What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-02-22 compared with 2021-02-24 · 223 added, 310 removed, 341 unchanged (61% of the section changed)

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Please see “ Forward-Looking Statements.

For a discussion and analysis of our results of operations and financial condition for the year ended December 31, 2019, please refer to Part II, Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

We are a U.S.-based, environmentally and socially minded supplier to the global steel industry.

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4 and Mine No.

7, our two operating mines, had approximately 97.5 million metric tons of recoverable reserves and our undeveloped Blue Creek mine contained 103.0 million metric tons of recoverable reserves.

7, our two operating mines, had approximately 90.2 million metric tons of recoverable reserves and our undeveloped Blue Creek mine contained 63.3 million metric tons of recoverable reserves and 44.9 million metric tons of coal resources exclusive of reserves, which total 108.2 million metric tons.

As a result of our high quality coal, our realized price has historically been in line with, or at a slight discount to, the Platts Index.

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Similarly, if alternative ingredients are used in substitution for met coal in the integrated steel mill process, the demand for met coal would materially decrease, which could also materially adversely affect demand for our met coal.

The global steelmaking industry's demand for met coal is also affected by pandemics, epidemics or other public health emergencies, such as the recent outbreak of the novel coronavirus ("COVID-19"), which has spread from China to many other countries including the United States.

In March 2020, the World Health Organization ("WHO") declared COVID-19 as a pandemic, and the President of the United States declared the COVID-19 outbreak a national emergency.

The outbreak has resulted in governments around the world implementing stringent measures to help control the spread of the virus, including quarantines, "shelter in place" and "stay at home" orders, travel restrictions, business curtailments, school closures, and other measures.

The global steelmaking industry's demand for met coal is affected by pandemics, epidemics or other public health emergencies, such as the outbreak of the novel coronavirus ("COVID-19"), which was first reported in late 2019.

In March 2020, the World Health Organization ("WHO") declared COVID-19 a pandemic, and the President of the United States declared the COVID-19 outbreak a national emergency.

In the two years since then, the pandemic has dramatically impacted the global health and economic environment, including millions of confirmed cases and deaths, business slowdowns or shutdowns, labor shortfalls, supply chain challenges, regulatory challenges, and market volatility.

In addition, governments and central banks in several parts of the world have enacted fiscal and monetary stimulus measures to counteract the impacts of COVID-19.

We are a company operating in a critical infrastructure industry, as defined by the U.S.

Department of Homeland Security.

As such, we continue to operate our mines in a safe manner under the guidelines issued by the Centers for Disease Control and Prevention and Alabama State Health Department.

This includes, among other things, eliminating business travel, staggering manbuses, cage and shift start times to allow for social distancing, enhanced disinfectant cleaning at all locations, maintaining antibacterial supplies at all locations, providing employees with masks, gloves and other gear, eliminating visitors or vendors on property without strict screening process and testing the temperature of all employees.

As of the filing of this Form 10-K, we have not had to idle or temporarily idle our mines.

Notwithstanding our continued operations, COVID-19 has had and may continue to have further negative impacts on our two operating mines, supply chain, transportation networks and customers, which may compress our margins, and reduce demand for the met coal that we produce, including as a result of preventative and precautionary measures that we, other businesses and governments are taking.

The COVID-19 outbreak is a widespread public health crisis that is adversely affecting

the economies and financial markets of many countries, including those of our customers, which are primarily located in Europe, South America and Asia.

Over the course of 2021, COVID-19 case rates and the health and economic impacts of the pandemic fluctuated dramatically in different communities in the U.S.

and globally, particularly with the spread of new variants.

We continued to see a prolonged impact on the economy, our industry, and our company, with increased challenges for customers and suppliers, labor shortages, supply chain challenges, and increasing inflation, among other impacts.

We expect these and other impacts to continue and possibly worsen, depending on the future course of the pandemic and actions taken in connection with it.

We continue to closely monitor and address the pandemic and related developments, including the impact on our company, our employees, our customers, our suppliers and our communities.

The Company has considered and continues to consider and be guided by health data and evolving guidance from the Centers for Disease Control and Prevention (CDC), in particular, as well as other health organizations globally, federal, state and local governmental authorities, and our customers, among others.

We have taken, and continue to take, robust actions to help protect the health, safety and well-being of our employees, to support continued performance, to support our suppliers and local communities, and to continue to serve our customers.

Our goals have been, and continue to be to lessen the potential adverse impacts, both health and economic, and to continue to position the Company for long-term success.

As of the filing of this Form 10-K, the Company has not had to idle or temporarily idle its mines due to COVID-19.

Notwithstanding our continued operations, COVID-19 has had and may continue to have further negative impacts on our two operating mines, supply chain, transportation networks and customers, which may continue to compress our margins, and reduce demand for the met coal that we produce.

The COVID-19 outbreak is a widespread public health crisis that is adversely affecting the economies and financial markets of many countries, including those of our customers, which are primarily located in Europe, South America and Asia.

A prolonged economic downturn could adversely affect demand for our met coal and contribute to volatile supply and demand conditions affecting prices and volumes.

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The extent of such delays and other effects of COVID-19 on our capital projects, certain of which are outside of our control, is unknown, but they may impact or delay the timing of anticipated benefits of capital projects.

In light of the uncertainties regarding the duration of the COVID-19 pandemic and its overall impact on the Company, its operations and the global economy, we withdrew our full-year 2020 guidance issued on February 19, 2020 and will not provide full year 2021 guidance at this time.

We also continue to appropriately adjust our operational needs, including managing our expenses, capital expenditures, working capital, liquidity and cash flows.

In addition, as a precautionary measure, we borrowed $70.0 million under the ABL Facility on March 24, 2020 ( the "ABL Draw") in order to increase the Company's cash position and preserve financial flexibility.

In June 2020, we reduced the principal amount of the outstanding ABL Draw by $30.0 million.

As of December 31, 2020, the Company had an aggregate principal amount of $40.0 million drawn under the ABL Facility.

We intend on retaining the funds in cash to preserve liquidity amid the growing uncertainty surrounding the COVID-19 outbreak.

We also delayed spending the $25.0 million that we budgeted for the development of Blue Creek until at least summer 2021 and temporarily suspended our New Stock Repurchase Program.

Our financial approach continues to focus on cash flow management and protecting the balance sheet in order to strategically move through this period of uncertainty and mitigate potential long-term impacts to the business (see Liquidity and Capital Resources below).

Collective Bargaining Agreement

Our CBA contract with the UMWA expired on April 1, 2021, and the UMWA initiated a strike which continues today.

We continue to negotiate in good faith to reach a new union contract.

During the strike, we continue to successfully execute our business continuity plans, allowing us to meet the needs of our valued customers.

Due to the strike, we idled Mine No.

4 and scaled back operations at Mine No.

In connection with the idling of Mine No.

4 and reduced operations at Mine No.

7, we incurred idle mine expenses of $33.9 million for the year ended December 31, 2021.

These expenses are reported separately in the Statements of Operations and represent expenses incurred while the respective mine is idled or operating below normal capacity, such as electricity, insurance and maintenance labor.

Due to the strike, we have also incurred approximately $21.4 million of business interruption expenses for the year ended December 31, 2021.

These expenses represent incremental expenses incurred as a direct result of the strike.

These expenses are also presented separately in the Statements of Operations.

Despite incurring costs associated with the strike, we have been able to manage our working capital and spending to deliver strong results in the current markets.

We believe that we are well positioned to fulfill anticipated customer volume commitments for 2022.

In the current environment and without a new contract, the Company believes that production and sales volume for 2022 could be between 5.0 million and 6.0 million metric tons.

These volumes include the assumed restart of Mine 4 and continued lower production at Mine 7.

Similarly, with a new contract, Warrior believes that production and sales volumes over a twelve-month period could ramp up to a run rate of approximately 7.0 million metric tons within three to four months.

While we have business continuity plans in place, the strike may still cause disruption to production and shipping activities, and our plans may vary significantly from quarter to quarter in 2022.

Basis of Presentation

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Segment Adjusted EBITDA

We define Segment Adjusted EBITDA as net (loss) income adjusted for other revenues, cost of other revenues, depreciation and depletion, selling, general and administrative, and certain transactions or adjustments that the CEO, our Chief Operating Decision Maker does not consider for the purposes of making decisions to allocate resources among segments or assessing segment performance.

We define Segment Adjusted EBITDA as net income (loss) adjusted for other revenues, cost of other revenues, depreciation and depletion, selling, general and administrative, and certain transactions or adjustments that the CEO, our Chief Operating Decision Maker does not consider for the purposes of making decisions to allocate resources among segments or assessing segment performance.

Segment Adjusted EBITDA is used as a supplemental financial measure by management and by external users of our financial statements, such as investors, industry analysts, lenders and ratings agencies, to assess:

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Adjusted EBITDA

We define Adjusted EBITDA as net (loss) income before net interest expense, income tax expense (benefit), depreciation and depletion, non-cash asset retirement obligation accretion, non-cash stock compensation expense, other non-cash accretion and valuation adjustments, transaction and other costs, loss on early extinguishment of debt and other income and expenses.

We define Adjusted EBITDA as net income (loss) before net interest expense, income tax expense (benefit), depreciation and depletion, non-cash asset retirement obligation accretion and valuation adjustments, non-cash stock compensation expense, other non-cash accretion and valuation adjustments, non-cash mark-to-market loss on gas hedges, loss on early extinguishment of debt, business interruption expenses, idle mine expenses and other income and expenses.

Adjusted EBITDA is used as a supplemental financial measure by management and by external users of our financial statements, such as investors, industry analysts, lenders and ratings agencies, to assess:

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We believe that the presentation of Adjusted EBITDA in this Annual Report provides information useful to investors in assessing our financial condition and results of operations.

The GAAP measure most directly comparable to Adjusted EBITDA is net (loss) income.

The GAAP measure most directly comparable to Adjusted EBITDA is net income (loss).

Adjusted EBITDA should not be considered an alternative to net income or loss or any other measure of financial performance or liquidity presented in accordance with GAAP.

Adjustments excludes some, but not all, items that affect net (loss) income and our presentation of Adjusted EBITDA may vary from that presented by other companies.

The following table presents a reconciliation of Adjusted EBITDA to net (loss) income, the most directly comparable GAAP financial measure, on a historical basis for each of the periods indicated.

Adjustments excludes some, but not all, items that affect net income (loss) and our presentation of Adjusted EBITDA may vary from that presented by other companies.

The following table presents a reconciliation of Adjusted EBITDA to net income (loss), the most directly comparable GAAP financial measure, on a historical basis for each of the periods indicated.

