liabilities |
|
Long-term lease financing |
|
|
|
|
|
|
|
|
Total finance lease liabilities |
|
|
|
$ |
|
|
$ |
|
|
|
(11) |
SELF-INSURANCE |
We self-insure our non-leased underground mining equipment. Such equipment was allocated among
13
We also self-insure for workers’ compensation claims. Restricted cash of $
|
(12) |
FAIR VALUE MEASUREMENTS |
We account for certain assets and liabilities at fair value. The hierarchy below lists three levels of fair value based on the extent to which inputs used in measuring fair value are observable in the market. We categorize each of our fair value measurements in one of these three levels based on the lowest level input that is significant to the fair value measurement in its entirety. These levels are:
Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. We consider active markets as those in which transactions for the assets or liabilities occur in sufficient frequency and volume to provide pricing information on an ongoing basis. We have no Level 1 instruments.
Level 2: Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability. We have no Level 2 instruments.
Level 3: Measured based on prices or valuation models that require inputs that are both significant to the fair value measurement and less observable from objective sources (i.e., supported by little or no market activity). ARO liabilities use Level 3 non-recurring fair value measures .
Credit Risk
The Company’s financial instruments exposed to concentrations of credit risk consist primarily of cash and cash equivalents, and restricted cash.
The Company’s cash and cash equivalent and restricted cash balances on deposit with financial institutions total $
|
(13) |
EQUITY METHOD INVESTMENTS |
We own a
|
(14) |
CONVERTIBLE NOTES |
On July 29, 2022, we issued a
$
14
On August 8, 2022, we issued an additional
$
On August 12, 2022, we issued an additional
$
The funds received from the issuance of the various notes described above were used to provide additional working capital to the Company. The conversion price and number of shares of the Company’s common stock issuable upon conversion of the above notes are subject to adjustment from time to time for any subdivision or consolidation of our shares of common stock and other standard dilutive events.
|
(15) |
NOTES PAYABLE - RELATED PARTIES |
In March 2024, we issued unsecured promissory notes, having a 12-month maturity date and
15
|
(16) |
ORGANIZATIONAL RESTRUCTURING |
On February 23, 2024, (the “Effective Date”), we committed to a reorganization effort in the Coal Operations Segment (the “Reorganization Plan”) that included a workforce reduction of approximately
|
(17) |
AT THE MARKET AGREEMENT |
On December 18, 2023
,
we entered into an At The Market Issuance Sales Agreement (the “Sales Agreement”) with B. Riley Securities, Inc. (the “Agent”), pursuant to which we may issue and sell, from time to time, shares (the “Shares”) of our common stock, par value $
During the nine months ended September 30, 2024, we issued
16
|
(18) |
SEGMENTS OF BUSINESS |
As of September 30, 2024, our operations are divided into
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
||||||||
|
|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
||||
|
|
|
(in thousands) |
|
(in thousands) |
|
||||||||
|
Operating revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Electric operations (i) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
Coal operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate and other and eliminations |
|
|
(
|
|
|
(
|
|
|
(
|
|
|
(
|
|
|
Consolidated operating revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Electric operations |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
Coal operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate and other and eliminations |
|
|
(
|
|
|
(
|
|
|
(
|
|
|
(
|
|
|
Consolidated operating expenses |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Electric operations |
|
$ |
|
|
$ |
(
|
|
$ |
|
|
$ |
|
|
|
Coal operations |
|
|
(
|
|
|
|
|
|
(
|
|
|
|
|
|
Corporate and other and eliminations |
|
|
(
|
|
|
|
|
|
(
|
|
|
(
|
|
|
Consolidated income (loss) from operations |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation, depletion and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Electric operations |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
Coal operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate and other and eliminations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated depreciation, depletion and amortization |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Electric operations |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
Coal operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate and other and eliminations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Electric operations |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
Coal operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate and other and eliminations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated capital expenditures |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
17
|
(i). |
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
||||||||
|
|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
||||
|
Operating revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Capacity revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Delivered energy |
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of contract liability |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other operating revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Electric Operations revenue: |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
(19) |
NET INCOME (LOSS) PER SHARE |
The following table (in thousands, except per share amounts) sets forth the computation of basic earnings (loss) per share for the periods indicated:
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
||||||||
|
|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
||||
|
Basic earnings per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) - basic |
|
$ |
|
|
$ |
|
|
$ |
(
|
|
$ |
|
|
|
Weighted average shares outstanding - basic |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per common share |
|
$ |
|
|
$ |
|
|
$ |
(
|
|
$ |
|
|
The following table (in thousands, except per share amounts) sets forth the computation of diluted net income (loss) per share:
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
||||||||
|
|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
||||
|
Diluted earnings per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) - basic |
|
$ |
|
|
$ |
|
|
$ |
(
|
|
$ |
|
|
|
Add: Convertible Notes interest expense, net of tax |
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
Net income (loss) - diluted |
|
$ |
|
|
$ |
|
|
$ |
(
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding - basic |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add: Dilutive effects of if converted Convertible Notes |
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
Add: Dilutive effects of Restricted Stock Units |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
Weighted average shares outstanding - diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income (loss) per share |
|
$ |
|
|
$ |
|
|
$ |
(
|
|
$ |
|
|
(20) ASSETS HELD-FOR-SALE
During the third quarter of 2024, the Company considered strategic alternatives with respect to its wholly-owned subsidiary Summit. Summit is included in our “Corporate and other and eliminations” segment and primarily holds property, plant and equipment. On July 29, 2024, the Company entered into a
18
Fair value is the amount at which an asset, liability or business could be bought or sold in a current transaction between willing parties and may be estimated using a number of techniques, or may be observable using quoted market prices. The Company used a market approach consisting of the contractual ROFR sales price, subject to prorations for property taxes and utilities, to determine the fair value as of September 30, 2024, and subtracted estimated costs to sell from that calculated fair value. The resulting net fair value of Summit's assets exceeded the carrying value of Summit’s assets, and accordingly
The sale of Summit does not represent a strategic shift that has or will have a major effect on the Company, and as such, does not qualify for treatment as a discontinued operation.
|
(21) |
SUBSEQUENT EVENTS |
On October 23, 2024
,
the Company entered into a
(beginning in June of 2025)
$
On October 23, 2024, the Company entered into a second amendment to the Fourth Amended and Restated Credit Agreement with PNC, dated as of August 2, 2023, to clarify certain provisions of the First Amendment that was entered into on September 27, 2024.
