hcc-20220930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2022


☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________

Commission File Number: 001-38061

Warrior Met Coal, Inc.

(Exact name of registrant as specified in its charter)


Delaware									81-0706839
(State or other jurisdiction of incorporation or organization)									(I.R.S. Employer Identification No.)


16243 Highway 216, Brookwood, Alabama									35444
(Address of Principal Executive Offices)									(Zip Code)

(205) 554-6150

(Registrant's telephone number, including area code)

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


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $.01 per share	HCC	New York Stock Exchange
Rights to Purchase Series A Junior Participating Preferred Stock, par value $0.01 per share	--	New York Stock Exchange

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No o

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

Large accelerated 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. o

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

Number of shares of common stock outstanding as of October 31, 2022: 51,653,568

TABLE OF CONTENTS


Forward-Looking Statements		1

Part I. Financial Information		3
Item 1.	Financial Statements	3
	Condensed Statements of Operations for the three and nine months ended September 30, 2022 (Unaudited) and September 30, 2021 (Unaudited)	4
	Condensed Balance Sheets as of S eptember 30, 2022 (Unaudited) and December 31, 2021	5
	Condensed Statements of Changes in Stockholders' Equity for the three and nine months ended September 30, 2022 (Unaudited) and September 30, 2021 (Unaudited)	6
	Condensed Statements of Cash Flows for the nine months ended September 30, 2022 (Unaudited) and September 30, 2021 (Unaudited)	7
	Notes to Condensed Financial Statements	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	34

Part II. Other Information		34
Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36
Item 3.	Defaults on Senior Securities	36
Item 4.	Mine Safety Disclosures	37
Item 5.	Other Information	37
Item 6.	Exhibits	38

Signatures		39

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this "Form 10-Q" or "this report") includes statements of our expectations, intentions, plans and beliefs that constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and are intended to come within the safe harbor protection provided by those sections. These statements, which involve risks and uncertainties, relate to analyses and other information that are based on forecasts of future results and estimates of amounts not yet determinable and may also relate to our future prospects, developments and business strategies, including any potential changes to our production and sales volumes as a result of our negotiations with the United Mine Workers of America (the "UMWA"). We have used the words “anticipate,” “approximately,” “assume,” “believe,” “could,” “contemplate,” “continue,” “estimate,” “expect,” “target,” “future,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should” and similar terms and phrases, including in references to assumptions, in this report to identify forward-looking statements. These forward-looking statements are made based on expectations and beliefs concerning future events affecting us and are subject to uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control, that could cause our actual results to differ materially from those matters expressed in or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to:

•the impact of global pandemics, such as the novel coronavirus (“COVID-19”) pandemic, including its impact on our business, employees, suppliers and customers, the metallurgical ("met") coal and steel industries, and global economic markets;

•the impacts of inflation on our business, including on our costs and our profitability;

•our relationships with, and other conditions affecting, our customers;

•successful implementation of our business strategies;

•unavailability of, or price increases in, the transportation of our met coal;

•significant cost increases and fluctuations, and delay in the delivery of raw materials, mining equipment and purchased components;

•work stoppages, negotiation of labor contracts, employee relations and workforce availability;

•competition and foreign currency fluctuations;

•litigation, including claims not yet asserted;

•terrorist attacks or security threats, including cybersecurity threats;

•global steel demand and the downstream impact on met coal prices;

•impact of weather and natural disasters on demand and production;

•a substantial or extended decline in pricing or demand for met coal;

•inherent difficulties and challenges in the coal mining industry that are beyond our control;

•our ability to develop or acquire met coal reserves in an economically feasible manner;

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

•inaccuracies in our estimates of our met coal reserves;

•costs associated with our workers’ compensation benefits;

•challenges to our licenses, permits and other authorizations;

•challenges associated with environmental, health and safety laws and regulations;

•regulatory requirements associated with federal, state and local regulatory agencies, and such agencies’ authority to order temporary or permanent closure of our mines;

•climate change concerns and our operations’ impact on the environment;

•failure to obtain or renew surety bonds on acceptable terms, which could affect our ability to secure reclamation and coal lease obligations;

•our obligations surrounding reclamation and mine closure;

•our substantial indebtedness and debt service requirements;

•our ability to comply with covenants in our ABL Facility (as defined below) and the Indenture (as defined below);

•adequate liquidity and the cost, availability and access to capital and financial markets;

•our expectations regarding our future cash tax rate as well as our ability to effectively utilize our net operating loss carry forwards (“NOLs”);

•our ability to continue paying our quarterly dividend or pay any special dividend;

•the timing and amount of any stock repurchases we make under our Stock Repurchase Program (as defined below) or otherwise;

•any consequences related to our transfer restrictions under our certificate of incorporation and our NOL rights agreement; and

•geopolitical events, including the effects of the Russia-Ukraine war.

These forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. Forward-looking statements should, therefore, be considered in light of various factors, including those set forth under “Part II, Item 1A. Risk Factors,” “Part I, Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Form 10-Q, and those set forth from time to time in our other filings with the Securities and Exchange Commission (the “SEC”). These documents are available through our website at www.warriormetcoal.com or through the SEC's Electronic Data Gathering and Analysis Retrieval system at http://www.sec.gov. In light of such risks and uncertainties, we caution you not to place undue reliance on these forward-looking statements.

When considering forward-looking statements made by us in this Form 10-Q, or elsewhere, such statements speak only as of the date on which we make them. New risks and uncertainties arise from time to time, and it is impossible for us to predict these events or how they may affect us. We have no duty to, and do not intend to, update or revise the forward-looking statements in this Form 10-Q after the date of this Form 10-Q, except as may be required by law. In light of these risks and uncertainties, you should keep in mind that any forward-looking statement made in this Form 10-Q or elsewhere might not occur.

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

WARRIOR MET COAL, INC.

CONDENSED STATEMENTS OF OPERATIONS

(in thousands, except per-share amounts)

(Unaudited)


	For the three months ended September 30,				For the nine months ended September 30,
	2022		2021		2022		2021
Revenues:
Sales	$	371,944	$	199,745	$	1,377,665	$	631,493
Other revenues	18,236		2,722		16,323		12,178
Total revenues	390,180		202,467		1,393,988		643,671
Costs and expenses:
Cost of sales (exclusive of items shown separately below)	203,441		91,973		529,869		399,088
Cost of other revenues (exclusive of items shown separately below)	8,417		6,654		26,120		22,792
Depreciation and depletion	30,805		28,967		86,973		102,021
Selling, general and administrative	10,557		7,430		36,985		26,182
Business interruption	7,106		6,872		20,084		13,892
Idle mine	5,418		9,327		10,141		20,203
Total costs and expenses	265,744		151,223		710,172		584,178
Operating income	124,436		51,244		683,816		59,493
Interest expense, net	(5,701)		(8,784)		(20,706)		(25,954)

Other income	—		1,400		675		1,291
Income before income tax expense	118,735		43,860		663,785		34,830
Income tax expense	20,332		5,433		122,141		22,439
Net income	$	98,403	$	38,427	$	541,644	$	12,391
Basic and diluted net income per share:
Net income per share—basic	$	1.91	$	0.75	$	10.49	$	0.24
Net income per share—diluted	$	1.90	$	0.74	$	10.48	$	0.24
Weighted average number of shares outstanding—basic	51,654		51,416		51,612		51,315
Weighted average number of shares outstanding—diluted	51,744		51,585		51,699		51,424
Dividends per share:	$	0.86	$	0.05	$	1.48	$	0.15

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

WARRIOR MET COAL, INC.

CONDENSED BALANCE SHEETS

(in thousands, except share and per-share data)


	September 30, 2022 (Unaudited)		December 31, 2021

ASSETS
Current assets:
Cash and cash equivalents	$	745,666	$	395,839
Short-term investments	8,546		8,505
Trade accounts receivable	215,172		122,150

Inventories, net	143,789		59,619
Prepaid expenses and other receivables	28,390		41,088
Total current assets	1,141,563		627,201
Mineral interests, net	90,502		93,180
Property, plant and equipment, net	677,718		603,412

Deferred income taxes	5,181		125,276
Other long-term assets	20,319		15,142
Total assets	$	1,935,283	$	1,464,211
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	51,885	$	33,829
Accrued expenses	78,797		54,847
Short-term financing lease liabilities	23,083		23,622
Other current liabilities	9,184		9,830

Total current liabilities	162,949		122,128
Long-term debt	303,916		339,806
Asset retirement obligations	69,583		65,536
Long-term financing lease liabilities	15,033		28,434
Other long-term liabilities	36,169		36,324
Total liabilities	587,650		592,228

Stockholders’ Equity:
Common stock, $0.01 par value, (140,000,000 shares authorized as of September 30, 2022 and December 31, 2021; 53,875,409 issued and 51,653,568 outstanding as of September 30, 2022; 53,659,643 issued and 51,437,802 outstanding as of December 31, 2021)	539		537
Preferred stock, $0.01 par value per share (10,000,000 shares authorized; no shares issued and outstanding)	—		—
Treasury stock, at cost (2,221,841 shares as of September 30, 2022 and December 31, 2021)	(50,576)		(50,576)
Additional paid in capital	266,585		256,059
Retained earnings	1,131,085		665,963
Total stockholders’ equity	1,347,633		871,983
Total liabilities and stockholders’ equity	$	1,935,283	$	1,464,211

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

WARRIOR MET COAL, INC.

CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(in thousands)

(Unaudited)


	For the three months ended September 30,				For the nine months ended September 30,
	2022		2021		2022		2021

Common Stock
Balance, beginning of period	$	537	$	536	$	537	$	534
Issuance of shares	2		—		2		2
Balance, end of period	539		536		539		536
Preferred Stock
Balance, beginning of period	—		—		—		—
Balance, end of period	—		—		—

SEC Form 10-Q filed by Warrior Met Coal Inc.