For the years ended December 31,

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(in thousands)

Net (loss) income $ (35,761) $ 301,699 $ 696,787

Net income (loss) $ 150,881 $ (35,761) $ 301,699

Interest expense, net 35,389 32,310 29,335

Income tax (benefit) expense (20,144) 65,417 (225,814)

Income tax expense (benefit) 49,096 (20,144) 65,417

Depreciation and depletion 141,418 118,092 97,330

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1,881 6,014 7,042

Transaction and other costs (4)

Non-cash mark-to-market loss on gas hedges 1,595 — —

Loss on early extinguishment of debt (4)

9,678 — 9,756

Business interruption (5)

Idle mine (6)

Other income and expenses (7)

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(1) Represents non-cash accretion expense and valuation adjustment associated with our asset retirement obligations (see Note 8 to our consolidated financial statements).

(2) Represents non-cash stock compensation expense associated with equity awards.

(2) Represents non-cash stock compensation expense associated with equity awards (see Note 12 to our consolidated financial statements).

(3) Represents non-cash accretion expense and valuation adjustment associated with our black lung obligations (see Note 10 to our consolidated financial statements).

(4) Represents non-recurring costs incurred by the Company in connection with the offering of the Notes (see Note 13 to our consolidated financial statements) and the Secondary Equity Offerings (as defined in Note 17).

(4) Represents a loss incurred in connection with the early extinguishment of debt (see Note 13 to our consolidated financial statements)

(6) Represents settlement proceeds received for the Shared Services Claim and Hybrid Debt Claim associated with the Walter Canada CCAA and other Walter Claims (each discussed below) less incremental expenses incurred by the Company related to COVID-19.

(5) Represents business interruption expenses associated with the UMWA strike.

(6) Represents idle mine expenses incurred in connection with the idling of Mine No.

4 and reduced operations at Mine No.

(7) Represents proceeds received upon settlement of a lawsuit, COVID-19 pandemic related expenses and settlement proceeds received for the Shared Services Claim and Hybrid Debt Claim associated with the Walter Canada CCAA and other Walter Claims (each discussed below).

Results of Operations

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Selling, general and administrative 35,593 3.4 % 32,879 4.2 %

Business interruption 21,372 2.0 % — — %

Idle mine 33,899 3.2 % — — %

Total costs and expenses 815,463 77.0 % 809,877 103.5 %

Operating (loss) income (27,139) (3.5) % 383,392 30.2 %

Operating income (loss) 243,753 23.0 % (27,139) (3.5) %

Interest expense, net (35,389) (3.3) % (32,310) (4.1) %

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Other income 1,291 0.1 % 3,544 0.5 %

(Loss) income before income tax (benefit) expense (55,905) (7.1) % 367,116 28.9 %

Income tax (benefit) expense (20,144) (2.6) % 65,417 5.2 %

Net (loss) income $ (35,761) (4.6) % 301,699 23.8 %

Income (loss) before income tax expense (benefit) 199,977 18.9 % (55,905) (7.1) %

Income tax expense (benefit) 49,096 4.6 % (20,144) (2.6) %

Net income (loss) $ 150,881 14.2 % (35,761) (4.6) %

Sales, production and cost of sales components on a per unit basis for the year ended December 31, 2021 and 2020 were as follows:

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The year ended December 31, 2021 was a challenging year.

COVID-19 has had an unprecedented impact on our business, adversely affecting the economies and financial markets of many countries, including those of our customers, which are primarily located in Europe, South America and Asia.

Despite the ongoing challenges posed by COVID-19, we are pleased with our performance in 2020.

Despite the ongoing challenges posed by COVID-19 and the UMWA strike, we are pleased with our performance in 2021.

The following list highlights our key accomplishments for the year ended December 31, 2021:

• we achieved an annual sales volume of 5.7 million metric tons and production volume of 5.1 million metric tons;

• we continued to successfully implement and maintain social distancing procedures under the guidelines issued by the Centers for Disease Control and Prevention related to COVID-19 while continuing to operate our mines near capacity;

• we achieved our lowest annual cash cost of sales per metric ton of $92.31;

• we reduced 2020 selling, general and administrative expenses by 11% to $32.9 million

• we reduced planned capex by 40% or $57.5 million from plan;

• we delivered positive cash flows from operations and nearly positive free cash flow in a low price environment while continuing to invest $114.6 million in property, plant and equipment and mine development;

• we achieved net income of $150.9 million, or $2.93 per diluted share;

• we delivered positive cash flows from operations of $351.5 million and positive free cash flow of $280.2 million while continuing to invest $71.4 million in property, plant and equipment and mine development;

• we maintained a strong balance sheet with total liquidity of $479.0 million, consisting of cash and cash equivalents of $395.8 million and $83.2 million available under our ABL Facility;

• we achieved a record total reportable incidence rate of 1.25, which is considerably lower than the national total reportable incidence rate for all underground coal mines in the United States of 4.89 for the nine months ended September 30, 2021 (represents the latest data available);

• we successfully refinanced our senior notes and amended our ABL Facility strengthening our balance sheet and financial position for long term success;

• we demonstrated an ongoing commitment to returning capital to our stockholders, paying our regular $0.05 per share quarterly dividends.

Sales were $761.9 million for the year ended December 31, 2020, compared to $1.2 billion for the year ended December 31, 2019.

The $474.1 million decrease in revenues was primarily driven by a $387.9 million decrease related to a $57.60 decrease in the average selling price per metric ton of met coal combined with a $86.2 million decrease due to a 0.5 million metric ton decrease in met coal sales volume.

Sales were $1.0 billion for the year ended December 31, 2021, compared to $761.9 million for the year ended December 31, 2020.

The $266.4 million increase in revenues was primarily driven by a $383.6 million increase related to a $67.31 increase in the average selling price per metric ton of met coal offset partially by a $117.2 million decrease due to a 1.0 million metric ton decrease in met coal sales volume.

Other revenues for the year ended December 31, 2021 were $30.9 million compared to $20.9 million for the year ended December 31, 2020.

Other revenues are comprised of revenue derived from our natural gas operations, as well as earned royalty revenue.

The $11.4 million decrease in other revenues is primarily due to a 22% decrease in gas sales driven by a decrease in natural gas prices and production during 2020.

The $10.1 million increase in other revenues is primarily due to an average increase in natural gas prices of approximately 90% offset partially by a loss of $1.6 million on our natural gas hedges.

Cost of sales (exclusive of items shown separately below) was $554.3 million, or 52.3% of total revenues for the year ended December 31, 2021, compared to $625.2 million, or 79.9% of total revenues for the year ended December 31, 2020.

The $95.6 million decrease in cost of sales was primarily driven by a $50.1 million decrease due to a 0.5 million metric ton decrease in met coal sales volumes combined with a $46.1 million decrease due to a $6.84 per metric ton decrease in the average cash cost of sales per metric ton.

The decrease in average cash cost of sales per metric ton is primarily due to our variable cost structure in our labor, royalties and logistics contracts that vary in response to changes in met coal prices.

The $70.9 million decrease in cost of sales was primarily driven by a $95.6 million decrease due to a 1.0 million metric ton decrease in met coal sales volumes offset partially by a $23.5 million increase due to a $4.12 per metric ton increase in the average cash cost of sales per metric ton.

The increase in average cash cost of sales per metric ton is primarily due to our variable cost structure in our labor, royalties and logistics contracts that vary in response to changes in met coal prices.

Cost of other revenues was $28.9 million for the year ended December 31, 2021, compared to $33.7 million for the year ended December 31, 2020.

The $3.9 million increase is primarily due to a net change of $10.4 million in our asset retirement obligation adjustment related to our gas businesses primarily attributable to the net impact of changes in current estimates of the costs and scope of remaining reclamation work, changes in discount rates and fluctuations in projected mine life estimates.

This increase is partially offset by a $3.2 million decrease in expenses related to Blue Creek, a $2.2 million decrease in gas cost of sales (excluding asset retirement obligation adjustments) related to the 28% decrease in gas sales driven by natural gas prices and production during 2020, and a $1.0 million decrease in our black lung obligation actuarial adjustment.

The $4.8 million decrease is primarily due to a net change of $4.3 million in our black lung obligation valuation adjustment recorded annually in the fourth quarter primarily attributable to changes in discount rates and claims history.

Depreciation and depletion was $141.4 million, or 13.4% of total revenues, for the year ended December 31, 2021, compared to $118.1 million, or 15.1% of total revenues for the year ended December 31, 2020.

The increase in depreciation expense is primarily driven by an increase in the book value of in-service assets.

The increase in depreciation expense is primarily driven by the immediate recognition of $20.7 million in depreciation expense that would normally be capitalized into coal inventory when produced but was not due to the idled status of Mine No.

4 combined with a 0.7 million metric ton drawdown in our ending coal inventory balances as depreciation and depletion is first capitalized into coal inventory and relieved when tons are sold.

Selling, general and administrative expenses were $35.6 million, or 3.4% of total revenues, for the year ended December 31, 2021 compared to $32.9 million, or 4.2% of total revenues for the year ended December 31, 2020.

The $4.1 million decrease in selling, general and administrative expenses is primarily due to decreases in professional services and employee related expenses.

The $2.7 million increase in selling, general and administrative expenses is primarily driven by an increase in employee related expenses and stock compensation expense due to the accelerated vesting of awards for certain individuals who have reached retirement eligibility offset partially by a decrease in other professional services.

Business interruption expenses were $21.4 million for the year ended December 31, 2021.

These expenses represent non-recurring expenses that are directly attributable to the ongoing UMWA strike for incremental safety and security, labor negotiations and other expenses.

Idle mine expenses were $33.9 million for the year ended December 31, 2021.

These expenses represent idle expenses incurred in connection with the idling of Mine No.

4 and reduced operations at Mine No.

7, such as electricity, insurance and maintenance labor.

Interest expense, net was $35.4 million, or 3.3% of total revenues, for the year ended December 31, 2021, compared to $32.3 million, or 4.1% of total revenues, for the year ended December 31, 2020.

The $3.0 million increase was primarily driven by a decrease in interest income of $3.4 million and a $0.6 million increase in interest expense primarily related to the ABL Draw.

For the year ended December 31, 2019, we recognized a loss on early extinguishment of debt of $9.8 million upon the extinguishment of $131.6 million of our Notes (as defined below).

The loss on early extinguishment of debt represents a

premium paid to retire the debt, accelerated amortization of debt discount, net, and fees incurred in connection with the transactions.

