Alpha Metallurgical Resources 10Q 2023 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


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

For the quarterly period ended September 30, 2023


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

For the transition period from to

Commission File Number 001-38735

ALPHA METALLURGICAL RESOURCES, INC.

(Exact name of registrant as specified in its charter)


Delaware						81-3015061
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification Number)

340 Martin Luther King Jr. Blvd.
Bristol, Tennessee 37620
(Address of principal executive offices, zip code)
(423) 573-0300
(Registrant’s telephone number, including area code)

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. x Yes ¨ No

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

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


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	AMR	New York Stock Exchange

Number of shares of the registrant’s Common Stock, $0.01 par value, outstanding as of October 27, 2023: 13,283,594


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	Cautionary Note Regarding Forward-Looking Statements	4

	Part I - Financial Information
Item 1.	Financial Statements
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2023 and September 30, 2022 (Unaudited)	6
	Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2023 and September 30, 2022 (Unaudited)	7
	Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022 (Unaudited)	8
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2023 and September 30, 2022 (Unaudited)	10
	Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended September 30, 2023 and September 30, 2022 (Unaudited)	12
	Notes to Condensed Consolidated Financial Statements (Unaudited)	14
	(1) Business and Basis of Presentation	14
	(2) Revenue	14
	(3) Accumulated Other Comprehensive Loss	15
	(4) Net Income Per Share	16
	(5) Inventories, net	17
	(6) Capital Stock	17
	(7) Accrued Expenses and Other Current Liabilities	18
	(8) Long-Term Debt	18
	(9) Acquisition-Related Obligations	19
	(10) Asset Retirement Obligations	19
	(11) Fair Value of Financial Instruments and Fair Value Measurements	20
	(12) Income Taxes	21
	(13) Employee Benefit Plans	21
	(14) Related Party Transactions	22
	(15) Commitments and Contingencies	22
	(16) Segment Information	25
	(17) Subsequent Events	28
	Glossary	29
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
	Results of Operations	33
	Liquidity and Capital Resources	45
	Critical Accounting Policies and Estimates	50
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	50
Item 4.	Controls and Procedures	51


	Part II - Other Information
Item 1.	Legal Proceedings	51
Item 1A.	Risk Factors	51
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	52
Item 4.	Mine Safety Disclosures	53
Item 5.	Other Information	53
Item 6.	Exhibits	54

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report includes statements of our expectations, intentions, plans and beliefs that constitute “forward-looking statements.” 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. We have used the words “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “should” and similar terms and phrases, including references to assumptions, in this report to identify forward-looking statements, but these terms and phrases are not the exclusive means of identifying such 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 expressed in or implied by these forward-looking statements.

The following factors are among those that may cause actual results to differ materially from our forward-looking statements:

•the financial performance of the company;

•our liquidity, results of operations and financial condition;

•our ability to generate sufficient cash or obtain financing to fund our business operations;

•depressed levels or declines in coal prices;

•railroad, barge, truck, port and other transportation availability, performance and costs;

•changes in domestic or international environmental laws and regulations, and court decisions, including those directly affecting our coal mining and production and those affecting our customers’ coal usage, including potential climate change initiatives;

•our ability to obtain or renew surety bonds on acceptable terms or maintain our current bonding status;

•worldwide market demand for coal and steel, including demand for U.S. coal exports, and competition in coal markets;

•attracting and retaining key personnel and other employee workforce factors, such as labor relations;

•our ability to pay dividends on our common stock and execute our share repurchase program;

•our ability to self-insure certain of our black lung obligations without a significant increase in required collateral;

•our ability to meet collateral requirements and fund employee benefit obligations;

•inflationary pressures on supplies and labor and significant or rapid increases in commodity prices;

•disruptions in delivery or changes in pricing from third-party vendors of key equipment and materials that are necessary for our operations, such as diesel fuel, steel products, explosives, tires and purchased coal;

•our ability to consummate financing or refinancing transactions, and other services, and the form and degree of these services available to us, which may be significantly limited by the lending, investment and similar policies of financial institutions and insurance companies regarding carbon energy producers and the environmental impacts of coal combustion;

•failures in performance, or non-performance, of services by third-party contractors, including contract mining and reclamation contractors;

•disruption in third-party coal supplies;

•cybersecurity attacks or failures, threats to physical security, extreme weather conditions or other natural disasters;

•the imposition or continuation of barriers to trade, such as tariffs;

•increased volatility and uncertainty regarding worldwide markets, seaborne transportation and our customers as a result of developments in and around Ukraine and the consequent export controls and financial and economic sanctions;

•changes in, renewal or acquisition of, terms of and performance of customers under coal supply arrangements and the refusal by our customers to receive coal under agreed-upon contract terms;

•reductions or increases in customer coal inventories and the timing of those changes;

•our production capabilities and costs;

•our ability to obtain, maintain or renew any necessary permits or rights;

•the effects of the COVID-19 pandemic on our operations and the world economy;

•inherent risks of coal mining, including those that are beyond our control;

•changes in, interpretations of, or implementations of domestic or international tax or other laws and regulations, including the Inflation Reduction Act of 2022 and its related regulations;

•our relationships with, and other conditions affecting, our customers, including the inability to collect payments from our customers if their creditworthiness declines;

•our indebtedness and potential future indebtedness;

•reclamation and mine closure obligations;

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•steel and coke producers switching to alternative energy sources such as natural gas, renewables and coal from basins where we do not operate;

•our assumptions concerning economically recoverable coal reserve estimates;

•our ability to mine properties due to defects in title on leasehold interests; and

•other factors, including the other factors discussed in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section included elsewhere in this Quarterly Report on Form 10-Q and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” sections included elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2022.

The list of factors identified above is not exhaustive. We caution readers not to place undue reliance on any forward-looking statements, which are based on information currently available to us and speak only as of the dates on which they are made. When considering these forward-looking statements, you should keep in mind the cautionary statements in this report. We do not undertake any responsibility to publicly revise these forward-looking statements to take into account events or circumstances that occur after the date of this report. Additionally, except as expressly required by federal securities laws, we do not undertake any responsibility to update you on the occurrence of any unanticipated events, which may cause actual results to differ from those expressed or implied by the forward-looking statements contained in this report.

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Part I - Financial Information

Item 1. Financial Statements

ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Revenues:
Coal revenues	$	738,998	$	867,849	$	2,499,503	$	3,271,845
Other revenues	2,822		1,919		11,923		6,299
Total revenues	741,820		869,768		2,511,426		3,278,144
Costs and expenses:
Cost of coal sales (exclusive of items shown separately below)	564,608		554,055		1,687,259		1,736,826
Depreciation, depletion and amortization	32,582		27,925		94,231		83,690
Accretion on asset retirement obligations	6,376		5,921		19,129		17,822
Amortization of acquired intangibles, net	2,069		4,543		6,458		16,038
Selling, general and administrative expenses (exclusive of depreciation, depletion and amortization shown separately above)	18,053		15,095		56,251		48,339
Total other operating loss (income):
Mark-to-market adjustment for acquisition-related obligations	—		(2,954)		—		10,615
Other expense (income)	973		2,713		(1,665)		569
Total costs and expenses	624,661		607,298		1,861,663		1,913,899
Income from operations	117,159		262,470		649,763		1,364,245
Other (expense) income:
Interest expense	(1,746)		(1,754)		(5,322)		(20,055)
Interest income	4,639		1,058		8,911		1,412
Equity loss in affiliates	(6,660)		(4,821)		(11,582)		(8,318)
Miscellaneous (expense) income, net	(614)		1,594		(857)		4,534
Total other expense, net	(4,381)		(3,923)		(8,850)		(22,427)
Income before income taxes	112,778		258,547		640,913		1,341,818
Income tax expense	(18,964)		(5,730)		(94,973)		(113,953)
Net income	$	93,814	$	252,817	$	545,940	$	1,227,865

Basic income per common share	$	6.88	$	14.77	$	37.87	$	68.14
Diluted income per common share	$	6.65	$	14.27	$	36.46	$	65.31

Weighted average shares – basic	13,633,640		17,119,328		14,416,289		18,019,161
Weighted average shares – diluted	14,110,488		17,718,517		14,973,168		18,800,674

Refer to accompanying Notes to Condensed Consolidated Financial Statements.

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ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

(Amounts in thousands)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Net income	$	93,814	$	252,817	$	545,940	$	1,227,865
Other comprehensive (loss) income, net of tax:
Employee benefit plans:
Amortization of and adjustments to employee benefit costs	(581)		818		(5,373)		(2,383)
Income tax benefit	129		—		1,192		—
Total other comprehensive (loss) income, net of tax	(452)		818		(4,181)		(2,383)
Total comprehensive income	$	93,362	$	253,635	$	541,759	$	1,225,482

Refer to accompanying Notes to Condensed Consolidated Financial Statements.

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ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

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


	September 30, 2023		December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	296,059	$	301,906
Short-term investments	—		46,052
Trade accounts receivable, net of allowance for credit losses of $250 and $239 as of September 30, 2023 and December 31, 2022, respectively	432,401		407,210
Inventories, net	271,805		200,574
Short-term deposits	6,736		84,748
Short-term restricted cash	—		24,547
Prepaid expenses and other current assets	41,945		49,384
Total current assets	1,048,946		1,114,421
Property, plant, and equipment, net of accumulated depreciation and amortization of $547,451 and $491,186 as of September 30, 2023 and December 31, 2022, respectively	539,904		442,645
Owned and leased mineral rights, net of accumulated depletion and amortization of $95,541 and $77,333 as of September 30, 2023 and December 31, 2022, respectively	446,364		451,062
Other acquired intangibles, net of accumulated amortization of $47,498 and $53,719 as of September 30, 2023 and December 31, 2022, respectively	48,644		55,102
Long-term restricted investments	71,269		105,735
Long-term restricted cash	83,004		28,941
Deferred income taxes	9,080		11,378
Other non-current assets	105,749		103,195
Total assets	$	2,352,960	$	2,312,479
Liabilities and Stockholders’ Equity
Current liabilities:
Current portion of long-term debt	$	3,438	$	3,078
Trade accounts payable	121,472		106,037
Acquisition-related obligations – current	181		28,254
Accrued expenses and other current liabilities	190,119		265,256
Total current liabilities	315,210		402,625
Long-term debt	7,064		7,897
Workers’ compensation and black lung obligations	180,072		188,247
Pension obligations	90,938		110,836
Asset retirement obligations	148,100		142,048
Deferred income taxes	35,282		10,874
Other non-current liabilities	18,221		20,197
Total liabilities	794,887		882,724
Commitments and Contingencies (Note 15)
Stockholders’ Equity
Preferred stock - par value $0.01, 5.0 million shares authorized, none issued	—		—
Common stock - par value $0.01, 50.0 million shares authorized, 22.0 million issued and 13.4 million outstanding at September 30, 2023 and 21.7 million issued and 15.5 million outstanding at December 31, 2022	220		217
Additional paid-in capital	825,143		815,442
Accumulated other comprehensive loss	(16,343)		(12,162)
Treasury stock, at cost: 8.6 million shares at September 30, 2023 and 6.2 million shares at December 31, 2022	(1,051,185)		(649,061)

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Retained earnings	1,800,238		1,275,319
Total stockholders’ equity	1,558,073		1,429,755
Total liabilities and stockholders’ equity	$	2,352,960	$	2,312,479

Refer to accompanying Notes to Condensed Consolidated Financial Statements.

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ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(Amounts in thousands)


	Nine Months Ended September 30,
	2023		2022
Operating activities:
Net income	$	545,940	$	1,227,865
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization	94,231		83,690
Amortization of acquired intangibles, net	6,458		16,038
Amortization of debt issuance costs and accretion of debt discount	1,585		7,757
Mark-to-market adjustment for acquisition-related obligations	—		10,615
Gain on disposal of assets	(6,089)		(2,607)
Accretion on asset retirement obligations	19,129		17,822
Employee benefit plans, net	9,989		1,312
Deferred income taxes	27,898		11,406
Stock-based compensation	9,678		4,103
Equity loss in affiliates	11,582		8,318
Other, net	(123)		432
Changes in operating assets and liabilities	(68,472)		(87,714)
Net cash provided by operating activities	651,806		1,299,037
Investing activities:
Capital expenditures	(183,836)		(103,351)
Proceeds from disposal of assets	7,855		3,010
Cash paid for business acquired	(11,919)		—
Purchases of investment securities	(166,515)		(181,539)
Sales and maturities of investment securities	249,598		117,380
Capital contributions to equity affiliates	(21,844)		(13,832)
Other, net	24		(4,232)
Net cash used in investing activities	(126,637)		(182,564)
Financing activities:

Principal repayments of long-term debt	(1,686)		(450,484)
Dividend and dividend equivalents paid	(99,731)		(6,807)
Common stock repurchases and related expenses	(403,385)		(391,166)
Proceeds from exercise of warrants	4,322		4,771
Other, net	(1,020)		(447)
Net cash used in financing activities	(501,500)		(844,133)
Net increase in cash and cash equivalents and restricted cash	23,669		272,340
Cash and cash equivalents and restricted cash at beginning of period	355,394		182,614
Cash and cash equivalents and restricted cash at end of period	$	379,063	$	454,954

Supplemental disclosure of noncash investing and financing activities:
Financing leases and capital financing - equipment	$	2,059	$	2,083
Accrued capital expenditures	$	11,618	$	10,527
Accrued common stock repurchases	$	6,275	$	5,864
Accrued dividend payable	$	9,418	$	6,898

The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the Condensed Consolidated Balance Sheets that sum to the total of the same such amounts shown in the Condensed Consolidated Statements of Cash Flows.

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	As of September 30,
	2023		2022
Cash and cash equivalents	$	296,059	$	404,430
Short-term restricted cash	—		18,800
Long-term restricted cash	83,004		31,724
Total cash and cash equivalents and restricted cash shown in the Condensed Consolidated Statements of Cash Flows	$	379,063	$	454,954

Refer to accompanying Notes to Condensed Consolidated Financial Statements.

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ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited)

(Amounts in thousands)


	Common Stock		Additional Paid-in Capital		Accumulated Other Comprehensive (Loss) Income		Treasury Stock at Cost		(Accumulated Deficit) Retained Earnings		Total Stockholders’ Equity
Balances, December 31, 2021	$	208	$	784,743	$	(58,503)	$	(107,800)	$	(71,739)	$	546,909
Net income	—		—		—		—		400,891		400,891
Other comprehensive income, net	—		—		775		—		—		775
Stock-based compensation, issuance of common stock for share vesting, and common stock reissuances	1		(391)		—		1,572		—		1,182
Exercise of stock options	—		891		—		—		—		891
Common stock repurchases and related expenses	—		—		—		(23,840)		—		(23,840)
Warrants exercises	1		3,038		—		—		—		3,039
Balances, March 31, 2022	$	210	$	788,281	$	(57,728)	$	(130,068)	$	329,152	$	929,847
Net income	—		—		—		—		574,157		574,157
Other comprehensive loss, net	—		—		(3,976)		—		—		(3,976)
Stock-based compensation, issuance of common stock for share vesting, and common stock reissuances	—		1,249		—		152		—		1,401
Exercise of stock options	—		11		—		—		—		11
Common stock repurchases and related expenses	—		—		—		(192,958)		—		(192,958)
Warrants exercises	6		18,062		—		—		—		18,068
Cash dividend and dividend equivalents declared ($0.375 per share)	—		—		—		—		(6,977)		(6,977)
Balances, June 30, 2022	$	216	$	807,603	$	(61,704)	$	(322,874)	$	896,332	$	1,319,573
Net income	—		—		—		—		252,817		252,817
Other comprehensive income, net	—		—		818		—		—		818
Stock-based compensation, issuance of common stock for share vesting, and common stock reissuances	—		1,176		—		344		—		1,520
Exercise of stock options	—		270		—		—		—		270
Common stock repurchases and related expenses	—		—		—		(198,564)		—		(198,564)
Warrants exercises	1		1,963		—		—		—		1,964
Cash dividend and dividend equivalents declared ($0.392 per share)	—		—		—		—		(6,729)		(6,729)
Balances, September 30, 2022	$	217	$	811,012	$	(60,886)	$	(521,094)	$	1,142,420	$	1,371,669

Balances, December 31, 2022	$	217	$	815,442	$	(12,162)	$	(649,061)	$	1,275,319	$	1,429,755
Net income	—		—		—		—		270,771		270,771
Other comprehensive loss, net	—		—		(488)		—		—		(488)
Stock-based compensation, issuance of common stock for share vesting, and common stock reissuances	1		(3,444)		—		6,477		—		3,034

Common stock repurchases and related expenses	—		—		—		(148,973)		—		(148,973)
Warrants exercises	—		1,301		—		—		—		1,301
Cash dividend and dividend equivalents declared ($0.44 per share)	—		—		—		—		(6,825)		(6,825)

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Balances, March 31, 2023	$	218	$	813,299	$	(12,650)	$	(791,557)	$	1,539,265	$	1,548,575
Net income	—		—		—		—		181,355		181,355
Other comprehensive loss, net	—		—		(3,241)		—		—		(3,241)
Stock-based compensation and issuance of common stock for share vesting	1		3,644		—		—		—		3,645

Common stock repurchases and related expenses	—		—		—		(157,645)		—		(157,645)
Warrants exercises	—		1,278		—		—		—		1,278
Cash dividend and dividend equivalents declared ($0.50 per share)	—		—		—		—		(7,233)		(7,233)
Balances, June 30, 2023	$	219	$	818,221	$	(15,891)	$	(949,202)	$	1,713,387	$	1,566,734
Net income	—		—		—		—		93,814		93,814
Other comprehensive loss, net	—		—		(452)		—		—		(452)
Stock-based compensation and common stock reissuances	1		2,587		—		411		—		2,999
Exercise of stock options	—		225		—		—		—		225
Common stock repurchases and related expenses	—		—		—		(102,394)		—		(102,394)
Warrants exercises	—		4,110		—		—		—		4,110
Cash dividend and dividend equivalents declared ($0.50 per share)	—		—		—		—		(6,963)		(6,963)
Balances, September 30, 2023	$	220	$	825,143	$	(16,343)	$	(1,051,185)	$	1,800,238	$	1,558,073

Refer to accompanying Notes to Condensed Consolidated Financial Statements.

