Alpha Metallurgical Resources, Inc. 10-K

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Price range of our common stock Upon the consummation of the transactions contemplated by the Merger Agreement, we began trading on the New York Stock Exchange under the ticker “CTRA” on November 9, 2018. Following the effectiveness of our name change on February 1, 2021, our ticker symbol on the New York Stock Exchange changed from “CTRA” to “AMR” effective on February 4, 2021. The following table sets forth, for the periods indicated, the high and low sales prices per share of our common stock reported on the New York Stock Exchange. 2020 High Low First Quarter $9.15 $1.93 Second Quarter $6.57 $2.25 Third Quarter $10.26 $3.02 Fourth Quarter $14.32 $6.37 2019 High Low First Quarter $66.00 $54.21 Second Quarter $61.87 $49.62 Third Quarter $52.71 $25.37 Fourth Quarter $28.12 $5.70 As of December 31, 2020, there were 155 registered holders of record of our common stock. The transfer agent and registrar for our common stock is Computershare Trust Company, N.A. Our common stock is registered by book-entry only. Dividend Policy The payment of dividends is subject to certain limitations, as set forth in the terms of our borrowing arrangements. During the years ended 2020 and 2019, we did not pay dividends on our common stock. Our Board of Directors periodically evaluates the initiation of dividends. There is no assurance as to the amount or payment of dividends in the future because they will be subject to ongoing Board of Directors review and authorization will be based on a number of factors, including terms of our borrowing arrangements, business and market conditions, our future financial performance and other capital priorities. Repurchase of Common Stock The following table summarizes information about shares of common stock that were repurchased during the fourth quarter of 2020. Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Share Repurchase Programs (2) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Programs (2),(3) October 1, 2020 through October 31, 2020 — $ — — $ 67,552 November 1, 2020 through November 30, 2020 — $ — — $ 67,552 December 1, 2020 through December 31, 2020 3,138 $ 12.15 — $ 67,552 3,138 — $ 67,552 (1) We are authorized to repurchase common shares from employees (upon the election by the employee) to satisfy the employees’ statutory tax withholdings upon the vesting of stock grants. Shares that are repurchased to satisfy the employees’ statutory tax withholdings are recorded in treasury stock at cost. (2) Refer to Note 13 for information on our capital return program. As of October 1, 2019, we suspended the Company Repurchase Plan. (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 54 Table of Contents regulatory requirements or restrictions, and other relevant factors. This amount does not include $16 thousand of stock repurchase related fees. There were no repurchases related to warrants during the current quarter. Refer to Note 2 for information on warrants. Item 6. Selected Financial Data Not applicable. Item 7. 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 years ended December 31, 2020 and 2019. The following discussion and analysis should be read in conjunction with our Consolidated Financial Statements and related notes and the risk factors included elsewhere in this Annual Report on Form 10-K. COVID-19 Pandemic In the first quarter of 2020, the COVID-19 virus was declared a pandemic by the World Health Organization. The COVID-19 pandemic has had negative impacts on our business, results of operations, financial condition and cash flows. A continued period of reduced demand for our products could have additional significant adverse consequences for us. The full extent of the impact of the COVID-19 pandemic on our operational and financial performance will depend on certain developments, including the duration and spread of the outbreak, its impact on our customers and suppliers and the range of governmental and community reactions to the pandemic, which are still uncertain and cannot be fully predicted at this time. Our current view of the impacts of COVID-19 to our customers and suppliers is discussed below in the Market Overview section. Additionally, refer to Note 1 for further discussion of the COVID-19 pandemic impacts to our business and Note 8 for discussion of certain strategic actions announced during the second quarter of 2020 with respect to two of our thermal coal mining complexes in an effort to strengthen our financial performance. All of our coal mining operations have been classified as essential in the states in which we operate. Health and safety are core values of our company and are the foundation for how we manage every aspect of our business and we have therefore implemented policies, procedures and prevention measures to protect our employees during the COVID-19 pandemic. These policies, procedures and prevention measures include, but are not limited to, employee communications on COVID-19 monitoring and precautionary measures, enhanced cleaning and sterilization practices, limiting contractor access to our properties, limiting business travel, implementing social distancing measures by staggering shift times, limiting in-person meetings and meeting sizes, and remote work arrangements. We will continue to evaluate these policies, procedures and precautionary measures for further enhancements as necessary. We have not experienced significant supply chain disruptions due the COVID-19 pandemic. We will continue to monitor these developments closely. Market Overview After a challenging COVID-19-afflicted 2020, the Australian metallurgical coal market, despite the recent pullback, has shown meaningful improvement in 2021, with the Australian premium hard coking coal index increasing 22% to $125 per metric ton in February since the end of 2020 and up nearly 30% since the lows of mid-November. The Atlantic High-Vol A indices have also performed well after reaching a low of $105 in mid-August. The current February High-Vol A index of $153 per metric ton represents a 46% improvement over that period. Global manufacturing and industrial production are continuing to show growth in all regions with the manufacturing Purchasing Managers’ Indices (“PMI”) above 50.0 in the U.S., Europe, Brazil, India, and China, which is showing the most moderate growth among the major producers at 50.9 in January. According to the World Steel Association (“WSA”), December 2020 crude steel production increased compared to the same prior year period in most producing regions. The overall global growth of 5.8% was driven mainly by China and Europe, which grew 7.7% and 10.2% in December, respectively. For the full year 2020, the global crude steel production declined less than 1%, led by declines in North America and Europe. South America, driven by Brazil, exhibited the strongest growth of any 55 Table of Contents major region, growing 16.3% in December. Turkey posted one of the most impressive growth rates in December and for the full year 2020, with crude steel production growing 17.7% and 6.0%, respectively. We concluded our 2021 domestic metallurgical contracts during the fourth quarter. In total, we expect to sell approximately 14 million tons from our Met reportable segment in 2021. Coking coal prices have risen from their recent multi-year lows. Trade tensions between Australia and China forced Australian coal producers to sell at weaker prices and encouraged them to divert and re-sell cargoes away from China into other markets. These actions have opened the door for some North American coking coal producers to ship coal to China at higher netbacks than could be achieved in Atlantic Basin markets. In addition, we see demand improving in other Atlantic Basin and global markets. At this time, we are also seeing increasing spot interest from both domestic and seaborne customers and prospective customers which has resulted in an increase in shipments. In connection with the company’s strategic focus on optimizing metallurgical coal production, we continue striving to match our available products and production with customer demand. On the thermal side, as of the end of December, natural gas prices had not achieved the previously forecasted levels. Since that time, severe weather has resulted in high consumer electricity demand and lower production, causing stress to the energy system in parts of the U.S. Natural gas inventories are poised to drop to the five-year average for the first time since the end of 2019. Central Appalachian thermal coal burns for our customers have not yet been significantly impacted by the fluctuations in natural gas prices, but we have seen increased demand associated with the recent severe weather. Internationally, Europe and Asia have also experienced severe weather, supply disruptions, reductions in coal capacity, and high carbon prices limiting opportunities for US coal. Increased ESG pressures are forcing expedited closure of coal units, domestically and abroad. US thermal coal producers are continuing to reduce investment in thermal coal. At our thermal coal operations, we have significantly reduced inventories at all locations, and are matching our sales and production to make for an orderly transition to lower thermal coal production. As Alpha enters 2021, we continue to evaluate market conditions for our metallurgical coal products amid residual uncertainty attributable to the continued concern around the COVID-19 pandemic. The impact the pandemic may have on demand continues to make customer demand forecasts challenging. Depending on the extent and timing of global and national economic stabilization and recovery, our ability to estimate future customer coal demand remains limited. 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 U.S. supplier of metallurgical products for the steel industry. We operate high-quality, cost-competitive coal mines across the CAPP coal basin. As of December 31, 2020, our operations consisted of twenty-three active mines and eight coal preparation and load-out facilities, with approximately 3,250 employees. We produce, process, and sell met coal and thermal coal from operations located in Virginia and West Virginia. 