19
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION UPDATES THE MD&A SECTION OF OUR 2023 ANNUAL REPORT ON FORM 10-K AND SHOULD BE READ IN CONJUNCTION THEREWITH.
Hallador Energy made significant progress in its transformation to an Independent Power Producer this quarter by signing a non-binding term sheet (“Term Sheet”) with a leading global data center developer. Our team is working diligently to finalize definitive agreements with this partner and relevant utilities that will support the delivery of our in front of the meter energy and capacity to the large hyperscaler. As we have discussed before, these types of deals are complex arrangements involving multiple parties. If we reach definitive agreements, we will have contracted large portions of our plant’s energy and capacity at much improved margins for more than a decade to come. The completion of the transaction contemplated by the Term Sheet is subject to, among other matters, the negotiation and execution of definitive agreements and there can be no assurance that definitive agreements will be entered into or that the proposed transaction will be consummated on the terms or timeframe currently contemplated, or at all.
The path to this type of long-term, higher margin transaction has been focused and deliberate. While we have not yet reached a binding agreement, we are encouraged both by the relationship with our current partner and the heavy interest that we continue to see from alternative counterparties in our energy and capacity offerings. This continued interest highlights the supply shortage in accredited capacity that we believe the MISO market is experiencing and provides the Company options in the event that we are unable to reach agreement in connection with the executed Term Sheet.
We believe accredited capacity in MISO continues to increase in value and demand, particularly in our sales region of MISO Zone 6, an area that includes Indiana and a portion of western Kentucky. This is important to Hallador based on our belief that Hallador has a significant amount of the remaining unsold accredited capacity in MISO Zone 6 over the next few years. Our current belief is guided by several factors, including:
| ● | Demand for power is growing at the fastest rate in several decades due to new demand from data centers, electric vehicles, and onshoring of industry. |
| ● | Indiana is seeing consistent interest from data center developers, likely due to favorable Indiana tax law for datacenter development and a pro-business climate. |
| ● | Supply Response is Restricted: |
| o | MISO has significantly reduced the capacity accreditation it awards to wind and solar generation (non-dispatchable), making it challenging to support accredited capacity needs from generating resources other than coal, U.S. natural gas (“Gas”), and nuclear (dispatchable). |
| o | We are currently seeing minimal supply response of accredited capacity which we believe relates to the regulatory and environmental challenges for all types of baseload generation, including Gas. Additionally, we believe the muted supply response is exacerbated by the glut of solar and wind projects, which provide minimal accredited capacity, overwhelming the queue and delaying access to dispatchable generation projects that would supplement the supply of accredited capacity. |
| ● | While our data center PPA negotiations proceed, we continue to focus on improving our balance sheet and access to liquidity. During the quarter we modified our credit facility to provide the Company with short-term covenant relief to pursue additional liquidity. Subsequent to the quarter, we executed a prepaid forward power sale in the amount of $60.0 million (see “Item 1. Footnote 21 - Subsequent Events” ), delivering power from June 2025 through December 2026. A portion of the proceeds were used to pay down $20.0 million on our Term Loan, which satisfies our January 2025, April 2025, July 2025 and a portion of our October 2025 required quarterly Term Loan payments. Our October 2025 required quarterly Term Loan payment is reduced to $6.0 million as part of the $20.0 million Term Loan pay down. We also paid $34.0 million on our revolver. We did not utilize the ATM in the third quarter. |
20
| ● | Quarter-over-Quarter our financial results improved. Our wholly owned subsidiary, Hallador Power, generated 1,074,000 MWh during the quarter versus 780,000 MWh in the second quarter of 2024. This is a result of stronger power pricing during the quarter and a significant decrease in Gas inventory levels against the imbalances we saw in the first half of the year. As Gas inventory decreased and prices increased, coal generation’s position in the dispatch stack improved. During the third quarter of 2024, our power plant operated more frequently than in the second quarter of 2024, partly due to having no planned maintenance, and as a result, our costs at the plant improved to $44.42 per MWh from $62.98 per MWh. |
| ● | During the third quarter, results at our Sunrise Coal subsidiary also improved in connection with the restructuring of our mining division that we undertook beginning in the first quarter of 2024 (see “Item 1. Footnote 16 – Organizational Restructuring” ). In July of 2024, we completed a project for four of our most productive units, which allowed all units to be on a split air system, which helped to improve efficiency and reduce operating costs at the mine to $66.43 per ton produced, a decrease of $1.59 from the second quarter of 2024. Sunrise Coal entered into a third-party coal contract to provide 2.5 million tons of coal from January 2026 to December 31, 2028, at an average price of $57.60 per ton. |
Our goal is for Hallador Power to generate approximately 1,500,000 MWh on a quarterly basis, which equates to approximately 6,000,000 MWh annually (see Hallador Power’s capacity and utilization information below). During the nine months ended September 30, 2024, Hallador Power generated 2,670,000 MWh, or 59.3% of our target. During the first nine months of the year, we experienced sales prices of nearly $261.00 per MWh for limited times, balanced against several days of pricing below our variable cost to produce. These fluctuations led to an inconsistent dispatch schedule.
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
||||
|
|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
|
Power Capacity and Utilization |
|
|
|
|
|
|
|
|
|
|
Nameplate capacity (MW) (i) |
|
1,080 |
|
1,080 |
|
1,080 |
|
1,080 |
|
|
Accredited capacity for the period (MW) (ii) |
|
828 |
|
864 |
|
858 |
|
899 |
|
|
Accredited capacity utilization (iii) |
|
59.00 |
% |
69.00 |
% |
47.00 |
% |
61.00 |
% |
|
(i). |
Nameplate capacity for the Merom Power Plant refers to the maximum electric output generated by the plant in the period presented and may not reflect actual production. Actual production each period varies based on weather conditions, operational conditions, and other factors. |
|
(ii). |
Accredited capacity is based on MISO’s average seasonal accreditations for the year. Average seasonal accreditations were 769 MW and 838 MW per day for 2024 and 2023, respectively. Accreditations are weighted and adjusted annually based on 3-year rolling performance metrics. |
|
(iii). |
Accredited capacity utilization is measured as power produced (MWh) divided by accredited capacity for the period (MW) multiplied by 24 times the number of days for the period. |
When forward selling Capacity, we target annual sales of around $65.0 million to offset our fixed annual costs at the plant of approximately $60.0 million. We have already sold a large portion of our near term Capacity, which we believe makes our forward Capacity sales goals attainable as illustrated in our “Solid Forward Sales Position” table below.