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ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited, amounts in thousands except share and per share data)

(1) Business and Basis of Presentation

Business

Alpha is a Tennessee-based mining company with operations across Virginia and West Virginia. With customers across the globe, high-quality reserves and significant port capacity, Alpha is a leading U.S. supplier of metallurgical coal products for the steel industry.

Basis of Presentation

Together, the condensed consolidated statements of operations, comprehensive income, balance sheets, cash flows and stockholders’ equity for the Company are referred to as the “Condensed Consolidated Financial Statements.” The Condensed Consolidated Financial Statements are also referenced across periods as “Condensed Consolidated Statements of Operations,” “Condensed Consolidated Statements of Comprehensive Income,” “Condensed Consolidated Balance Sheets,” “Condensed Consolidated Statements of Cash Flows,” and “Condensed Consolidated Statements of Stockholders’ Equity.”

The Condensed Consolidated Financial Statements include all wholly-owned subsidiaries’ results of operations for the three and nine months ended September 30, 2023 and 2022. All significant intercompany transactions have been eliminated in consolidation.

The accompanying interim Condensed Consolidated Financial Statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and in accordance with the rules and regulations of the United States Securities and Exchange Commission (“SEC”) for Form 10-Q. Such rules and regulations allow the omission of certain information and footnote disclosures normally included in the financial statements prepared in accordance with U.S. GAAP as long as the financial statements are not misleading. In the opinion of management, these interim Condensed Consolidated Financial Statements reflect all normal and recurring adjustments necessary for a fair presentation of the results for the periods presented. Results of operations for the three and nine months ended September 30, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023 or any other period. These interim Condensed Consolidated Financial Statements should be read in conjunction with the Company’s Consolidated Financial Statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

Reclassifications

Certain immaterial amounts for the three and nine months ended September 30, 2022 in the Condensed Consolidated Financials Statements and notes to the Condensed Consolidated Financials Statements have been recast to reclassify discontinued operations and present the related amounts within continuing operations as part of the All Other category.

Recent Accounting Guidance

There are no new pronouncements issued but not yet effective expected to have a material impact on the Company’s financial position, results of operations, or liquidity.

(2) Revenue

Disaggregation of Revenue from Contracts with Customers

The Company earns revenues primarily through the sale of coal produced by Company operations and coal purchased from third parties. The Company extracts, processes and markets met and thermal coal from deep and surface mines for sale to steel and coke producers, industrial customers, and electric utilities.

The Company has disaggregated revenue between met coal and thermal coal and export and domestic revenues which depicts the pricing and contract differences between the two. Export revenue generally is derived by spot or short-term contracts with pricing determined at the time of shipment or based on a market index, whereas domestic revenue is characterized by contracts that typically have a term of one year or longer and with fixed pricing terms. The following tables disaggregate the

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ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited, amounts in thousands except share and per share data)

Company’s coal revenues by product category and by market to depict how the nature, amount, timing, and uncertainty of the Company’s coal revenues and cash flows are affected by economic factors:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Export met coal revenues	$	485,955	$	602,314	$	1,714,215	$	2,626,077
Export thermal coal revenues	28,642		39,031		95,085		55,796
Total export coal revenues	$	514,597	$	641,345	$	1,809,300	$	2,681,873

Domestic met coal revenues	$	213,389	$	192,301	$	649,094	$	514,771
Domestic thermal coal revenues	11,012		34,203		41,109		75,201
Total domestic coal revenues	$	224,401	$	226,504	$	690,203	$	589,972

Total met coal revenues	$	699,344	$	794,615	$	2,363,309	$	3,140,848
Total thermal coal revenues	39,654		73,234		136,194		130,997
Total coal revenues	$	738,998	$	867,849	$	2,499,503	$	3,271,845

Performance Obligations

The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied as of September 30, 2023:


	Remainder of 2023		2024		2025		2026		2027		Total
Estimated coal revenues	$	71,365	$	85,187	$	—��	$	—	$	—	$	156,552

(3) Accumulated Other Comprehensive Loss

The following tables summarize the changes to accumulated other comprehensive loss during the nine months ended September 30, 2023 and 2022:


	Balance January 1, 2023		Other comprehensive loss before reclassifications		Amounts reclassified from accumulated other comprehensive loss		Balance September 30, 2023
Employee benefit costs	$	(12,162)	$	(2,825)	$	(1,356)	$	(16,343)


	Balance January 1, 2022		Other comprehensive loss before reclassifications		Amounts reclassified from accumulated other comprehensive loss		Balance September 30, 2022
Employee benefit costs	$	(58,503)	$	(4,837)	$	2,454	$	(60,886)

The following table summarizes the amounts reclassified from accumulated other comprehensive loss and the Condensed Consolidated Statements of Operations line items affected by the reclassification during the three and nine months ended September 30, 2023 and 2022:

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ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited, amounts in thousands except share and per share data)


Details about accumulated other comprehensive loss components	Amounts reclassified from accumulated other comprehensive loss								Affected line item in the Condensed Consolidated Statements of Operations
	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Employee benefit costs:
Amortization of net actuarial (gain) loss (1)	$	(581)	$	828	$	(1,743)	$	2,483	Miscellaneous (expense) income, net
Settlement (1)	—		(10)		—		(29)		Miscellaneous (expense) income, net
Total before income tax	$	(581)	$	818	$	(1,743)	$	2,454
Income tax	129		—		387		—		Income tax expense
Total, net of income tax	$	(452)	$	818	$	(1,356)	$	2,454

(1) These accumulated other comprehensive loss components are included in the computation of net periodic benefit costs for certain employee benefit plans. Refer to Note 13.

(4) Net Income Per Share

The number of shares used to calculate basic net income per common share is based on the weighted average number of the Company’s outstanding common shares during the respective period. The number of shares used to calculate diluted net income per common share is based on the number of common shares used to calculate basic net income per common share plus the dilutive effect of stock options and other stock-based instruments held by the Company’s employees and directors during the period, and the Company’s outstanding warrants. The dilutive effect of outstanding stock-based instruments is determined by application of the treasury stock method. The stock options and warrants become dilutive for diluted net income per common share calculations when the market price of the Company’s common stock exceeds the exercise price. Anti-dilution also occurs in periods of a net loss, and the dilutive impact of all warrants and share-based compensation awards are excluded.

For the three and nine months ended September 30, 2023, 0 and 1,240 stock-based instruments, respectively, were excluded from the computation of dilutive net income per common share because they would have been anti-dilutive. For the three and nine months ended September 30, 2022, no warrants, stock options, or other stock-based instruments were excluded from the computation of dilutive net income per common share because they would have been anti-dilutive. When applying the treasury stock method, anti-dilution generally occurs when the exercise prices or unrecognized compensation cost per share are higher than the Company’s average stock price during an applicable period.

The following table presents the net income per common share for the three and nine months ended September 30, 2023 and 2022:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Basic
Net income	$	93,814	$	252,817	$	545,940	$	1,227,865
Weighted average common shares outstanding - basic	13,633,640		17,119,328		14,416,289		18,019,161
Net income per common share - basic	$	6.88	$	14.77	$	37.87	$	68.14

Diluted
Weighted average common shares outstanding - basic	13,633,640		17,119,328		14,416,289		18,019,161
Dilutive effect of warrants	31,667		170,827		108,469		312,395
Dilutive effect of stock options	1,666		2,043		1,866		4,902
Dilutive effect of other stock-based instruments	443,515		426,319		446,544		464,216
Weighted average common shares outstanding - diluted	14,110,488		17,718,517		14,973,168		18,800,674
Net income per common share - diluted	$	6.65	$	14.27	$	36.46	$	65.31

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ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited, amounts in thousands except share and per share data)

(5) Inventories, net

Inventories, net consisted of the following:


	September 30, 2023		December 31, 2022
Raw coal	$	53,762	$	57,382
Saleable coal	156,715		91,474
Materials, supplies and other, net	61,328		51,718
Total inventories, net	$	271,805	$	200,574

(6) Capital Stock

Share Repurchase Program

On February 21, 2023, the Company’s Board of Directors (the “Board”) approved a $200,000 increase to the existing common share repurchase program that the Board adopted on March 4, 2022, bringing the total authorization to repurchase the Company’s stock to $1,200,000. As of September 30, 2023, the Company had repurchased an aggregate of 5,976,397 shares under the plan for an aggregate purchase price of approximately $910,281 (comprised of $910,101 of share repurchases and $180 of related fees). The Company has also accrued a stock repurchase excise tax of $3,482 related to the share repurchase program as of September 30, 2023, which is recorded in treasury stock at cost.

On October 31, 2023, the Board approved an additional $300,000 increase to the share repurchase program, bringing the total authorization to repurchase the Company’s stock to $1,500,000.

Dividend Program

Pursuant to the dividend policy adopted by the Board on May 3, 2022, the Board declared the following quarterly cash dividends on the Company’s common stock during the nine months ended September 30, 2023:


Dividend per share		Dividend Paid (1)		Declaration Date	Holders of Record Date	Payable Date
$	0.44	$	6,602	February 21, 2023	March 15, 2023	April 3, 2023
$	0.50	$	7,001	May 3, 2023	June 15, 2023	July 5, 2023
$	0.50	$	6,736	August 2, 2023	September 15, 2023	October 3, 2023

(1) Excludes dividend equivalents paid or accrued of $682 as of September 30, 2023. As of September 30, 2023, a related $6,736 balance was held on deposit to facilitate the dividend payment on October 3, 2023.

On August 2, 2023, the Board determined to end the Company’s fixed dividend program following the quarterly dividend declared and to be paid in the fourth quarter of 2023 and to focus instead on the Company’s share repurchase program.

On October 31, 2023, the Board declared a quarterly cash dividend of $0.50 per share which will be payable on December 15, 2023 for stockholders of record as of December 1, 2023.

Warrants

On July 26, 2016, the Company issued 810,811 warrants, which are classified as equity instruments. Pursuant to the underlying warrants agreement, the warrants were exercisable for cash or on a cashless basis at any time until their expiration, and no fractional shares were to be issued upon warrant exercises. Pursuant to the underlying warrants agreement, the exercise price was adjusted from $45.086 per share to $44.972 per share as of the March 15, 2023 dividend record date and to $44.820 per share as of the June 15, 2023 dividend record date, while the warrant share number remained unchanged at 1.20. At 5:00 pm Eastern Time on July 26, 2023 the Company’s Series A Warrants expired pursuant to their terms.

As of September 30, 2023, no warrants remained outstanding as the warrants expired during the current quarter. For the three and nine months ended September 30, 2023, the Company issued 96,556 and 169,028 shares of common stock, respectively, resulting from exercises of its warrants and, pursuant to the terms of the underlying warrants agreement, withheld

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ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited, amounts in thousands except share and per share data)

4,978 and 20,139 of the issued shares, respectively, in satisfaction of the warrant exercise price and in lieu of fractional shares, which were subsequently reclassified as treasury stock in the amount of $577 and $2,368, respectively.

As of September 30, 2022, 211,477 warrants were outstanding, with a total of 245,313 shares underlying the un-exercised warrants. For the three and nine months ended September 30, 2022, the Company issued 60,084 and 678,241 shares of common stock, respectively, resulting from exercises of its warrants and, pursuant to the terms of the underlying warrants agreement, withheld 18,151 and 186,397 of the issued shares, respectively, in satisfaction of the warrant exercise price and in lieu of fractional shares, which were subsequently reclassified as treasury stock in the amounts of $1,680 and $18,331, respectively.

(7) Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following:


	September 30, 2023		December 31, 2022
Wages and benefits	$	66,048	$	69,458
Workers’ compensation	11,651		11,651
Black lung	9,664		9,664
Taxes other than income taxes	25,731		24,959
Asset retirement obligations	35,745		36,963
Dividend payable	8,701		86,118
Income taxes payable	8,589		—
Freight accrual	12,378		7,181
Other	11,612		19,262
Total accrued expenses and other current liabilities	$	190,119	$	265,256

(8) Long-Term Debt

Long-term debt consisted of the following:


	September 30, 2023		December 31, 2022
Notes payable and other	$	5,726	$	6,179

Financing leases	4,776		4,796

Total long-term debt	$	10,502	$	10,975
Less current portion	(3,438)		(3,078)
Long-term debt, net of current portion	$	7,064	$	7,897

Credit Agreement

At September 30, 2023, the Company’s Second Amended and Restated Asset-Based Revolving Credit Agreement (the “ABL Agreement”) included a senior secured asset-based revolving credit facility (the “ABL Facility”). Under the ABL Facility, the Company could borrow cash or obtain letters of credit, on a revolving basis, in an aggregate amount of up to $155,000, of which no more than $150,000 could represent outstanding letters of credit ($125,000 on a committed basis and another $25,000 on an uncommitted cash collateralized basis). The facility’s maturity date was December 6, 2024. As of September 30, 2023 and December 31, 2022, there were no outstanding borrowings under the ABL Facility. As of September 30, 2023 and December 31, 2022, the Company had $60,927 and $61,877 letters of credit outstanding under the ABL Facility, respectively. The ABL Agreement, as amended, and related documents contained negative and affirmative covenants including certain financial covenants. The Company was in compliance with all covenants under these agreements as of September 30, 2023.

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ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited, amounts in thousands except share and per share data)

On October 27, 2023, the Company terminated its existing ABL Agreement and along with certain of its directly and indirectly owned subsidiaries (the “Borrowers”) entered into a new Credit Agreement (the “New ABL Agreement”) with Regions Bank, as lender, swingline lender, LC issuer, administrative agent, collateral agent, and lead arranger, along with ServisFirst Bank and Texas Capital Bank, as joint lead arrangers and the other lenders party thereto. The New ABL Agreement continues to include an asset-based revolving credit facility (the “New ABL Facility”) which allows the Company to borrow cash or obtain letters of credit (“LCs”), on a revolving basis, in an aggregate amount of up to $155,000. The Company may request an increase to the capacity of the facility of up to $75,000 provided that $25,000 may be solely for the purpose of providing additional availability to obtain cash collateralized LCs. Availability under the New ABL Facility is calculated monthly and fluctuates based on qualifying amounts of coal inventory, trade accounts receivable and in certain circumstances specified amounts of cash. The Company must maintain minimum liquidity, as defined in the New ABL Agreement, of $75,000. The New ABL Facility matures on October 27, 2027. As part of the transition from the previous ABL Facility to the New ABL Facility, the Company temporarily collateralized outstanding LCs with approximately $62,754 in cash. The Company expects to replace the cash collateral with new LCs under the New ABL Facility prior to year-end 2023.

Under the terms of the New ABL Facility, letter of credit fees will be calculated at 3.25% (including a fronting fee of 0.25%) while future borrowings will bear interest based on the character of the loan (defined as either a “Term Secured Overnight Financing Rate Loan” (or “Term SOFR Loan”) or a “Base Rate Loan”) plus an applicable rate of 3.10% for a Term SOFR Loan and 2.00% for a Base Rate Loan. The Company may elect the character and interest period for each loan. All amounts borrowed may be repaid prior to maturity without penalty. A commitment fee of 0.375% will be charged on any unused capacity.

The New ABL Facility is guaranteed by substantially all of Alpha’s directly and indirectly owned subsidiaries that are not Borrowers (the “Guarantors”) and is secured by all or substantially all assets of the Borrowers and Guarantors.