The $3.1 million increase was primarily driven by an increase of $1.8 million due to interest on new equipment financing leases, an increase of $0.8 million in interest on our senior notes due to the timing of the issuance of the New Notes (as defined below) and a decrease in interest income.

For the year ended December 31, 2021, we recognized a loss on early extinguishment of debt of $9.7 million upon the extinguishment of $343.4 million of our Existing Notes (as defined below).

The loss on early extinguishment of debt represents a premium paid to retire the debt, accelerated amortization of debt discount, net, and the write-off of Existing Notes debt issuance costs.

Other income was $1.3 million, or 0.1% of total revenues, for the year ended December 31, 2021 compared to $3.5 million or 0.5% of total revenues, for the year ended December 31, 2020.

Other income for the year ended December 31, 2021, represents proceeds received in connection with the settlement of a lawsuit offset partially by COVID-19 pandemic related expenses.

In connection with our acquisition of certain core operating assets of Walter Energy, we acquired a receivable owed to Walter Energy by Walter Canada for certain shared services provided by Walter Energy to Walter Canada (the “Shared Services Claim”) and a receivable for unpaid interest owed to Walter Energy from Walter Canada in respect of a promissory note (the “Hybrid Debt Claim”).

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In 2020, we received $1.8 million in settlement proceeds for the Shared Services Claim and Hybrid Debt Claim which is reflected as other income in the Statements of Operations.

In March 2020, we received an additional $1.8 million in settlement proceeds for the Shared Services Claim and Hybrid Debt Claim which is reflected as other income in the Statements of Operations.

The collectability of additional amounts, if any, related to the Shared Services Claim and Hybrid Debt Claim depends on the outcome of, and the timing of any resolution of, the Walter Canada CCAA proceedings and cannot be predicted with certainty

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As with the Walter Canada CCAA claims, we did not assign any value to these receivables in acquisition accounting as collectability was deemed remote.

For the year ended December 31, 2020, we recognized an income tax benefit of $20.1 million or an effective tax rate of 36.0% primarily due to a loss recognized before income taxes and a $4.0 million income tax benefit from the IRC Section 451 Marginal Well Credit.

For the year ended December 31, 2021, we recognized income tax expense of $49.1 million or an effective tax rate of 24.6% primarily due to pre-tax income of $200.0 million combined with the establishment of a non-cash state deferred income tax asset valuation allowance of $46.0 million offset partially by an income tax benefit of $22.4 million due to the remeasurement of state deferred income tax assets and liabilities, $12.2 million of depletion and a $4.7 million income tax benefit from the IRC Section 451 Marginal Well Credit.

The Marginal Well Credit is a production-based tax credit that provides a credit for qualified natural gas production.

The credit is phased out when natural gas prices exceed certain levels.

For the year ended December 31, 2019, we recognized an income tax expense of $65.4 million or an effective tax rate of 17.8%.

In the fourth quarter of 2019, an adjustment of $6.7 million was recorded to recognize additional alternative minimum tax credits, general business credits and net operating losses available to the Company in connection with a settlement agreement between Walter Energy and the Internal Revenue Service.

At December 31, 2021, we had federal and state NOLs of approximately $722.3 million and $992.6 million, respectively.

The increase in the federal and state NOLs from the prior year was primarily driven by the Company applying a 100%, first-year bonus depreciation for certain qualified equipment for tax purposes as allowed under the Tax Cuts and Jobs Act combined with the current year net loss.

Accordingly, we expect to continue to utilize our NOLs and we believe we will not pay any cash federal income taxes for the next six to eight years based on our long-term forecast of met coal prices, sales volumes and performance.

Accordingly, we expect to continue to utilize our federal NOLs and credit carryforwards, we believe we will not pay any cash federal income taxes for the next six to eight years based on our long-term forecast of met coal prices, sales volumes and performance.

federal and state pre-tax net operating loss carryforwards do not begin to expire until 2034 and 2029, respectively.

Our general business credits begin to expire in December 31, 2027.

See Note 7 of the Notes to the Consolidated Financial Statements for more information.

Year Ended December 31, 2019 and 2018

The following table summarizes certain financial information relating to our operating results that have been derived from our audited financial statements for the year ended 2019 and 2018.

For the years ended December 31,

Revenues 2018 % of

(in thousands)

Sales $ 1,235,998 97.5 % 1,342,683 97.4 %

Other revenues 32,311 2.5 % 35,324 2.6 %

Total revenues 1,268,309 100.0 % 1,378,007 100.0 %

Costs and expenses:

Cost of sales (exclusive of items shown separately below) 720,745 56.8 % 716,645 52.0 %

Cost of other revenues (exclusive of items shown separately below) 29,828 2.4 % 10,172 0.7 %

Depreciation and depletion 97,330 7.7 % 97,209 7.1 %

Selling, general and administrative 37,014 2.9 % 36,626 2.7 %

Transaction and other costs — — % 9,068 70.0 %

Total costs and expenses 884,917 69.8 % 869,720 63.1 %

Operating income 383,392 30.2 % 508,287 36.9 %

Interest expense, net (29,335) (2.3) % (37,314) (2.7) %

Loss on early extinguishment of debt (9,756) (8.0) % — — %

Other income 22,815 1.8 % — — %

Income before income tax expense (benefit) 367,116 28.9 % 470,973 34.2 %

Income tax expense (benefit) 65,417 5.2 % (225,814) (16.4) %

Net income $ 301,699 23.8 % 696,787 50.6 %

Sales, production and cost of sales components on a per unit basis for the year ended 2019 and 2018 were as follows:

For the years ended December 31,

Met Coal (metric tons in thousands)

Metric tons sold 7,240 6,931

Metric tons produced 7,683 7,017

Gross price realization (1)

Average net selling price per metric ton $ 170.72 $ 193.72

Cash cost of sales per metric ton $ 99.15 $ 103.35

(1) For the years ended 2019 and 2018, our gross price realization represents a volume weighted-average calculation of our daily realized price per ton based on gross sales, which excludes demurrage and other charges, as a percentage of the Platts Index price.

The year ended December 31, 2019 was an outstanding year, as reflected in our record high operational performance and strong financial performance.

For the full year of 2019, we produced 7.7 million metric tons of coal and sold 7.2 million metric tons, both of which were record highs for us.

We were pleased with our performance in 2019, even in the face of challenging market conditions in the second half of the year.

Even with a slowdown in steel production in the latter half of 2019, as well as additional macroeconomic issues in the global economy which significantly impacted pricing, we were still able to execute another year of strong sales volume along with a significant increase in production volume.

The following list highlights our key accomplishments for the year ended December 31, 2019:

• through strong operational and financial performance, we were able to increase our guidance targets for 2019 and produced and sold record high volumes;

• we achieved a record annual sales volume of 7.2 million metric tons and cash cost of sales per metric ton of $99.15;

• we recorded our best ever annual production volume of 7.7 million metric tons, while achieving a record low safety

incident rate at the mines of 2.30;

• we successfully retired $131.6 million aggregate principal amount of our Notes through the Restricted Payment Offer

(as defined below) and Tender Offer (as defined below) to permit up to $299.0 million in stockholder returns;

• we demonstrated an ongoing commitment to returning capital to our stockholders, including $240.4 million of special

dividends and our regular $0.05 per share quarterly dividends;

• we implemented the New Stock Repurchase Program (as defined below) of $70.0 million after fully exhausting the First Stock Repurchase Program (as defined below) of $40.0 million and repurchased 0.6 million shares of the Company’s common stock, totaling $12.5 million;

• we amended our ABL Facility to generally conform certain definitions with the corresponding definitions of these terms in our indenture governing the Notes;

• we successfully completed five longwall operation moves during 2019.

Sales were $1.2 billion for the year ended December 31, 2019, compared to $1.3 billion for the year ended December 31, 2018.

The $106.7 million decrease in revenues was primarily driven by a $166.5 million decrease in revenue related to a $23.00 decrease in the average selling price per metric ton of met coal offset partially by a $59.9 million increase in revenue due to a 0.3 million metric ton increase in met coal sales volume.

Other revenues for the year ended December 31, 2019 were $32.3 million compared to $35.3 million for the year ended December 31, 2018.

Other revenues are comprised of revenue derived from our natural gas operations, as well as earned

royalty revenue.

The $3.0 million decrease in other revenues is primarily due to an 18% decrease in gas sales driven by a decrease in natural gas prices and production during 2019.

Cost of sales (exclusive of items shown separately below) was $720.7 million, or 56.8% of total revenues for the year ended December 31, 2019, compared to $716.6 million, or 52.0% of total revenues for the year ended December 31, 2018.

The $4.1 million increase in cost of sales was primarily driven by a $31.9 million increase due to a 0.3 million metric ton increase in met coal sales volumes offset partially by a $30.4 million decrease due to a $4.20 per metric ton decrease in the average cash cost of sales per metric ton.

Cost of other revenues was $29.8 million for the year ended December 31, 2019, compared to $10.2 million for the year ended December 31, 2018.

The $19.7 million increase is primarily due to the change in our asset retirement obligation adjustment attributable to the net impact of changes in current estimates of the costs and scope of remaining reclamation work,

changes in discount rates and fluctuations in projected mine life estimates.

This increase is partially offset by an 18% decrease

in gas sales driven by natural gas prices and production during 2019.

Depreciation and depletion was $97.3 million, or 7.7% of total revenues, for the year ended December 31, 2019, compared to $97.2 million, or 7.1% of total revenues for the year ended December 31, 2018.

The year ended December 31, 2018, included $4.0 million of accelerated depreciation on equipment beyond its economic repair.

This was offset by an increase of $4.1 million in capital expenditures combined with an increase in depletion due to an increase in metric tons produced.

Selling, general and administrative expenses were $37.0 million, or 2.9% of total revenues, for the year ended December 31, 2019, and remained consistent compared to $36.6 million, or 2.7% of total revenues for the year ended December 31, 2018.

Transaction and other costs were $9.1 million, or 0.7% for the year ended December 31, 2018 which was comprised primarily of professional fees incurred in connection with the issuance of the New Notes and the Secondary Equity Offerings.

Interest expense, net was $29.3 million, or 2.3% of total revenues, for the year ended December 31, 2019, compared to

$37.3 million, or 2.7% of total revenues, for the year ended December 31, 2018.

The $8.0 million decrease was primarily driven by the retirement of debt of $131.6 million in the first quarter of 2019.

Interest expense, net is comprised of interest on our senior secured notes and amortization of our ABL Facility and senior secured notes debt issuance costs offset partially by earned interest income.

For the year ended December 31, 2019, we recognized a loss on early extinguishment of debt of $9.8 million upon the

extinguishment of $131.6 million of our Notes (as defined below).