In addition to the Term Sheet discussed above, which is not included in the graph below, our forward contracted energy sales position has a significant price increase in future years as illustrated in the graph below.
21
To match Sunrise’s production levels and cost structure to that of the market demands, we restructured Sunrise operations in the first quarter of 2024. As we have previously noted, the restructuring included a reduction in force (“RIF”) of approximately 110 people in February, and we have since allowed attrition to further reduce our workforce by approximately 140 additional people, a total workforce reduction of more than 25%. We also restructured our operations to focus on our more profitable units and to idle units with higher production costs. Transitioning our Oaktown mining facilities from 7 units of production to 4 units of production was a deliberate process which took considerable time and effort, and was completed in mid-July. We are encouraged by the early results of Sunrise’s restructuring and have seen improvement in mining costs since we made the decision to adjust our operations.
The Company last reviewed its long-lived assets for impairment during the fourth quarter of 2023 and concluded no impairment was indicated. In preparing the Company’s impairment analysis, it utilizes undiscounted net cash flows over the expected life of the long-lived asset based upon anticipated production along with contracted and forward prices as well as historical operating expenses adjusted for inflation. This cash flow analysis is largely dependent upon the operating plans of the Company, which are reviewed by the Company and its Board of Directors no less than annually, normally during the fourth quarter of each year. Changes in anticipated activity levels, pricing or operating expenses can have significant effects on the ultimate value of the undiscounted cash flow analysis.
During the third quarter of 2024, the Company began a review of our mining assets and our future mining plans. This review will continue through the fourth quarter of 2024. Should the anticipated future mining activity be reduced, an impairment of our mining assets could occur. The amount of any such potential impairment, if any, is not currently estimable and will ultimately be based upon the finalized operating plans of the Company as approved by its Board of Directors, market driven pricing and cost trends, which are not known at this time. Nevertheless, the carrying amount of the Company’s mining assets is material to its condensed consolidated balance sheet at September 30, 2024 and any future impairment of such assets could therefore be material. The Company has concluded that no impairment exists as of September 30, 2024 as no triggering events have occurred during the period ended September 30, 2024.
Our condensed consolidated financial statements should be read in conjunction with this discussion. This analysis includes a discussion of metrics on a per mega-watt hour (MWh) and a per ton basis as derived from the condensed consolidated financial statements, which are considered non-GAAP measurements. These metrics are significant factors in assessing our operating results and profitability.
22
OVERVIEW
|
I. |
Q3 2024 Net Income of $1.6 million. |
| a. | Electric Operations: During the third quarter of 2024, we sold 1,183,000 MWh representing a 41.0% increase in total MWh sold and a decrease of $10.31 in operating revenues per MWh from Q2 2024. |
| i. | In Q3 2024, Electric Operations operating revenues were $71.9 million, or $60.78 per MWh, on a segment basis. |
| ii. | In Q3 2024, Electric Operations operating expenses were $52.5 million, or $44.42 per MWh, which represents a decrease of $18.56 per MWh from Q2 2024. |
| iii. | Q3 2024 Electric Operations income from operations was $16.36 per MWh, an increase of $8.25 from Q2 2024. |
| b. | Coal Operations: During the third quarter of 2024, 0.9 million tons of coal were shipped on a segment basis during the quarter, with approximately 0.3 million tons of that being shipped to the Merom Power Plant for $16.7 million. This is an increase of 0.1 million tons of coal shipped from Q2 2024, on a segment basis. |
| i. | In Q3 2024, Coal Operations operating revenues were $49.3 million, or $53.27 per ton, on a segment basis. |
| ii. | In Q3 2024, Hallador’s Coal Operations operating expenses were $66.43 per ton on a segment basis, which represents a $1.59 per ton decrease from Q2 2024. |
| iii. | We recorded a loss from operations for the quarter of $13.16 per ton on a segment basis. This is a decrease in our loss of $0.17 per ton from Q2 2024 income from operations. |
|
II. |
Q3 2024 Activity |
| a. | Cash Flow & Debt |
| i. | During Q3 2024, we had net cash used in operating activities of $12.9 million, and we increased our bank debt by $24.5 million. |
| ii. | During the third quarter of 2024, we executed the First Amendment to our Credit Agreement. The primary purpose of the First Amendment was to provide us with short-term covenant relief to pursue additional liquidity. As of September 30, 2024, our bank debt was $70.0 million and our total liquidity was $34.9 million. Total liquidity is comprised of a) our additional borrowing capacity which is net of outstanding letters of credit that we are required to maintain for surety bonds and amounts drawn on our revolver, and b) cash and cash equivalents. See “Item 1. Footnote 5 – Bank Debt” . |
| iii. | During Q3 2024, we signed a ninety-day ROFR with a potential buyer of our wholly-owned subsidiary Summit for $3.2 million. Summit is included in our “Corporate and other and eliminations” segment and primarily holds property, plant and equipment. Summit met the held-for-sale criteria and its assets were included in “assets held-for-sale” in our current assets section of our condensed consolidated balance sheets. See “Item 1. Footnote 20 – Assets Held-For-Sale” . |