(9) Acquisition-Related Obligations

Acquisition-related obligations consisted of the following:


	September 30, 2023		December 31, 2022
Contingent Revenue Obligation	$	—	$	27,719
Environmental Settlement Obligation	181		535

Total acquisition-related obligations - current	$	181	$	28,254

Contingent Revenue Obligation

During the first quarter of 2023, the Company paid the final calculated payment pursuant to terms of the Contingent Revenue Obligation. Refer to Note 11 for further disclosures related to the fair value assignment and methods used.

(10) Asset Retirement Obligations

The following table summarizes the changes in asset retirement obligations for the nine months ended September 30, 2023:


Total asset retirement obligations at December 31, 2022	$	179,011
Accretion for the period	19,129

Revisions in estimated cash flows	(43)
Expenditures for the period	(14,252)
Total asset retirement obligations at September 30, 2023	183,845
Less current portion (1)	(35,745)
Long-term portion	$	148,100

(1) Included within Accrued expenses and other current liabilities on the Company’s Condensed Consolidated Balance Sheets. Refer to Note 7.

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ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited, amounts in thousands except share and per share data)

(11) Fair Value of Financial Instruments and Fair Value Measurements

The estimated fair values of financial instruments are determined based on relevant market information. These estimates involve uncertainty and cannot be determined with precision.

The carrying amounts for cash and cash equivalents, trade accounts receivable, net, prepaid expenses and other current assets, restricted cash, deposits, trade accounts payable, accrued expenses and other current liabilities, and environmental settlement obligations approximate fair value as of September 30, 2023 and December 31, 2022 due to the short maturity of these instruments.

The following tables set forth by level, within the fair value hierarchy, the Company’s financial and non-financial assets and liabilities that were accounted for at fair value on a recurring basis as of September 30, 2023 and December 31, 2022. Financial and non-financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the determination of fair value for assets and liabilities and their placement within the fair value hierarchy levels.


	September 30, 2023
	Total Fair Value		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Trading securities (1)	$	71,269	$	—	$	71,269	$	—

(1) Classified as Long-term restricted investments on the Company’s Condensed Consolidated Balance Sheets.


	December 31, 2022
	Total Fair Value		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Contingent Revenue Obligation	$	27,719	$	—	$	—	$	27,719
Trading securities (1)	$	151,787	$	—	$	151,787	$	—

(1) Includes $46,052 classified as Short-term investments and $105,735 classified as Long-term restricted investments on the Company’s Condensed Consolidated Balance Sheets.

The following tables are reconciliations of the financial and non-financial assets and liabilities that were accounted for at fair value on a recurring basis and that were categorized within Level 3 of the fair value hierarchy:


	December 31, 2022		Payments		Loss (Gain) Recognized in Earnings		Transfer In (Out) of Level 3 Fair Value Hierarchy		September 30, 2023
Contingent Revenue Obligation	$	27,719	$	(27,719)	$	—	$	—	$	—


	December 31, 2021		Payments		Loss (Gain) Recognized in Earnings (1)		Transfer In (Out) of Level 3 Fair Value Hierarchy		September 30, 2022
Contingent Revenue Obligation	$	35,005	$	(16,166)	$	10,615	$	—	$	29,454

(1) The loss recognized in earnings resulted primarily from an increase in forecasted future revenue as of September 30, 2022.

The following methods and assumptions were used to estimate the fair values of the assets and liabilities in the tables above:

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ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited, amounts in thousands except share and per share data)

Level 2 Fair Value Measurements

Trading Securities - Typically includes certificates of deposit, corporate fixed income, and U.S. government securities. The fair values are obtained from a third-party pricing service provider. The fair values provided by the pricing service provider are based on observable market inputs including credit spreads and broker-dealer quotes, among other inputs. The Company classifies the prices obtained from the pricing services within Level 2 of the fair value hierarchy because the underlying inputs are directly observable from active markets. However, the pricing models used entail a certain amount of subjectivity and therefore differing judgments in how the underlying inputs are modeled could result in different estimates of fair value.

Level 3 Fair Value Measurements

Contingent Revenue Obligation - The fair value of the Contingent Revenue Obligation was estimated using a Black-Scholes pricing model. The inputs included in the Black-Scholes pricing model are the Company’s forecasted future revenue, the stated royalty rate, the remaining periods in the obligation, annual risk-free interest rate based on the U.S. Constant Maturity Treasury Curve and annualized volatility. The annualized volatility was calculated by observing volatilities for comparable companies with adjustments for the Company's size and leverage. As the royalty period ended on December 31, 2022, the fair value of the remaining obligation as of that date represents the actual final calculated payment made during the first quarter of 2023. Refer to Note 9 for additional information.

(12) Income Taxes

For the nine months ended September 30, 2023, the Company recorded income tax expense of $94,973 on income before income taxes of $640,913. The income tax expense differs from the expected statutory amount primarily due to the permanent impact of percentage depletion and foreign-derived intangible income deductions, partially offset by the impact of state income taxes, net of federal impact. For the nine months ended September 30, 2022, the Company recorded income tax expense of $113,953 on income before income taxes of $1,341,818. The income tax expense differs from the expected statutory amount primarily due to the decrease in the valuation allowance and the permanent impact of percentage depletion and foreign-derived intangible income deductions, partially offset by the impact of state income taxes, net of federal impact.

(13) Employee Benefit Plans

The components of net periodic benefit cost (credit) other than the service cost component for black lung are included in the line item miscellaneous (expense) income, net in the Condensed Consolidated Statements of Operations.

Pension

The following table details the components of the net periodic benefit cost (credit) for pension obligations:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Interest cost	$	5,993	$	3,995	$	17,979	$	11,985
Expected return on plan assets	(5,499)		(7,183)		(16,497)		(21,549)
Amortization of net actuarial loss	183		528		548		1,583

Net periodic benefit cost (credit)	$	677	$	(2,660)	$	2,030	$	(7,981)

During the three months ended June 30, 2023, an annual census data actuarial revaluation of pension obligations was performed, which resulted in an increase in the liability for pension obligations of approximately $3,630 with the offset to accumulated other comprehensive loss and a slight increase in net periodic benefit cost to be recognized subsequent to the revaluation date. An annual census data actuarial revaluation of pension obligations was also performed during the three months ended June 30, 2022, which resulted in an increase in the liability for pension obligations of approximately $4,837 with the offset to accumulated other comprehensive loss and a slight decrease in net periodic benefit credit to be recognized subsequent to the revaluation date.

Black Lung

The following table details the components of the net periodic benefit cost for black lung obligations:

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ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited, amounts in thousands except share and per share data)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Service cost	$	512	$	661	$	1,538	$	1,982
Interest cost	1,165		681		3,495		2,041
Expected return on plan assets	(12)		(13)		(38)		(39)
Amortization of net actuarial (gain) loss	(708)		314		(2,124)		943
Net periodic benefit cost	$	957	$	1,643	$	2,871	$	4,927

Self-insured Medical Plan

The Company is self-insured for health benefit coverage for all of its active employees. Estimated liabilities for health and medical claims are recorded based on the Company’s historical experience and include a component for incurred but not paid claims. During the three months ended September 30, 2023 and 2022 the Company incurred total expenses of $22,040 and $18,324, respectively, and during the nine months ended September 30, 2023 and 2022, the Company incurred total expenses of $61,866 and $49,334, respectively, which primarily include claims processed and an estimate for claims incurred but not paid.

(14) Related Party Transactions

There were no material related party transactions for the nine months ended September 30, 2023 or 2022.

(15) Commitments and Contingencies

(a) General

Estimated losses from loss contingencies are accrued by a charge to income when available information indicates that it is probable that an asset has been impaired or a liability has been incurred and the amount of the loss can be reasonably estimated.

If a loss contingency is not probable or reasonably estimable, disclosure of the loss contingency is made in the Condensed Consolidated Financial Statements when it is at least reasonably possible that a loss may be incurred and that the loss could be material.

(b) Commitments and Contingencies

Commitments

The Company leases coal mining and other equipment under long-term financing and operating leases with varying terms. In addition, the Company leases mineral interests and surface rights from landowners under various terms and royalty rates.

Coal royalty expense was $39,284 and $44,340 for the three months ended September 30, 2023 and 2022, respectively. Coal royalty expense was $136,308 and $174,310 for the nine months ended September 30, 2023 and 2022, respectively.

Contingencies

Extensive regulation of the impacts of mining on the environment and of maintaining workplace safety has had, and is expected to continue to have, a significant effect on the Company’s costs of production and results of operations. Further regulations, legislation or litigation in these areas may also cause the Company’s sales or profitability to decline by increasing costs or by hindering the Company’s ability to continue mining at existing operations or to permit new operations.

During the normal course of business, contract-related matters arise between the Company and its customers. When a loss related to such matters is considered probable and can reasonably be estimated, the Company records a liability.

During the first half of 2023, the Company purchased and sold 399 tons, totaling $15,170, under the Cumberland Back-to-Back Coal Supply Agreements. For the three and nine months ended September 30, 2022, the Company purchased and sold 443

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ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited, amounts in thousands except share and per share data)

and 1,120 tons, respectively, totaling $16,979 and $43,100, respectively, under the Cumberland Back-to-Back Coal Supply Agreements. As of June 30, 2023, the Cumberland Back-to-Back Coal Supply Agreements had been fully performed.

In the normal course of business, the Company is a party to certain guarantees and financial instruments with off-balance sheet risk, such as bank letters of credit, performance or surety bonds, and other guarantees and indemnities related to the obligations of affiliated entities which are not reflected in the Company’s Condensed Consolidated Balance Sheets. However, the underlying liabilities that they secure, such as asset retirement obligations, workers’ compensation liabilities, and royalty obligations, are reflected in the Company’s Condensed Consolidated Balance Sheets.

The Company is required to provide financial assurance in order to perform the post-mining reclamation required by its mining permits, pay workers’ compensation claims under workers’ compensation laws in various states, pay federal black lung benefits, and perform certain other obligations. In order to provide the required financial assurance, the Company generally uses surety bonds for post-mining reclamation and workers’ compensation obligations. The Company can also use bank letters of credit to collateralize certain obligations.

As of September 30, 2023, the Company had $60,927 letters of credit outstanding under the ABL Agreement.

As of September 30, 2023, the Company had outstanding surety bonds with a total face amount of $175,339 to secure various obligations and commitments. To secure the Company’s reclamation-related obligations, the Company has $33,372 of collateral in the form of restricted cash and restricted investments supporting these obligations as of September 30, 2023.

The Company meets frequently with its surety providers and has discussions with certain providers regarding the extent of and the terms of their participation in the program. These discussions may cause the Company to shift surety bonds between providers or to alter the terms of their participation in our program. To the extent that surety bonds become unavailable or the Company’s surety bond providers require additional collateral, the Company would seek to secure its obligations with letters of credit, cash deposits or other suitable forms of collateral. The Company’s failure to maintain, or inability to acquire, surety bonds or to provide a suitable alternative would have a material adverse effect on its liquidity. These failures could result from a variety of factors, including the lack of availability, higher cost or unfavorable market terms of new surety bonds, and the exercise by third-party surety bond issuers of their right to refuse to renew the surety.

Amounts included in restricted cash provide collateral to secure the following obligations:


	September 30, 2023		December 31, 2022
Workers’ compensation and black lung obligations	$	71,988	$	15,334
Reclamation-related obligations	840		3,220
Financial payments and other performance obligations	10,176		10,387
Contingent Revenue Obligation escrow	—		24,547
Total restricted cash	83,004		53,488
Less current portion	—		(24,547)
Restricted cash, net of current portion	$	83,004	$	28,941

Amounts included in restricted investments provide collateral to secure the following obligations:


	September 30, 2023		December 31, 2022
Workers’ compensation and black lung obligations	$	33,866	$	72,136
Reclamation-related obligations	32,532		31,718
Financial payments and other performance obligations	4,871		1,881
Total restricted investments (1)	$	71,269	$	105,735

(1) Classified as long-term trading securities as of September 30, 2023 and December 31, 2022.

Amounts included in deposits provide collateral to secure the following obligations:

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ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited, amounts in thousands except share and per share data)


	September 30, 2023		December 31, 2022

Reclamation-related obligations	$	—	$	102
Financial payments and other performance obligations	—		391
Other operating agreements (1)	7,605		85,618
Total deposits	7,605		86,111
Less current portion	(6,736)		(84,748)
Total deposits, net of current portion (2)	$	869	$	1,363

(1) Included $6,736 and $84,748 related to the Company’s dividend payable as of September 30, 2023 and December 31, 2022, respectively. Refer to Note 6 for additional information.

(2) Included within Other non-current assets on the Company’s Condensed Consolidated Balance Sheets.

DCMWC Reauthorization Process

In July 2019, the U.S. Department of Labor (Division of Coal Mine Workers’ Compensation or “DCMWC”) began implementing a new authorization process for all self-insured coal mine operators. As requested by the DCMWC, the Company filed an application and supporting documentation for reauthorization to self-insure certain of its black lung obligations in October 2019. As a result of this application, the DCMWC notified the Company in a letter dated February 21, 2020 that the Company was reauthorized to self-insure certain of its black lung obligations for a period of one-year from February 21, 2020. The DCMWC reauthorization is contingent, however, upon the Company’s providing collateral of $65,700 to secure certain of its black lung obligations. This proposed collateral requirement is an increase from the approximate $2,600 in collateral that the Company currently provides to secure these self-insured black lung obligations. The reauthorization process provided the Company with the right to appeal the security determination in writing within 30 days of the date of the notification, which appeal period the DCMWC agreed to extend to May 22, 2020. The Company exercised this right of appeal in connection with the substantial increase in the amount of required collateral. In February 2021, the U.S. Department of Labor (“DOL”) withdrew its Federal Register notice seeking comments on its bulletin describing its new method of calculating collateral requirements. The DOL removed the bulletin from its website in May 2021. On February 10, 2022, a telephone conference was held with DCMWC and DOL decision makers wherein the Company presented facts and arguments in support of its appeal. No ruling has been made on the appeal, but during the call the Company indicated that it would be willing to allocate an additional $10,000 in collateral. If the Company’s appeal is unsuccessful, the Company may be required to provide additional letters of credit to receive the self-insurance reauthorization from the DCMWC or alternatively insure these black lung obligations through a third-party provider that would likely also require the Company to provide additional collateral. In January 2023, the DOL proposed for public comment new regulations which, if adopted, would substantially increase the collateral required to secure self-insured federal black lung obligations. Under the proposed 120% minimum collateral requirement, the Company estimates it could be required to provide approximately $80,000 to $100,000 of collateral to secure certain of its black lung obligations. The DOL has indicated that it expects that some form of these new regulations could go into effect in the fourth quarter of 2023. A significant increase in these collateral obligations could have a materially adverse effect on the Company’s liquidity.

(d) Legal Proceedings

The Company is party to legal proceedings from time to time. These proceedings, as well as governmental examinations, could involve various business units and a variety of claims including, but not limited to, contract disputes, personal injury claims, property damage claims (including those resulting from blasting, trucking and flooding), environmental and safety issues, securities-related matters and employment matters. While some legal matters may specify the damages claimed by the plaintiffs, many seek an unquantified amount of damages. Even when the amount of damages claimed against the Company or its subsidiaries is stated, (i) the claimed amount may be exaggerated or unsupported; (ii) the claim may be based on a novel legal theory or involve a large number of parties; (iii) there may be uncertainty as to the likelihood of a class being certified or the ultimate size of the class; (iv) there may be uncertainty as to the outcome of pending appeals or motions; and/or (v) there may be significant factual issues to be resolved. As a result, if such legal matters arise in the future, the Company may be unable to estimate a range of possible loss for matters that have not yet progressed sufficiently through discovery and the development of important factual information and legal issues. The Company records accruals based on an estimate of the ultimate outcome of these matters, but these estimates can be difficult to determine and involve significant judgment.

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ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited, amounts in thousands except share and per share data)

(16) Segment Information

The Company extracts, processes and markets met and thermal coal from deep and surface mines for sale to steel and coke producers, industrial customers, and electric utilities. The Company conducts mining operations only in the United States with mines in Central Appalachia (“CAPP”). The Company has one reportable segment: Met, which consists of five active mines and two preparation plants in Virginia, sixteen active mines and five preparation plants in West Virginia, as well as expenses associated with certain idled/closed mines.

In addition to the one reportable segment, the All Other category includes general corporate overhead and corporate assets and liabilities, the former CAPP - Thermal operations consisting of one preparation plant in West Virginia, and the elimination of certain intercompany activity, as well as expenses associated with certain idled/closed mines. Certain immaterial amounts as of and for the three and nine months ended September 30, 2022 in the Condensed Consolidated Financials Statements and notes to the Condensed Consolidated Financials Statements have been recast to reclassify discontinued operations and present the related amounts within continuing operations as part of the All Other category.