The loss on early extinguishment of debt represents a premium paid to retire the debt, accelerated amortization of debt discount, net, and fees incurred in connection with the transactions.

Other income was $22.8 million, or 1.8% of total revenues, for the year ended December 31, 2019.

In 2019, we received $22.8 million in settlement proceeds for the Shared Services Claim and Hybrid Debt Claim which is reflected as other income in the Statements of Operations.

For the year ended December 31, 2019, we recognized income tax expense of $65.4 million or an effective tax rate of

17.8% which was principally offset by the utilization of our NOLs for cash tax purposes.

Internal Revenue Service.

At December 31, 2019, we had federal and state NOLs of approximately $785.6 million and $860.3 million, respectively.

federal pre-tax net operating loss carryforwards do not begin to expire until 2034.

For the year ended December 31, 2018 we recognized an income tax benefit of $225.8 million or an effective tax rate of (47.9)%.

During the fourth quarter of 2018, we concluded that our deferred income tax assets are more likely than not to be realized.

In making such determination, we considered all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income and our continued strong financial performance which contributed to a cumulative three-year income position.

Accordingly, at December 31, 2018, we released all of our valuation allowance against our deferred income tax assets.

The release of the valuation allowance primarily resulted in a net income tax benefit of $225.8 million that was recorded in income tax (expense) benefit in our Statements of Operations.

On January 14, 2019, the IRS issued a statement that AMT refunds for taxable years beginning after December 31,

2017 will not be subject to sequestration which reversed an earlier IRS announcement that refundable AMT credits would be subject to sequestration.

As a result, we completed our accounting for the income tax effects of the Tax Cuts and Jobs Act and

recorded a measurement period adjustment recognizing an income tax receivable and related income tax benefit of $2.8 million.

As of December 31, 2019, we had a current income tax receivable of $12.9 million and a non-current income tax receivable of $11.3 million.

During the third quarter of 2020, the Company received these proceeds.

In addition, the Company has approximately $23.3 million of general business credit carryforwards which begin to expire in December 31, 2027 and fully expire in December 31, 2041.

See Note 7 of the Notes to the Financial Statements for more information.

Liquidity and Capital Resources

Our sources of cash have been coal and natural gas sales to customers, proceeds received from the Notes (as defined below) and access to our ABL Facility.

Historically, our primary uses of cash have been for funding the operations of our coal and natural gas production operations, our capital expenditures, our reclamation obligations, payment of principal and interest on our Notes, professional fees and other non-recurring transaction expenses.

Historically, our primary uses of cash have been for funding the operations of our coal and natural gas production operations, working capital, our capital expenditures, our reclamation obligations, payment of principal and interest on our Notes, professional fees and other non-recurring transaction expenses.

In addition, we used available cash on hand to repurchase shares of common stock and to pay our quarterly and special dividends, each of which reduces or reduced cash and cash equivalents.

Going forward, we will use cash to fund debt service payments on our Notes, the ABL Facility and our other indebtedness, to fund operating activities, working capital, capital expenditures, and strategic investments, and, if declared, to pay our quarterly and/or special dividends.

strategic investments, capital expenditures, or special dividends financed partially or wholly with debt financing, our ability to access the capital markets to raise additional capital.

Our ability to generate positive cash flow from operations in the future will be, at least in part, dependent on continued stable global economic conditions.

In March 2020, the WHO declared the outbreak of COVID-19 a global pandemic.

There is significant uncertainty as to the effects of this pandemic on the global economy, which in turn may, among other things, impact our ability to generate positive cash flows from operations, fund capital expenditure needs and successfully execute and fund key initiatives, such as the development of Blue Creek.

As events relating to COVID-19 continue to develop globally and impact the capital markets, our liquidity could also be adversely impacted due to possible deterioration in our customers' financial condition and their ability to timely pay outstanding receivables owed to us.

Our ability to fund our capital needs going forward will depend on our ongoing ability to generate cash from operations and borrowing availability under the ABL Facility, and, in the case of any future strategic investments, capital expenditures, or special dividends financed partially or wholly with debt financing, our ability to access the capital markets to raise additional capital.

Our ability to generate positive cash flow from operations in the future will be, at least in part, dependent on continued stable global economic conditions and a resolution of the CBA contract negotiations with the UMWA.

There remains significant uncertainty as to the effects of new COVID-19 variants on the global economy, which in turn may, among other things, impact our ability to generate positive cash flows from operations, fund capital expenditure needs and successfully execute and fund key initiatives, such as the development of Blue Creek.

Our available liquidity as of December 31, 2021 was $479.0 million, consisting of $395.8 million of cash and cash equivalents and $83.2 million of availability under our ABL Facility.

As of December 31, 2020, we had an aggregate principal amount of $40.0 million drawn under the ABL Facility and issued and outstanding letters of credit with a face amount equal to $9.4 million.

On March 24, 2020, we borrowed $70.0 million in a partial draw of the ABL Facility (the “ABL Draw”) as a precautionary measure in order to increase our cash position and preserve financial flexibility in light of the current uncertainty resulting from the COVID-19 outbreak.

In June 2020, we reduced the outstanding principal amount of the ABL Draw by $30.0 million.

We believe that our future cash flows from operations, together with cash on our balance sheet and proceeds from the ABL Draw, will provide adequate resources to fund our debt service payments and planned operating and capital expenditure needs for at least the next twelve months.

However, as the impact of the COVID-19 pandemic on the economy and our operations evolves, we will continue to assess our liquidity needs.

A continued worldwide disruption could materially affect our future access to our sources of liquidity, particularly our cash flows from operations, financial condition, capitalization and capital investments.

In the event of a sustained market deterioration, we may need additional liquidity, which would require us to evaluate available alternatives and take appropriate actions.

As of December 31, 2021, no loans were outstanding under the ABL Facility and there were $9.4 million of letters of credit issued and outstanding under the ABL Facility.

In June 2020, we reduced the outstanding principal amount of the ABL Draw by $30.0 million and in the third quarter of 2021, we reduced the remaining $40.0 million outstanding principal amount of the ABL Draw.

In the ordinary course of our business, we are required to provide surety bonds and letters of credit to provide financial assurance for certain transactions and business activities.

Federal and state laws require us to obtain surety bonds or other acceptable security to secure payment of certain long-term obligations including mine closure or reclamation costs and other miscellaneous obligations.

As of December 31, 2021, we had outstanding surety bonds and letters of credit with parties for post-mining reclamation at all of our mining operations totaling $40.9 million, $17.0 million as collateral for self-insured black lung related claims and $3.6 million for miscellaneous purposes.

We believe that our future cash flows from operations, together with cash on our balance sheet and proceeds from the borrowings under our ABL Facility, will provide adequate resources to fund our debt service payments and planned operating and capital expenditure needs for at least the next twelve months and beyond.

However, we will continue to assess our liquidity needs in light of the ongoing CBA contract negotiations with the UMWA and the ongoing impact of COVID-19.

The Company's principal contractual commitments include repayments of long-term debt and related interest, potential minimum throughput payments associated with our rail and port providers, asset retirement obligation payments, black lung obligation payments, payments on various coal and land leases, payments under financing lease obligations and payments associated with our natural gas swap contracts.

Currently, there are no known trends or expected changes anticipated in future periods that would not be indicative of past results for our contractual commitments.

Refer to the respective notes to the financial statements for further information about our credit facilities and long-term debt (Note 13), commitments and contingencies (Note 16), asset retirement obligations (Note 8), black lung obligations (Note 10), lease payment obligations (Note 14), share repurchase programs (Note 17) and derivative instruments (Note 18).

If our cash flows from operations are less than we require, we may need to incur additional debt or issue additional equity.

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Our access to, and the availability of, financing on acceptable terms and conditions in the future will be affected by many factors, including:

(i) our credit ratings, (ii) the liquidity of the overall capital markets, (iii) the current state of the global economy and (iv) restrictions in our ABL Facility, the Indenture (as defined below), and any other existing or future debt agreements.

(i) our credit ratings, (ii) the liquidity of the overall capital markets, (iii) the current state of the global economy and

(iv) restrictions in our ABL Facility, the Indenture (as defined below), and any other existing or future debt agreements.

There can be no assurance that we will have or continue to have access to the capital markets on terms acceptable to us or at all.

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Net cash used in investing activities (71,146) (108,189) (134,213)

Net cash provided by (used in) financing activities 14,096 (411,623) (281,626)

Net cash (used in) provided by financing activities (96,474) 14,096 (411,623)

Net increase (decrease) in cash and cash equivalents and restricted cash $ 183,923 $ 18,533 $ (13,022)

Operating Activities

Net cash flows from operating activities consist of net (loss) income adjusted for noncash items, such as depreciation and depletion of property, plant and equipment and mineral interests, deferred income tax expense (benefit), stock-based compensation, amortization of debt issuance costs and debt discount, net, accretion expense and valuation adjustment associated with our asset retirement obligations, loss on early extinguishment of debt and changes in net working capital.

timing between the conversion of our billed and unbilled receivables into cash from our customers and disbursements to our vendors is the primary driver of changes in our working capital.

Net cash flows from operating activities consist of net income (loss) adjusted for noncash items, such as depreciation and depletion of property, plant and equipment and mineral interests, deferred income tax expense (benefit), stock-based compensation, amortization of debt issuance costs and debt discount, net, accretion expense and valuation adjustment associated with our asset retirement obligations, mark-to-market losses on gas hedges, loss on early extinguishment of debt and changes in net working capital.

The timing between the conversion of our billed and unbilled receivables into cash from our customers, production and sale of coal inventory and disbursements to our vendors is the primary driver of changes in our working capital.

Net cash provided by operating activities was $351.5 million for the year ended December 31, 2021, and was primarily attributed to net income of $150.9 million adjusted for depreciation and depletion expense of $141.4 million, deferred income tax expense of $49.1 million, stock-based compensation expense of $9.4 million, loss on early extinguishment of debt of $9.7 million, accretion expense and valuation adjustment of asset retirement obligations of $3.4 million, amortization of debt issuance costs and debt discount of $1.7 million, mark-to-market loss on gas hedges of 1.6 million, an increase in other operating activities of $5.7 million and an increase in net working capital of $21.4 million.

The increase in our working capital was primarily attributable to an increase in trade accounts receivable combined with a decrease in accounts payable and accrued expenses and other current liabilities offset partially by a decrease in inventories.

The increase in trade accounts receivable is due to the timing of sales and a $67.31 increase in the average selling price per metric ton.