23
|
III. |
Solid Forward Sales Position (unaudited) |
|
|
|
2024 |
|
2025 |
|
2026 |
|
2027 |
|
2028 |
|
2029 |
|
Total |
|||||||
|
Power |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contracted MWh (in millions) |
|
|
0.81 |
|
|
2.56 |
|
|
1.83 |
|
|
1.78 |
|
|
1.09 |
|
|
0.27 |
|
|
8.34 |
|
Average contracted price per MWh |
|
$ |
35.51 |
|
$ |
35.81 |
|
$ |
55.37 |
|
$ |
54.65 |
|
$ |
53.07 |
|
$ |
51.33 |
|
|
|
|
Contracted revenue (in millions) |
|
$ |
28.76 |
|
$ |
91.67 |
|
$ |
101.33 |
|
$ |
97.28 |
|
$ |
57.85 |
|
$ |
13.86 |
|
$ |
390.75 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capacity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average daily contracted capacity MW |
|
|
716 |
|
|
801 |
|
|
744 |
|
|
623 |
|
|
454 |
|
|
100 |
|
|
|
|
Average contracted capacity price per MW |
|
$ |
205 |
|
$ |
198 |
|
$ |
230 |
|
$ |
226 |
|
$ |
225 |
|
$ |
230 |
|
|
|
|
Contracted capacity revenue (in millions) |
|
$ |
13.54 |
|
$ |
57.89 |
|
$ |
62.46 |
|
$ |
51.39 |
|
$ |
37.39 |
|
$ |
3.47 |
|
$ |
226.14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Energy & Capacity Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contracted Power revenue (in millions) |
|
$ |
42.30 |
|
$ |
149.56 |
|
$ |
163.79 |
|
$ |
148.67 |
|
$ |
95.24 |
|
$ |
17.33 |
|
$ |
616.89 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Coal |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Priced tons - 3rd party (in millions) |
|
|
0.66 |
|
|
1.78 |
|
|
1.50 |
|
|
1.50 |
|
|
0.50 |
|
|
— |
|
|
5.94 |
|
Avg price per ton - 3rd party |
|
$ |
48.02 |
|
$ |
50.04 |
|
$ |
56.17 |
|
$ |
57.17 |
|
$ |
59.00 |
|
$ |
— |
|
|
|
|
Contracted coal revenue - 3rd party (in millions) |
|
$ |
31.69 |
|
$ |
89.07 |
|
$ |
84.26 |
|
$ |
85.76 |
|
$ |
29.50 |
|
$ |
— |
|
$ |
320.28 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Committed and unpriced tons - 3rd party (in millions) |
|
|
— |
|
|
1 |
|
|
1 |
|
|
1 |
|
|
— |
|
|
— |
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contracted tons - 3rd party (in millions) |
|
|
0.66 |
|
|
2.78 |
|
|
2.50 |
|
|
2.50 |
|
|
0.50 |
|
|
— |
|
|
8.94 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL CONTRACTED REVENUE (IN MILLIONS) - CONSOLIDATED |
|
$ |
73.99 |
|
$ |
238.63 |
|
$ |
248.05 |
|
$ |
234.43 |
|
$ |
124.74 |
|
$ |
17.33 |
|
$ |
937.17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Priced tons - Merom (in millions) |
|
|
0.27 |
|
|
2.30 |
|
|
2.30 |
|
|
2.30 |
|
|
2.30 |
|
|
— |
|
|
9.47 |
|
Avg price per ton - Merom |
|
$ |
51.00 |
|
$ |
51.00 |
|
$ |
51.00 |
|
$ |
51.00 |
|
$ |
51.00 |
|
$ |
— |
|
|
|
|
Contracted coal revenue - Merom (in millions) |
|
$ |
13.77 |
|
$ |
117.30 |
|
$ |
117.30 |
|
$ |
117.30 |
|
$ |
117.30 |
|
$ |
— |
|
$ |
482.97 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL CONTRACTED REVENUE (IN MILLIONS) - SEGMENT |
|
$ |
87.76 |
|
$ |
355.93 |
|
$ |
365.35 |
|
$ |
351.73 |
|
$ |
242.04 |
|
$ |
17.33 |
|
$ |
1,420.14 |
| ● | Actual revenue related to solid forward sales positions may differ materially for various reasons, including price adjustment features for coal quality and cost escalations, volume optionality provisions and potential force majeure events. |
24
LIQUIDITY AND CAPITAL RESOURCES
|
I. |
Liquidity and Capital Resources |
| a. | As set forth in our condensed consolidated statements of cash flows, cash provided by operations was $27.0 million and $79.5 million for the nine months ended September 30, 2024 and 2023, respectively. |
| b. | Bank debt was reduced by $21.5 million during the nine months ended September 30, 2024. As of September 30, 2024, our bank debt was $70.0 million. |
| c. | We expect cash generated from operations to primarily fund our capital expenditures and our debt service. As of September 30, 2024, we also had an additional borrowing capacity of $31.1 million. |
| d. | Total liquidity as of September 30, 2024 was $34.9 million. |
|
II. |
Material Off-Balance Sheet Arrangements |
| a. | Other than our surety bonds for reclamation, we have no material off-balance sheet arrangements. We have recorded the present value of reclamation obligations of $17.1 million, including $5.6 million at Merom, presented as asset retirement obligations (“ARO”) and accounts payable and accrued liabilities in our accompanying condensed consolidated balance sheets. In the event we are not able to perform reclamation, we have surety bonds in place totaling $30.8 million to cover ARO. |
CAPITAL EXPENDITURES (capex)
For the nine months ended September 30, 2024, capex was $39.6 million allocated as follows (in millions):
|
Oaktown – maintenance capex |
|
$ |
18.3 |
|
Oaktown – investment |
|
|
4.7 |
|
Freelandville Mine |
|
|
— |
|
Merom Plant |
|
|
16.1 |
|
Other |
|
|
0.5 |
|
Capex per the Condensed Consolidated Statements of Cash Flows |
|
$ |
39.6 |
RESULTS OF OPERATIONS
Presentation of Segment Information
Our operations are divided into two primary reportable segments: Electric Operations and Coal Operations. The remainder of our operations, which are not significant enough on a stand-alone basis to warrant treatment as an operating segment, are presented as “Corporate and Other and Eliminations” within the Notes to the Condensed Consolidated Financial Statements and primarily are comprised of unallocated corporate costs and activities, including a 50% interest in Sunrise Energy, LLC, a private gas exploration company with operations in Indiana, which we account for using the equity method, and our held-for-sale wholly-owned subsidiary Summit Terminal LLC, a logistics transport facility located on the Ohio River.