Reportable segment operating results are regularly reviewed by the Chief Operating Decision Maker (the “CODM”), who is the Chief Executive Officer of the Company.

Segment operating results and capital expenditures for the three and nine months ended September 30, 2023 and 2022 were as follows:


	Three Months Ended September 30, 2023
	Met		All Other		Consolidated
Total revenues	$	733,536	$	8,284	$	741,820
Depreciation, depletion, and amortization	$	31,893	$	689	$	32,582
Amortization of acquired intangibles, net	$	2,069	$	—	$	2,069
Adjusted EBITDA	$	172,414	$	(18,503)	$	153,911
Capital expenditures	$	54,237	$	488	$	54,725


	Three Months Ended September 30, 2022
	Met		All Other		Consolidated
Total revenues	$	841,958	$	27,810	$	869,768
Depreciation, depletion, and amortization	$	26,747	$	1,178	$	27,925
Amortization of acquired intangibles, net	$	3,591	$	952	$	4,543
Adjusted EBITDA	$	301,556	$	(5,358)	$	296,198
Capital expenditures	$	32,623	$	716	$	33,339


	Nine Months Ended September 30, 2023
	Met		All Other		Consolidated
Total revenues	$	2,461,274	$	50,152	$	2,511,426
Depreciation, depletion, and amortization	$	92,421	$	1,810	$	94,231
Amortization of acquired intangibles, net	$	6,458	$	—	$	6,458
Adjusted EBITDA	$	803,517	$	(36,697)	$	766,820
Capital expenditures	$	177,813	$	6,023	$	183,836

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ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited, amounts in thousands except share and per share data)


	Nine Months Ended September 30, 2022
	Met		All Other		Consolidated
Total revenues	$	3,217,588	$	60,556	$	3,278,144
Depreciation, depletion, and amortization	$	81,010	$	2,680	$	83,690
Amortization of acquired intangibles, net	$	13,182	$	2,856	$	16,038
Adjusted EBITDA	$	1,521,089	$	(28,360)	$	1,492,729
Capital expenditures	$	99,979	$	3,372	$	103,351

The following tables present a reconciliation of net income (loss) to Adjusted EBITDA for the three and nine months ended September 30, 2023 and 2022:


	Three Months Ended September 30, 2023
	Met		All Other		Consolidated
Net income (loss)	$	134,886	$	(41,072)	$	93,814
Interest expense	190		1,556		1,746
Interest income	(369)		(4,270)		(4,639)
Income tax expense	—		18,964		18,964
Depreciation, depletion and amortization	31,893		689		32,582
Non-cash stock compensation expense	23		2,976		2,999
Accretion on asset retirement obligations	3,722		2,654		6,376
Amortization of acquired intangibles, net	2,069		—		2,069
Adjusted EBITDA	$	172,414	$	(18,503)	$	153,911


	Three Months Ended September 30, 2022
	Met		All Other		Consolidated
Net income (loss)	$	268,157	$	(15,340)	$	252,817
Interest expense	40		1,714		1,754
Interest income	(369)		(689)		(1,058)
Income tax expense	—		5,730		5,730
Depreciation, depletion and amortization	26,747		1,178		27,925
Non-cash stock compensation expense	—		1,520		1,520
Mark-to-market adjustment - acquisition-related obligations	—		(2,954)		(2,954)
Accretion on asset retirement obligations	3,390		2,531		5,921
Amortization of acquired intangibles, net	3,591		952		4,543
Adjusted EBITDA	$	301,556	$	(5,358)	$	296,198

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ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited, amounts in thousands except share and per share data)


	Nine Months Ended September 30, 2023
	Met		All Other		Consolidated
Net income (loss)	$	693,494	$	(147,554)	$	545,940
Interest expense	553		4,769		5,322
Interest income	(643)		(8,268)		(8,911)
Income tax expense	—		94,973		94,973
Depreciation, depletion and amortization	92,421		1,810		94,231
Non-cash stock compensation expense	69		9,609		9,678
Accretion on asset retirement obligations	11,165		7,964		19,129
Amortization of acquired intangibles, net	6,458		—		6,458
Adjusted EBITDA	$	803,517	$	(36,697)	$	766,820


	Nine Months Ended September 30, 2022
	Met		All Other		Consolidated
Net income (loss)	$	1,417,125	$	(189,260)	$	1,227,865
Interest expense	132		19,923		20,055
Interest income	(541)		(871)		(1,412)
Income tax expense	—		113,953		113,953
Depreciation, depletion and amortization	81,010		2,680		83,690
Non-cash stock compensation expense	3		4,100		4,103
Mark-to-market adjustment - acquisition-related obligations	—		10,615		10,615
Accretion on asset retirement obligations	10,178		7,644		17,822
Amortization of acquired intangibles, net	13,182		2,856		16,038
Adjusted EBITDA	$	1,521,089	$	(28,360)	$	1,492,729

No asset information has been disclosed as the CODM does not regularly review asset information by reportable segment.

The Company markets produced, processed and purchased coal to customers in the United States and in international markets. Revenue is tracked within the Company’s accounting records based on the product destination. The following tables present additional information on our revenues and top customers:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
Total coal revenues	$	738,998		$	867,849		$	2,499,503		$	3,271,845
Total revenues	$	741,820		$	869,768		$	2,511,426		$	3,278,144
Export coal revenues	$	514,597		$	641,345		$	1,809,300		$	2,681,873
Export coal revenues as % of total coal revenues	70		%	74		%	72		%	82		%
Countries with export coal revenue exceeding 10% of total revenues	India			India			India			India
Top customer as % of total revenues	13		%	18		%	12		%	28		%
Top 10 customers as % of total revenues	83		%	65		%	74		%	70		%
Number of customers exceeding 10% of total revenues	4			1			3			1


	As of September 30,
	2023	2022
Number of customers exceeding 10% of total trade accounts receivable, net	4	2

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ALPHA METALLURGICAL RESOURCES, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited, amounts in thousands except share and per share data)

(17) Subsequent Events

Refer to Note 6 for subsequent event disclosures regarding the Company’s dividend program and share repurchase program. Refer to Note 8 for subsequent event disclosures related to the refinancing of the ABL Facility.

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GLOSSARY

Alpha. Alpha Metallurgical Resources, Inc. (the “Company”) (previously named Contura Energy, Inc.).

Ash. Impurities consisting of iron, alumina and other incombustible matter that are contained in coal. Since ash increases the weight of coal, it adds to the cost of handling and can affect the burning characteristics of coal.

Bituminous coal. Coal used primarily to generate electricity and to make coke for the steel industry with a heat value ranging between 10,500 and 15,500 BTUs per pound.

British Thermal Unit or BTU. A measure of the thermal energy required to raise the temperature of one pound of pure liquid water one degree Fahrenheit at the temperature at which water has its greatest density (39 degrees Fahrenheit).

Central Appalachia or CAPP. Coal producing area in eastern Kentucky, Virginia, southern West Virginia and a portion of eastern Tennessee.

Coal reserves. The economically mineable part of a measured or indicated coal resource, which includes diluting materials and allowances for losses that may occur when coal is mined or extracted.

Coal resources. Coal deposits in such form, quality, and quantity that there are reasonable prospects for economic extraction.

Coal seam. Coal deposits occur in layers. Each layer is called a “seam.”

Coke. A hard, dry carbon substance produced by heating coal to a very high temperature in the absence of air. Coke is used in the manufacture of iron and steel. Its production results in a number of useful byproducts.

Cumberland Back-to-Back Coal Supply Agreement. Certain agreements with Iron Senergy under which Iron Senergy would sell to the Company all of the coal that the Company was obligated to sell to customers under Cumberland coal supply agreements (“Cumberland CSAs”) which existed as of the transaction closing date but did not transfer to Iron Senergy at closing (each, a “Cumberland Back-to-Back Coal Supply Agreement”). Each Cumberland Back-to-Back Coal Supply Agreement had economic terms identical to, but offsetting, the related Cumberland CSA. If a Cumberland customer subsequently consented to assign a Cumberland CSA to Iron Senergy after closing, the related Cumberland CSA would immediately and automatically transfer to Iron Senergy and the related Cumberland Back-to-Back Coal Supply Agreements executed by the parties would thereupon terminate as set forth therein.

ESG. Environmental, social and governance sustainability criteria.

Indicated coal resource. That part of a coal resource for which quantity and quality are estimated on the basis of adequate geological evidence and sampling sufficient to establish geological and quality continuity with reasonable certainty.

In situ coal resources. Coal resources stated on an in-seam dry basis (excluding surface and inherent moisture) with no consideration for dilution or losses that may occur when coal is mined or extracted.

Measured coal resource. That part of a coal resource for which quantity and quality are estimated on the basis of conclusive geological evidence and sampling sufficient to test and confirm geological and quality continuity.

Merger. Merger with ANR, Inc. and Alpha Natural Resources Holdings, Inc. completed on November 9, 2018.

Metallurgical coal. The various grades of coal suitable for carbonization to make coke for steel manufacture. Also known as “met” coal, its quality is primarily differentiated based on volatility or its percent of volatile matter. Met coal typically has a particularly high BTU but low ash and sulfur content.

MSHA. The United States Mine Safety and Health Administration, which has responsibility for developing and enforcing safety and health rules for U.S. mines.

Operating Margin. Coal revenues less cost of coal sales.

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Preparation plant. A preparation plant is a facility for crushing, sizing and washing coal to remove impurities and prepare it for use by a particular customer. The washing process has the added benefit of removing some of the coal’s sulfur content. A preparation plant is usually located on a mine site, although one plant may serve several mines.

Probable mineral reserve. The economically mineable part of an indicated and, in some cases, a measured coal resource.

Productivity. As used in this report, refers to clean metric tons of coal produced per underground man hour worked, as published by the MSHA.

Proven mineral reserve. The economically mineable part of a measured coal resource.

Reclamation. The process of restoring land and the environment to their original state following mining activities. The process commonly includes “recontouring” or reshaping the land to its approximate original appearance, restoring topsoil and planting native grass and ground covers. Reclamation operations are usually underway before the mining of a particular site is completed. Reclamation is closely regulated by both state and federal law.

Roof. The stratum of rock or other mineral above a coal seam; the overhead surface of a coal working place.

Sulfur. One of the elements present in varying quantities in coal that contributes to environmental degradation when coal is burned. Sulfur dioxide is produced as a gaseous by-product of coal combustion.

Surface mine. A mine in which the coal lies near the surface and can be extracted by removing the covering layer of soil.

Thermal coal. Coal used by power plants and industrial steam boilers to produce electricity, steam or both. It generally is lower in BTU heat content and higher in volatile matter than metallurgical coal.

Tons. A “short” or net ton is equal to 2,000 pounds. A “long” or British ton is equal to 2,240 pounds; a “metric” ton (or “tonne”) is approximately 2,205 pounds. Tonnage amounts in this report are stated in short tons, unless otherwise indicated.

Underground mine. Also known as a “deep” mine. Usually located several hundred feet below the earth’s surface, an underground mine’s coal is removed mechanically and transferred by shuttle car and conveyor to the surface.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis provides a narrative of our results of operations and financial condition for the three and nine months ended September 30, 2023 and 2022. The following discussion and analysis should be read in conjunction with our Condensed Consolidated Financial Statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and our Consolidated Financial Statements and related notes and risk factors included elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2022.

The following discussion includes forward-looking statements about our business, financial condition and results of operations, including discussions about management’s expectations for our business. These statements represent projections, beliefs and expectations based on current circumstances and conditions and in light of recent events and trends, and you should not construe these statements either as assurances of performance or as promises of a given course of action. Instead, various known and unknown factors are likely to cause our actual performance and management’s actions to vary, and the results of these variances may be both material and adverse. See “Cautionary Statement Regarding Forward-Looking Statements” and “Item 1A. Risk Factors.”

Market Overview

Recent months have brought about continued economic pressures in many areas of the world as well as intensified geopolitical conflicts, all of which influence metallurgical coal markets. The lingering effects of the Russian war, recessionary pressures, and high-interest environments have resulted in muted world manufacturing output, new orders, and employment data and, in the case of Europe specifically, worsening conditions for regions already stalled in a significant downturn. The uncertainty around the depth of China’s economic challenges and the escalating conflict and violence between Israel and Palestine are additional challenges affecting the stability of the global economic landscape. Despite these factors, metallurgical coal indices have strengthened in recent months amid tight supply conditions globally and the expectation of slow, but increasing, steel demand. According to the World Steel Association’s latest short-range outlook, 2024 steel demand is expected to rise by roughly 2% over 2023 levels, with developing economies projected to increase growth at a faster pace than advanced economies, especially developed nations hindered by high-interest rates and geopolitical impacts.

After a slight softening of metallurgical coal indices in the early part of the third quarter of 2023, each of the four indices Alpha closely monitors began moving upward in mid-August and have continued to show strength through the rest of the quarter and into October. The Australian Premium Low Volatile index moved up from $233.00 per metric ton at the beginning of July to $333.00 per metric ton at the end of the quarter. The U.S. East Coast Low Volatile index increased from $227.00 per metric ton at the start of the quarter to $258.00 per metric ton at the end of September. During the third quarter, the U.S. East Coast High Volatile A index moved from $216.00 per metric ton on July 1, 2023 to $288.00 per metric ton at quarter close, and the U.S. East Coast High Volatile B index increased from $206.00 per metric ton to $238.00 per metric ton over the course of the quarter. Following the quarter close, the U.S. East Coast indices of Low Volatile, High Volatile A and High Volatile B measured $258.00, $277.00, and $236.00 per ton, respectively, as of October 24, 2023. The Australian Premium Low Volatile jumped from its quarter-close level to $344.50 per metric ton on the same date.

The world manufacturing Purchasing Managers’ Index (“PMI”) of 49.1 for September 2023 was roughly flat against the August figure of 49.0, remaining in below-50.0 levels which signifies contraction. Considerable and continued weakness was evident in Europe’s September PMI of 43.4, virtually unchanged from 43.5 in August. September clocked the fifteenth successive month in contractionary territory for Europe’s key indicator, with growth expectations in the region dropping to a ten-month low and new orders shrinking rapidly. Brazil’s September PMI of 49.0 was down from 50.1 in August, and China’s figure slid to 50.6 in September from August’s 51.0. Monthly changes in the United States PMI showed an increase in September to 49.8 from 47.9 in August. Among Alpha’s key markets, India continues to show strength with its September index registering at 57.5, down from the August level of 58.6 but still firmly signaling expansion.

As compiled by the World Steel Association (“WSA”), September 2023 global crude steel production of 149.3 million metric tons from 63 countries represented a decrease of 1.5% from September 2022. China, the largest steel-producing country, produced 82.1 million metric tons, 5.6% less than its year-ago September production amount. India, the second largest producer behind China, increased their year-over-year steel production by 18.2% to a level of 11.6 million metric tons. The United States had an increase of 2.6% to 6.7 million metric tons produced compared to September 2022. South Korea produced 5.5 million metrics tons of steel in September 2023, an 18.2% increase from the country’s September 2022 production. Among the top ten steel producing countries, South Korea and India posted the largest percentage increases against their year-ago production levels (both countries at 18.2%). In terms of regional production, the Asia and Oceania region, which contains both India and China, produced 110.7 million metric tons of crude steel for the month, a 2.1% decrease from September 2022. Only two

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regions saw increases against their year-ago production levels for the month of September: Europe at 2.7% and Russia at 10.7%. All other regions reported decreases when compared to year-ago September levels.

The American Iron and Steel Institute’s capacity utilization rate for U.S. steel mills was 74.1% for the week ending October 21, 2023. This is up in comparison to the year-ago period, when the capacity utilization rate was 73.7%.

In the seaborne thermal market, the API2 index increased from $119.05 per metric ton at the beginning of July 2023 to $128.05 per metric ton as of the end of the third quarter.

Business Overview

We are a Tennessee-based mining company with operations across Virginia and West Virginia. With customers across the globe, high-quality reserves and significant port capacity, we are a leading supplier of metallurgical coal products to the steel industry. We operate high-quality, cost-competitive coal mines across the CAPP coal basin. As of September 30, 2023, our operations consisted of twenty-one active mines and eight coal preparation and load-out facilities, with approximately 4,030 employees. We produce, process, and sell met coal and thermal coal. We also sell coal produced by others, some of which is processed and/or blended with coal produced from our mines prior to resale, with the remainder purchased for resale. As of December 31, 2022, we had 336.7 million tons of reserves, which included 322.7 million tons of proven and probable metallurgical reserves and 14.0 million tons of proven and probable thermal reserves. Additionally, we had approximately 527.3 million tons of in situ bituminous coal resources.