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, 2020, we had 623.5 million tons of reserves, including 445.0 million tons of proven reserves and 178.5 million tons of probable reserves. We began operations on July 26, 2016, with mining operations in NAPP, CAPP, and the PRB. Through the Acquisition, we acquired a significant reserve base. We also acquired Alpha Natural Resources Inc.’s 40.6% interest in the DTA coal export terminal in eastern Virginia, and on March 31, 2017, we acquired a portion of another partner’s ownership stake and increased our interest to 65.0%. We merged with Alpha Natural Resources Holdings, Inc. and ANR, Inc. on November 9, 2018. On December 8, 2017, the Company closed a transaction to sell the Eagle Butte and Belle Ayr mines located in the PRB, Wyoming, along with related coal reserves, equipment, infrastructure and other real properties. Refer to Note 3 for information related to Blackjewel’s subsequent bankruptcy filing and the related ESM Transaction. On December 10, 2020, we closed on a transaction with Iron Senergy Holdings, LLC, to sell our thermal coal mining operations located in Pennsylvania consisting primarily of our Cumberland mining complex and related property (our former NAPP operations). This transaction accelerated our strategic exit from thermal coal production to shift our focus toward met coal production. The former PRB and NAPP operations results of operations and financial position are reported as discontinued operations in the Consolidated Financial Statements. The historical information in the accompanying Notes to the Consolidated Financial Statements has been restated to reflect the effects of these former operations being reported as discontinued operations in the Consolidated Financial Statements. Refer to Note 3 for further information on discontinued operations. For the years ended December 31, 2020 and 2019, sales of met coal were 12.3 million tons and 12.7 million tons, respectively, and accounted for approximately 80% and 74%, respectively, of our coal sales volume. Sales of thermal coal were 56 Table of Contents 3.2 million tons and 4.5 million tons, respectively, and accounted for approximately 20% and 26%, 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 Europe, Asia and the Americas. Our sales of thermal coal were made primarily to large utilities and industrial customers throughout the United States. For the years ended December 31, 2020 and 2019 approximately 64% and 61%, 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 December 31, 2020, we have two reportable segments: Met and CAPP - Thermal. To conform to the current period reportable segments presentation, the prior periods have been restated to reflect the change in reportable segments. Refer to Note 25 for additional disclosures on reportable segments including export coal revenue information. Other Business Development s Effective February 1, 2021, we changed our corporate name from Contura Energy, Inc. to Alpha Metallurgical Resources, Inc. for rebranding to more accurately reflect our strategic focus on the production of met coal. Following the effectiveness of our name change, our ticker symbol on the New York Stock Exchange changed from “CTRA” to “AMR” effective on February 4, 2021. During the third quarter of 2020, we joined three other regional coal producers to restructure and expand the Virginia Coal & Energy Alliance to now be named the Metallurgical Coal Producers Association (“MCPA”) focusing on issues specific to the U.S.’s metallurgical coal industry. Additionally, the MCPA will focus on our regional presence by combining forces to advance collective interests. 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 March 11, 2021, we have sales commitments as follows: 2021 Tons % Priced Average Realized Price per Ton Met 14.0 million 56 % $80.68 CAPP - Thermal 1.5 million 100 % $57.57 Due to the significant uncertainty in the worldwide coal markets due to COVID-19, there is risk of reduction in future shipments due to deferrals and utilization of force majeure clauses in customer contracts. 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. • Coal Quality. The energy content or heat value of thermal coal is a significant factor influencing coal prices as higher energy coal is more desirable to consumers and typically commands a higher price in the market. The heat value of coal is commonly measured in British thermal units or the amount of heat needed to raise the temperature of one pound of water by one-degree Fahrenheit. Coal from the Eastern and Midwest regions of the United States tends to have a higher heat value than coal found in the western United States. Coal volatility is a significant factor influencing met coal pricing as coal with a lower volatility has historically been more highly valued and typically commands a higher price in the market. The volatility refers to the loss in mass, less moisture, when coal is heated in the absence of air. The volatility of met coal determines the percentage of feed coal that becomes coke, known as coke yield, with lower volatility producing a higher coke yield. 57 Table of Contents • Market Conventions. Coal sales contracts are priced according to conventions specific to the market into which such coal is to be sold. Our domestic sales contracts are typically priced free on board (“FOB”) at our mines and on a short ton basis. Our international sales contracts are typically priced FOB at the shipping port from which such coal is delivered and on a metric ton basis. Accordingly, for international sales contracts, we typically bear the cost of transportation from our mines to the applicable outbound shipping port, and our coal sales realization per ton calculation reflects the conversion of such tonnage from metric tons into short tons, as well as the elimination of the freight and handling fulfillment component of coal sales revenue. In addition, for domestic sales contracts, as customers typically bear the cost of transportation from our mines, our operations located further away from the end user of the coal may command lower prices. • Regional Supply and Demand. Our realized price per ton is influenced by market forces of the regional market into which such coal is to be sold. Market pricing may vary according to region and lead to different discounts or premiums to the most directly comparable benchmark price for such coal product. Costs. Our results of operations are dependent upon our ability to improve productivity and control costs. Our primary expenses are for operating supply costs, repair and maintenance expenditures, cost of purchased coal, royalties, current wages and benefits, post-employment benefits, freight and handling costs and taxes incurred in selling our coal. 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 structure, 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 years ended December 31, 2020 and 2019 are discussed in these “Results of Operations” presented below. Year Ended December 31, 2020 Compared to the Year Ended December 31, 2019 Revenues The following table summarizes information about our revenues during the years ended December 31, 2020 and 2019: Year Ended December 31, Increase (Decrease) (In thousands, except for per ton data) 2020 2019 $ or Tons % Coal revenues $ 1,413,124 $ 1,995,934 $ (582,810) (29.2) % Other revenues 3,063 5,346 (2,283) (42.7) % Total revenues $ 1,416,187 $ 2,001,280 $ (585,093) (29.2) % Tons sold 15,513 17,152 (1,639) (9.6) % Coal revenues. Coal revenues decreased $582.8 million, or 29.2%, for the year ended December 31, 2020 compared to the prior year period. The decrease was primarily due to lower total overall coal sales volume and lower coal sales realization within our Met operations as a result of a weaker pricing environment impacted by the COVID-19 pandemic. Refer to the Coal Operations section below for further detail on coal revenues for the year ended December 31, 2020 compared to the prior year period. 58 Table of Contents Cost and Expenses The following table summarizes information about our costs and expenses during the years ended December 31, 2020 and 2019: Year Ended December 31, Increase (Decrease) (In thousands) 2020 2019 $ % Cost of coal sales (exclusive of items shown separately below) $ 1,281,011 $ 1,667,768 $ (386,757) (23.2) % Depreciation, depletion and amortization 139,885 215,757 (75,872) (35.2) % Accretion on asset retirement obligations 26,504 23,865 2,639 11.1 % Amortization of acquired intangibles, net 9,214 (3,189) 12,403 388.9 % Selling, general and administrative expenses (exclusive of depreciation, depletion and amortization shown separately above) 57,356 78,953 (21,597) (27.4) % Merger-related costs — 1,090 (1,090) (100.0) % Asset impairment and restructuring 83,878 66,324 17,554 26.5 % Goodwill impairment — 124,353 (124,353) (100.0) % Total other operating income: Mark-to-market adjustment for acquisition-related obligations (8,750) (3,564) (5,186) (145.5) % Other income (2,223) (974) (1,249) (128.2) % Total costs and expenses $ 1,586,875 $ 2,170,383 $ (583,508) (26.9) % Cost of coal sales. Cost of coal sales decreased $386.8 million, or 23.2%, for the year ended December 31, 2020 compared to the prior year period. The decrease was primarily driven by a decrease in tons sold in the current period relative to the prior year period and decreased costs of purchased coal, salaries and wages expense, and supplies and maintenance expense as we continue to improve our cost management to achieve operational efficiencies, partially offset by inventory change during the current period. Depreciation, depletion and amortization. Depreciation, depletion and amortization decreased $75.9 million, or 35.2%, for the year ended December 31, 2020 compared to the prior year period. The decrease in depreciation, depletion and amortization primarily related to asset impairments and revisions to asset retirement obligations during the current period. Accretion on asset retirement obligations. Accretion on asset retirement obligations increased $2.6 million, or 11.1%, for the year ended December 31, 2020 compared to the prior year period. This increase was primarily driven by an increase in our credit-adjusted risk-free rate used to discount the obligations relative to the prior period. Amortization of acquired intangibles, net. Amortization of acquired intangibles, net increased $12.4 million, or 388.9%, for the year ended December 31, 2020 compared to the prior year period. The increase was primarily driven by the lower current period amortization related to below-market acquired coal supply agreements. Selling, general and administrative. Selling, general and administrative expenses decreased $21.6 million, or 27.4%, for the year ended December 31, 2020 compared to the prior year period. This decrease in expense was primarily related to decreases of $6.5 million in severance expense, $5.8 million in wages and benefits expense, $4.8 million in stock compensation expense, and $4.4 million in professional fees, partially offset by an increase of $2.8 million in incentive pay. Asset impairment and restructuring. Asset impairment and restructuring increased $17.6 million, or 26.5%, for the year ended December 31, 2020 compared to the prior year period. Asset impairment and restructuring for the year ended December 31, 2020 includes long-lived asset impairments of $81.0 million related to asset groups recorded within the Met and CAPP - Thermal reporting segments and restructuring expense of $2.9 million recorded in CAPP - Thermal and All Other reporting segments. Asset impairment and restructuring for the year ended December 31, 2019 includes a long-lived asset impairment of $60.2 million related to asset groups recorded within the Met and CAPP - Thermal reporting segments and an asset impairment of $6.2 million primarily related to the write-off of prepaid purchased coal as a result of Blackjewel’s Chapter 11 bankruptcy filing on July 1, 2019. Refer to Note 8 for further information. 