hnrg20230630

hnrg20230630_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

	For the quarterly period ended June 30, 2023
OR
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number:001-34743

HALLADOR ENERGY COMPANY

(www.halladorenergy.com)

Colorado

(State of incorporation)

84-1014610

(IRS Employer Identification No.)

1183 East Canvasback Drive, Terre Haute, Indiana

(Address of principal executive offices)

47802

(Zip Code)

Registrant’s telephone number, including area code: 812.299.2800

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Shares, $.01 par value	HNRG	Nasdaq

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of 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). Yes ☑ No ☐

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

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

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

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

As of August 7, 2023, we had 33,142,403 shares of common stock outstanding.

Table of Contents

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION	1

ITEM 1. FINANCIAL STATEMENTS (Unaudited)	1

Condensed Consolidated Balance Sheets	1

Condensed Consolidated Statements of Operations	2

Condensed Consolidated Statements of Cash Flows	3

Condensed Consolidated Statements of Stockholders’ Equity	4

Notes to Condensed Consolidated Financial Statements	5

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	16

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	23

ITEM 4. CONTROLS AND PROCEDURES	23

PART II - OTHER INFORMATION	24

ITEM 4. MINE SAFETY DISCLOSURES	24

ITEM 5. OTHER INFORMATION	24

ITEM 6. EXHIBITS	24

SIGNATURES	25

Table of Contents

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Hallador Energy Company

Condensed Consolidated Balance Sheets

(in thousands, except per share data)

(unaudited)

	*June 30,*			*December 31,*
	*2023*			*2022*
ASSETS
Current assets:
Cash and cash equivalents	$	2,337		$	3,009
Restricted cash		4,033			3,417
Accounts receivable		21,428			29,889
Inventory		47,945			49,796
Parts and supplies		33,859			28,295
Contract asset - coal purchase agreement		—			19,567
Prepaid expenses		3,100			4,546
Total current assets		112,702			138,519
Property, plant and equipment:
Land and mineral rights		115,506			115,595
Buildings and equipment		554,271			534,129
Mine development		149,747			140,108
Total property, plant and equipment		819,524			789,832
Less - accumulated depreciation, depletion and amortization		(342,734	)		(309,370	)
Total property, plant and equipment, net		476,790			480,462
Investment in Sunrise Energy		3,215			3,988
Other assets		7,182			7,585
Total Assets	$	599,889		$	630,554
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of bank debt, net	$	17,638		$	33,031
Accounts payable and accrued liabilities		70,933			82,972
Deferred revenue		41,106			35,485
Contract liability - power purchase agreement and capacity payment reduction		48,087			88,114
Total current liabilities		177,764			239,602
Long-term liabilities:
Long-term bank debt, excluding current maturities, net		54,700			49,713
Convertible note payable		10,000			10,000
Convertible notes payable - related party		9,000			9,000
Deferred income taxes		9,036			4,606
Asset retirement obligations		17,235			17,254
Contract liability - power purchase agreement		65,721			84,096
Other		1,551			1,259
Total long-term liabilities		167,243			175,928
Total liabilities		345,007			415,530
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.10 par value, 10,000 shares authorized; none issued and outstanding		—			—
Common stock, $.01 par value, 100,000 shares authorized; 33,137 and 32,983 issued and outstanding, as of June 30, 2023 and December 31, 2022, respectively		332			330
Additional paid-in capital		119,678			118,788
Retained earnings		134,872			95,906
Total stockholders’ equity		254,882			215,024
Total liabilities and stockholders’ equity	$	599,889		$	630,554

See accompanying notes to the condensed consolidated financial statements.

Table of Contents

Hallador Energy Company

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)

	*Three Months Ended June 30,*						*Six Months Ended June 30,*
	*2023*			*2022*			*2023*			*2022*
SALES AND OPERATING REVENUES:
Coal sales	$	88,574		$	64,161		$	183,176		$	121,171
Electric sales		71,017			—		$	163,409			—
Other revenues		1,603			1,768			2,943			3,665
Total revenue		161,194			65,929			349,528			124,836
EXPENSES:
Operating expenses		115,420			51,394			248,941			105,995
Depreciation, depletion and amortization		17,169			11,164			35,145			20,695
Asset retirement obligations accretion		461			250			912			496
Exploration costs		305			215			511			272
General and administrative		5,595			3,722			12,542			6,871
Total operating expenses		138,950			66,745			298,051			134,329

INCOME (LOSS) FROM OPERATIONS		22,244			(816	)		51,477			(9,493	)

Interest expense (1)		(3,541	)		(2,337	)		(7,440	)		(4,121	)
Equity method investment (loss) income		(217	)		188			(148	)		338
NET INCOME (LOSS) BEFORE INCOME TAXES		18,486			(2,965	)		43,889			(13,276	)

INCOME TAX EXPENSE:
Current		61			—			493			—
Deferred		1,510			421			4,430			244
Total income tax expense		1,571			421			4,923			244