For the three months ended September 30, 2023 and 2022, sales of met coal were 3.8 million tons and 3.5 million tons, respectively, and accounted for approximately 89% and 85%, respectively, of our coal sales volume. Sales of thermal coal were 0.4 million tons and 0.6 million tons, respectively, and accounted for approximately 11% and 15%, respectively, of our coal sales volume. For the nine months ended September 30, 2023 and 2022, sales of met coal were 11.2 million tons and 10.8 million tons, respectively, and accounted for approximately 90% and 87%, respectively, of our coal sales volume. Sales of thermal coal were 1.2 million tons and 1.6 million tons, respectively, and accounted for approximately 10% and 13%, respectively, of our coal sales volume.

Our sales of met coal were made primarily to steel companies in the northeastern and midwestern regions of the United States and in several countries in Asia, Europe, and the Americas. Our sales of thermal coal were made primarily to large utilities and industrial customers both in the United States and across the world. For the three months ended September 30, 2023 and 2022 approximately 70% and 74%, respectively, of our coal revenues were derived from coal sales made to customers outside the United States. For the nine months ended September 30, 2023 and 2022 approximately 72% and 82%, respectively, of our coal revenues were derived from coal sales made to customers outside the United States.

In addition, we generate other revenues from equipment sales, rentals, terminal and processing fees, coal and environmental analysis fees, royalties and the sale of natural gas. We also record freight and handling fulfillment revenue within coal revenues for freight and handling services provided in delivering coal to certain customers, which are a component of the contractual selling price.

As of September 30, 2023, we have one reportable segment: Met. Our Met segment operations consist of high-quality met coal mines, including Deep Mine 41, Road Fork 52, Black Eagle, and Lynn Branch. The coal produced by our Met segment operations is predominantly met coal with some amounts of thermal coal being produced as a byproduct of mining. In addition to the one reportable segment, our All Other category includes general corporate overhead and corporate assets and liabilities, our former CAPP - Thermal operations consisting of one preparation plant in West Virginia, and the elimination of certain intercompany activity, as well as expenses associated with certain idled/closed mines. Refer to Note 16 to our Condensed Consolidated Financial Statements for additional disclosures on reportable segments, geographic areas, and export coal revenue information.

As discussed in the “Market Overview” presented above, monetary tightening in the United States and Europe, a muted recovery in China, weak economic conditions across the globe, and the ongoing war between Russia and Ukraine have influenced metallurgical coal markets so far in 2023. As a result, our nine months ended September 30, 2023 results of operations were impacted by the continued volatility in coal indices.

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Other Business Developments

In August 2023, we completed our transition to a pure-play metallurgical producer with the cessation of mining of our Mammoth mining complex's sole remaining thermal coal mine, Slabcamp.

In January 2023, our subsidiary Maxxim Rebuild Co., LLC (“Maxxim”) completed a series of transactions to acquire a number of coal trucks and related equipment and facilities to secure trucking services for our operations.

Factors Affecting Our Results of Operations

Sales Agreements. We manage our commodity price risk for coal sales through the use of coal supply agreements. As of October 25, 2023, we had sales commitments for 2023 as follows:


	Tons	% Priced		Average Realized Price per Ton
Met - Domestic				$192.92
Met - Export				$176.67
Met Total	15.0 million	88	%	$182.08
Thermal	1.2 million	100	%	$102.45
Met Segment	16.2 million	90	%	$174.19
All Other	0.6 million	95	%	$92.23

Realized Pricing. Our realized price per ton of coal is influenced by many factors that vary by region, including (i) coal quality, which includes energy (heat content), sulfur, ash, volatile matter and moisture content; (ii) differences in market conventions concerning transportation costs and volume measurement; and (iii) regional supply and demand.

Costs. Our results of operations are dependent upon our ability to maximize productivity and control costs. Our primary expenses are for operating supply costs, repair and maintenance expenditures, costs of purchased coal, royalties, wages and benefits, freight and handling costs and taxes incurred in selling our coal. The principal goods and services we use in our operations include maintenance and repair parts and services, electricity, fuel, roof control and support items, explosives, tires, conveyance structures, ventilation supplies and lubricants. Our management strives to aggressively control costs and improve operating performance to mitigate external cost pressures. We experience volatility in operating costs related to fuel, explosives, steel, tires, contract services and healthcare, among others, and take measures to mitigate the increases in these costs at all operations. We have a centralized sourcing group for major supplier contract negotiation and administration, for the negotiation and purchase of major capital goods, and to support the business units. We promote competition between suppliers and seek to develop relationships with suppliers that focus on lowering our costs. We seek suppliers who identify and concentrate on implementing continuous improvement opportunities within their area of expertise. To the extent upward pressure on costs exceeds our ability to realize sales increases, or if we experience unanticipated operating or transportation difficulties, our operating margins would be negatively impacted. We may also experience difficult geologic conditions, delays in obtaining permits, labor shortages, unforeseen equipment problems, and unexpected shortages of critical materials such as tires, fuel and explosives that may result in adverse cost increases and limit our ability to produce at forecasted levels.

Results of Operations

Our results of operations for the three and nine months ended September 30, 2023 and 2022 are discussed in these “Results of Operations” presented below. Certain immaterial amounts for the three and nine months ended September 30, 2022 have been recast to reclassify discontinued operations and present the related amounts within continuing operations as part of the All Other category.

Three Months Ended September 30, 2023 Compared to the Three Months Ended September 30, 2022

Revenues

The following table summarizes information about our revenues during the three months ended September 30, 2023 and 2022:

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	Three Months Ended September 30,				Increase (Decrease)
(In thousands, except for per ton data)	2023		2022		$ or Tons		%
Coal revenues	$	738,998	$	867,849	$	(128,851)	(14.8)	%
Other revenues	2,822		1,919		903		47.1	%
Total revenues	$	741,820	$	869,768	$	(127,948)	(14.7)	%

Tons sold	4,225		4,145		80		1.9	%

Coal revenues. Coal revenues decreased $128.9 million, or 14.8%, for the three months ended September 30, 2023 compared to the prior year period. The decrease was primarily due to a 17.6% reduction in average coal sales realization within our Met segment as pricing moderated from the higher levels experienced during the prior year, partially offset by a 5.6% increase in coal sales volumes. The elevated coal sales pricing environment in the prior year period was driven by increased coal demand, resulting from improved economic activity, coupled with limited supply response. Coal revenues within our All Other category also declined due to the cessation of mining of our Mammoth mining complex's sole remaining thermal coal mine in August of 2023. Refer to the “Non-GAAP Coal revenues” section below for further detail on coal revenues for the three months ended September 30, 2023 compared to the prior year period.

Cost and Expenses

The following table summarizes information about our costs and expenses during the three months ended September 30, 2023 and 2022:


	Three Months Ended September 30,				Increase (Decrease)
(In thousands)	2023		2022		$		%
Cost of coal sales (exclusive of items shown separately below)	$	564,608	$	554,055	$	10,553	1.9	%
Depreciation, depletion and amortization	32,582		27,925		4,657		16.7	%
Accretion on asset retirement obligations	6,376		5,921		455		7.7	%
Amortization of acquired intangibles, net	2,069		4,543		(2,474)		(54.5)	%
Selling, general and administrative expenses (exclusive of depreciation, depletion and amortization shown separately above)	18,053		15,095		2,958		19.6	%
Total other operating loss (income):
Mark-to-market adjustment for acquisition-related obligations	—		(2,954)		2,954		100.0	%
Other expense	973		2,713		(1,740)		(64.1)	%
Total costs and expenses	$	624,661	$	607,298	$	17,363	2.9	%

Cost of coal sales. Cost of coal sales increased $10.6 million, or 1.9%, for the three months ended September 30, 2023 compared to the prior year period, primarily due to a 1.9% increase in coal sales volumes. On a per ton basis, cost of coal sales was consistent with the prior period as increases in cost due to inflationary pressure and increased levels of coal purchases were offset by lower royalties, taxes, and freight and handling costs due to the lower coal pricing environment.

Depreciation, depletion and amortization. Depreciation, depletion and amortization increased $4.7 million, or 16.7%, for the three months ended September 30, 2023 compared to the prior year period. The increase was primarily due to capital expenditures.

Amortization of acquired intangibles, net. Amortization of acquired intangibles, net decreased $2.5 million, or 54.5%, for the three months ended September 30, 2023 compared to the prior year period. The decrease was primarily driven by accelerated prior period amortization of certain acquired mine permits as a result of an update to the estimated life of the associated mines.

Selling, general and administrative. Selling, general and administrative expenses increased $3.0 million, or 19.6%, for the three months ended September 30, 2023 compared to the prior year period. This increase was primarily related to increases of $1.4 million in stock compensation expense and $1.2 million in incentive pay.

Mark-to-market adjustment for acquisition-related obligations. The mark-to-market adjustment for acquisition-related

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obligations was $3.0 million for the three months ended September 30, 2022. As the royalty period ended on December 31, 2022, there was no mark-to-market adjustment recorded during the three months ended September 30, 2023. Refer to Notes 9 and 11 for additional information on the Contingent Revenue Obligation.

Total Other Expense, Net

The following table summarizes information about our total other expense, net during the three months ended September 30, 2023 and 2022:


	Three Months Ended September 30,				Increase (Decrease)
(In thousands)	2023		2022		$		%
Total other expense, net	$	4,381	$	3,923	$	458	11.7	%

Income Tax Expense

The following table summarizes information about our income tax expense during the three months ended September 30, 2023 and 2022:


	Three Months Ended September 30,		Increase (Decrease)
(In thousands)	2023	2022	$		%
Income tax expense	18,964	5,730	$	13,234	231.0	%

Income tax expense of $19.0 million was recorded for the three months ended September 30, 2023 on income before income taxes of $112.8 million. The effective tax rate differs from the federal statutory rate of 21% primarily due to the permanent impact of percentage depletion and foreign-derived intangible income deductions.

Income tax expense of $5.7 million was recorded for the three months ended September 30, 2022 on income before income taxes of $258.5 million. The effective tax rate differs from the federal statutory rate of 21% primarily due to the decrease in the valuation allowance and the permanent impact of percentage depletion and foreign-derived intangible income deductions. Refer to Note 12 for additional information.

Non-GAAP Financial Measures

The discussion below contains “non-GAAP financial measures.” These are financial measures that either exclude or include amounts that are not excluded or included in the most directly comparable measures calculated and presented in accordance with generally accepted accounting principles in the United States (“U.S. GAAP” or “GAAP”). Specifically, we make use of the non-GAAP financial measures “Adjusted EBITDA,” “non-GAAP coal revenues,” “non-GAAP cost of coal sales,” and “non-GAAP coal margin.” We use Adjusted EBITDA to measure the operating performance of our segments and allocate resources to the segments. Adjusted EBITDA does not purport to be an alternative to net income (loss) as a measure of operating performance or any other measure of operating results, financial performance, or liquidity presented in accordance with GAAP. Moreover, this measure is not calculated identically by all companies and therefore may not be comparable to similarly titled measures used by other companies. Adjusted EBITDA is presented because management believes it is a useful indicator of the financial performance of our coal operations. We use non-GAAP coal revenues to present coal revenues generated, excluding freight and handling fulfillment revenues. Non-GAAP coal sales realization per ton for our operations is calculated as non-GAAP coal revenues divided by tons sold. We use non-GAAP cost of coal sales to adjust cost of coal sales to remove freight and handling costs, depreciation, depletion and amortization - production (excluding the depreciation, depletion and amortization related to selling, general and administrative functions), accretion on asset retirement obligations, amortization of acquired intangibles, net, and idled and closed mine costs. Non-GAAP cost of coal sales per ton for our operations is calculated as non-GAAP cost of coal sales divided by tons sold. Non-GAAP coal margin per ton for our coal operations is calculated as non-GAAP coal sales realization per ton for our coal operations less non-GAAP cost of coal sales per ton for our coal operations. The presentation of these measures should not be considered in isolation, or as a substitute for analysis of our results as reported under GAAP.

Management uses non-GAAP financial measures to supplement GAAP results to provide a more complete understanding of the factors and trends affecting the business than GAAP results alone. The definition of these non-GAAP measures may be changed periodically by management to adjust for significant items important to an understanding of operating trends and to adjust for items that may not reflect the trend of future results by excluding transactions that are not indicative of our core operating performance. Furthermore, analogous measures are used by industry analysts to evaluate the Company’s operating performance. Because not all companies use identical calculations, the presentations of these measures may not be comparable

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to other similarly titled measures of other companies and can differ significantly from company to company depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which companies operate, and capital investments.

Included below are reconciliations of non-GAAP financial measures to GAAP financial measures.

The following tables summarize certain financial information relating to our coal operations for the three months ended September 30, 2023 and 2022:


	Three Months Ended September 30, 2023
(In thousands, except for per ton data)	Met		All Other		Consolidated
Coal revenues	$	731,481	$	7,517	$	738,998
Less: Freight and handling fulfillment revenues	(94,770)		(2)		(94,772)
Non-GAAP Coal revenues	$	636,711	$	7,515	$	644,226
Tons sold	4,115		110		4,225
Non-GAAP Coal sales realization per ton	$	154.73	$	68.32	$	152.48

Cost of coal sales (exclusive of items shown separately below)	$	552,737	$	11,871	$	564,608
Depreciation, depletion and amortization - production (1)	31,893		377		32,270
Accretion on asset retirement obligations	3,722		2,654		6,376
Amortization of acquired intangibles, net	2,069		—		2,069
Total Cost of coal sales	$	590,421	$	14,902	$	605,323
Less: Freight and handling costs	(94,770)		(2)		(94,772)
Less: Depreciation, depletion and amortization - production (1)	(31,893)		(377)		(32,270)
Less: Accretion on asset retirement obligations	(3,722)		(2,654)		(6,376)
Less: Amortization of acquired intangibles, net	(2,069)		—		(2,069)
Less: Idled and closed mine costs	(5,507)		(2,549)		(8,056)
Non-GAAP Cost of coal sales	$	452,460	$	9,320	$	461,780
Tons sold	4,115		110		4,225
Non-GAAP Cost of coal sales per ton	$	109.95	$	84.73	$	109.30

(1) Depreciation, depletion and amortization - production excludes the depreciation, depletion and amortization related to selling, general and administrative functions.


	Three Months Ended September 30, 2023
(In thousands, except for per ton data)	Met		All Other		Consolidated
Coal revenues	$	731,481	$	7,517	$	738,998
Less: Total Cost of coal sales (per table above)	(590,421)		(14,902)		(605,323)
GAAP Coal margin	$	141,060	$	(7,385)	$	133,675
Tons sold	4,115		110		4,225
GAAP Coal margin per ton	$	34.28	$	(67.14)	$	31.64

GAAP Coal margin	$	141,060	$	(7,385)	$	133,675
Add: Depreciation, depletion and amortization - production (1)	31,893		377		32,270
Add: Accretion on asset retirement obligations	3,722		2,654		6,376
Add: Amortization of acquired intangibles, net	2,069		—		2,069
Add: Idled and closed mine costs	5,507		2,549		8,056
Non-GAAP Coal margin	$	184,251	$	(1,805)	$	182,446
Tons sold	4,115		110		4,225
Non-GAAP Coal margin per ton	$	44.78	$	(16.41)	$	43.18

(1) Depreciation, depletion and amortization - production excludes the depreciation, depletion and amortization related to selling, general and administrative functions.

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	Three Months Ended September 30, 2022
(In thousands, except for per ton data)	Met		All Other		Consolidated
Coal revenues	$	840,638	$	27,211	$	867,849
Less: Freight and handling fulfillment revenues	(122,585)		(3)		(122,588)
Non-GAAP Coal revenues	$	718,053	$	27,208	$	745,261
Tons sold	3,896		249		4,145
Non-GAAP Coal sales realization per ton	$	184.31	$	109.27	$	179.80

Cost of coal sales (exclusive of items shown separately below)	$	534,718	$	19,337	$	554,055
Depreciation, depletion and amortization - production (1)	26,747		906		27,653
Accretion on asset retirement obligations	3,390		2,531		5,921
Amortization of acquired intangibles, net	3,591		952		4,543
Total Cost of coal sales	$	568,446	$	23,726	$	592,172
Less: Freight and handling costs	(122,585)		(3)		(122,588)
Less: Depreciation, depletion and amortization - production (1)	(26,747)		(906)		(27,653)
Less: Accretion on asset retirement obligations	(3,390)		(2,531)		(5,921)
Less: Amortization of acquired intangibles, net	(3,591)		(952)		(4,543)
Less: Idled and closed mine costs	(3,580)		(2,530)		(6,110)
Non-GAAP Cost of coal sales	$	408,553	$	16,804	$	425,357
Tons sold	3,896		249		4,145
Non-GAAP Cost of coal sales per ton	$	104.86	$	67.49	$	102.62

(1) Depreciation, depletion and amortization - production excludes the depreciation, depletion and amortization related to selling, general and administrative functions.