The decrease in inventories, accounts payable and accrued expenses and other current liabilities is due to lower production volumes with the idling of Mine No.

4 for much of the year combined with lower spending due to the ongoing UMWA strike.

Net cash provided by operating activities was $112.6 million for the year ended December 31, 2020, and was primarily attributed to a net loss of $35.8 million adjusted for depreciation and depletion expense of $118.1 million, an increase in other operating activities of $19.6 million, stock-based compensation expense of $7.6 million, accretion expense of asset retirement obligations of $3.0 million, amortization of debt issuance costs and debt discount of $1.5 million and a decrease in net working capital of $19.0 million, partially offset by a deferred income tax benefit of $20.1 million and a change in the asset retirement obligation due to a change in estimate of $0.4 million.

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The increase in our accounts payable is primarily driven by the timing of payments.

Net cash provided by operating activities was $532.8 million for the year ended December 31, 2019, and was primarily attributed to net income of $301.7 million adjusted for depreciation and depletion expense of $97.3 million, deferred income tax expense of $68.5 million, an increase in other operating activities of $26.1 million, loss on early extinguishment of debt of $9.8 million, stock-based compensation expense of $5.8 million, accretion expense of asset retirement obligations of $3.2 million, amortization of debt issuance costs and debt discount of $1.4 million, and a decrease in net working capital of $30.2 million, partially offset by a change in asset retirement obligation due to a change in estimate of $11.1 million.

million, stock-based compensation expense of $5.8 million, accretion expense of asset retirement obligations of $3.2 million, amortization of debt issuance costs and debt discount of $1.4 million, and a decrease in net working capital of $30.2 million, partially offset by a change in asset retirement obligation due to a change in estimate of $11.1 million.

The decrease in our working capital was primarily attributable to a decrease in trade accounts receivable combined with a decrease in income tax receivable and an increase in inventories offset by accrued expenses and accounts payable due to decreased fourth quarter production and sales volume.

Net cash provided by operating activities was $559.4 million for the year ended December 31, 2018, and was primarily attributed to net income of $696.8 million adjusted for depreciation and depletion expense of $97.2 million, stock based compensation expense of $6.4 million, amortization of debt issuance costs and debt discount of $2.5 million, accretion of asset retirement obligations of $4.6 million, offset partially by an increase in net working capital of $10.7 million, a change in asset retirement obligation due to a change in estimate of $24.6 million and the release of our valuation allowance against deferred income tax assets of $223.0 million.

The increase in our working capital was primarily attributable to an increase in trade accounts receivable due to higher sales volumes combined with an increase in income tax receivable offset by an increase in accounts payable and accrued expenses due to increased production and sales volume.

Investing Activities

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We spent approximately $45.2 million in sustaining capital and spent an additional $12.7 million in other discretionary capital, which included primarily the service shaft construction and bathhouse at Mine No.

Net cash used in investing activities was $108.2 million for the year ended December 31, 2020, primarily comprised of $87.5 million of purchases of property, plant and equipment and $27.1 million of capitalized mine development costs associated with our Mine No.

4 development.

We spent approximately $60.0 million in sustaining capital and spent an additional $28.0 million in other discretionary capital, which included primarily the service shaft construction and bathhouse at Mine No.

The cash capital expenditures exclude non-cash capital accruals and leases of approximately $44.8 million.

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Net cash used in investing activities also includes $24.2 million of purchases of short-term investments offset partially by $17.5 million of sales of short-term investments and $3.1 million of proceeds from sale of property, plant and equipment.

Net cash used in investing activities was $107.6 million for the year ended December 31, 2018, primarily comprised of $101.6 million of purchases of property, plant and equipment and $8.9 million of capitalized mine development costs associated with our Mine 4 development.

We spent approximately $69.0 million in sustaining capital and spent an additional $33.0 million in other discretionary capital, which included the construction of a new portal at Mine No.

The cash capital expenditures exclude non-cash capital accruals and leases of approximately $6.3 million.

Financing Activities

Net cash used in financing activities was $96.5 million for the year ended December 31, 2021, primarily due to the redemption of the Existing Notes of $350.3 million, the repayment of the ABL Draw of $40.0 million, principal repayments of financing lease obligations of $29.0 million, payment of dividends of $10.5 million and payment of debt issuance costs associated with the issuance of the New Notes and the amendment of the ABL Facility of $11.4 million offset partially by $347.7 million in proceeds received from the issuance of the New Notes.

Net cash provided by financing activities was $14.1 million for the year ended December 31, 2020, primarily due to the proceeds received from the ABL Draw of $70.0 million offset by the subsequent partial repayment of the ABL Draw in an amount equal to $30.0 million, principal repayments of financing lease obligations of $14.2 million and the payment of dividends of $10.4 million.

Net cash used in financing activities was $411.6 million for the year ended December 31, 2019, primarily due to the payment of regular quarterly dividends and the April 2019 Special Dividend totaling $240.4 million in the aggregate, retirements of debt of $140.3 million, repayments of financing lease obligations of $17.3 million, and common shares repurchased of $12.5 million.

Net cash used in financing activities was $281.6 million for the year ended December 31, 2018, primarily due to the payment of dividends totaling $360.6 million in the aggregate, common shares repurchased of $38.0 million, payment of debt issuance costs of $3.7 million, retirements of debt of $3.1 million, offset partially by the net proceeds received from the issuance of the New Notes of $128.8 million.

Capital Allocation

Capital Allocation Policy

On May 17, 2017, the Board adopted the Capital Allocation Policy of paying a quarterly cash dividend of $0.05 per share.

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Any future dividends or stock repurchases will be at the discretion of the Board and subject to consideration of a number of factors, including business and market conditions, future financial performance and other strategic investment opportunities.

The Company will also seek to optimize its capital structure to improve returns to stockholders while allowing flexibility for the Company to pursue very selective strategic growth opportunities that can provide compelling stockholder returns.

The Company has paid a regular quarterly cash dividend of $0.05 per share every quarter since the Board adopted the Dividend Policy.

As of December 31, 2020, the Company has paid $39.5 million of regular quarterly cash dividends under the Dividend Policy.

As the Company continues to monitor its liquidity in light of the COVID-19 pandemic, the Company may decide to suspend its Dividend Policy in the future if the Board deems it to be necessary or appropriate.

April 2018 Special Dividend

On April 3, 2018, the Board declared the April Special Dividend of approximately $350.0 million, which was funded with the net proceeds from the offering of the New Notes due 2024, together with cash on hand of approximately $225.0 million, and was paid on April 20, 2018 to stockholders of record as of the close of business on April 13, 2018.

The Company will also seek to optimize its capital structure to improve returns to stockholders while allowing

flexibility for the Company to pursue very selective strategic growth opportunities that can provide compelling stockholder returns.

As the Company continues to monitor its liquidity in light of the COVID-19 pandemic, the Chinese ban on Australian coal and our CBA contract negotiations with the UMWA, the Company may decide to suspend its Capital Allocation Policy in the future if the Board deems it to be necessary or appropriate.

The Company has paid a regular quarterly cash dividend of $0.05 per share every quarter since the Board adopted the Capital Allocation Policy.

As of December 31, 2021, the Company has paid $49.9 million of regular quarterly cash dividends under the Capital Allocation Policy.

April 2019 Special Dividend

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Under the New Stock Repurchase Program, we may repurchase shares of our common stock from time to time, in amounts, at prices and at such times as we deem appropriate, subject to market and industry conditions, share price, regulatory requirements and other considerations as determined from time to time by us.

Our repurchases may be executed using open

market purchases or privately negotiated transactions in accordance with applicable securities laws and regulations, including Rule 10b-18 of the Exchange Act and repurchases may be executed pursuant to Rule 10b5-1 under the Exchange Act.

Our repurchases may be executed using open market purchases or privately negotiated transactions in accordance with applicable securities laws and regulations, including Rule 10b-18 of the Exchange Act and repurchases may be executed pursuant to Rule 10b5-1 under the Exchange Act.

Repurchases will be subject to limitations in the ABL Facility and the Indenture.

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Company has temporarily suspended its New Stock Repurchase Program.

The Company will continue to monitor its liquidity in light of the COVID-19 pandemic and will consider when to reinstate the program.

On April 1, 2016, we entered into the ABL Facility with certain lenders and Citibank, N.A.

The Company will continue to monitor its liquidity in light of the pandemic, the Chinese ban on Australian coal and our CBA contract negotiations with the UMWA and will consider when to reinstate the program.

On April 1, 2016, we entered into the Asset-Based Revolving Credit Agreement with certain lenders and Citibank, N.A.

(together with its affiliates, “Citibank”), as administrative agent and collateral agent, with an aggregate lender commitment of up to $50.0 million, at any time outstanding, subject to borrowing base availability.

as administrative agent (in such capacity, the "Agent"), which amended and restated in its entirety the existing ABL Facility and, among other things (i) increased the aggregate commitments available to be borrowed under the ABL Facility to $125.0 million, (ii) extended the maturity date of the ABL Facility to October 15, 2023;

On October 15, 2018, we entered into an Amended and Restated Asset-Based Revolving Credit Agreement, by and among us and certain of our subsidiaries, as borrowers, the guarantors party thereto, the lenders from time to time party thereto and Citibank, as administrative agent, which amended and restated in its entirety the existing ABL Facility and, among other things (i) increased the aggregate commitments available to be borrowed under the ABL Facility to $125.0 million, (ii) extended the maturity date of the Asset-Based Revolving Credit Agreement to October 15, 2023;

(iii) decreased the applicable interest rate margins with respect to the loans and the applicable fees in connection with the issuance of letters of credit;

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On December 19, 2019, we entered into an Amendment No.

2 to the Amended and Restated Credit Agreement (the “Second Amendment”), which, among other things amended the definitions of Fixed Charges and Fixed Charge Coverage Ratio in the Amended and Restated Credit Agreement to generally conform to the corresponding definitions in the Indenture, solely for purposes of incurring unsecured debt based on the Fixed Charge Coverage Ratio and added customary language in connection with the Qualified Financial Contract Stay Rules.

2 to the Amended and Restated Credit Agreement, which, among other things amended the definitions of Fixed Charges and Fixed Charge Coverage Ratio in the Amended and Restated Credit Agreement to generally conform to the corresponding definitions in the Indenture, solely for purposes of incurring

unsecured debt based on the Fixed Charge Coverage Ratio and added customary language in connection with the Qualified Financial Contract Stay Rules.

On July 20, 2020, we entered into an Amendment No.

3 to the Amended and Restated Credit Agreement (the "Third Amendment"), which among other things (i) clarified certain definitions related to the calculation of the borrowing base and (ii) decreased the aggregate commitments available to be borrowed under the ABL Facility to $120.0 million on February 28, 2021.