25
Electric Operations
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
||||||||
|
|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
||||
|
|
|
(in thousands) |
|
(in thousands) |
|
||||||||
|
Delivered Energy |
|
$ |
55,855 |
|
$ |
54,391 |
|
$ |
147,355 |
|
$ |
184,675 |
|
|
Capacity |
|
|
15,860 |
|
|
13,012 |
|
|
44,506 |
|
|
46,137 |
|
|
Other |
|
|
187 |
|
|
141 |
|
|
518 |
|
|
329 |
|
|
OPERATING REVENUES: |
|
|
71,902 |
|
|
67,544 |
|
|
192,379 |
|
|
231,141 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fuel |
|
|
29,602 |
|
|
50,652 |
|
|
76,522 |
|
|
147,032 |
|
|
Other operating and maintenance costs |
|
|
6,176 |
|
|
5,727 |
|
|
25,958 |
|
|
16,640 |
|
|
Cost of purchased power |
|
|
3,149 |
|
|
— |
|
|
7,694 |
|
|
— |
|
|
Utilities |
|
|
91 |
|
|
87 |
|
|
316 |
|
|
306 |
|
|
Labor |
|
|
7,360 |
|
|
7,705 |
|
|
22,203 |
|
|
23,871 |
|
|
Depreciation, depletion and amortization |
|
|
4,802 |
|
|
4,695 |
|
|
14,197 |
|
|
14,045 |
|
|
Asset retirement obligations accretion |
|
|
115 |
|
|
159 |
|
|
339 |
|
|
468 |
|
|
Exploration costs |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
General and administrative |
|
|
1,252 |
|
|
1,195 |
|
|
3,760 |
|
|
3,494 |
|
|
Total operating expenses |
|
|
52,547 |
|
|
70,220 |
|
|
150,989 |
|
|
205,856 |
|
|
INCOME (LOSS) FROM OPERATIONS |
|
$ |
19,355 |
|
$ |
(2,676) |
|
$ |
41,390 |
|
$ |
25,285 |
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
||||||||
|
|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
||||
|
|
|
(per MWh Sold) |
|
(per MWh Sold) |
||||||||
|
MWh Generated (in thousands) |
|
|
1,074 |
|
|
1,307 |
|
|
2,670 |
|
|
3,612 |
|
MWh Purchased (in thousands) |
|
|
109 |
|
|
— |
|
|
243 |
|
|
— |
|
MWh Sold (in thousands) |
|
|
1,183 |
|
|
1,307 |
|
|
2,913 |
|
|
3,612 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Delivered Energy |
|
$ |
47.21 |
|
$ |
41.62 |
|
$ |
50.59 |
|
$ |
51.13 |
|
Capacity |
|
|
13.41 |
|
|
9.96 |
|
|
15.28 |
|
|
12.77 |
|
Other |
|
|
0.16 |
|
|
0.11 |
|
|
0.18 |
|
|
0.09 |
|
OPERATING REVENUES: |
|
|
60.78 |
|
|
51.69 |
|
|
66.05 |
|
|
63.99 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fuel |
|
|
25.02 |
|
|
38.75 |
|
|
26.27 |
|
|
40.71 |
|
Other operating and maintenance costs |
|
|
5.22 |
|
|
4.38 |
|
|
8.91 |
|
|
4.61 |
|
Cost of purchased power |
|
|
2.66 |
|
|
— |
|
|
2.64 |
|
|
— |
|
Utilities |
|
|
0.08 |
|
|
0.07 |
|
|
0.11 |
|
|
0.08 |
|
Labor |
|
|
6.22 |
|
|
5.90 |
|
|
7.62 |
|
|
6.61 |
|
Depreciation, depletion and amortization |
|
|
4.06 |
|
|
3.59 |
|
|
4.87 |
|
|
3.89 |
|
Asset retirement obligations accretion |
|
|
0.10 |
|
|
0.12 |
|
|
0.12 |
|
|
0.13 |
|
General and administrative |
|
|
1.06 |
|
|
0.91 |
|
|
1.29 |
|
|
0.97 |
|
Total operating expenses |
|
|
44.42 |
|
|
53.72 |
|
|
51.83 |
|
|
57.00 |
|
INCOME (LOSS) FROM OPERATIONS: |
|
$ |
16.36 |
|
$ |
(2.03) |
|
$ |
14.22 |
|
$ |
6.99 |
26
2024 vs. 2023 (third quarter)
Revenues from electric operations increased $4.4 million, or 6.5%, compared to the third quarter of 2023. While the Merom Facility ran less hours in the third quarter of 2024 compared to 2023, the contracted hours were at higher prices. We have new delivered energy contracts and capacity contracts with sales starting in 2024. We entered into three new delivered energy contracts during the current year which increased revenues by $20.9 million. We entered into three capacity contracts during 2023 that began delivery in 2024 and one new capacity contract that we entered into during the current year, which increased revenues by $10.9 million. Revenue increases from new contracts were offset by suppressed MISO pricing (~66% of total energy hours at the Merom node being priced below our production cost at our Merom Facility), and reductions in demand for Power and higher demand for Gas as Gas inventories remained high, with a continued decline in average spot pricing per MBtu of $2.11 compared to $2.59 during the same three-month period in 2023.
Fuel decreased $21.1 million, or 41.6%, compared to the third quarter of 2023. Our MWh sold decreased by 124 MWh, or 9.5%, from the third quarter of 2023. The decrease in fuel costs are primarily related to our decreased electricity sales and declines in coal market pricing. We used 0.1 million less tons of coal in our electric production compared to the third quarter of 2023. The average purchase price per ton of coal used in the plant on a segment basis, was $53.33 in the third quarter of 2024, decreasing from $76.94 per ton in the third quarter of 2023.
Cost of purchased power was $3.1 million during the third quarter of 2024. As noted above, when energy hours at the Merom Hub are priced below our production cost at our Merom Facility, we make net hourly purchases of power in the MISO market.
Income from operations increased $22.0 million, or 823.3%, and increased $18.39 per MWh, from the three months ended September 30, 2023. The main drivers of this change in income from operations are described in the discussion above.