	Three Months Ended September 30, 2022
(In thousands, except for per ton data)	Met		All Other		Consolidated
Coal revenues	$	840,638	$	27,211	$	867,849
Less: Total Cost of coal sales (per table above)	(568,446)		(23,726)		(592,172)
GAAP Coal margin	$	272,192	$	3,485	$	275,677
Tons sold	3,896		249		4,145
GAAP Coal margin per ton	$	69.86	$	14.00	$	66.51

GAAP Coal margin	$	272,192	$	3,485	$	275,677
Add: Depreciation, depletion and amortization - production (1)	26,747		906		27,653
Add: Accretion on asset retirement obligations	3,390		2,531		5,921
Add: Amortization of acquired intangibles, net	3,591		952		4,543
Add: Idled and closed mine costs	3,580		2,530		6,110
Non-GAAP Coal margin	$	309,500	$	10,404	$	319,904
Tons sold	3,896		249		4,145
Non-GAAP Coal margin per ton	$	79.44	$	41.78	$	77.18

(1) Depreciation, depletion and amortization - production excludes the depreciation, depletion and amortization related to selling, general and administrative functions.

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	Three Months Ended September 30,				Increase (Decrease)
(In thousands, except for per ton data)	2023		2022		$ or Tons		%
Met segment operations:
Tons sold	4,115		3,896		219		5.6	%
Non-GAAP Coal revenues	$	636,711	$	718,053	$	(81,342)	(11.3)	%
Non-GAAP Coal sales realization per ton	$	154.73	$	184.31	$	(29.58)	(16.0)	%

All Other category:
Tons sold	110		249		(139)		(55.8)	%
Non-GAAP Coal revenues	$	7,515	$	27,208	$	(19,693)	(72.4)	%
Non-GAAP Coal sales realization per ton	$	68.32	$	109.27	$	(40.95)	(37.5)	%

Non-GAAP Coal revenues. Met segment operations non-GAAP coal revenues decreased $81.3 million, or 11.3%, for the three months ended September 30, 2023 compared to the prior year period. The decrease was primarily due to a $29.58 per ton, or 16.0%, reduction in average non-GAAP coal sales realization as prices moderated from the higher levels experienced during the third quarter of 2022, partially offset by a 5.6% increase in Met coal sales volumes. The elevated coal sales pricing environment in the prior year period was driven by increased coal demand, resulting from improved economic activity, coupled with limited supply response.

All Other category non-GAAP coal revenues decreased $19.7 million, or 72.4%, for the three months ended September 30, 2023 compared to the prior year period due to a weaker thermal coal pricing environment combined with a decline in coal sales volumes as our Mammoth mining complex’s sole remaining thermal coal mine ceased operation in August of 2023.


	Three Months Ended September 30,				Increase (Decrease)
(In thousands, except for per ton data)	2023		2022		$		%
Met segment operations:
Non-GAAP Cost of coal sales	$	452,460	$	408,553	$	43,907	10.7	%
Non-GAAP Cost of coal sales per ton	$	109.95	$	104.86	$	5.09	4.9	%
Non-GAAP Coal margin per ton	$	44.78	$	79.44	$	(34.66)	(43.6)	%

All Other category:
Non-GAAP Cost of coal sales	$	9,320	$	16,804	$	(7,484)	(44.5)	%
Non-GAAP Cost of coal sales per ton	$	84.73	$	67.49	$	17.24	25.5	%
Non-GAAP Coal margin per ton	$	(16.41)	$	41.78	$	(58.19)	(139.3)	%

Non-GAAP Cost of coal sales. Met segment operations non-GAAP cost of coal sales increased $43.9 million, or 10.7%, for the three months ended September 30, 2023 compared to the prior year period. The increase was primarily driven by a 5.6% increase in Met coal sales volumes combined with a 4.9% increase in average non-GAAP cost of coal sales per ton. The increase in average non-GAAP cost of coal sales per ton was primarily driven by inflationary pressures and increased levels of coal purchases, partially offset by lower royalties and taxes as a result of a lower coal pricing environment.

All Other category non-GAAP cost of coal sales decreased $7.5 million, or 44.5%, for the three months ended September 30, 2023 compared to the prior year period primarily due to the cessation of mining of our Mammoth mining complex’s sole remaining thermal coal mine in August of 2023.

Adjusted EBITDA

The following tables present a reconciliation of net income (loss) to Adjusted EBITDA for the three months ended September 30, 2023 and 2022:

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	Three Months Ended September 30, 2023
(In thousands)	Met		All Other		Consolidated
Net income (loss)	$	134,886	$	(41,072)	$	93,814
Interest expense	190		1,556		1,746
Interest income	(369)		(4,270)		(4,639)
Income tax expense	—		18,964		18,964
Depreciation, depletion and amortization	31,893		689		32,582
Non-cash stock compensation expense	23		2,976		2,999
Accretion on asset retirement obligations	3,722		2,654		6,376
Amortization of acquired intangibles, net	2,069		—		2,069
Adjusted EBITDA	$	172,414	$	(18,503)	$	153,911


	Three Months Ended September 30, 2022
(In thousands)	Met		All Other		Consolidated
Net income (loss)	$	268,157	$	(15,340)	$	252,817
Interest expense	40		1,714		1,754
Interest income	(369)		(689)		(1,058)
Income tax expense	—		5,730		5,730
Depreciation, depletion and amortization	26,747		1,178		27,925
Non-cash stock compensation expense	—		1,520		1,520
Mark-to-market adjustment - acquisition-related obligations	—		(2,954)		(2,954)
Accretion on asset retirement obligations	3,390		2,531		5,921
Amortization of acquired intangibles, net	3,591		952		4,543
Adjusted EBITDA	$	301,556	$	(5,358)	$	296,198

The following table summarizes Adjusted EBITDA for our Met segment operations and All Other category:


	Three Months Ended September 30,				Increase (Decrease)
(In thousands)	2023		2022		$		%
Adjusted EBITDA
Met segment operations	$	172,414	$	301,556	$	(129,142)	(42.8)	%
All Other category	(18,503)		(5,358)		(13,145)		(245.3)	%
Total	$	153,911	$	296,198	$	(142,287)	(48.0)	%

Met segment operations. Adjusted EBITDA decreased $129.1 million, or 42.8%, for the three months ended September 30, 2023 compared to the prior year period. The decrease in Adjusted EBITDA was primarily driven by decreased coal margin and lower non-GAAP coal sales realization per ton in the current period.

All Other category. Adjusted EBITDA decreased $13.1 million, or 245.3%, for the three months ended September 30, 2023 compared to the prior year period. The decrease in Adjusted EBITDA was primarily driven by a decrease in tons sold, decreased coal margin, and lower non-GAAP coal sales realization per ton in the current period.

Nine Months Ended September 30, 2023 Compared to the Nine Months Ended September 30, 2022

Revenues

The following table summarizes information about our revenues during the nine months ended September 30, 2023 and 2022:

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	Nine Months Ended September 30,				Increase (Decrease)
(In thousands, except for per ton data)	2023		2022		$ or Tons		%
Coal revenues	$	2,499,503	$	3,271,845	$	(772,342)	(23.6)	%
Other revenues	11,923		6,299		5,624		89.3	%
Total revenues	$	2,511,426	$	3,278,144	$	(766,718)	(23.4)	%

Tons sold	12,488		12,497		(9)		(0.1)	%

Coal revenues. Coal revenues decreased $772.3 million, or 23.6%, for the nine months ended September 30, 2023 compared to the prior year period. The decrease was primarily due to a 25.4% reduction in average coal sales realization within our Met segment as pricing moderated from the higher levels experienced during the prior year, partially offset by a 2.3% increase in coal sales volumes. The elevated coal sales pricing environment in the prior year period was driven by increased coal demand, resulting from improved economic activity, coupled with limited supply response. Coal revenues within our All Other category also declined due to the cessation of mining of our Mammoth mining complex’s sole remaining thermal coal mine in August of 2023. Refer to the “Non-GAAP Coal revenues” section below for further detail on coal revenues for the nine months ended September 30, 2023 compared to the prior year period.

Cost and Expenses

The following table summarizes information about our costs and expenses during the nine months ended September 30, 2023 and 2022:


	Nine Months Ended September 30,				Increase (Decrease)
(In thousands)	2023		2022		$		%
Cost of coal sales (exclusive of items shown separately below)	$	1,687,259	$	1,736,826	$	(49,567)	(2.9)	%
Depreciation, depletion and amortization	94,231		83,690		10,541		12.6	%
Accretion on asset retirement obligations	19,129		17,822		1,307		7.3	%
Amortization of acquired intangibles, net	6,458		16,038		(9,580)		(59.7)	%
Selling, general and administrative expenses (exclusive of depreciation, depletion and amortization shown separately above)	56,251		48,339		7,912		16.4	%
Total other operating loss (income):
Mark-to-market adjustment for acquisition-related obligations	—		10,615		(10,615)		(100.0)	%
Other (income) expense	(1,665)		569		(2,234)		(392.6)	%
Total costs and expenses	$	1,861,663	$	1,913,899	$	(52,236)	(2.7)	%

Cost of coal sales. Cost of coal sales decreased $49.6 million, or 2.9%, for the nine months ended September 30, 2023 compared to the prior year period as increased costs due to inflationary pressure and increased levels of coal purchases were more than offset by lower royalties, taxes, and freight and handling costs due to the lower coal pricing environment.

Depreciation, depletion and amortization. Depreciation, depletion and amortization increased $10.5 million, or 12.6%, for the nine months ended September 30, 2023 compared to the prior year period. The increase was primarily due to capital expenditures.

Amortization of acquired intangibles, net. Amortization of acquired intangibles, net decreased $9.6 million, or 59.7%, for the nine months ended September 30, 2023 compared to the prior year period. The decrease was primarily driven by accelerated prior period amortization of certain acquired mine permits as a result of an update to the estimated life of the associated mines.

Selling, general and administrative. Selling, general and administrative expenses increased $7.9 million, or 16.4%, for the nine months ended September 30, 2023 compared to the prior year period. This increase was primarily related to increases of $5.1 million in stock compensation expense, $1.8 million in wages and benefits expense, and $0.3 million in incentive pay.

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Mark-to-market adjustment for acquisition-related obligations. The mark-to-market adjustment for acquisition-related obligations was $10.6 million for the nine months ended September 30, 2022. As the royalty period ended on December 31, 2022, there was no mark-to-market adjustment recorded during the nine months ended September 30, 2023. Refer to Notes 9 and 11 for additional information on the Contingent Revenue Obligation.

Other (income) expense. Other income increased $2.2 million, or 392.6%, for the nine months ended September 30, 2023 compared to the prior year period, primarily due to an increase in income on sale of assets in the current period.

Total Other Expense, Net

The following table summarizes information about our total other expense, net during the nine months ended September 30, 2023 and 2022:


	Nine Months Ended September 30,				Increase (Decrease)
(In thousands)	2023		2022		$		%
Total other expense, net	$	8,850	$	22,427	$	(13,577)	(60.5)	%

Total other expense, net decreased $13.6 million, or 60.5%, for the nine months ended September 30, 2023 compared to the prior year period, primarily related to decreased interest expense due to a reduction in outstanding debt.

Income Tax Expense

The following table summarizes information about our income tax expense during the nine months ended September 30, 2023 and 2022:


	Nine Months Ended September 30,				Increase (Decrease)
(In thousands)	2023		2022		$		%
Income tax expense	$	94,973	$	113,953	$	(18,980)	(16.7)	%

Income tax expense of $95.0 million was recorded for the nine months ended September 30, 2023 on income before income taxes of $640.9 million. The effective tax rate differs from the federal statutory rate of 21% primarily due to the permanent impact of percentage depletion and foreign-derived intangible income deductions.

Income tax expense of $114.0 million was recorded for the nine months ended September 30, 2022 on income before income taxes of $1,341.8 million. The effective tax rate differs from the federal statutory rate of 21% primarily due to the decrease in the valuation allowance and the permanent impact of percentage depletion and foreign-derived intangible income deductions. Refer to Note 12 for additional information.

Non-GAAP Financial Measures

Included below are reconciliations of non-GAAP financial measures to GAAP financial measures. Refer to the “Three Months Ended September 30, 2023 Compared to the Three Months Ended September 30, 2022” section above for discussion on “non-GAAP financial measures.”

The following tables summarize certain financial information relating to our coal operations for the nine months ended September 30, 2023 and 2022:

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	Nine Months Ended September 30, 2023
(In thousands, except for per ton data)	Met		All Other		Consolidated
Coal revenues	$	2,452,462	$	47,041	$	2,499,503
Less: Freight and handling fulfillment revenues	(319,244)		(227)		(319,471)
Non-GAAP Coal revenues	$	2,133,218	$	46,814	$	2,180,032
Tons sold	12,001		487		12,488
Non-GAAP Coal sales realization per ton	$	177.75	$	96.13	$	174.57

Cost of coal sales (exclusive of items shown separately below)	$	1,639,230	$	48,029	$	1,687,259
Depreciation, depletion and amortization - production (1)	92,421		922		93,343
Accretion on asset retirement obligations	11,165		7,964		19,129
Amortization of acquired intangibles, net	6,458		—		6,458
Total Cost of coal sales	$	1,749,274	$	56,915	$	1,806,189
Less: Freight and handling costs	(319,244)		(227)		(319,471)
Less: Depreciation, depletion and amortization - production (1)	(92,421)		(922)		(93,343)
Less: Accretion on asset retirement obligations	(11,165)		(7,964)		(19,129)
Less: Amortization of acquired intangibles, net	(6,458)		—		(6,458)
Less: Idled and closed mine costs	(13,107)		(7,558)		(20,665)
Non-GAAP Cost of coal sales	$	1,306,879	$	40,244	$	1,347,123
Tons sold	12,001		487		12,488
Non-GAAP Cost of coal sales per ton	$	108.90	$	82.64	$	107.87

(1) Depreciation, depletion and amortization - production excludes the depreciation, depletion and amortization related to selling, general and administrative functions.


	Nine Months Ended September 30, 2023
(In thousands, except for per ton data)	Met		All Other		Consolidated
Coal revenues	$	2,452,462	$	47,041	$	2,499,503
Less: Total Cost of coal sales (per table above)	(1,749,274)		(56,915)		(1,806,189)
GAAP Coal margin	$	703,188	$	(9,874)	$	693,314
Tons sold	12,001		487		12,488
GAAP Coal margin per ton	$	58.59	$	(20.28)	$	55.52

GAAP Coal margin	$	703,188	$	(9,874)	$	693,314
Add: Depreciation, depletion and amortization - production (1)	92,421		922		93,343
Add: Accretion on asset retirement obligations	11,165		7,964		19,129
Add: Amortization of acquired intangibles, net	6,458		—		6,458
Add: Idled and closed mine costs	13,107		7,558		20,665
Non-GAAP Coal margin	$	826,339	$	6,570	$	832,909
Tons sold	12,001		487		12,488
Non-GAAP Coal margin per ton	$	68.86	$	13.49	$	66.70

(1) Depreciation, depletion and amortization - production excludes the depreciation, depletion and amortization related to selling, general and administrative functions.