59 Table of Contents Mark-to-market adjustment for acquisition-related obligations. The mark-to-market adjustment for acquisition-related obligations resulted in an increase to income of $5.2 million for the year ended December 31, 2020 compared to the adjustment in the prior year period. This increase was related to changes in underlying fair value assumptions during the current period. Refer to Note 18 for Contingent Revenue Obligation fair value input assumptions. Other (Expense) Income The following table summarizes information about our other (expense) income during the year ended December 31, 2020 and 2019: Year Ended December 31, Increase (Decrease) (In thousands) 2020 2019 $ % Other (expense) income: Interest expense $ (74,528) $ (67,521) $ (7,007) (10.4) % Interest income 7,027 7,247 (220) (3.0) % Loss on modification and extinguishment of debt — (26,459) 26,459 100.0 % Equity loss in affiliates (3,473) (6,874) 3,401 49.5 % Miscellaneous loss, net (1,972) (10,195) 8,223 80.7 % Total other expense, net $ (72,946) $ (103,802) $ 30,856 29.7 % Interest expense. Interest expense increased $7.0 million, or 10.4%, for the year ended December 31, 2020 compared to the prior year period, primarily due to an increase in debt outstanding and higher interest rates related to the debt facilities in place during the current period. Additionally, there were higher letters of credit fees due to higher letters of credit outstanding under the Amended and Restated Asset-Based Revolving Credit Agreement during the current period. Refer to Note 15 for additional information. Loss on modification and extinguishment of debt. During the year ended December 31, 2019, we recorded a loss on modification of debt of $0.3 million, primarily related to modification fees paid under the refinance, and a loss on extinguishment of debt of $26.2 million, primarily related to the write-off of outstanding debt discounts and unamortized debt issuance costs under the Amended and Restated Credit Agreement dated November 9, 2018. Refer to Note 15 for additional information. Miscellaneous loss, net. Miscellaneous loss, net decreased $8.2 million, or 80.7%, for the year ended December 31, 2020 compared to the prior year period, primarily due to the decrease in pension obligation net periodic benefit costs due to lower settlement charges and interest costs during the current period. Refer to Note 20 for additional information. Income Tax Benefit The following table summarizes information about our income tax benefit during the years ended December 31, 2020 and 2019: Year Ended December 31, Increase (Decrease) (In thousands) 2020 2019 $ % Income tax benefit $ 2,164 $ 53,287 $ (51,123) (95.9) % Income taxes. Income tax benefit of $2.2 million was recorded for the year ended December 31, 2020 on a loss from continuing operations before income taxes of $243.6 million. The effective tax rate differs from the federal statutory rate of 21% primarily due to the increase in the valuation allowance, partially offset by the permanent impact of percentage depletion deductions, the impact of state income taxes, net of federal tax impact, and a refund of previously sequestered AMT Credits. Income tax benefit of $53.3 million was recorded for the year ended December 31, 2019 on a loss from continuing operations before income taxes of $272.9 million. The effective tax rate differs from the federal statutory rate of 21% primarily due to the impact of state income taxes, net of federal impact, the net operating loss carryback benefit, and the permanent impact of the percentage depletion deduction, mostly offset by the impact of the non-deductible goodwill impairment and the increase in the valuation allowance. Refer to Note 19 for additional information. 60 Table of Contents Coal Operations Our Met operations consist of high-quality met coal mines, including Deep Mine 41, Road Fork 52, Black Eagle, and Lynn Branch. The coal produced by Met operations is predominantly met coal with some amounts of thermal coal being produced as a byproduct of mining. Our CAPP - Thermal operations consist of one underground thermal coal mine. The coal produced by CAPP - Thermal operations is predominantly thermal coal with some met coal byproduct. Our All Other category is not included in our Coal Operations results of operations as it includes general corporate overhead and corporate assets and liabilities and the elimination of certain intercompany activity. Refer to Item 1. Business and Notes 24 and 25 for additional financial information about reportable segments and geographic areas. Non-GAAP Financial Measures The discussion below contains “non-GAAP financial measures.” These are financial measures which 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 “Adjusted cost of produced coal sold.” 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. 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, idled and closed mine costs and coal inventory acquisition accounting impacts. 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. We also use Adjusted cost of produced coal sold to distinguish the cost of captive produced coal from the effects of purchased coal. 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 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 years ended December 31, 2020 and 2019: 61 Table of Contents Year Ended December 31, 2020 (In thousands, except for per ton data) Met CAPP - Thermal All Other Consolidated Coal revenues $ 1,263,855 $ 148,880 $ 389 $ 1,413,124 Less: Freight and handling fulfillment revenues (206,509) (12,940) — (219,449) Non-GAAP Coal revenues $ 1,057,346 $ 135,940 $ 389 $ 1,193,675 Tons sold 13,070 2,437 6 15,513 Non-GAAP Coal sales realization per ton $ 80.90 $ 55.78 $ 64.83 $ 76.95 Cost of coal sales (exclusive of items shown separately below) $ 1,140,556 $ 136,944 $ 3,511 $ 1,281,011 Depreciation, depletion and amortization - production (1) 124,060 20,453 (5,885) 138,628 Accretion on asset retirement obligations 14,214 9,285 3,005 26,504 Amortization of acquired intangibles, net 12,889 (3,775) 100 9,214 Total Cost of coal sales $ 1,291,719 $ 162,907 $ 731 $ 1,455,357 Less: Freight and handling costs (206,509) (12,940) — (219,449) Less: Depreciation, depletion and amortization - production (1) (124,060) (20,453) 5,885 (138,628) Less: Accretion on asset retirement obligations (14,214) (9,285) (3,005) (26,504) Less: Amortization of acquired intangibles, net (12,889) 3,775 (100) (9,214) Less: Idled and closed mine costs (16,640) (8,973) (3,267) (28,880) Non-GAAP Cost of coal sales $ 917,407 $ 115,031 $ 244 $ 1,032,682 Tons sold 13,070 2,437 6 15,513 Non-GAAP Cost of coal sales per ton $ 70.19 $ 47.20 $ 40.67 $ 66.57 (1) Depreciation, depletion and amortization - production excludes the depreciation, depletion and amortization related to selling, general and administrative functions. Year Ended December 31, 2020 (In thousands, except for per ton data) Met CAPP - Thermal All Other Consolidated Coal revenues $ 1,263,855 $ 148,880 $ 389 $ 1,413,124 Less: Total Cost of coal sales (per table above) (1,291,719) (162,907) (731) (1,455,357) GAAP Coal margin $ (27,864) $ (14,027) $ (342) $ (42,233) Tons sold 13,070 2,437 6 15,513 GAAP Coal margin per ton $ (2.13) $ (5.76) $ (57.00) $ (2.72) GAAP Coal margin $ (27,864) $ (14,027) $ (342) $ (42,233) Add: Depreciation, depletion and amortization - production (1) 124,060 20,453 (5,885) 138,628 Add: Accretion on asset retirement obligations 14,214 9,285 3,005 26,504 Add: Amortization of acquired intangibles, net 12,889 (3,775) 100 9,214 Add: Idled and closed mine costs 16,640 8,973 3,267 28,880 Non-GAAP Coal margin $ 139,939 $ 20,909 $ 145 $ 160,993 Tons sold 13,070 2,437 6 15,513 Non-GAAP Coal margin per ton $ 10.71 $ 8.58 $ 24.17 $ 10.38 (1) Depreciation, depletion and amortization - production excludes the depreciation, depletion and amortization related to selling, general and administrative functions. 62 Table of Contents Year Ended December 31, 2019 (In thousands, except for per ton data) Met CAPP - Thermal All Other Consolidated Coal revenues $ 1,709,863 $ 285,390 $ 681 $ 1,995,934 Less: Freight and handling fulfillment revenues (242,049) (34,133) — (276,182) Non-GAAP Coal revenues $ 1,467,814 $ 251,257 $ 681 $ 1,719,752 Tons sold 12,926 4,218 8 17,152 Non-GAAP Coal sales realization per ton $ 113.56 $ 59.57 $ 85.13 $ 100.27 Cost of coal sales (exclusive of items shown separately below) $ 1,389,619 $ 274,320 $ 3,829 $ 1,667,768 Depreciation, depletion and amortization - production (1) 152,835 57,483 4,025 214,343 Accretion on asset retirement obligations 9,599 10,929 3,337 23,865 Amortization of acquired intangibles, net 10,389 (13,578) — (3,189) Total Cost of coal sales $ 1,562,442 $ 329,154 $ 11,191 $ 1,902,787 Less: Freight and handling costs (242,049) (34,133) — (276,182) Less: Depreciation, depletion and amortization - production (1) (152,835) (57,483) (4,025) (214,343) Less: Accretion on asset retirement obligations (9,599) (10,929) (3,337) (23,865) Less: Amortization of acquired intangibles, net (10,389) 13,578 — 3,189 Less: Idled and closed mine costs (8,699) (2,702) (3,164) (14,565) Less: Cost impact of coal inventory fair value adjustment (2) (4,751) (3,458) — (8,209) Non-GAAP Cost of coal sales $ 1,134,120 $ 234,027 $ 665 $ 1,368,812 Tons sold 12,926 4,218 8 17,152 Non-GAAP Cost of coal sales per ton $ 87.74 $ 55.48 $ 83.13 $ 79.80 (1) Depreciation, depletion and amortization - production excludes the depreciation, depletion and amortization related to selling, general and administrative functions. (2) The cost impact of the coal inventory fair value adjustment as a result of the Merger was completed during the three months ended June 30, 2019. 