NET INCOME (LOSS)	$	16,915		$	(3,386	)	$	38,966		$	(13,520	)

NET INCOME (LOSS) PER SHARE:
Basic	$	0.51		$	(0.11	)	$	1.18		$	(0.44	)
Diluted	$	0.47		$	(0.11	)	$	1.08		$	(0.44	)

WEIGHTED AVERAGE SHARES OUTSTANDING
Basic		33,137			30,809			33,061			30,797
Diluted		36,708			30,809			36,696			30,797

(1) Interest Expense:
Interest on bank debt	$	2,055		$	1,712		$	4,310		$	3,422
Other interest		462			58			894			58
Amortization and swap-related interest:
Payments on interest rate swap, net of changes in value		—			(250	)		—			(867	)
Amortization of debt issuance costs		1,024			817			2,236			1,508
Total amortization and swap related interest		1,024			567			2,236			641
Total interest expense	$	3,541		$	2,337		$	7,440		$	4,121

See accompanying notes to the condensed consolidated financial statements.

Table of Contents

Hallador Energy Company

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

	*Six Months Ended June 30,*
	*2023*			*2022*
OPERATING ACTIVITIES:
Net income (loss)	$	38,966		$	(13,520	)
Deferred income taxes		4,430			244
Equity income (loss) – Sunrise Energy		148			(338	)
Cash distribution - Sunrise Energy		625			—
Depreciation, depletion, and amortization		35,145			20,695
Loss on sale of assets		58			(367	)
Change in fair value of interest rate swaps		—			(867	)
Amortization of debt issuance costs		2,236			1,508
Asset retirement obligations accretion		912			496
Cash paid on asset retirement obligation reclamation		(931	)		(1,184	)
Stock-based compensation		2,001			108
Provision for loss on customer contracts		—			159
Amortization of contract asset and contract liabilities		(22,162	)		—
Other		704			485
Change in operating assets and liabilities:
Accounts receivable		8,461			(3,571	)
Inventory		(9,322	)		(6,107	)
Parts and supplies		(5,564	)		(2,232	)
Prepaid expenses		282			705
Accounts payable and accrued liabilities		(11,867	)		4,065
Deferred revenue		121			—
Cash provided by operating activities		44,243			279
INVESTING ACTIVITIES:
Capital expenditures		(30,610	)		(22,903	)
Proceeds from sale of equipment		62			758
Cash used in investing activities		(30,548	)		(22,145	)
FINANCING ACTIVITIES:
Payments on bank debt		(37,013	)		(14,700	)
Borrowings of bank debt		26,000			33,700
Issuance of convertible note		—			1,000
Issuance of related party convertible notes payable		—			9,000
Debt issuance costs		(1,629	)		(590	)
Taxes paid on vesting of RSUs		(1,109	)		—
Cash (used in) provided by financing activities		(13,751	)		28,410
(Decrease) increase in cash, cash equivalents, and restricted cash		(56	)		6,544
Cash, cash equivalents, and restricted cash, beginning of period		6,426			5,829
Cash, cash equivalents, and restricted cash, end of period	$	6,370		$	12,373
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH CONSIST OF THE FOLLOWING:
Cash and cash equivalents	$	2,337		$	8,882
Restricted cash		4,033			3,491
	$	6,370		$	12,373

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest	$	5,010		$	4,055
SUPPLEMENTAL NON-CASH FLOW INFORMATION:
Change in capital expenditures included in accounts payable and prepaid expense	$	426		$	2,004
Debt issuance costs included in accounts payable and accrued liabilities	$	—		$	853
Convertible notes payable and related party convertible notes payable converted to common stock	$	—		$	10,000

See accompanying notes to the condensed consolidated financial statements.

Table of Contents

Hallador Energy Company

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands)

(unaudited)

							*Additional*					*Total*
	*Common Stock Issued*						*Paid-in*			*Retained*		*Stockholders'*
	*Shares*			*Amount*			*Capital*			*Earnings*		*Equity*
Balance, March 31, 2023		33,137		$	332		$	118,897		$	117,957	$	237,186
Stock-based compensation		—			—			781			—		781
Net income		—			—			—			16,915		16,915
Balance, June 30, 2023		33,137		$	332		$	119,678		$	134,872	$	254,882

Balance, December 31, 2022		32,983		$	330		$	118,788		$	95,906	$	215,024
Stock-based compensation		—			—			2,001			—		2,001
Stock issued on vesting of RSUs		275			3			(3	)		—		—
Taxes paid on vesting of RSUs		(121	)		(1	)		(1,108	)		—		(1,109	)
Net income		—			—			—			38,966		38,966
Balance, June 30, 2023		33,137		$	332		$	119,678		$	134,872	$	254,882

Additional

Total

Common Stock Issued

Paid-in

Retained

Stockholders'

Shares

Amount

Capital

Earnings

Equity

Balance, March 31, 2022

SEC Form 10-Q filed by Hallador Energy Company