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	Nine Months Ended September 30, 2022
(In thousands, except for per ton data)	Met		All Other		Consolidated
Coal revenues	$	3,213,639	$	58,206	$	3,271,845
Less: Freight and handling fulfillment revenues	(423,132)		(21)		(423,153)
Non-GAAP Coal revenues	$	2,790,507	$	58,185	$	2,848,692
Tons sold	11,726		771		12,497
Non-GAAP Coal sales realization per ton	$	237.98	$	75.47	$	227.95

Cost of coal sales (exclusive of items shown separately below)	$	1,684,224	$	52,602	$	1,736,826
Depreciation, depletion and amortization - production (1)	81,009		1,953		82,962
Accretion on asset retirement obligations	10,178		7,644		17,822
Amortization of acquired intangibles, net	13,182		2,856		16,038
Total Cost of coal sales	$	1,788,593	$	65,055	$	1,853,648
Less: Freight and handling costs	(423,132)		(21)		(423,153)
Less: Depreciation, depletion and amortization - production (1)	(81,009)		(1,953)		(82,962)
Less: Accretion on asset retirement obligations	(10,178)		(7,644)		(17,822)
Less: Amortization of acquired intangibles, net	(13,182)		(2,856)		(16,038)
Less: Idled and closed mine costs	(9,892)		(9,732)		(19,624)
Non-GAAP Cost of coal sales	$	1,251,200	$	42,849	$	1,294,049
Tons sold	11,726		771		12,497
Non-GAAP Cost of coal sales per ton	$	106.70	$	55.58	$	103.55


	Nine Months Ended September 30, 2022
(In thousands, except for per ton data)	Met		All Other		Consolidated
Coal revenues	$	3,213,639	$	58,206	$	3,271,845
Less: Total Cost of coal sales (per table above)	(1,788,593)		(65,055)		(1,853,648)
GAAP Coal margin	$	1,425,046	$	(6,849)	$	1,418,197
Tons sold	11,726		771		12,497
GAAP Coal margin per ton	$	121.53	$	(8.88)	$	113.48

GAAP Coal margin	$	1,425,046	$	(6,849)	$	1,418,197
Add: Depreciation, depletion and amortization - production (1)	81,009		1,953		82,962
Add: Accretion on asset retirement obligations	10,178		7,644		17,822
Add: Amortization of acquired intangibles, net	13,182		2,856		16,038
Add: Idled and closed mine costs	9,892		9,732		19,624
Non-GAAP Coal margin	$	1,539,307	$	15,336	$	1,554,643
Tons sold	11,726		771		12,497
Non-GAAP Coal margin per ton	$	131.27	$	19.89	$	124.40

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	Nine Months Ended September 30,				Increase (Decrease)
(In thousands, except for per ton data)	2023		2022		$		%
Met segment operations:
Tons sold	12,001		11,726		275		2.3	%
Non-GAAP Coal revenues	$	2,133,218	$	2,790,507	$	(657,289)	(23.6)	%
Non-GAAP Coal sales realization per ton	$	177.75	$	237.98	$	(60.23)	(25.3)	%

All Other category:
Tons sold	487		771		(284)		(36.8)	%
Non-GAAP Coal revenues	$	46,814	$	58,185	$	(11,371)	(19.5)	%
Non-GAAP Coal sales realization per ton	$	96.13	$	75.47	$	20.66	27.4	%

Non-GAAP Coal revenues. Met segment operations non-GAAP coal revenues decreased $657.3 million, or 23.6%, for the nine months ended September 30, 2023 compared to the prior year period. The decrease was primarily due to a $60.23 per ton, or 25.3%, reduction in average non-GAAP coal sales realization as prices moderated from the higher levels experienced during the prior year period, partially offset by a 2.3% increase in Met coal sales volumes. The elevated coal sales pricing environment in the prior year period was driven by increased coal demand, resulting from improved economic activity, coupled with limited supply response.

All Other category non-GAAP coal revenues decreased $11.4 million, or 19.5%, for the nine months ended September 30, 2023 compared to the prior year period primarily due to a decline in coal sales volumes as our Mammoth mining complex’s sole remaining thermal coal mine ceased operation in August of 2023.


	Nine Months Ended September 30,				Increase (Decrease)
(In thousands, except for per ton data)	2023		2022		$		%
Met segment operations:
Non-GAAP Cost of coal sales	$	1,306,879	$	1,251,200	$	55,679	4.5	%
Non-GAAP Cost of coal sales per ton	$	108.90	$	106.70	$	2.20	2.1	%
Non-GAAP Coal margin per ton	$	68.86	$	131.27	$	(62.41)	(47.5)	%

All Other category:
Non-GAAP Cost of coal sales	$	40,244	$	42,849	$	(2,605)	(6.1)	%
Non-GAAP Cost of coal sales per ton	$	82.64	$	55.58	$	27.06	48.7	%
Non-GAAP Coal margin per ton	$	13.49	$	19.89	$	(6.40)	(32.2)	%

Non-GAAP Cost of coal sales. Met segment operations non-GAAP cost of coal sales increased $55.7 million, or 4.5%, for the nine months ended September 30, 2023 compared to the prior year period. The increase was primarily driven by a 2.3% increase in Met coal sales volumes combined with a 2.1% increase in average non-GAAP cost of coal sales per ton. The increase in average non-GAAP cost of coal sales per ton was primarily driven by inflationary pressures and increased levels of coal purchases, partially offset by lower royalties and taxes as a result of a lower coal pricing environment.

All Other category non-GAAP cost of coal sales decreased $2.6 million, or 6.1%, for the nine months ended September 30, 2023 compared to the prior year period primarily due to the cessation of mining of our Mammoth mining complex’s sole remaining thermal coal mine in August of 2023.

Adjusted EBITDA

The following tables present a reconciliation of net income (loss) to Adjusted EBITDA for the nine months ended September 30, 2023 and 2022:

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	Nine Months Ended September 30, 2023
	Met		All Other		Consolidated
Net income (loss)	$	693,494	$	(147,554)	$	545,940
Interest expense	553		4,769		5,322
Interest income	(643)		(8,268)		(8,911)
Income tax expense	—		94,973		94,973
Depreciation, depletion and amortization	92,421		1,810		94,231
Non-cash stock compensation expense	69		9,609		9,678
Accretion on asset retirement obligations	11,165		7,964		19,129
Amortization of acquired intangibles, net	6,458		—		6,458
Adjusted EBITDA	$	803,517	$	(36,697)	$	766,820


	Nine Months Ended September 30, 2022
	Met		All Other		Consolidated
Net income (loss)	$	1,417,125	$	(189,260)	$	1,227,865
Interest expense	132		19,923		20,055
Interest income	(541)		(871)		(1,412)
Income tax expense	—		113,953		113,953
Depreciation, depletion and amortization	81,010		2,680		83,690
Non-cash stock compensation expense	3		4,100		4,103
Mark-to-market adjustment - acquisition-related obligations	—		10,615		10,615
Accretion on asset retirement obligations	10,178		7,644		17,822
Amortization of acquired intangibles, net	13,182		2,856		16,038
Adjusted EBITDA	$	1,521,089	$	(28,360)	$	1,492,729

The following table summarizes Adjusted EBITDA for our Met segment operations and All Other category:


	Nine Months Ended September 30,				Increase (Decrease)
(In thousands)	2023		2022		$		%
Adjusted EBITDA
Met segment operations	$	803,517	$	1,521,089	$	(717,572)	(47.2)	%
All Other category	(36,697)		(28,360)		(8,337)		(29.4)	%
Total	$	766,820	$	1,492,729	$	(725,909)	(48.6)	%

Met segment operations. Adjusted EBITDA decreased $717.6 million, or 47.2%, for the nine months ended September 30, 2023 compared to the prior year period. The decrease in Adjusted EBITDA was primarily driven by decreased coal margin and lower non-GAAP coal sales realization per ton in the current period.

All Other category. Adjusted EBITDA decreased $8.3 million, or 29.4%, for the nine months ended September 30, 2023 compared to the prior year period. The decrease in Adjusted EBITDA was primarily driven by a decrease in tons sold and decreased coal margin, partially offset by higher non-GAAP coal sales realization per ton in the current period.

Liquidity and Capital Resources

Overview

Our primary liquidity and capital resource requirements stem from the cost of our coal production and purchases, our capital expenditures, our debt service, our reclamation obligations, taxes, our regulatory costs and settlements and associated costs. Our primary sources of liquidity are derived from sales of coal, our debt financing, and miscellaneous revenues.

We believe that cash on hand and cash generated from our operations will be sufficient to meet our working capital requirements, anticipated capital expenditures, income taxes, debt service requirements, acquisition-related obligations, and

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reclamation obligations for the next 12 months and the reasonably foreseeable future. We may also use cash in accordance with our share repurchase program and dividend program. We rely on a number of assumptions in budgeting for our future activities. These include the costs for mine development to sustain capacity of our operating mines, our cash flows from operations, effects of regulation and taxes by governmental agencies, mining technology improvements and reclamation costs. These assumptions are inherently subject to significant business, political, economic, regulatory, environmental and competitive uncertainties, pending and existing climate-related initiatives, contingencies and risks, all of which are difficult to predict and many of which are beyond our control. For example, if the new authorization process for all self-insured coal mine operators is adopted, it would substantially increase the collateral required to secure our self-insured federal black lung obligations. Refer to the DCMWC Reauthorization Process section below for more information. Increased scrutiny of ESG matters specific to the coal sector could negatively influence our ability to raise capital in the future and result in a reduced number of surety and insurance providers. We may need to raise additional funds if market conditions deteriorate, and we may not be able to do so in a timely fashion, on terms acceptable to us, or at all; one or more of our assumptions prove to be incorrect or if we choose to expand our acquisition, exploration, appraisal, or development efforts or any other activity more rapidly than we presently anticipate. Additionally, we may elect to raise additional funds before we need them if the conditions for raising capital are favorable. We may seek to sell equity or debt securities or obtain additional bank credit facilities. The sale of equity securities could result in dilution to our stockholders. The incurrence of additional indebtedness could result in increased fixed obligations and additional covenants that could restrict our operations.

Liquidity

The following table summarizes our total liquidity as of September 30, 2023:


(in thousands)	September 30, 2023
Cash and cash equivalents	$	296,059
Credit facility availability (1)	94,073
Total liquidity	$	390,132

(1) Comprised of our unused commitments available under the Second Amended and Restated Asset-Based Revolving Credit Agreement (the “ABL Agreement”), subject to limitations described therein.

Cash Collateral

We are required to provide cash collateral to secure our obligations under certain workers’ compensation, black lung, reclamation-related obligations, financial payments and other performance obligations, and other operating agreements. Future regulatory changes relating to these obligations could result in increased obligations, additional costs, or additional collateral requirements which could require greater use of alternative sources of funding for this purpose, which would reduce our liquidity. Refer to the DCMWC Reauthorization Process section below for information related to the new authorization process for self-insured coal mine operators being implemented by the U.S. Department of Labor (Division of Coal Mine Workers’ Compensation). As of September 30, 2023, we had the following cash collateral on our Condensed Consolidated Balance Sheets:


(in thousands)	September 30, 2023
Long-term restricted cash	$	83,004
Long-term restricted investments	71,269
Short-term and long-term deposits (1)	7,605
Total cash collateral	$	161,878

(1) Includes $6,736 related to our dividend payable. Refer to Note 6 for additional information.

Off-Balance Sheet Arrangements

We are required to provide financial assurance in order to perform the post-mining reclamation required by our mining permits, pay workers’ compensation claims under workers’ compensation laws in various states, pay federal black lung benefits, and perform certain other obligations. In order to provide the required financial assurance, we generally use surety bonds for post-mining reclamation and workers’ compensation obligations. We also use bank letters of credit to collateralize certain obligations. As of September 30, 2023, we had the following outstanding surety bonds and letters of credit:

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(in thousands)	September 30, 2023
Surety bonds	$	175,339
Letters of credit (1)	$	60,927

(1) The letters of credit outstanding are under the ABL Agreement dated December 6, 2021.

Refer to Note 15, part (c) for further disclosures on off-balance sheet arrangements.

Debt Financing and Related Transactions

At September 30, 2023, the ABL Agreement included a senior secured asset-based revolving credit facility (the “ABL Facility”). Under the ABL Facility, we could borrow cash or obtain letters of credit, on a revolving basis, in an aggregate amount of up to $155.0 million, of which no more than $150.0 million could represent outstanding letters of credit ($125.0 million on a committed basis and another $25.0 million on an uncommitted cash collateralized basis). The facility’s maturity date was December 6, 2024. Availability under the ABL Facility was calculated on a monthly basis and fluctuated based on qualifying amounts of coal inventory and trade accounts receivable (the “Borrowing Base”) and the facility’s covenant limitations related to our Fixed Charge Coverage Ratio (refer to “Analysis of Material Debt Covenants” below). In accordance with terms of the ABL Facility, we could have been required to cash collateralize the ABL Facility to the extent outstanding borrowings and letters of credit under the ABL Facility exceeded the Borrowing Base after considering covenant limitations.

Refer to Note 8 for additional disclosures on long-term debt and for subsequent event disclosures related to the refinancing of the ABL Facility.

Acquisition-Related Obligations

During the first quarter of 2023, we paid the final calculated payment pursuant to terms of the Contingent Revenue Obligation. At September 30, 2023, we had $0.2 million of acquisition-related obligations outstanding. Refer to Note 9 for additional disclosures on acquisition-related obligations.

Capital Requirements

Our capital expenditures for the nine months ended September 30, 2023 were $183.8 million. We expect to spend between $250.0 million and $280.0 million on capital expenditures during 2023.

Contractual Obligations

Our contractual obligations are discussed in the “Liquidity and Capital Resources—Contractual Obligations” section contained in our Annual Report on Form 10-K for the year ended December 31, 2022. There have been no material changes to our contractual obligations during the nine months ended September 30, 2023.

Refer to Note 8, Note 9, and Note 15 for additional disclosures on long-term debt, acquisition-related obligations, and other commitments, respectively.

Business Updates

On August 3, 2023, S&P Global Ratings upgraded its issuer credit rating on the Company to B+ from B based on the strength of our balance sheet. The rating outlook was noted as stable. On July 18, 2023, Moody’s Investors Service upgraded our Corporate Family Rating to B1 from B2, upgraded our Probability of Default Rating to B1-PD from B2-PD, and affirmed our B1 rating on the ABL Facility. Our Speculative Grade Liquidity Rating remained unchanged at SGL-2. The rating outlook was revised to stable from positive. Should we receive any negative outlook ratings in the future, such negative outlook ratings would result in potential liquidity risks for us, including the risks of declines in our stock value, declines in our cash and cash equivalents, less availability and higher costs of additional credit, and requests for additional collateral by surety providers.

We own a 65.0% interest in Dominion Terminal Associates (“DTA”), a coal export terminal in Newport News, Virginia. DTA provides us with the ability to fulfill a broad range of customer coal quality requirements through coal blending, while also providing storage capacity and transportation flexibility. DTA is in need of capital investment to maximize functionality and minimize downtime due to mechanical issues. Together with DTA leadership and ownership partners, we are evaluating a needs assessment and rough timeline for the recommended work. In connection with expected capital investments at DTA, we expect to spend between $40.0 million and $50.0 million on capital contributions for equity affiliates in 2024. The cash contribution range for 2024 includes both the cash needed for normal operating costs which are expected to be approximately

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$20.0 million along with the amounts expected to be spent related to the facility upgrades. Beyond our share of routine operating costs, we expect we will invest up to an incremental $25.0 million per year for infrastructure and equipment upgrades at DTA over the next 6 years.

We continually strive to enhance our capital structure and financial flexibility and reduce cash outflows from operations. As opportunities arise, we will continue to consider the possibility of the refinancing, repayment or repurchase of any outstanding debt and amendment of our credit facility, and may consider the sale of other assets or businesses, and such other measures as we believe circumstances warrant. We may decide to pursue or not pursue these opportunities at any time. Access to additional funds from liquidity-generating transactions or other sources of external financing is subject to market conditions and certain limitations, including our credit rating and covenant restrictions in our credit facilities.

As a regular part of our business, we review opportunities for, and engage in discussions and negotiations concerning, the acquisition or disposition of coal mining and related infrastructure assets and interests in coal mining companies, and acquisitions or dispositions of, or combinations or other strategic transactions involving, companies with coal mining or other energy assets. When we believe that these opportunities are consistent with our strategic plans and our acquisition or disposition criteria, we will make bids or proposals and/or enter into letters of intent and other similar agreements. These bids or proposals, which may be binding or non-binding, are customarily subject to a variety of conditions and usually permit us to terminate the discussions and any related agreement if, among other things, we are not satisfied with the results of due diligence. Any acquisition opportunities we pursue could materially affect our liquidity and capital resources and may require us to incur indebtedness, seek equity capital or both. There can be no assurance that additional financing will be available on terms acceptable to us, or at all.

Income Taxes

As of September 30, 2023, the Company has recorded federal income taxes payable of $8.6 million. Refer to Note 12 for further disclosures related to income taxes.

Pension Plans

We do not expect to have any additional contributions to the pension plans for the remainder of 2023. Refer to Note 13 for further disclosures related to this obligation.

DCMWC Reauthorization Process

The reauthorization process provided us with the right to appeal the security determination in writing within 30 days of the date of the notification, which appeal period the DCMWC agreed to extend to May 22, 2020, and we exercised this right of appeal. We strongly disagree with the DCMWC’s substantially higher collateral determination and the methodology through which the calculation was derived. In February 2021, the U.S. Department of Labor (“DOL”) withdrew its Federal Register notice seeking comments on its bulletin describing its new method of calculating collateral requirements. The DOL removed the bulletin from its website in May 2021. On February 10, 2022, a telephone conference was held with DCMWC and DOL decision makers wherein we presented facts and arguments in support of our appeal. No ruling has been made on the appeal, but during the call we indicated that we would be willing to allocate an additional $10.0 million in collateral. If our appeal is unsuccessful, we may be required to provide additional letters of credit in order to receive self-insurance reauthorization from the DCMWC or insure these black lung obligations through a third-party provider, which would likely also require us to provide additional collateral. In January 2023, the DOL proposed for public comment new regulations which, if adopted, would substantially increase the collateral required to secure self-insured federal black lung obligations. Under the proposed 120% minimum collateral requirement, we estimate we could be required to provide approximately $80.0 million to $100.0 million of

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collateral to secure certain of our black lung obligations. The DOL has indicated that it expects that some form of these new regulations could go into effect in the fourth quarter of 2023. A significant increase in these collateral obligations could have a materially adverse effect on our liquidity.