63 Table of Contents Year Ended December 31, 2019 (In thousands, except for per ton data) Met CAPP - Thermal All Other Consolidated Coal revenues $ 1,709,863 $ 285,390 $ 681 $ 1,995,934 Less: Total Cost of coal sales (per table above) (1,562,442) (329,154) (11,191) (1,902,787) GAAP Coal margin $ 147,421 $ (43,764) $ (10,510) $ 93,147 Tons sold 12,926 4,218 8 17,152 GAAP Coal margin per ton $ 11.40 $ (10.38) $ (1,313.75) $ 5.43 GAAP Coal margin $ 147,421 $ (43,764) $ (10,510) $ 93,147 Add: Depreciation, depletion and amortization - production (1) 152,835 57,483 4,025 214,343 Add: Accretion on asset retirement obligations 9,599 10,929 3,337 23,865 Add: Amortization of acquired intangibles, net 10,389 (13,578) — (3,189) Add: Idled and closed mine costs 8,699 2,702 3,164 14,565 Add: Cost impact of coal inventory fair value adjustment (2) 4,751 3,458 — 8,209 Non-GAAP Coal margin $ 333,694 $ 17,230 $ 16 $ 350,940 Tons sold 12,926 4,218 8 17,152 Non-GAAP Coal margin per ton $ 25.82 $ 4.08 $ 2.00 $ 20.46 (1) Depreciation, depletion and amortization - production excludes the depreciation, depletion and amortization related to selling, general and administrative functions. (2) The cost impact of the coal inventory fair value adjustment as a result of the Merger was completed during the three months ended June 30, 2019. Year Ended December 31, Increase (Decrease) (In thousands, except for per ton data) 2020 2019 $ % Tons sold: Met operations 13,070 12,926 144 1.1 % CAPP - Thermal operations 2,437 4,218 (1,781) (42.2) % Non-GAAP Coal revenues: Met operations $ 1,057,346 $ 1,467,814 $ (410,468) (28.0) % CAPP - Thermal operations $ 135,940 $ 251,257 $ (115,317) (45.9) % Non-GAAP Coal sales realization per ton: Met operations $ 80.90 $ 113.56 $ (32.66) (28.8) % CAPP - Thermal operations $ 55.78 $ 59.57 $ (3.79) (6.4) % Average $ 76.95 $ 100.27 $ (23.32) (23.3) % Non-GAAP segment coal revenues. Met operations non-GAAP coal revenues decreased $410.5 million, or 28.0%, for the year ended December 31, 2020 compared to the prior year period. The decrease in Met operations non-GAAP coal revenues was primarily due to lower non-GAAP coal sales realization of $32.66 per ton as a result of a weaker pricing environment resulting from the impacts of the COVID-19 pandemic. CAPP - Thermal operations non-GAAP coal revenues decreased $115.3 million, or 45.9%, for the year ended December 31, 2020 compared to the prior year period. The decrease in CAPP - Thermal operations non-GAAP coal revenues was due to lower coal sales volumes of 1.8 million tons and lower non-GAAP coal sales realization of $3.79 per ton as a result of a weaker pricing environment resulting from the impacts of the COVID-19 pandemic. 64 Table of Contents Year Ended December 31, Increase (Decrease) (In thousands, except for per ton data) 2020 2019 $ % Non-GAAP Cost of coal sales: Met operations $ 917,407 $ 1,134,120 $ (216,713) (19.1) % CAPP - Thermal operations $ 115,031 $ 234,027 $ (118,996) (50.8) % Non-GAAP Cost of coal sales per ton: Met operations $ 70.19 $ 87.74 $ (17.55) (20.0) % CAPP - Thermal operations $ 47.20 $ 55.48 $ (8.28) (14.9) % Non-GAAP Coal margin per ton: Met operations $ 10.71 $ 25.82 $ (15.11) (58.5) % CAPP - Thermal operations $ 8.58 $ 4.08 $ 4.50 110.3 % Non-GAAP cost of coal sales. Met operations non-GAAP cost of coal sales decreased $216.7 million, or 19.1%, for the year ended December 31, 2020 compared to the prior year period. The decrease in Met operations non-GAAP cost of coal sales was primarily driven by decreased costs of purchased coal, salaries and wages expense, supplies and maintenance expense, and royalties and taxes, partially offset by inventory change during the current period. CAPP - Thermal operations non-GAAP cost of coal sales decreased $119.0 million, or 50.8%, for the year ended December 31, 2020 compared to the prior year period. The decrease in CAPP - Thermal operations non-GAAP cost of coal sales was primarily due to a decrease in tons sold in the current period relative to the prior year period and decreased supplies and maintenance expense and salaries and wages expense, partially offset by inventory change during the current period. Our non-GAAP cost of coal sales includes purchased coal costs. In the following tables, we calculate Adjusted cost of produced coal sold as non-GAAP cost of coal sales less purchased coal costs. Year Ended December 31, 2020 (In thousands, except for per ton data) Met CAPP - Thermal All Other Consolidated Non-GAAP Cost of coal sales $ 917,407 $ 115,031 $ 244 $ 1,032,682 Less: cost of purchased coal sold (85,769) (925) — (86,694) Adjusted cost of produced coal sold $ 831,638 $ 114,106 $ 244 $ 945,988 Produced tons sold 11,941 2,423 6 14,370 Adjusted cost of produced coal sold per ton (1) $ 69.65 $ 47.09 $ 40.67 $ 65.83 (1) Cost of produced coal sold per ton for our operations is calculated as non-GAAP cost of produced coal sold divided by produced tons sold. Year Ended December 31, 2019 (In thousands, except for per ton data) Met CAPP - Thermal All Other Consolidated Non-GAAP Cost of coal sales $ 1,134,120 $ 234,027 $ 665 $ 1,368,812 Less: cost of purchased coal sold (237,681) (6,976) — (244,657) Adjusted cost of produced coal sold $ 896,439 $ 227,051 $ 665 $ 1,124,155 Produced tons sold 10,727 4,091 8 14,826 Adjusted cost of produced coal sold per ton (1) $ 83.57 $ 55.50 $ 83.13 $ 75.82 (1) Cost of produced coal sold per ton for our operations is calculated as non-GAAP cost of produced coal sold divided by produced tons sold. Segment Adjusted EBITDA Segment Adjusted EBITDA for our reportable segments is a financial measure. This non-GAAP financial measure is presented as a supplemental measure and is not intended to replace financial performance measures determined 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. Segment Adjusted EBITDA is presented because management believes it is 65 Table of Contents a useful indicator of the financial performance of our coal operations. The following tables present a reconciliation of net income (loss) to Adjusted EBITDA for the years ended December 31, 2020 and 2019: Year Ended December 31, 2020 (In thousands) Met CAPP - Thermal All Other Consolidated Net loss from continuing operations $ (77,519) $ (52,520) $ (111,431) $ (241,470) Interest expense (2,014) 6 76,536 74,528 Interest income (63) — (6,964) (7,027) Income tax benefit — — (2,164) (2,164) Depreciation, depletion and amortization 124,060 20,453 (4,628) 139,885 Non-cash stock compensation expense 289 8 4,600 4,897 Mark-to-market adjustment - acquisition-related obligations — — (8,750) (8,750) Accretion on asset retirement obligations 14,214 9,285 3,005 26,504 Asset impairment and restructuring (1) 46,317 36,719 842 83,878 Management restructuring costs (2) 501 5 435 941 Loss on partial settlement of benefit obligations 1,607 (328) 1,687 2,966 Amortization of acquired intangibles, net 12,889 (3,775) 100 9,214 Adjusted EBITDA $ 120,281 $ 9,853 $ (46,732) $ 83,402 (1) Asset impairment and restructuring for the year ended December 31, 2020 includes long-lived asset impairments of $81.0 million related to asset groups recorded within the Met and CAPP - Thermal reporting segments and restructuring expense of $2.9 million recorded in CAPP - Thermal and All Other reporting segments. Refer to Note 8 for further information. (2) Management restructuring costs are related to severance expense associated with senior management changes during the three months ended March 31, 2020. Year Ended December 31, 2019 (In thousands) Met CAPP - Thermal All Other Consolidated Net income (loss) from continuing operations $ 7,944 $ (97,398) $ (130,164) $ (219,618) Interest expense (1,209) 23 68,707 67,521 Interest income (100) — (7,147) (7,247) Income tax benefit — — (53,287) (53,287) Depreciation, depletion and amortization 152,835 57,483 5,439 215,757 Merger-related costs — — 1,090 1,090 Non-cash stock compensation expense 1,494 71 10,783 12,348 Mark-to-market adjustment - acquisition-related obligations — — (3,564) (3,564) Accretion on asset retirement obligations 9,599 10,929 3,337 23,865 Loss on modification and extinguishment of debt — — 26,459 26,459 Asset impairment (1) 15,034 50,993 297 66,324 Goodwill impairment (2) 124,353 — — 124,353 Cost impact of coal inventory fair value adjustment (3) 4,751 3,458 — 8,209 Gain on assets acquired in an exchange transaction (4) (9,083) — — (9,083) Management restructuring costs (5) — — 7,720 7,720 Loss on partial settlement of benefit obligations (1) — 6,447 6,446 Amortization of acquired intangibles, net 10,389 (13,578) — (3,189) Adjusted EBITDA $ 316,006 $ 11,981 $ (63,883) $ 264,104 (1) Asset impairment for the year ended December 31, 2019 includes a long-lived asset impairment of $60.2 million related to asset groups recorded within the Met and CAPP - Thermal reporting segments and an asset impairment of $6.2 million primarily related to the write-off of prepaid purchased coal as a result of Blackjewel’s Chapter 11 bankruptcy filing on July 1, 2019. Refer to Note 8 for further information. 