Under the ABL Facility, up to $10.0 million of the commitments may be used to incur swingline loans from Citibank and up to $50.0 million of the commitments may be used to issue letters of credit.

The ABL Facility will mature on October 15, 2023.

As of December 31, 2020, the Company had $40.0 million outstanding under the ABL Facility and there were $9.4 million of letters of credit issued and outstanding under the ABL Facility.

At December 31, 2020, we had $31.6 million of availability under the ABL Facility.

We intend to retain these funds in cash to preserve liquidity amid the growing uncertainty surrounding the COVID-19 outbreak.

The ABL Draw, which is a proactive measure similar to actions taken by other public companies, is one of the Company’s precautionary measures taken to reduce risk during these unprecedented times.

3 to the Amended and Restated Credit Agreement, which among other things (i) clarified certain definitions related to the calculation of the borrowing base and (ii) decreased the aggregate commitments available to be borrowed under the ABL Facility to $120.0 million on February 28, 2021.

On December 6, 2021, we entered into the Second Amended and Restated Asset-Based Revolving Credit Agreement (the “Second Amended and Restated Credit Agreement”), by and among us and certain of its subsidiaries, as borrowers, the guarantors party thereto, the lenders from time to time party thereto and Citibank, as administrative agent (in such capacity, the "Agent"), which amends and restates in its entirety the existing Amended and Restated Asset-Based Revolving Credit Agreement (as amended, the “ABL Facility”).

The Second Amended and Restated Credit Agreement, among other things, (i) extended the maturity date of the ABL Facility to December 6, 2026;

(ii) changed the calculation of the interest rate payable on borrowings from being based on LIBOR to be based on SOFR, with corresponding changes to the applicable interest rate margins with respect to such borrowings, (iii) amended certain definitions related to the calculation of the borrowing base;

(iv) increased the commitments that may be used to issue letters of credit to $65.0 million;

and (v) amended certain baskets contained in the covenants to conform to the baskets contained in the Indenture.

The Second Amended and Restated Credit Agreement also allows us to borrow up to $132.0 million through October 14, 2023, decreasing to $116.0 million through November 2026, subject to availability under the borrowing base and other conditions.

The amendment to the ABL Facility in December 2021 was considered to be a debt modification and resulted in incremental debt issuance costs of $3.3 million which are reflected as deferred financing costs in other long-term assets on the Balance Sheet.

These costs coupled with the $1.7 million of deferred financing costs related to the existing ABL will be amortized to interest expense over the remaining term of the ABL Facility.

Under the ABL Facility, up to $10.0 million of the commitments may be used to incur swingline loans from Citibank.

As of December 31, 2021, no loans were outstanding under the ABL Facility and there were $9.4 million of letters of credit issued and outstanding under the ABL Facility.

At December 31, 2021, the Company had $83.2 million of availability under the ABL Facility.

Revolving loan (and letter of credit) availability under the ABL Facility is subject to a borrowing base, which at any time is equal to the sum of certain eligible billed and unbilled accounts, certain eligible inventory, certain eligible supplies inventory and qualified cash, in each case, subject to specified advance rates.

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Subject to permitted exceptions, the obligations of the borrowers under the ABL Facility are guaranteed by each of our domestic subsidiaries and secured by (i) first-priority security interests in the ABL Priority Collateral (as defined in the indenture governing the Notes), which includes, among other things, certain accounts receivables, inventory and cash of ours and the guarantors, and (ii) second-priority security interests in the Notes Priority Collateral (as defined in the indenture governing the Notes), which includes, among other things, material mining properties, shares of capital stock of the guarantors, intellectual property, as extracted collateral (to the extent not constituting inventory), and certain fixed assets of ours and the guarantors.

Borrowings under the ABL Facility bear interest at a rate equal to LIBOR or an alternate base rate plus an applicable margin, which is determined based on the average availability of the commitments under the ABL Facility, ranging currently from 150 bps to 200 bps or 50 bps to 100 bps, respectively.

Borrowings under the ABL Facility bear interest at a rate equal to either (i) SOFR, plus a credit adjustment spread, ranging currently from approximately 11 bps to 43 bps depending on the interest period selected by us, or (ii) an alternate base rate plus, in each case of the foregoing (i) and (ii), an applicable margin, which is determined based on the average availability of the commitments under the ABL Facility, ranging currently from 150 bps to 200 bps or 50 bps to 100 bps, respectively.

In addition to paying interest on the outstanding borrowings under the ABL Facility, we are required to pay a fee in respect of unutilized commitments, which is based on the availability of the commitments under the ABL Facility, ranging from 25 bps to 37.5 bps.

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We are required to repay outstanding loans and cash collateralize letters of credit anytime the outstanding loans and letters of credit exceed the maximum availability then in effect.

We are also required to use net proceeds from certain significant asset sales to repay outstanding loans, but may re-borrow following such prepayments if the conditions to borrowings are met.

We are also required to use

net proceeds from certain significant asset sales to repay outstanding loans, but may re-borrow following such prepayments if the conditions to borrowings are met.

The ABL Facility contains customary covenants for asset-based credit agreements of this type, including among other things:

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Senior Secured Notes

On November 2, 2017, we consummated a private offering (the “Offering”) of $350.0 million aggregate principal amount of 8.00% Senior Secured Notes due 2024 to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and to certain non-U.S.

On December 6, 2021, we issued $350.0 million in aggregate principal amount of 7.875% senior secured notes due 2028 (the “Notes”) at an initial price of 99.343% of their face amount.

The Notes were issued to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and to certain non-U.S.

persons in transactions outside the United States in accordance with Regulation S under the Securities Act.

The Company used the net proceeds of approximately $340.0 million from the Offering, together with cash on hand of approximately $260.0 million, to pay a special cash dividend of approximately $600.0 million, or $11.21 per share, to all of its stockholders on a pro rata basis.

On March 1, 2018, we issued $125.0 million in aggregate principal amount of its 8.00% Senior Secured Notes due 2024 (the "New Notes") to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"), and to certain non-U.S.

persons in transactions outside the United States in accordance with Regulation S under the Securities Act ("Regulation S").

The New Notes were issued at103.00% of the aggregate principal amount thereof, plus accrued interest from November 2, 2017.

The New Notes were issued as "Additional Notes" under the indenture dated as of November 2, 2017 (the "Original Indenture") among the Company, the subsidiary guarantors party thereto and Wilmington Trust, National Association, as trustee (the "Trustee") and priority lien collateral trustee (the "Priority Lien Collateral Trustee"), as supplemented by the First Supplemental Indenture, dated as of March 1, 2018 (the "First Supplemental Indenture" and, the Original Indenture as supplemented thereby, the "Indenture").

The New Notes have not been and will not be registered under the Securities Act, and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act.

The Company used the net proceeds of the offering of the New Notes, together with cash on hand of $225.0 million, to pay a special dividend of approximately $350.0 million, or $6.53 per share, to all of its stockholders on a pro rata basis on April 20, 2018.

The Notes will mature on November 1, 2024 and interest is payable on May 1 and November 1 of each year, commencing May 1, 2018.

The Notes are redeemable at our option, in whole or in part, from time to time, on or after November 1, 2020, at redemption prices specified in the indenture, plus accrued and unpaid interest, if any, to, but excluding the redemption date.

We are also required to make offers to purchase the Notes (i) at a purchase price of 101.00% of the principal amount thereof in the event we experience specific kinds of change of control triggering events, (ii) at a purchase price of 103.00% of the principal amount thereof prior to making certain restricted payments, and (iii) at a purchase price of 100.00% of the principal amount thereof in the event we make certain asset sales or dispositions and do not reinvest the net proceeds therefrom or use such net

proceeds to repay certain indebtedness, in each case, plus accrued and unpaid interest, if any, to, but excluding the date of purchase.

We used the net proceeds of the offering of the Notes, together with cash on hand, to fund the redemption of all of our outstanding 8.00% senior secured notes due 2024 (the “Existing Notes”), including payment of the redemption premium in connection with such redemption.

As a result, we recognized a loss on early extinguishment of debt of $9.7 million which represents the write-off of the previously capitalized Existing Notes debt issuance costs and debt discount, net, along with the redemption premium.

In connection with the issuance of the Notes, we incurred debt issuance costs of $8.1 million for the year ended December 31, 2021, which consisted primarily of structuring fees and legal fees, and are included in long-term debt in the Balance Sheet.

The Notes will accrue interest at a rate of 7.875% per year from December 6, 2021.

Interest on the Notes will be payable on June 1 and December 1 of each year, commencing on June 1, 2022.

The Notes will mature on December 1, 2028.

At any time prior to December 1, 2024, we may redeem the Notes, in whole or in part, at a price equal to 100.00% of the principal amount of the Notes redeemed plus the Applicable Premium (as defined in the indenture governing the Notes) and accrued and unpaid interest, if any, to, but excluding, the applicable redemption date.

The Notes are redeemable at our option, in whole or in part, from time to time, on or after December 1, 2024, at redemption prices specified in the indenture governing the Notes, plus accrued and unpaid interest, if any, to, but excluding the redemption date.

At any time on or prior to December 1, 2024, we may redeem up to 40% of the aggregate principal amount of the Notes with the proceeds of certain equity offerings, at a redemption price of 107.875% of the principal amount of the Notes, plus accrued and unpaid interest, if any, to but excluding the redemption date.

Offer to Purchase the Notes

On February 21, 2019, the Company commenced an offer to purchase (the “Restricted Payment Offer”), in cash, up to $150,000,000 principal amount of its outstanding Notes, at a repurchase price of 103% of the aggregate principal amount of such Notes, plus accrued and unpaid interest with respect to such Notes to, but not including, the date of repurchase (the “Restricted Payment Repurchase Price”).

Concurrently with, but separate from, the Restricted Payment Offer, the Company commenced a cash tender offer (the “Tender Offer” and, together with the Restricted Payment Offer, the “Offers”) to purchase up to $150,000,000 principal amount of the Notes at a repurchase price of 104.25% of the aggregate principal amount of such Notes, plus accrued and unpaid interest to, but not including, the date of repurchase (the “TO Repurchase Price”).

The Offers expired on March 22, 2019 (the “Expiration Date”).

Restricted Payment Offer

As of the Expiration Date, $1,900,000 aggregate principal amount of the Notes were validly tendered and not validly withdrawn pursuant to the Restricted Payment Offer.