2024 vs. 2023 (nine months)
Delivered energy revenues from electric operations decreased $37.3 million, or 20.2%, compared to the nine months ended September 30, 2023 due to suppressed MISO pricing (~75% of total energy hours at the Merom Hub being priced below our production cost at our Merom Facility), reductions in demand for Power and higher demand for Gas as Gas inventories remained high with a continued decline in average spot pricing per MBtu of $2.11 compared to $2.47 during the same nine-month period in 2023.
Fuel decreased $70.5 million, or 48.0%, compared to the nine months ended September 30, 2023. Production decreased by 942 MWh, or 26.1%, from the first nine months of 2023. The decrease in fuel costs are due to the expiration of a coal purchase contract in June of 2023 and declines in coal market pricing. We used 0.5 million less tons of coal in our electric production compared to the nine months ended September 30, 2023. The average purchase price per ton of coal used in the plant on a segment basis, was $54.83 for the nine months ended September 30, 2024, decreasing from $62.37 during the nine months ended September 30, 2023. As discussed above, average spot prices for Gas were down per MMBtu decreasing the demand for Electric Power.
Cost of purchased power was $7.7 million during the first nine months of 2024. As noted above, when energy hours at the Merom Hub are priced below our production cost at our Merom Facility, we make net hourly purchases of power in the MISO market.
Other operating and maintenance costs increased $9.3 million, or 56.0%, compared to the nine months ended September 30, 2023 primarily due to our planned maintenance outage during the second quarter of 2024 which resulted in $7.0 million in additional costs for the period.
Income from operations increased $16.1 million, or 63.7%, and increased $7.23 per MWh, from the nine months ended September 30, 2023. The main drivers of this change in income from operations are described in the discussion above.
27
Coal Operations
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
||||||||
|
|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
||||
|
|
|
(in thousands) |
|
(in thousands) |
||||||||
|
OPERATING REVENUES: |
|
$ |
49,331 |
|
$ |
134,896 |
|
$ |
162,630 |
|
$ |
343,267 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fuel |
|
|
572 |
|
|
1,537 |
|
|
2,557 |
|
|
5,712 |
|
Other operating and maintenance costs |
|
|
27,031 |
|
|
59,700 |
|
|
80,419 |
|
|
122,882 |
|
Utilities |
|
|
3,094 |
|
|
4,421 |
|
|
10,639 |
|
|
13,041 |
|
Labor |
|
|
19,361 |
|
|
29,934 |
|
|
66,241 |
|
|
90,827 |
|
Depreciation, depletion and amortization |
|
|
9,013 |
|
|
11,508 |
|
|
28,671 |
|
|
37,249 |
|
Asset retirement obligations accretion |
|
|
295 |
|
|
309 |
|
|
869 |
|
|
912 |
|
Exploration costs |
|
|
62 |
|
|
171 |
|
|
179 |
|
|
682 |
|
General and administrative |
|
|
2,082 |
|
|
2,552 |
|
|
8,012 |
|
|
7,747 |
|
Total operating expenses |
|
|
61,510 |
|
|
110,132 |
|
|
197,587 |
|
|
279,052 |
|
INCOME (LOSS) FROM OPERATIONS |
|
$ |
(12,179) |
|
$ |
24,764 |
|
$ |
(34,957) |
|
$ |
64,215 |
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
||||||||
|
|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
||||
|
|
|
(per ton) |
|
(per ton) |
||||||||
|
Tons Sold (in thousands) |
|
|
926 |
|
|
2,054 |
|
|
2,989 |
|
|
5,461 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING REVENUES: |
|
$ |
53.27 |
|
$ |
65.67 |
|
$ |
54.41 |
|
$ |
62.86 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fuel |
|
|
0.62 |
|
|
0.75 |
|
|
0.86 |
|
|
1.05 |
|
Other operating and maintenance costs |
|
|
29.19 |
|
|
29.07 |
|
|
26.90 |
|
|
22.50 |
|
Utilities |
|
|
3.34 |
|
|
2.15 |
|
|
3.56 |
|
|
2.39 |
|
Labor |
|
|
20.91 |
|
|
14.57 |
|
|
22.16 |
|
|
16.63 |
|
Depreciation, depletion and amortization |
|
|
9.73 |
|
|
5.60 |
|
|
9.59 |
|
|
6.82 |
|
Asset retirement obligations accretion |
|
|
0.32 |
|
|
0.15 |
|
|
0.29 |
|
|
0.17 |
|
Exploration costs |
|
|
0.07 |
|
|
0.08 |
|
|
0.06 |
|
|
0.12 |
|
General and administrative |
|
|
2.25 |
|
|
1.24 |
|
|
2.68 |
|
|
1.42 |
|
Total operating expenses |
|
|
66.43 |
|
|
53.61 |
|
|
66.10 |
|
|
51.10 |
|
INCOME (LOSS) FROM OPERATIONS: |
|
$ |
(13.16) |
|
$ |
12.06 |
|
$ |
(11.69) |
|
$ |
11.76 |
2024 vs. 2023 (third quarter)
Segment operating revenues from coal operations decreased $85.6 million, or 63.4%, from the third quarter of 2023. Consolidated operating revenues from coal operations decreased $65.2 million, or 66.6%, from the third quarter of 2023. These declines were due to reductions in volume and average sales price for our coal. Our average sales price, on a segment basis, decreased $12.40 per ton and we sold 1.1 million tons less compared to the third quarter of 2023. Our average sales price on a consolidated basis decreased $7.91 per ton and we sold 1.0 million tons less compared to the third quarter of 2023. Operating revenues for the third quarter of 2024 include $16.7 million in sales to the Merom plant which were eliminated in the consolidation.
Other operating and maintenance costs decreased $32.7 million, or 54.7%, and labor decreased $10.6 million, or 35.3%, from the third quarter of 2023. These changes were driven by impacts from the Reorganization Plan disclosed in “Item 1. Note 16 — Organizational Restructuring” to the Condensed Consolidated Financial Statements. During the third quarter 2024, underground costs such as roof support and belt maintenance, fuel and utilities, as well as maintenance costs all had significant decreases in comparison to the third quarter of 2023. We produced 0.7 million tons less in the third quarter of 2024 than the third quarter of 2023.
28
Depreciation, depletion, and amortization decreased $2.5 million, or 21.7%, from the third quarter of 2023 due to decreases in coal production and the remaining useful lives of the mine development assets.