66 Table of Contents (2) The goodwill impairment testing as of December 31, 2019 resulted in a goodwill impairment of $124.4 million to write down the full carrying value of goodwill. Refer to Note 2 for further information. (3) The cost impact of the coal inventory fair value adjustment as a result of the Merger was completed during the three months ended June 30, 2019. (4) During the year ended December 31, 2019, the Company entered into an exchange transaction which primarily included the release of the PRB overriding royalty interest owed to the Company in exchange for met coal reserves which resulted in a gain of $9.1 million. (5) Management restructuring costs are related to severance expense associated with senior management changes in the year ended December 31, 2019. The following table summarizes Adjusted EBITDA for our two reportable segments and All Other category: Year Ended December 31, Increase (Decrease) (In thousands) 2020 2019 $ % Adjusted EBITDA Met operations $ 120,281 $ 316,006 $ (195,725) (61.9) % CAPP - Thermal operations 9,853 11,981 (2,128) (17.8) % All Other (46,732) (63,883) 17,151 26.8 % Total $ 83,402 $ 264,104 $ (180,702) (68.4) % Met operations. Adjusted EBITDA decreased $195.7 million, or 61.9%, for the year ended December 31, 2020 compared to the prior year period. The decrease in Adjusted EBITDA was primarily driven by decreased non-GAAP coal sales realization per ton of $32.66, or 28.8%, due to a weaker pricing environment resulting from the impact of the COVID-19 pandemic. CAPP - Thermal operations. Adjusted EBITDA decreased $2.1 million, or 17.8%, for the year ended December 31, 2020. The decrease in Adjusted EBITDA was primarily driven by decreased coal sales volumes of 1.8 million tons, or 42.2%, and decreased non-GAAP coal sales realization per ton of $3.79, or 6.4%, due to a weaker pricing and demand environment resulting from the COVID-19 pandemic. All Other category. Adjusted EBITDA increased $17.2 million, or 26.8%, for the year ended December 31, 2020 compared to the prior year period. The increase in Adjusted EBITDA was primarily driven by decreases in selling, general and administrative expenses and increased gain on sale of assets. Discontinued Operations The former PRB and NAPP operations results of operations and financial position are reported as discontinued operations in the Consolidated Financial Statements. Refer to Note 3 for further information on discontinued operations. The following tables summarize certain financial information relating to the PRB and NAPP discontinued operating results which are reported within the All Other reporting segment that have been derived from our consolidated financial statements for the years ended December 31, 2020 and 2019. 67 Table of Contents Year Ended December 31, (In thousands, except for per ton data) 2020 2019 Coal revenues $ 233,083 $ 286,073 Less: Freight and handling fulfillment revenues (11,135) (8,827) Non-GAAP Coal revenues $ 221,948 $ 277,246 Tons sold 5,420 7,484 Non-GAAP Coal sales realization per ton $ 40.95 $ 37.05 Cost of coal sales (exclusive of items shown separately below) $ 215,390 $ 256,336 Depreciation, depletion and amortization - production (1) 11,570 99,405 Accretion on asset retirement obligations 4,154 9,894 Amortization of acquired intangibles, net 861 3,101 Total Cost of coal sales $ 231,975 $ 368,736 Less: Freight and handling costs (11,135) (8,827) Less: Depreciation, depletion and amortization - production (1) (11,570) (99,405) Less: Accretion on asset retirement obligations (4,154) (9,894) Less: Amortization of acquired intangibles, net (861) (3,101) Less: Idled and closed mine costs (3,102) (4,005) Non-GAAP Cost of coal sales $ 201,153 $ 243,504 Tons sold 5,420 7,484 Non-GAAP Cost of coal sales per ton $ 37.11 $ 32.54 (1) Depreciation, depletion and amortization - production excludes the depreciation, depletion and amortization related to selling, general and administrative functions. Year Ended December 31, (In thousands, except for per ton data) 2020 2019 Coal revenues $ 233,083 $ 286,073 Less: Total Cost of coal sales (per table above) (231,975) (368,736) GAAP Coal margin $ 1,108 $ (82,663) Tons sold 5,420 7,484 GAAP Coal margin per ton $ 0.20 $ (11.05) GAAP Coal margin $ 1,108 $ (82,663) Add: Depreciation, depletion and amortization - production (1) 11,570 99,405 Add: Accretion on asset retirement obligations 4,154 9,894 Add: Amortization of acquired intangibles, net 861 3,101 Add: Idled and closed mine costs 3,102 4,005 Non-GAAP Coal margin $ 20,795 $ 33,742 Tons sold 5,420 7,484 Non-GAAP Coal margin per ton $ 3.84 $ 4.51 (1) Depreciation, depletion and amortization - production excludes the depreciation, depletion and amortization related to selling, general and administrative functions. Refer to Note 3 for disclosures on the Cumberland and PRB Back-to-Back Coal Supply Agreements. 68 Table of Contents Liquidity and Capital Resources 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, 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, cash generated from our operations, and expected tax refunds will be sufficient to meet our working capital requirements, anticipated capital expenditures, debt service requirements, acquisition-related obligations, and reclamation obligations for the next 12 months. 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, contingencies and risks, all of which are difficult to predict and many of which are beyond our control. 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 more quickly if market conditions deteriorate, and we may not be able to do so in a timely fashion, or at all; or 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. We may decide 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 and Cash Collateral At December 31, 2020, we had cash and cash equivalents of $139.2 million and no remaining unused capacity under the Amended and Restated Asset-Based Revolving Credit Agreement (the “ABL Facility”). Availability under the ABL Facility is calculated on a monthly basis and fluctuates 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 may be required to cash collateralize the ABL Facility to the extent outstanding borrowings and letters of credit under the ABL Facility exceed the Borrowing Base after considering covenant limitations. Due to fluctuations of the Borrowing Base, we were required to post $25.0 million of cash collateral in January 2021 to remain in compliance with the terms of the ABL Facility as of December 31, 2020. In February 2021, a portion of the posted cash collateral was used to repay the remaining $3.4 million in borrowings under the ABL Facility. In March 2021, the remaining posted cash collateral was returned to unrestricted cash. To secure our obligations under certain worker’s compensation, black lung, and reclamation obligations and financial guarantees, we are required to provide cash collateral. At December 31, 2020, we had cash collateral in the amounts of $96.0 million, $23.8 million, and $27.2 million classified as long-term restricted cash, long-term restricted investments, and long-term deposits, respectively, on our Consolidated Balance Sheets. 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 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). Additionally, as December 31, 2020, we had $9.3 million of short-term restricted cash held in escrow related to our contingent revenue obligation. Refer to Note 16 for further information regarding the contingent revenue obligation. Business Updates With respect to global economic events, there continues to be uncertainty and weakness in the coal industry. On December 14, 2020, S&P Global Ratings affirmed their June 2, 2020 downgrades on their issuer credit ratings on the Company and their issue-level rating on our senior secured debt. On June 2, 2020, S&P Global Ratings downgraded their issuer credit rating on the Company from “B-” to “CCC+” and their issue-level rating on our senior secured debt from “B” to “CCC+” amid weak market indicators. The rating outlook was noted as negative. On April 13, 2020, Moody’s Investors Service downgraded the Company’s Corporate Family Rating to Caa1 from B3, Senior Secured Bank Credit Facility to Caa2 from Caa1, and Probability of Default Rating to Caa1 from B3. The rating outlook was changed from stable to negative. These issues bring 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. During the second quarter of 2020, as a result of the weakening coal market conditions due in part to the impact of the global COVID-19 pandemic, we announced that we would take certain strategic actions with respect to two of our thermal coal 69 Table of Contents mining complexes in an effort to strengthen our financial performance and improve forecasted liquidity. We announced that an underground mine and preparation plant located in West Virginia would be idled during the third quarter of 2020. In addition, we decided not to move forward with the construction of a new refuse impoundment at our Cumberland mine in Pennsylvania and would therefore no longer spend the significant capital required in connection with the project. On December 10, 2020, we announced the closing of our previously announced agreement to divest our Cumberland mining operations and related property to a third-party purchaser for total consideration of $50.0 million, comprised of approximately $20.0 million in cash and $30.0 million in surety bonding collateral, resulting in a loss on sale of $36.1 million. Refer to Note 3 for additional disclosure information on this transaction, the divestiture of our former PRB operations and the related ESM Transaction, and the related discontinued operations. Weak market conditions and depressed coal prices have resulted in operating losses in recent quarters. If market conditions do not improve, we expect to continue to experience operating losses and cash outflows in the coming quarters, which would adversely affect our liquidity. In particular, we expect a decrease in cash and cash equivalents to the extent that capital expenditures and other cash obligations, including our debt service obligations, exceed cash generated from our operations. The COVID-19 pandemic has had negative impacts on our business, results of operations, financial condition, and cash flows. A continued period of reduced demand for our products could have significant adverse consequences on our business. The full extent of the impact of the COVID-19 pandemic on our operational and financial performance will depend on various developments, including the duration and spread of the outbreak, its impact on our customers and suppliers and the range of governmental and community reactions to the pandemic, which are still uncertain and cannot be fully predicted at this time. We have continued to take steps