Share Repurchase Program

Refer to Note 6 and “Unregistered Sales of Equity Securities and Use of Proceeds” for information on the share repurchase program, the shares repurchased during the current period, and subsequent event disclosures related to the approval by our Board of Directors (the “Board”) to increase the aggregate amount permitted to be repurchased under the share repurchase program.

Dividend Program

Refer to Note 6 for information related to our dividend program, including the quarterly cash dividend declared during the current period and subsequent event disclosures on the declaration of a quarterly cash dividend during the fourth quarter.

Cash Flows

Cash, cash equivalents, and restricted cash increased by $23.7 million and $272.3 million over the nine months ended September 30, 2023 and 2022, respectively. The net change in cash, cash equivalents, and restricted cash was attributable to the following:


	Nine Months Ended September 30,
	2023		2022
Cash flows (in thousands):
Net cash provided by operating activities	$	651,806	$	1,299,037
Net cash used in investing activities	(126,637)		(182,564)
Net cash used in financing activities	(501,500)		(844,133)
Net increase in cash and cash equivalents and restricted cash	$	23,669	$	272,340

Operating Activities. The decrease in net cash provided by operating activities for the nine months ended September 30, 2023 compared to the prior year period was primarily attributable to lower coal sale realizations as discussed above in “Results of Operations,” partially offset by reductions in royalties and taxes as a result of a lower coal pricing environment.

Investing Activities. The decrease in net cash used in investing activities for the nine months ended September 30, 2023 compared to the prior year period was primarily driven by a net increase in cash from investment security activity, partially offset by increases in capital expenditures and cash paid for business acquired.

Financing Activities. The decrease in net cash used in financing activities for the nine months ended September 30, 2023 compared to the prior year period was primarily driven by decreases in principal repayments of long-term debt as a result of the payoff of the Term Loan Credit Facility in the prior year period, partially offset by increases in dividends paid and common stock repurchases and related expenses.

Analysis of Material Debt Covenants

We were in compliance with all covenants under the ABL Agreement as of September 30, 2023. A breach of the covenants in the ABL Agreement could have resulted in a default under the terms of such agreement, and the respective lenders could then have elected to declare all amounts borrowed due and payable.

Pursuant to the ABL Agreement, during any Liquidity Period (capitalized terms as defined in the ABL Agreement), our Fixed Charge Coverage Ratio could not have been less than 1.0 as of the last day of any Test Period, commencing with the Test Period ended immediately preceding the commencement of such Liquidity Period. The Fixed Charge Coverage Ratio was calculated as (a) Consolidated EBITDA of the Company and its Restricted Subsidiaries for such period, minus non-financed Capital Expenditures (including Capital Expenditures financed with the proceeds of any Loans) paid or payable currently in cash by the Company or any of its Subsidiaries for such period to (b) the Fixed Charges of the Company and its Restricted Subsidiaries during such period. As of September 30, 2023, we were not in a Liquidity Period.

Refer to Note 8 for subsequent event disclosures related to the refinancing of the ABL Facility.

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Critical Accounting Policies and Estimates

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other factors and assumptions, including the current economic environment, that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis and adjust such estimates and assumptions as facts and circumstances require. Foreign currency and energy markets, and fluctuations in demand for steel products, have combined to increase the uncertainty inherent in such estimates and assumptions. As future events and their effects cannot be determined with precision, actual results may differ significantly from these estimates. Changes in these estimates resulting from continuing changes in the economic environment will be reflected in the financial statements in future periods.

Our critical accounting policies are discussed in the “Critical Accounting Policies and Estimates” section contained in our Annual Report on Form 10-K for the year ended December 31, 2022. Our critical accounting policies remain unchanged at September 30, 2023. Refer to the Recent Accounting Guidance section in Note 1 for further information.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Commodity Price Risk

We manage our commodity price risk for coal sales through the use of coal supply agreements. Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Factors Affecting Our Results of Operations” for information on our sales commitments for 2023.

We have exposure to commodity price risk for supplies that are used directly or indirectly in the normal course of production such as diesel fuel, steel and other items such as explosives. We manage our risk for these items through strategic sourcing contracts in normal quantities with our suppliers.

The market price of diesel fuel fluctuates due to changes in production, seasonality, and other market factors generally outside of our control. Increased fuel costs may have a negative impact on our results of operations and financial condition. As of September 30, 2023, our forecasted diesel fuel usage and fixed price diesel fuel purchase commitments for 2023 and 2024 are as follows:


	Budgeted Diesel Fuel Usage in Gallons	% Priced		Average Realized Price per Gallon
2023	23.9 million	94.6	%	$3.49
2024	23.3 million	42.4	%	$3.46

Interest Rate Risk

As of September 30, 2023, we maintain a senior secured asset-based revolving credit facility under which we may borrow up to $155.0 million (less amounts outstanding for letters of credit). Any cash borrowings under the facility would bear a floating rate of interest. No cash borrowings were outstanding under the facility as of September 30, 2023 or December 31, 2022. As of September 30, 2023 and December 31, 2022, we had $60.9 million and $61.9 million letters of credit outstanding under the facility, respectively. Refer to Note 8 for additional information. Also refer to the “Financial Statements and Supplementary Data—Note 14” section contained in our Annual Report on Form 10-K for the year ended December 31, 2022 for discussion on the terms of our long-term debt.

As of September 30, 2023 and December 31, 2022, we had investments in trading securities of $71.3 million and $151.8 million respectively. While the fair value of these investments is exposed to risk with respect to changes in market rates of interest, we do not believe exposure to changes in interest rates is material to our consolidated financial statements. We manage risk by investing in shorter term highly rated debt obligations (primarily U.S. government securities). As of September 30, 2023 and December 31, 2022, the remaining maturities of our acquired debt securities was less than 12 months.

Foreign Currency Risk

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Our transactions are denominated in U.S. dollars, and, as a result, we do not have material exposure to currency exchange-rate risks. However, our coal is sold internationally in U.S. dollars and, as a result, general economic conditions in foreign markets and changes in foreign currency exchange rates may provide our foreign competitors with a competitive advantage. If our competitors’ currencies decline against the U.S. dollar or against our foreign customers’ local currencies, those competitors may be able to offer lower prices for coal to customers. Furthermore, if the currencies of our overseas customers were to significantly decline in value in comparison to the U.S. dollar, those customers may seek decreased prices for the coal we sell to them. Consequently, currency fluctuations could adversely affect the competitiveness of our coal in international markets, which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act, 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 management, including our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In accordance with Rule 13a-15(b) of the Exchange Act, we have evaluated, under the supervision of our CEO and our CFO, the effectiveness of disclosure controls and procedures as of September 30, 2023. Based on this evaluation, our CEO and our CFO concluded that our disclosure controls and procedures were effective as of September 30, 2023.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Disclosure Controls and Procedures

Our CEO, our CFO and other members of management do not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Part II - Other Information

Item 1. Legal Proceedings

For a description of the Company’s legal proceedings, refer to Note 15, part (d), to the unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the risk factor below and the factors discussed in the “Risk Factors” section contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, together with the cautionary statement under the caption “Cautionary Note Regarding Forward-Looking Statements” included elsewhere in this Quarterly Report on Form 10-Q. These described risks are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

Disruptions in transportation services or port facilities, and increased transportation costs, could impair our ability to supply coal to our customers, reduce demand and adversely affect our business.

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For the nine months ended September 30, 2023 and the year ended December 31, 2022, 89% and 84% of our coal volume, respectively, was transported from our shipping points to a vessel loading point or customer location by rail. Deterioration in the reliability of the service provided by rail carriers because of, for example, insufficient allocation of resources to us by rail companies or a strike by railroad workers, would result in increased internal coal handling costs and decreased shipping volumes. If we were unable to find alternatives, our business would be adversely affected, possibly materially. Most of our operations are serviced by a single rail carrier. Due to the difficulty in arranging alternative transportation, these operations are particularly at risk of disruptions, capacity issues or other difficulties with that carrier’s transportation services, which could adversely and materially affect our revenues and results of operations.

Further, we depend significantly upon the reliable operation of the Dominion Terminal Associates (“DTA”) coal export terminal in Newport News, Virginia. DTA, in which we hold a 65.0% ownership interest, provides us with the ability to fulfill a broad range of customer coal quality requirements through coal blending, while also providing storage capacity and transportation flexibility. Any significant disruption in DTA’s functions and operations could adversely and materially affect our revenues and results of operations.

We also depend upon trucks, barges and ocean vessels to deliver coal to our customers. In addition, much of our coal is transported from our mines to our loading facilities by trucks owned and operated by third parties. Disruption of any of these transportation services due to weather-related problems, mechanical difficulties, fuel and supply costs, strikes, lockouts, bottlenecks, terrorist attacks or other events could impair our ability to supply coal to our customers, resulting in decreased shipments and revenue. Disruption in shipment levels over long periods of time could cause our customers to look to other sources for their coal needs, negatively affecting our revenues and results of operations.

An increase in transportation costs could have an adverse effect on our ability to increase or to maintain production on a profit-making basis and could therefore adversely affect our revenues and earnings. Because transportation costs represent a significant portion of the total cost of coal for our customers, increases in transportation costs could also reduce overall demand for coal or make our coal production less competitive than coal produced from other sources or other regions.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Dividend Policy

Pursuant to the dividend policy adopted by the Board on May 3, 2022, the Board declared quarterly cash dividends of $0.44, $0.50, and $0.50 per share on the Company’s common stock during the three months ended March 31, 2023, June 30, 2023, and September 30, 2023, respectively. The holders of the Company’s common stock are entitled to receive such dividends, if any, when they are declared by the Board. On August 2, 2023, the Board determined to end the Company’s fixed dividend program following the quarterly dividend declared and to be paid in the fourth quarter of 2023. The decision to declare and pay cash dividends will be made by the Board and will depend on the Company’s earnings, financial condition and other relevant factors. Refer to Note 6 for further information related to the Company’s dividend program.

Repurchase of Common Stock

The following table summarizes information about shares of common stock that were repurchased during the third quarter of 2023.


	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (In thousands) (1)(2)(3)
July 1, 2023 through July 31, 2023	257,614	$	162.93	257,614	$	416,422
August 1, 2023 through August 31, 2023	173,015	$	184.93	173,015	$	384,427
September 1, 2023 through September 30, 2023	114,412	$	235.78	114,412	$	357,451
	545,041			545,041

(1) On February 21, 2023, the Board approved an increase to the existing common share repurchase program that the Board adopted on March 4, 2022, bringing the total authorization to repurchase the Company’s stock to $1.2 billion. Refer to Note 6 for additional information.

(2) The Company adopted a capital return program in 2019, including a stock repurchase plan with no expiration date that permitted the Company to repurchase up to an aggregate amount of $100 million of the Company's common stock. The Company suspended this stock repurchase plan on October 1, 2019 and does not currently intend to make further repurchases under it.

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(3) We cannot estimate the number of shares that will be repurchased because decisions to purchase are subject to market and business conditions, levels of available liquidity, our cash needs, restrictions under agreements or obligations, legal or regulatory requirements or restrictions, and other relevant factors. This amount does not include stock repurchase related fees and excise taxes.

Refer to Note 6 for information about repurchases related to warrants during the current quarter.

Item 4. Mine Safety Disclosures

Information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in Exhibit 95 to this Quarterly Report on Form 10-Q.

Item 5. Other Information

(a) On October 27, 2023, the Company entered into a Credit Agreement by and among the Company and certain of its subsidiaries, as borrowers, guarantors party thereto, Regions Capital Markets, a division of Regions Bank, as book runner and lead arranger, ServisFirst Bank and Texas Capital Bank, as joint book runners and joint lead arrangers, other lenders from time to time party thereto, and Regions Bank, as administrative agent, collateral agent, swingline lender and letter of credit issuer (the “New ABL Facility”).

The New ABL Facility provides for a $155 million senior secured asset-based revolving loan facility that matures on October 27, 2027 (subject to any intervening maturity date, as described in the New ABL Facility). The New ABL Facility also (i) contains a letter of credit sub-facility with $155 million committed availability for letters of credit and another $25 million uncommitted on a cash collateralized basis and (ii) provides the Borrowers with the right to seek additional credit under the agreement in an aggregate amount of up to $75 million, subject to certain specified conditions.

Borrowings under the New ABL Facility will bear interest at a rate per annum, at the option of the Company, at either (i) Term SOFR (as defined in the New ABL Facility) plus 3.0% and an additional 0.10% adjustment and (ii) the Base Rate (as defined in the New ABL Facility) plus 2.0%. The New ABL Facility also provides for the payment of additional fees, including an upfront fee, a 0.375% commitment fee, and a 0.25% per annum fronting fee on the face amount of each letter of credit, and other fees set forth therein. The New ABL Facility replaces the Company’s Second Amended and Restated Asset-Based Revolving Credit Agreement dated as December 6, 2021 (as amended, modified or supplemented), among the Company, the Borrowers and Guarantors party thereto, the lenders and letter of credit issuers from time to time party thereto and Citibank, N.A., as administrative agent and collateral agent.

The terms of the New ABL Facility include customary representations and warranties, affirmative and negative covenants and events of default. The New ABL Facility is guaranteed by substantially all of the Company’s direct and indirect subsidiaries (together with the Company, the “Loan Parties”) and secured by all or substantially all of the assets of the Loan Parties, including equity in the Loan Parties’ domestic subsidiaries, as collateral for the obligations under the New ABL Facility

The above summary of the New ABL Facility is not a complete description thereof and is qualified in its entirety by the full text of the agreements filed as Exhibits 10.1 and 10.2 and incorporated herein by reference.

On October 31, 2023, the compensation committee of the Board increased the base salary of Mr. Munsey, the Company's chief financial officer, to $500,000 per year, effective as of November 6, 2023.

(b) None.

During the quarter ended September 30, 2023, no director or officer adopted or terminated:

(i) Any contract, instruction or written plan for the purchase or sale of securities of the Company intended to satisfy the affirmative defense conditions of Rule 10b5-1(c); or

(ii) Any “non-Rule 10b5-1 trading arrangement” as defined in paragraph (c) of item 408(a) of Regulation S-K.

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Item 6. Exhibits

Refer to the Exhibit Index following the signature page to this Quarterly Report on Form 10-Q.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.


	ALPHA METALLURGICAL RESOURCES, INC.
Date: November 2, 2023	By:	/s/ J. Todd Munsey
	Name:	J. Todd Munsey
	Title:	Chief Financial Officer
		(Principal Financial Officer and Principal Accounting Officer)

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Exhibit Index


Exhibit No.			Description of Exhibit
3.1			Second Amended and Restated Certificate of Incorporation of Alpha Metallurgical Resources, Inc., as amended through January 22, 2021 (Incorporated by reference to Exhibit 3.1 on Form 10-Q of Alpha Metallurgical Resources, Inc. filed on November 5, 2021)
3.2			Fourth Amended and Restated Bylaws of Alpha Metallurgical Resources, Inc. (Incorporated by reference to Exhibit 3.1 on Form 8-K of Alpha Metallurgical Resources, Inc. filed on December 2, 2022)
10.1			Credit Agreement, dated as of October 27, 2023, by and among Alpha Metallurgical Resources, Inc. and certain of its Subsidiaries, as borrowers, the Guarantors party thereto, Regions Capital Markets, a division of Regions Bank, as Book Runner and Lead Arranger, ServisFirst Bank and Texas Capital Bank, as Joint Book Runners and Joint Lead Arrangers, the other Lenders from time to time party thereto, and Regions Bank, as administrative agent, collateral agent, swingline lender and LC issuer.
10.2			Security Agreement, dated as of October 27, 2023, by and among Alpha Metallurgical Resources, Inc., the subsidiaries of Alpha Metallurgical Resources, Inc. that are grantors thereunder and Regions Bank, as collateral agent.
31*			Certifications Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to §302 of the Sarbanes-Oxley Act of 2002
32**			Certifications Pursuant to 18 U.S.C. §1350, As Adopted Pursuant to §906 of the Sarbanes-Oxley Act of 2002
95*			Mine Safety Disclosure Exhibit
101*			The following financial information from Alpha Metallurgical Resources, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2023 formatted in Inline XBRL (Extensible Business Reporting Language) includes: (i) Condensed Consolidated Statements of Operations, (ii) Condensed Consolidated Statements of Comprehensive Income, (iii) Condensed Consolidated Balance Sheets, (iv) Condensed Consolidated Statements of Cash Flows, (v) Condensed Consolidated Statements of Stockholders’ Equity, and (vi) Notes to the Condensed Consolidated Financial Statements.
104*			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* Filed herewith

** Furnished herewith

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Alpha Metallurgical Resources (AMR) 10-Q2023 Q3 Quarterly report

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