Income (loss) from operations decreased $36.9 million, or 149.2%, and decreased $25.22 per ton, from the three months ended September 30, 2023. The main drivers of this change in income (loss) from operations are described in the discussion above.
2024 vs. 2023 (nine months)
Segment operating revenues from coal operations decreased $180.6 million, or 52.6%, from the nine months ended September 30, 2023. Consolidated operating revenues from coal operations decreased $166.0 million, or 58.7%, from the nine months ended September 30, 2023. These declines were due to reductions in volume and average sales price for our coal. Our average sales price, on a segment basis, decreased $8.45 per ton and we sold 2.5 million tons less compared to the first nine months of 2023. Our average sales price, on a consolidated basis, for the first nine months of 2024, decreased $4.63 per ton and we sold 2.6 million tons less compared to the first nine months of 2023.
Other operating and maintenance costs decreased $42.5 million, or 34.6%, and labor decreased $24.6 million, or 27.1%, from the nine months ended September 30, 2023. These changes were driven by the Reorganization Plan disclosed in “Item 1. Note 16 — Organizational Restructuring” to the Condensed Consolidated Financial Statements. During the first nine months of 2024, we produced 2.3 million tons less on a segment basis than the first nine months of 2023. Additionally, we went from 5 mines producing to 1 mine producing and reduced our coal employee headcount by 313 employees as part of the Reorganization Plan.
Depreciation, depletion, and amortization decreased $8.6 million, or 23.0%, from the nine months ended September 30, 2023 due to decreases in coal production and the remaining useful lives of the mine development assets.
Income (loss) from operations decreased $99.2 million, or 154.4%, and decreased $23.45 per ton, from the nine months ended September 30, 2023. The main drivers of this change in income from operations are described in the discussion above.
Quarterly coal sales and cost data on a segment basis are as follows (in thousands, except per ton data and wash plant recovery percentage):
|
All Mines |
|
4th 2023 |
|
1st 2024 |
|
2nd 2024 |
|
3rd 2024 |
|
T4Qs |
|
|||||
|
Tons produced |
|
|
1,331 |
|
|
1,271 |
|
|
889 |
|
|
873 |
|
|
4,364 |
|
|
Tons sold |
|
|
1,461 |
|
|
1,214 |
|
|
849 |
|
|
926 |
|
|
4,450 |
|
|
Wash plant recovery in % |
|
|
62 |
% |
|
60 |
% |
|
59 |
% |
|
60 |
% |
|
|
|
|
Capex |
|
$ |
17,867 |
|
$ |
8,632 |
|
$ |
7,560 |
|
$ |
6,810 |
|
$ |
40,869 |
|
|
Maintenance capex |
|
$ |
13,567 |
|
$ |
8,085 |
|
$ |
6,014 |
|
$ |
4,208 |
|
$ |
31,874 |
|
|
Maintenance capex per ton sold |
|
$ |
9.29 |
|
$ |
6.66 |
|
$ |
7.08 |
|
$ |
4.54 |
|
$ |
7.16 |
|
|
All Mines |
|
4th 2022 |
|
1st 2023 |
|
2nd 2023 |
|
3rd 2023 |
|
T4Qs |
|
|||||
|
Tons produced |
|
|
1,721 |
|
|
2,006 |
|
|
1,723 |
|
|
1,594 |
|
|
7,044 |
|
|
Tons sold |
|
|
1,664 |
|
|
1,693 |
|
|
1,714 |
|
|
2,054 |
|
|
7,125 |
|
|
Wash plant recovery in % |
|
|
68 |
% |
|
70 |
% |
|
67 |
% |
|
65 |
% |
|
|
|
|
Capex |
|
$ |
12,368 |
|
$ |
12,639 |
|
$ |
14,445 |
|
$ |
11,570 |
|
$ |
51,022 |
|
|
Maintenance capex |
|
$ |
5,748 |
|
$ |
7,778 |
|
$ |
9,754 |
|
$ |
7,938 |
|
$ |
31,218 |
|
|
Maintenance capex per ton |
|
$ |
3.45 |
|
$ |
4.59 |
|
$ |
5.69 |
|
$ |
3.86 |
|
$ |
4.38 |
|
29
Presentation of Consolidated Information
EARNINGS (LOSS) PER SHARE
|
|
|
4th 2023 |
|
1st 2024 |
|
2nd 2024 |
|
3rd 2024 |
||||
|
Basic |
|
$ |
(0.31) |
|
$ |
(0.05) |
|
$ |
(0.27) |
|
$ |
0.04 |
|
Diluted |
|
$ |
(0.31) |
|
$ |
(0.05) |
|
$ |
(0.27) |
|
$ |
0.04 |
|
|
|
4th 2022 |
|
1st 2023 |
|
2nd 2023 |
|
3rd 2023 |
||||
|
Basic |
|
$ |
0.91 |
|
$ |
0.67 |
|
$ |
0.51 |
|
$ |
0.49 |
|
Diluted |
|
$ |
0.83 |
|
$ |
0.61 |
|
$ |
0.47 |
|
$ |
0.44 |
INCOME TAXES
Our effective tax rate (ETR) is estimated at ~24% and ~13% for the nine months ended September 30, 2024 and 2023, respectively. For the nine months ended September 30, 2024, we recorded income taxes using an estimated annual effective tax rate based upon projected annual income (loss), forecasted permanent tax differences, discrete items, and statutory rates in states in which we operate. Our ETR differs from the statutory rate due primarily to statutory depletion in excess of tax basis and changes in the valuation allowance. The deduction for statutory percentage depletion does not necessarily change proportionately to changes in income (loss) before income taxes.
RESTRICTED STOCK GRANTS
See “Item 1. Financial Statements - Note 9 - Stock Compensation Plans” for a discussion of RSUs.
CRITICAL ACCOUNTING ESTIMATES
We believe that the estimates of coal reserves, asset retirement obligation liabilities, deferred tax accounts, valuation of inventory, and the estimates used in impairment analysis are our critical accounting estimates.