to enhance our capital structure and financial flexibility and reduce cash outflows from operations in the near term, including reductions in our operating, SG&A, and overhead costs, reductions in production volumes, and the amendment of our credit facility. We expect to engage in similar efforts in the future as opportunities arise through refinancing, repayment or repurchase of outstanding debt, amendment of our credit facilities, and other methods, and may consider the sale of other assets or businesses, and such other measures as 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 facility and indentures. On March 27, 2020, the CARES Act was enacted into law. As a result of the CARES Act, AMT Credits of $66.1 million were received in the fourth quarter of 2020. As of December 31, 2020, the Company has recorded $64.2 million of current federal income tax receivable and associated interest receivable of $5.2 million related to an NOL carryback claim. Refer to Note 19. Pension Plans We sponsor three qualified non-contributory pension plans (“Pension Plans”) which cover certain salaried and non-union hourly employees. Participants accrued benefits either based on certain formulas, the participant’s compensation prior to retirement or plan specified amounts for each year of service. Benefits are frozen under these Pension Plans. Annual funding contributions to the Pension Plans are made as recommended by consulting actuaries based upon the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) funding standards. Funding decisions also consider certain funded status thresholds defined by the Pension Protection Act of 2006. We expected to contribute $25.5 million to the Pension Plans in 2021 based on our estimates prior to the recent funding relief granted under the American Rescue Plan Act. We now expect these amounts may be reduced, as a result of the relief, and are in the process of quantifying the impact. Refer to Note 20 for further disclosures related to this obligation. 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 DCMWC, we filed an application and supporting documentation for reauthorization to self-insure certain of our black lung obligations in October 2019. As a result of this application, the DCMWC notified us in a letter dated February 21, 2020 that we were reauthorized to self-insure certain of our black lung obligations for a period of one-year from February 21, 2020. The DCMWC reauthorization is contingent, however, upon us providing collateral of $65.7 million to secure certain of our black lung obligations. This collateral requirement, which the DCMWC advises represents 70% of our estimated future liability according to the DCMWC’s estimation methodology, is an increase of approximately 2,400% from the approximately $2.6 million in collateral which we (previously by Alpha Natural Resources Inc. prior to the Merger) have provided since 2016 to secure these self-insured black 70 Table of Contents lung obligations. Future liability has not previously been estimated by the DCMWC in connection with the reauthorization process but is now being considered as part of its new collateral-setting methodology. 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. 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 collateral. Either of these outcomes would significantly reduce our liquidity. Cash Flows Cash, cash equivalents, and restricted cash decreased by $103.1 million and $129.6 million over the years ended December 31, 2020 and 2019, respectively. The net change in cash, cash equivalents, and restricted cash was attributable to the following: Year Ended December 31, 2020 2019 Cash flows (in thousands): Net cash provided by operating activities $ 129,236 $ 131,880 Net cash used in investing activities (209,969) (191,752) Net cash used in financing activities (22,376) (69,694) Net decrease in cash and cash equivalents and restricted cash $ (103,109) $ (129,566) Operating Activities Net cash flows from operating activities consist of a net loss adjusted for non-cash items. Net cash provided by operating activities for the year ended December 31, 2020 was $129.2 million and was primarily attributable to net loss of $446.9 million adjusted for asset impairment and restructuring of $256.5 million, depreciation, depletion and amortization of $151.5 million, deferred income taxes of $33.1 million, loss on sale of business of $36.1 million, accretion on asset retirement obligations of $30.7 million, amortization of debt issuance costs and accretion of debt discount of $14.8 million. The change in our operating assets and liabilities of $34.4 million was primarily attributable to decreases in trade accounts receivable, net, of $91.2 million, decreases in inventories, net, of $48.7 million, and decreases in prepaid expenses and other current assets of $28.2 million, partially offset by decreases in other non-current liabilities of $43.8 million, decreases in acquisition-related obligations of $32.6 million, decreases in trade accounts payable of $28.6 million, and decreases in asset retirement obligations of $19.4 million. Net cash provided by operating activities for the year ended December 31, 2019 was $131.9 million and was primarily attributable to net loss of $316.3 million adjusted for depreciation, depletion and amortization of $315.2 million, goodwill impairment of $124.4 million, asset impairment of $83.5 million, accretion on asset retirement obligations of $33.8 million, loss on modification and extinguishment of debt of $26.5 million, employee benefit plans, net, of $20.8 million. The change in our operating assets and liabilities of ($172.8) million was primarily attributable to decreases in asset retirement obligations of $111.6 million, increases in inventories, net, of $40.7 million, decreases in other non-current liabilities of $33.6 million, decreases in trade accounts payable of $28.1 million, decreases in acquisition-related obligations of $28.1 million, decreases in accrued expenses and other current liabilities of $25.5 million, and increases in other non-current assets of $24.5 million, partially offset by decreases in prepaid expenses and other current assets of $56.7 million, resulting primarily from income tax refunds of $72.2 million, and decreases in trade accounts receivable, net, of $47.4 million. Investing Activities Net cash used in investing activities for the year ended December 31, 2020 was $210.0 million, primarily driven by capital expenditures of $154.0 million, cash paid on sale of business of $52.2 million, and purchases of investment securities of $21.1 million, partially offset by maturity of investment securities of $16.7 million. Net cash used in investing activities for the year ended December 31, 2019 was $191.8 million, primarily driven by capital expenditures of $192.4 million, purchases of investment securities of $92.9 million, partially offset by maturity of investment securities of $100.3 million. 71 Table of Contents Financing Activities Net cash used in financing activities for the year ended December 31, 2020 was $22.4 million, primarily attributable to principal repayments of debt of $59.8 million and principal repayments of notes payable of $16.7 million, partially offset by proceeds from borrowings on debt of $57.5 million. Net cash used in financing activities for the year ended December 31, 2019 was $69.7 million, primarily attributable to principal repayments of debt of $552.8 million, common stock repurchases and related expenses of $37.6 million, and principal repayments of notes payable of $14.8 million, partially offset by proceeds from borrowings on debt of $544.9 million. Long-Term Debt On November 9, 2018, we entered into a $225.0 million ABL Facility under the Amended and Restated Asset-Based Revolving Credit Agreement expiring on April 3, 2022. On June 14, 2019, we entered into a $561.8 million Term Loan Credit Facility under the Credit Agreement. Refer to Note 15 for additional disclosures on long-term debt. Analysis of Material Debt Covenants We are in compliance with all covenants under the Credit Agreement and the Amended and Restated Asset-Based Revolving Credit Agreement, as of December 31, 2020. A breach of the covenants in the Credit Agreement and the Amended and Restated Asset-Based Revolving Credit Agreement could result in a default under the terms of the agreement and the respective lenders could elect to declare all amounts borrowed due and payable. Pursuant to the Amended and Restated Asset-Based Revolving Credit Agreement, during any Liquidity Period (capitalized terms as defined in the Amended and Restated Asset-Based Revolving Credit Agreement), our Fixed Charge Coverage Ratio cannot be 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 is 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 December 31, 2020, we were not in a Liquidity Period. Acquisition-Related Obligations Refer to Note 16 for additional details and disclosures on acquisition-related obligations. Off-Balance Sheet Arrangements Refer to Note 23, part (c) for disclosures on off-balance sheet arrangements. Other 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. 