Pursuant to the terms of the Restricted Payment Offer:

(1) an automatic pro ration factor of 31.5789% was applied to the $1,900,000 aggregate principal amount of the Notes that were validly tendered and not validly withdrawn in the Restricted Payment Offer (rounded down to avoid the purchase of Notes in a principal amount other than in integrals of $1,000), which resulted in $599,000 aggregate principal amount of the Notes (the “RP Pro-Rated Tendered Notes”);

(2) the Company accepted all $599,000 aggregate principal amount of the RP Pro-Rated Tendered Notes for payment of the Restricted Payment Repurchase Price in cash;

(3) the remaining balance of $1,301,000 aggregate principal amount of the Notes tendered that were not RP Pro- Rated Tendered Notes were not accepted for payment and were returned to the tendering holder of the Notes.

The Company consummated the Restricted Payment Offer on March 25, 2019.

Accordingly, pursuant to the terms of the Indenture, the Company was permitted to make one or more restricted payments in the form of special dividends to holders of the Company’s common stock and/or repurchases of the Company’s common stock in the aggregate amount of up to $299,401,000 (the "RP Basket") without having to make another offer to repurchase Notes.

The Company used a portion of the RP Basket to pay the April 2019 Special Dividend (as defined below) and intends to use the remainder of the RP Basket to make repurchases under the New Stock Repurchase Program (as defined below).

As of the Expiration Date, $415,099,000 aggregate principal amount of the Notes were validly tendered and not validly withdrawn pursuant to the Tender Offer.

Pursuant to the terms of the Tender Offer:

(1) an automatic pro ration factor of 31.5789% was applied to the $415,099,000 aggregate principal amount of the Notes that were validly tendered and not validly withdrawn in the Tender Offer (rounded down to avoid the purchase of Notes in a principal amount other than in integrals of $1,000), which resulted in $130,966,000 aggregate principal amount of the Notes (the “TO Pro-Rated Tendered Notes”);

(2) the Company accepted all $130,966,000 aggregate principal amount of the TO Pro-Rated Tendered Notes for payment of the TO Repurchase Price in cash;

(3) the remaining balance of $284,133,000 aggregate principal amount of the Notes tendered that were not TO Pro-Rated Tendered Notes were not accepted for payment and were returned to the tendering holder of the Notes.

The Company consummated the Tender Offer on March 26, 2019.

In connection with the payments for the RP Pro-Rated Tendered Notes and the TO Pro-Rated Tendered Notes, the Company recognized a loss on early extinguishment of debt of $9.8 million during the year ended December 31, 2019.

On February 21, 2019, we commenced an offer to purchase (the “Restricted Payment Offer”), in cash, up to $150.0 million principal amount of its outstanding Existing Notes, at a repurchase price of 103% of the aggregate principal amount of such Existing Notes, plus accrued and unpaid interest with respect to such Existing Notes to, but not including, the date of repurchase.

Concurrently with, but separate from, the Restricted Payment Offer, we commenced a cash tender offer (the “Tender Offer” and, together with the Restricted Payment Offer, the “Offers”) to purchase up to $150.0 million principal amount of the Existing Notes at a repurchase price of 104.25% of the aggregate principal amount of such Existing Notes, plus accrued and unpaid interest to, but not including, the date of repurchase.

In connection with the Offers, we extinguished $140.3 million of the Existing Notes and recognized a loss on early extinguishment of debt of $9.8 million during the year ended December 31, 2019.

Short-Term Investments

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Our ability to obtain bank financing or our ability to access the capital markets for future equity or debt offerings may be limited by our financial condition at the time of any such financing or offering and the covenants in our current or future debt agreements, as well as by general economic conditions, contingencies and uncertainties, including as a result of the COVID-19 pandemic that are beyond our control.

Our capital expenditures were $87.5 million and $107.3 million for the year ended December 31, 2020 and December 31, 2019, respectively.

This represents the continuation of the capital investment program that we implemented in 2017 to upgrade all key production equipment to further improve efficiency and reliability of our mining operations.

We spent approximately $60.0 million in sustaining capital and an additional $28.0 million in other discretionary capital, which included primarily the service shaft construction and bathhouse at Mine No.

The capital expenditures exclude non-cash capital accruals and leases of approximately $44.8 million.

Our deferred mine development costs were $27.1 million and $23.4 million for the years ended December 31, 2020 and December 31, 2019, respectively, and relate to Mine No.

Our capital expenditures were $57.9 million, $87.5 million and $107.3 million for the year ended December 31, 2021, December 31, 2020 and December 31, 2019 respectively.

During 2021, we spent approximately $45.2 million in sustaining capital and an additional $12.7 million in other discretionary capital, which included primarily the service shaft construction and bathhouse at Mine No.

As a result of the UMWA strike, we temporarily suspended work on the Mine No.

4 service shaft, bathhouse and mine development.

Our deferred mine development costs were $13.5 million, $27.1 million and $23.4 million for the years ended December 31, 2021, December 31, 2020 and December 31, 2019 respectively, and primarily relate to Mine No.

We evaluate our spending on an ongoing basis in connection with our mining plans and the prices of met coal taking into consideration the funding available to maintain our operations at optimal production levels.

Our capital spending is expected to range from $95.0 million to $105.0 million for the full year 2022, consisting of sustaining capital expenditures of approximately $75.0 to $80.0 million and discretionary capital expenditures of approximately $20.0 to $25.0 million for the 4 North portal construction.

Our sustaining capital expenditures include expenditures related to longwall operations, continuous miners, new ventilation, and bleeder shafts.

Rights Agreement

On February 14, 2020, we adopted the Rights Agreement in an effort to prevent the imposition of significant limitations under Section 382 of the Code on our ability to utilize our current NOLs to reduce our future tax liabilities.

The Company's stockholders ratified the Rights Agreement at the 2020 Annual Meeting of Stockholders.

The Rights Agreement is intended to supplement the 382 Transfer Restrictions and is designed to serve the interests of all stockholders by preserving the availability of our NOLs and is similar to plans adopted by other companies with significant NOLs.

Pursuant to the Rights Agreement, one preferred stock purchase right (a “Right” or the “Rights”) will be distributed to stockholders of the Company for each share of common stock of the Company outstanding as of the close of business on February 28, 2020.

Pursuant to the Rights Agreement, one preferred stock purchase right (a “Right” or the “Rights”) was distributed to stockholders of the Company for each share of common stock of the Company outstanding as of the close of business on February 28, 2020.

Initially, these Rights will not be exercisable and will trade with the shares of common stock.

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While the Rights Agreement is in effect, any person or group that acquires beneficial ownership of 4.99% or more of the common stock or any existing stockholder who currently owns 5.00% or more of the common stock that acquires any additional shares of common stock (such person, group or existing stockholder, an "Acquiring Person") without approval from the Board would be subject to significant dilution in their ownership interest in the Company.

In such an event, each Right will entitle its holder to buy, at the exercise price, common stock having a market value of two times the then current exercise price of the Right and the Rights held by such Acquiring Person will become void.

In such an event, each Right will entitle its holder to buy, at the exercise price, common stock having a market value of two times the then current exercise price of the Right and

the Rights held by such Acquiring Person will become void.

The Rights Agreement also gives discretion to the Board to determine that someone is an Acquiring Person even if they do not own 4.99% or more of the Common Stock but do own 4.99% or more in value of the outstanding stock, as determined pursuant to Section 382 of the Code and the regulations promulgated thereunder.

In addition, the Board has established procedures to consider requests to exempt certain acquisitions of the Company’s securities from the Rights Agreement if the Board determines that doing so would not limit or impair the

availability of the NOLs or is otherwise in the best interests of the Company.

The Board may redeem the Rights for $0.01 per Right at any time before any person or group triggers the Rights Agreement.

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We believe that the combination of a low production cost and the high quality of the High Vol A met coal mined from Blue Creek, assuming we achieve our expected price realizations, will generate some of the highest met coal margins in the U.S., generate strong investment returns for us and achieve a rapid payback of our investment across a range of met coal price environments.

According to our third party reserve report, Blue Creek contains approximately 103.0 million metric tons of recoverable reserves and we have the ability to acquire adjacent reserves that would increase total reserves to over 154 million metric tons.

According to our third party reserve report, and under the SEC's new rules governing mineral reserves, specifically subpart 1300 of Regulation S-K under the Modernization of Property Disclosures for Mining Registrants, Blue Creek has 63.3 million metric tons of recoverable reserves and 44.9 million metric tons of coal resources exclusive of reserves, which total 108.2 million metric tons.

We have the ability to acquire adjacent reserves that would increase total reserves to over 154 million metric tons.

We expect that Blue Creek will have a mine life of approximately 50 years assuming a single longwall operation.

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Low Vol coals;

however, in the last eighteen months, it has been priced at or slightly above these coals.

however, in the last eighteen months, it has been priced at or slightly

above these coals.

Warrior expects High Vol A coals will continue to become increasingly scarce as a result of Central Appalachian producers mining thinner and deeper reserves, which we expect will continue to support prices.

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If we are able to successfully develop Blue Creek, we expect that it will be a transformational investment for us.

We expect that the new single longwall mine at Blue Creek will have the capacity to produce an average of 3.9 million metric tons

per annum of premium High Vol A met coal over the first ten years of production, thereby increasing our annual production capacity by 54%.

We expect that the new single longwall mine at Blue Creek will have the capacity to produce an average of 3.9 million metric tons per annum of premium High Vol A met coal over the first ten years of production, thereby increasing our annual production capacity by 54%.

This, in turn, would expand our product portfolio to our global customers by allowing us to offer three premium hard coking coals from a single port location.

Given these factors, and assuming we achieve expected price realizations, we believe that we will achieve some of the highest premium met coal margins in the United States.

The COVID-19 pandemic has substantially affected national and international financial markets, which could affect our ability to obtain financing for Blue Creek.

The extent to which COVID-19 will impact our business and our financial results will depend on future developments, which are highly uncertain and cannot be predicted.

Such developments may include the geographic spread of the virus, the severity of the disease, the duration of the outbreak, the actions that may be taken by various governmental authorities in response to the outbreak and the impact on the U.S.

or global economy.

As a result of this uncertainty, the Company initially delayed spending the $25.0 million that we budgeted for the development of the Blue Creek project until at least July 1, 2020 and has now further delayed the development of that project until at least summer 2021.

As a result of the COVID-19 pandemic and the unprecedented period of uncertainty, including the unknown duration and overall impact on our operations and the global economy, we withdrew our full-year 2020 guidance issued on February 19, 2020.

Due to the ongoing uncertainty related to the COVID-19 pandemic, we will not provide full year 2021 guidance at this time.