The reserve estimates are used in the depreciation, depletion, and amortization calculations and our internal cash flow projections. If these estimates turn out to be materially under or over-stated, our depreciation, depletion and amortization expense and impairment test may be affected. The process of estimating reserves is complex, requiring significant judgment in the evaluation of all available geological, geophysical, engineering and economic data. The reserve estimates are prepared by professional engineers, both internal and external, and are subject to change over time as more data becomes available. Changes in the reserves estimates from the prior year were nominal.
SMCRA and similar state statutes require, among other things, that surface disturbance be restored in accordance with specified standards and approved reclamation plans. SMCRA requires us to restore affected surface areas to approximate the original contours as contemporaneously as practicable with the completion of surface mining operations. Federal law and some states impose on mine operators the responsibility for replacing certain water supplies damaged by mining operations and repairing or compensating for damage to certain structures occurring on the surface as a result of mine subsidence, a consequence of longwall mining and possibly other mining operations.
Obligations are reflected at the present value of their future cash flows. We reflect accretion of the obligations for the period from the date they are incurred through the date they are extinguished. The ARO assets are amortized using the units-of-production method over estimated recoverable (proven and probable) reserves. We use credit-adjusted risk-free discount rates ranging from 7% to 10% to discount the obligation, inflation rates anticipated during the time to reclamation, and cost estimates prepared by its engineers inclusive of market risk premiums. Activities include reclamation of pit and support acreage at surface mines, sealing portals at underground mines, and reclamation of refuse areas and slurry ponds.
30
Accretion expense is recognized on the obligation through the expected settlement date. On at least an annual basis, we review our entire reclamation liability and make necessary adjustments for permit changes as granted by state authorities, changes in the timing and extent of reclamation activities, and revisions to cost estimates and productivity assumptions, to reflect current experience. Any difference between the recorded amount of the liability and the actual cost of reclamation will be recognized as a gain or loss when the obligation is settled.
We have analyzed our filing positions in all of the federal and state jurisdictions where we are required to file income tax returns, as well as all open tax years in these jurisdictions. We identified our federal tax return and our Indiana state tax return as “major” tax jurisdictions. We believe that our income tax filing positions and deductions would be sustained on audit and do not anticipate any adjustments that will result in a material change to our consolidated financial position. We have not taken any significant uncertain tax positions, and our tax provisions and returns are prepared by a large public accounting firm with significant experience in energy related industries. Changes to the estimates from reported amounts in the prior year were not significant.
Inventory is valued at a lower of cost or net realizable value (NRV). Anticipated utilization of low sulfur, higher-cost coal from our Freelandville, and Prosperity mines has the potential to create NRV adjustments as our estimated needs change. The NRV adjustments are subject to change as our costs may fluctuate due to higher or lower production and our NRV may fluctuate based on sales contracts we enter into from time to time. As of September 30, 2024, and December 31, 2023, coal inventory includes NRV adjustments of $1.8 million and $2.0 million, respectively.
Long-lived assets used in operations are depreciated and assessed for impairment annually or whenever changes in facts and circumstances indicate a possible significant deterioration in future cash flows is expected to be generated by an asset group. For impairment assessments, management groups individual assets based on a judgmental assessment of the lowest level for which there are identifiable cash flows that are largely independent of the cash flows of other groups of assets. The determination of the lowest level of cash flows is largely based on nature of production, common infrastructure, common sales points, common regulation and management oversight to make such determinations. These determinations could impact the determination and measurement of a potential asset impairment. This cash flow analysis is largely dependent upon the operating plans of the Company, which are reviewed by the Company and its Board of Directors no less than annually, normally during the 4 th quarter of each year. Changes in anticipated activity levels, pricing or operating expenses can have significant effects on the ultimate value of the undiscounted cash flow analysis.
During the third quarter of 2024, the Company began a review of its Oaktown mining facilities and future mining plan related to this complex. This review will continue through the fourth quarter of 2024. Should the anticipated future mining activity related to the Company’s Oaktown mining facilities be reduced, an impairment of certain mining assets could occur. The amount of any such potential impairment, if any, is not currently estimable and will ultimately be based upon the finalized operating plans of the Company as approved by its Board of Directors, market driven pricing and cost trends, which are not known at this time. Nevertheless, the carrying amount of the Company’s mining assets is material to its condensed consolidated balance sheet at September 30, 2024 and any future impairment of such assets could therefore be material.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
No material changes from the disclosure in our 2023 Annual Report on Form 10-K .
31
ITEM 4. CONTROLS AND PROCEDURES
DISCLOSURE CONTROLS
We maintain a system of disclosure controls and procedures that are designed for the purpose of ensuring that information required to be disclosed in our SEC reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our CEO and CFO and as appropriate to allow timely decisions regarding required disclosure.
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our CEO and CFO of the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, our CEO and CFO concluded that our disclosure controls and procedures are effective.
There have been no changes to our internal control over financial reporting during the quarter ended September 30, 2024, that materially affected or are reasonably likely to materially affect our internal control over financial reporting.
32
PART II -
ITEM 4. MINE SAFETY DISCLOSURES
See Exhibit 95.1 to this Form 10-Q for a listing of our mine safety violations.
ITEM 6. EXHIBITS
|
Exhibit No. |
|
Document |
|
10.1 |
|
|
|
10.2 |
|
Second Amended to the Fourth Amended and Restated Credit Agreement dated as of October 23, 2024 |
|
31.1 |
|
|
|
31.2 |
|
|
|
32 |
|
|
|
95.1 |
|
|
|
101.INS |
|
Inline XBRL Instance Document |
|
101.SCH |
|
Inline XBRL Schema Document |
|
101.CAL |
|
Inline XBRL Calculation Linkbase Document |
|
101.LAB |
|
Inline XBRL Labels Linkbase Document |
|
101.PRE |
|
Inline XBRL Presentation Linkbase Document |
|
101.DEF |
|
Inline XBRL Definition Linkbase Document |
|
104 |
|
Cover Page Interactive Data File (embedded with the Inline XBRL document) |
|
|
|
|
33
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.
|
|
HALLADOR ENERGY COMPANY |
|
|
|
|
Date: November 12, 2024 |
/s/ MARJORIE HARGRAVE |
|
|
Marjorie Hargrave, CFO (Principal Financial Officer and Principal Accounting Officer) |
34