72 Table of Contents Contractual Obligations The following is a summary of our significant contractual obligations as of December 31, 2020: (in thousands ) 2021 2022 2023 2024 2025 After 2025 Total Long-term debt (1) $ 24,993 $ 21,468 $ 8,118 $ 536,519 $ — $ — $ 591,098 Other debt (2) 3,837 3,347 1,182 109 — — 8,475 Acquisition-related obligations 8,144 4,247 — — — — 12,391 Contingent revenue obligation (3) 11,395 13,209 13,702 — — — 38,306 Minimum equipment purchase commitments 5,008 — 170 — — — 5,178 Transportation commitments 29 338 — — — — 367 Operating leases 1,210 1,076 1,101 982 897 4,018 9,284 Minimum royalties 15,708 14,525 13,633 11,560 10,815 43,603 109,844 Coal purchase commitments 44,707 — — — — — 44,707 Total $ 115,031 $ 58,210 $ 37,906 $ 549,170 $ 11,712 $ 47,621 $ 819,650 (1) Includes Term Loan Credit Facility principal amounts of $5.6 million in 2021, $5.6 million in 2022, $5.6 million in 2023, and $536.5 million in 2024. Cash interest payable on this obligation, with an interest rate of 9.00% as of December 31, 2020, would be approximately $53.4 million in 2021, $55.3 million in 2022, $54.8 million in 2023, and $24.7 million in 2024. Also includes Lexington Coal Company (“LCC”) Note Payable principal amounts of $17.5 million in 2021 and $10.0 million in 2022, LCC Water Treatment Stipulation principal amounts of $1.9 million in 2021, $2.5 million in 2022, and $2.5 million in 2023, and the senior secured asset-based revolving credit facility (“ABL Facility”) principal amount of $3.4 million in 2022. Refer to Note 15 for principal payment and interest rate terms. (2) Includes financing lease obligation principal amounts of $2.0 million in 2021, $1.7 million in 2022, $0.3 million in 2023, and $6 thousand in 2024. Cash interest payable on these obligations with interest rates ranging between 2.49% and 27.39%, would be approximately $0.2 million in 2021, $0.1 million in 2022, and $15 thousand in 2023. Other debt includes principal amounts of $1.8 million in 2021, $1.6 million in 2022, $0.9 million in 2023, and $0.1 million in 2024. (3) Refer to Note 16 for further disclosures related to this obligation. Additionally, we have long-term liabilities relating to asset retirement obligations, pension, black lung benefits, life insurance benefits, and workers’ compensation benefits. The table below reflects the estimated undiscounted cash flows for these obligations: (in thousands) 2021 2022 2023 2024 2025 After 2025 Total Asset retirement obligation $ 25,490 $ 34,180 $ 28,330 $ 35,725 $ 42,622 $ 330,075 $ 496,422 Pension benefit obligation (1) 31,178 31,267 31,628 32,149 32,426 981,075 1,139,723 Black lung benefit obligation 6,810 6,929 7,038 7,112 7,244 177,472 212,605 Life insurance benefit obligation 628 588 586 586 587 14,909 17,884 Workers’ compensation benefit obligation 13,155 9,351 7,185 6,106 5,633 80,382 121,812 Total $ 77,261 $ 82,315 $ 74,767 $ 81,678 $ 88,512 $ 1,583,913 $ 1,988,446 (1) The estimated undiscounted cash flows will be paid from the defined benefit pension plan assets held within the defined benefit pension plan trust. Refer to Note 20 for further disclosures related to this obligation. We expect to spend between $75 million and $95 million on capital expenditures during 2021. 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 73 Table of Contents 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. Business Combinations. We account for our business combinations under the acquisition method of accounting. The total cost of acquisitions is allocated to the underlying identifiable net tangible and intangible assets based on their respective estimated fair values. Determining the fair value of assets acquired and liabilities assumed requires management’s judgment, the utilization of independent valuation experts, and often involves the use of significant estimates and assumptions with respect to the timing and amounts of future cash inflows and outflows, discount rates, market prices and asset lives, among other items. Reclamation. Our asset retirement obligations arise from the federal Surface Mining Control and Reclamation Act of 1977 and similar state statutes, which require that mine property be restored in accordance with specified standards and an approved reclamation plan. Significant reclamation activities include reclaiming refuse and slurry ponds, reclaiming the pit and support acreage at surface mines, sealing portals at deep mines, and the treatment of water. We determine the future cash flows necessary to satisfy our reclamation obligations on a permit-by-permit basis based upon current permit requirements and various estimates and assumptions, including estimates of disturbed acreage, cost estimates, and assumptions regarding productivity. We are also faced with increasingly stringent environmental regulation, much of which is beyond our control, which could increase our costs and materially increase our asset retirement obligations. Estimates of disturbed acreage are determined based on approved mining plans and related engineering data. Cost estimates are based upon third-party costs. Productivity assumptions are based on historical experience with the equipment that is expected to be utilized in the reclamation activities. Our asset retirement obligations are initially recorded at fair value. In order to determine fair value, we use assumptions including a discount rate and third-party margin. Each is discussed further below: • Discount Rate. Asset retirement obligations are initially recorded at fair value. We utilize discounted cash flow techniques to estimate the fair value of our obligations. We base our discount rate on the rates of treasury bonds with maturities similar to expected mine lives and adjust for our credit standing as necessary after considering funding and assurance provisions. Changes in our credit standing could have a material impact on our asset retirement obligations. • Third-Party Margin. The measurement of an obligation at fair value is based upon the amount a third party would demand to perform the obligation. Because we plan to perform a significant amount of the reclamation activities with internal resources, a third-party margin was added to the estimated costs of these activities. This margin was estimated based upon our historical experience with contractors performing similar types of reclamation activities. The inclusion of this margin will result in a recorded obligation that is greater than our estimates of our cost to perform the reclamation activities. If our cost estimates are accurate, the excess of the recorded obligation over the cost incurred to perform the work will be recorded within depreciation, depletion and amortization within our Consolidated Statements of Operations at the time that reclamation work is completed. On at least an annual basis, we review our reclamation liabilities and make necessary adjustments for permit changes as granted by state authorities, additional costs resulting from accelerated mine closures, and revisions to cost estimates and productivity assumptions to reflect current experience and updated plans. At December 31, 2020, we had recorded asset retirement obligation liabilities of $165.1 million, including amounts reported as current. While the precise amount of these future costs cannot be determined with certainty, as of December 31, 2020, we estimate that the aggregate undiscounted cost of final mine closures is approximately $496.4 million. Retirement Plans. We have three non-contributory defined benefit retirement plans (the “Pension Plans”) covering certain of our salaried and non-union hourly employees, all of which are frozen. Benefits are based on either the employee’s compensation prior to retirement or stated amounts for each year of service with us. Funding of the Pension Plans is in accordance with requirements of ERISA, and our contributions can be deducted for federal income tax purposes. We contributed $22.7 million to our Pension Plans for the year ended December 31, 2020. For the year ended December 31, 2020, we recorded a net periodic benefit credit of $4.7 million, which included a settlement of $1.6 million, for our Pension Plans and have recorded net obligations of $218.7 million. The calculation of the net periodic benefit expense (credit) and projected benefit obligation associated with our Pension Plans requires the use of a number of assumptions, which are used by our independent actuaries to make the underlying calculations. Changes in these assumptions can result in different net periodic benefit expense and liability amounts, and actual experience can differ from the assumptions. • The expected long-term rate of return on plan assets is an assumption of the rate of return on plan assets reflecting the average rate of earnings expected on the funds invested or to be invested to provide for the benefits included in the 74 Table of Contents projected benefit obligation. We establish the expected long-term rate of return at the beginning of each fiscal year based upon historical returns and projected returns on the underlying mix of invested assets. The Pension Plans investment targets are 60% equity securities and 40% fixed income funds. Investments are rebalanced on a periodic basis to stay within these targeted guidelines. The long-term rate of return assumption used to determine net periodic benefit expense was 5.90% for the year ended December 31, 2020. The long-term rate of return assumption to be used in 2021 is expected to be 5.80%. Any difference between the actual experience and the assumed experience is deferred as an unrecognized actuarial gain or loss and amortized into expense in future periods. • The discount rate represents our estimate of the interest rate at which pension benefits could be effectively settled. Assumed discount rates are used in the measurement of the projected and accumulated benefit obligations and the interest cost component of the net periodic benefit expense. In estimating that rate, we use rates of return on high quality, fixed income investments. The weighted average discount rate used to determine pension expense was 2.92% for the year ended December 31, 2020. The differences resulting from actual versus assumed discount rates are amortized into pension expense (credit) over the remaining average life of the active plan participants. A one percentage-point increase in the discount rate would increase the net periodic pension cost for the year ended December 31, 2020 by approximately $3.8 million and decrease the projected benefit obligation as of December 31, 2020 by approximately $90.9 million. The corresponding effects of a one percentage-point decrease in discount rate would decrease the net periodic pension cost for the year ended December 31, 2020 by approximately $5.2 million and increase the projected benefit obligation as of December 31, 2020 by approximately $113.9 million. Coal Workers’ Pneumoconiosis. We are required by federal and state statues to provide benefits to employees for awards related to coal workers’ pneumoconiosis disease (black lung). Certain of our subsidiaries are insured for black lung obligations by a third-party insurance provider and certain subsidiaries are self-insured for state black lung obligations. Certain other subsidiaries are self-insured for federal black lung benefits and may fund benefit payments through Section 501(c)(21) tax-exempt trust fund. Provisions are made for estimated benefits based on annual evaluations prepared by independent actuaries. Charges are made to operations for self-insured black lung claims, as determined by an independent actuary at the present value of the actuarially computed liability for such benefits over the employee’s applicable term of service. These actuarially determined liabilities use various actuarial assumptions, including the discount rate, future cost trends, demographic assumptions, and return on plan assets to estimate the costs and obligations for these items. The discount rate represents our estimate of the interest rate at which black lung obligations could be effectively settled. Assumed discount rates are used in the measurement of the black lung benefit obligations and the interest cost and service cost components of the net periodic benefit expense. In estimating that rate, we use rates of return on high quality, fixed income investments. Refer to Note 20 to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for the weighted-average rate assumptions related to black lung obligations used to determine the benefit obligation. If our assumptions do not materialize as expected, actual cash expenditures and costs that we incur could differ materially from our current estimates. Moreover, regulatory changes could affect our obligation to satisfy these or additional obligations. As of December 31, 2020, we had estimated black lung obligations of approximately $124.8 million, including amounts reported as current and within discontinued operations, which are net of assets of $2.7 million that are held in a tax-exempt trust fund. Income Taxes. We recognize deferred tax assets and liabilities using enacted tax rates for the effect of temporary differences between the book and tax bases of recorded assets and liabilities. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax assets will not be realized. In evaluating our ability to recover our deferred tax assets within the jurisdiction in which they arise, we consider all available positive and negative evidence, including the expected reversals of deferred tax liabilities, projected future taxable income, taxable income available via carryback to prior years, tax planning strategies, and results of recent operations. We assess the realizability of our deferred tax assets, including scheduling the reversal of our deferred tax assets and liabilities, to determine the amount of valuation allowance needed. Scheduling the reversal of deferred tax asset and liability balances requires judgment and estimation. We believe the deferred tax liabilities relied upon as future taxable income in our assessment will reverse in the same period and jurisdiction and are of the same character as the temporary differences giving rise to the deferred tax assets that will be realized. At December 31, 2020, a valuation allowance of $263.4 million has been provided on federal and state net operating losses and other deferred tax assets not expected to provide future tax benefits. Asset Impairment. U.S. GAAP requires that a long-lived asset group that is held and used should be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the long-lived asset group might not be recoverable. Once indicators of potential impairment are identified, testing of a long-lived asset group for impairment is a two-step process. Step one evaluates the recoverability of an asset group by comparing its projected future net undiscounted cash flows to its carrying value. If the carrying value of an asset group exceeds its projected future net undiscounted cash flows, step two is performed whereby the fair value of the asset group is estimated and compared to its carrying amount. The amount of any potential impairment is equal to the excess of an asset group’s carrying value over its estimated fair value. The amount of 75 Table of Contents any potential impairment is allocated to the individual long-lived assets within the asset group on a pro-rata basis, except that the carrying value of individual long-lived assets are not reduced below their individual estimated fair values. Long-lived assets located in a close geographic area are grouped together for purposes of impairment testing when, after considering revenue and cost interdependencies, circumstances indicate the assets are used together to produce future cash flows. Our asset groups generally consist of the assets and applicable liabilities of one or more mines and preparation plants and associated coal reserves for which cash flows are largely independent of cash flows of other mines, preparation plants and associated reserves. We performed long-lived asset impairment tests as of November 30, 2020, August 31, 2020, May 31, 2020, and February 29, 2020. In total, we determined that indicators of impairment with respect to five long-lived asset groups within our Met reporting segment, three long-lived asset groups within its CAPP - Thermal reporting segment, and one long-lived asset group within discontinued operations existed during the year ended December 31, 2020. At December 31, 2020, we determined that the carrying amounts of the asset groups exceeded both their undiscounted cash flows and their estimated fair values. As a result, the Company recorded a long-lived asset impairment of $228.6 million, including $147.6 million recorded within discontinued operations. We estimate the fair value of an asset group generally using discounted cash flow analysis based on estimates of future sales volumes, coal prices, production costs, and a risk-adjusted cost of capital. Changes in any of these assumptions could materially impact the estimated undiscounted cash flows of our asset groups. Refer to Note 2 and Note 8 to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K. Goodwill. Goodwill represents the excess of purchase price over the fair value of the identifiable net assets of acquired companies. Goodwill is not amortized; instead, it is tested for impairment annually as of October 31 of each year, or more frequently if indicators of impairment exist. Refer to Note 2 to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K. Prior to performing a quantitative goodwill impairment test, the Company first has the option of performing a qualitative assessment of goodwill. If the Company determines based on its qualitative assessment that more likely than not that the fair value of a reporting unit containing goodwill exceeds its carrying amount, no further impairment testing is required. If a quantitative impairment test is required, the Company compares the fair value of a reporting unit including goodwill to its carrying value. If the fair value of the reporting unit is lower than its carrying amount, its goodwill is written down by the lesser of the amount by which the reporting units carrying amount exceeded its fair value or its carrying value of goodwill. The valuation methodology utilized to estimate the fair value of the reporting units is based on both a market and income approach and is within the range of fair values yielded under each approach. The income approach is based on a discounted cash flow methodology based on estimates of future sales volumes, coal prices, production costs, and a risk-adjusted cost of capital. The market approach is based on a guideline company and similar transaction methodology. Under the guideline company approach, certain metrics from a selected group of publicly traded guideline companies that have similar operations to the Company’s reporting units are used to estimate the fair value of the reporting units. Under the similar transactions approach, recent merger and acquisition transactions for companies that have similar operations to the Company’s reporting units are used to estimate the fair value of the Company’s reporting units. The income approach is dependent upon a number of significant management estimates about future performance. Changes in any of these assumptions could materially impact the estimated fair value of our reporting units. Our forecasts of coal prices generally reflect a long-term outlook of market prices expected to be received for our coal. However, coal prices are influenced by global market conditions beyond our control. If actual coal prices are less than our expectations, it could have a material impact on the fair value of our reporting units. Our forecasts of costs to produce coal are based on our operating forecasts and an assumed inflation rate for materials and supplies such as steel, diesel fuel and explosives. However, the costs of the materials and supplies used in our production process such as steel, diesel fuel and explosives are influenced by global market conditions beyond our control. If actual costs are higher or if inflation increases above our expectations, it could have a material impact on the fair value of our reporting units. We also are faced with increasingly stringent safety standards and governmental regulation, much of which is beyond our control, which could increase our costs and materially decrease the fair value of our reporting units. For a further discussion of the factors that could result in a change in our assumptions, see “Risk Factors” in this Annual Report on Form 10-K and our other filings with the Securities and Exchange Commission. As of December 31, 2019, our goodwill balance was fully impaired. Refer to Note 2 to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K. Contingent Revenue Obligation. Our contingent revenue obligation was assumed in connection with the Merger. Determining the fair value of this obligation requires management’s judgment and the utilization of independent valuation 76 Table of Contents experts, and involves the use of significant estimates and assumptions with respect to forecasts of future revenues and discount rates. The Company forecasts future revenues for the duration of the obligation for the properties subject to the obligation. Discount rates are determined based on the risk associated with the projected cash flows. If our assumptions do not materialize as expected, actual payments made under the obligation could differ materially from our current estimates. For a further discussion of the factors that could result in a change in our assumptions, see “Risk Factors” in this Annual Report on Form 10-K and our other filings with the Securities and Exchange Commission. New Accounting Pronouncements. Refer to Note 2 for disclosures related to new accounting policies adopted. 77 Table of Contents