Although we are aggressively managing our response to the recent COVID-19 pandemic, its impact on our full-year fiscal 2021 results and beyond is uncertain.

The Company is taking a more conservative approach to managing its cash flow given this uncertainty, and is carefully managing operating expenses, working capital, and capital expenditures during this period, as well as suspending our New Stock Repurchase Program.

We have also implemented extensive preventative measures across all operations in order to safeguard the health of our employees.

This includes among other things:

eliminating business travel, staggering manbuses, cage and shift start times to allow for social distancing, enhanced disinfectant cleaning at all locations, maintaining antibacterial supplies at all locations, providing employees with mask, gloves and other gear, eliminating visitors or vendors on property without strict screening process and testing temperatures of all employees.

We believe that the most significant elements of uncertainty are the intensity and duration of the impact on the global steel industry, primarily due to restrictions to contain the virus.

However, we believe the execution of our strategy will continue to provide attractive opportunities for profitable growth in the long term following the recovery of the global economy from the effects of the COVID-19 pandemic.

Contractual Obligations

The following is a summary of our significant contractual obligations at December 31, 2020.

Payments due by Year

Total Less than

(in thousands)

Senior Secured Notes (principal and interest) (1)

$ 451,045 27,475 54,950 368,620 —

Minimum throughput obligations (2)

$ 426,999 95,874 150,267 153,133 27,725

Royalty obligations (3)

$ 81,389 5,999 11,879 11,879 51,632

Black lung obligations (4)

$ 82,143 2,367 5,123 4,845 69,808

Asset retirement obligations (4)

$ 78,752 4,375 4,247 6,432 63,698

Financing lease obligations (5)

$ 42,894 16,276 23,330 3,288 —

Total contractual obligations $ 1,163,222 $ 152,366 $ 249,796 $ 548,197 $ 212,863

(1) Represents principal and interest payments on our Notes.

See Note 13 to our consolidated financial statements.

(2) Represents minimum throughput obligations with our rail and port providers.

(3) We have obligations on various coal and land leases to prepay certain amounts, which are recoupable in future years when mining occurs.

(4) Represents estimated costs for black lung and asset retirement obligations, which have been presented on an undiscounted basis.

(5) Represents a financing lease obligation for the purchase of underground mining equipment.

See Note 14 to our consolidated financial statements.

Off-Balance Sheet Arrangements

In the ordinary course of our business, we are required to provide surety bonds and letters of credit to provide financial assurance for certain transactions and business activities.

As of December 31, 2020, we had outstanding surety bonds and letters of credit with parties for post-mining reclamation at all of our mining operations totaling $40.8 million, $17.0 million as collateral for self-insured black lung related claims and $3.6 million for miscellaneous purposes.

Due to the ongoing uncertainty related to the COVID-19 pandemic, the Chinese ban on Australian coal and our current CBA contract negotiations with the UMWA, we incurred minimal spend on the development of Blue Creek in 2021.

We have delayed the development of the Blue Creek project, while we focus on preserving cash and liquidity.

During the UMWA strike, the Company continues to successfully execute its business continuity plans, allowing it to meet the needs of its valued customers.

Despite incurring costs associated with the strike, the Company has been able to manage its working capital and spending to deliver strong results in the current markets.

inflation hit its fastest pace in nearly four decades in 2021 as pandemic related supply and demand imbalances, along with stimulus intended to shore up the economy, pushed the consumer price index up to a 7% annual rate.

We expect COVID-19 to continue to impact global supply markets and supply chains, resulting in shortages, extended lead times and increased inflation impacting our operations and profitability.

We are applying a number of different strategies to mitigate the impact of these challenges on our operations, including placing purchase orders earlier, utilizing short term contracts and leveraging our supplier relationships.

While inflation did not have a significant impact to our profitability in 2021, we do expect ongoing inflation to have a larger impact in 2022.

In 2022, we expect inflation to have a larger negative impact on our profitability, as we expect increases in steel prices, freight rates, labor and other materials and supplies.

These increases affect, among others, the costs of belt structure, roof bolts, cable, magnetite, rock dust and machinery and equipment purchases.

The Company believes that it is well positioned to fulfill anticipated customer volume commitments for 2022.

In the current operating environment and without a new labor contract, the Company believes that production and sales volume for 2022 could be between 5.5 million and 6.5 million short tons.

These volumes include the assumed restart of Mine 4 and continued lower production at Mine 7.

While the Company has business continuity plans in place, the strike and COVID-19 may still cause disruption to production and shipment activities, and the plans may vary significantly from quarter to quarter for the full year of 2022.

Similarly, with a new contract, Warrior believes that production and sales volume over a twelve-month period could ramp up to a run rate of approximately 7.5 million short tons within three to four months.

Critical Accounting Policies and Estimates

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Coal Reserves

There are numerous uncertainties inherent in estimating quantities and values of economically recoverable coal reserves, including many factors that are beyond our control.

As a result, estimates of economically recoverable coal reserves are by their nature uncertain.

Information about our reserves consists of estimates based on engineering, economic and geological data assembled by our internal engineers and geologists or third-party consultants.

A number of sources of information are used to determine accurate recoverable reserve estimates including:

Our mineral reserves and resources estimates are calculated in accordance with subpart 1300 of Regulation S-K under the Modernization of Property Disclosures for Mining Registrants of the Securities Exchange Act of 1934, as amended (the "Exchange Act").

Our mineral reserves and resources are updated on an annual basis.

There are numerous uncertainties inherent in estimating quantities and values of mineral reserves and resources, including many factors that are beyond our control.

As a result, estimates of mineral reserves and resources are by their nature uncertain.

Information about our reserves and resources consists of estimates based on engineering, economic and geological data assembled by our internal engineers and geologists or third-party consultants.

A number of sources of information are used to determine accurate recoverable reserve and resource estimates including:

• geological conditions;

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• future operating costs.

Some of the factors and assumptions, which will change from time to time, that impact economically recoverable reserve estimates include, among other factors:

Some of the factors and assumptions, which will change from time to time, that impact mineral reserve and resource estimates include, among other factors:

• mining activities;

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• modification of mining plans or mining methods.

Each of these factors may vary considerably from the assumptions used in estimating reserves.

For these reasons, estimates of economically recoverable quantities of coal attributable to a particular group of properties, and classifications of

these reserves based on risk of recovery and estimates of future net cash flows, may vary substantially.

Actual production, revenues and expenditures with respect to reserves will likely vary from estimates and these variances may be material.

Variances could affect our projected future revenues and expenditures, as well as the valuation of coal reserves and depletion rates.

As of December 31, 2020, we had 210.4 million metric tons of proven and probable coal reserves.

Each of these factors may vary considerably from the assumptions used in estimating reserves and resources.

For these reasons, estimates of economically recoverable quantities of coal attributable to a particular group of properties, and classifications of these reserves and resources based on risk of recovery and estimates of future net cash flows, may vary substantially.

Actual production, revenues and expenditures with respect to reserves and resources will likely vary from estimates and these variances may be material.

Variances could affect our projected future revenues and expenditures, as well as the valuation of coal reserves, resources and depletion rates.

As of December 31, 2021, we had estimated reserves totaling 162.8 million metric tons and estimated mineral resources exclusive of reserves of 44.9 million metric tons

Asset Retirement Obligations

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If our assumptions differ from actual experience, or if changes in the regulatory environment occur, our actual cash expenditures and costs that we incur could be materially different than currently estimated.

At December 31, 2020, we had recorded asset retirement obligation liabilities of $61.9 million, including $4.4 million reported as current.

As a result of the acquisition of certain assets of Walter Energy, we have significant federal and state NOLs of approximately $920.7 million and $995.8 million, respectively, as of December 31, 2020.

At December 31, 2021, we had recorded asset retirement obligation liabilities of $70.7 million, including $5.1 million reported as a current liability.

As a result of the acquisition of certain assets of Walter Energy, we have significant federal and state NOLs.

The Company has federal NOL carryforwards of approximately $722.3 million as of December 31, 2021, of which $31.0 million are indefinite lived and the remainder expire predominantly in December 31, 2034 through December 31, 2036.

The Company has state NOL carryforwards of approximately $992.6 million, which expire predominantly in December 31, 2029 through December 31, 2031.

In addition, the Company has approximately $23.3 million of general business credits which begin to expire in December 31, 2027 and fully expire in December 31, 2041

We believe the utilization of these NOLs, subject to certain limitations, will significantly reduce the amount of federal and state income taxes payable by us for the foreseeable future as compared to what we would have had to pay at the statutory rates without these NOL benefits.

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In our evaluation of the need for a valuation allowance on our deferred tax assets, we consider, among other things, all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, the overall business environment, our historical financial results, our industry's historically cyclical financial results, our cumulative three-year income or loss position and potential current and future tax planning strategies.

At December 31, 2017, the Company had a valuation allowance established against its deferred income tax assets, which represented a full valuation allowance against its net deferred income tax assets.

As of December 31, 2018, after considering all relevant factors, the Company concluded that its deferred income tax assets were more likely than not to be

realized and released its valuation allowance against its net deferred income tax assets resulting in a $225.8 million income tax benefit.

As of December 31, 2020, the Company considered all positive and negative evidence and concluded that our deferred income tax assets remain more likely than not to be realized and a valuation allowance was not required.

Certain factors, could change or circumstances could arise that could further limit or eliminate the amount of the available NOLs to the Company, such as an ownership change or an adjustment by a tax authority.

Also, certain circumstances, such as the COVID-19 pandemic and the unknown duration and overall impact on our operations, including our failing to generate sufficient future taxable income from operations, could limit our ability to fully utilize our deferred tax assets before expiration.

At December 31, 2017, we had a valuation allowance established against our deferred income tax assets, which represented a full valuation allowance against our net deferred income tax assets.

As of December 31, 2018, after considering all relevant factors, we concluded that our deferred income tax assets were more likely than not to be realized and released our valuation allowance against our net deferred income tax assets resulting in a $225.8 million income tax benefit.

On February 12, 2021, the Alabama Governor signed into law Alabama House Bill 170, now Act 2021-1 (the "Act").

The Act makes several changes to the state’s business tax structure.

Among the provisions of the Act, is the repeal of the so-called corporate income tax “throwback rule.” That rule required all sales originating in Alabama and delivered to a jurisdiction where the seller was not subject to tax, to be included in the seller’s Alabama income tax base.

Thus, prior to repeal of the throwback rule, we had to rely on its Alabama NOL carryforwards to shelter taxes imposed under such throwback rule.

As a result of the now repealed throwback rule, effective January 1, 2021, all such sales should now be excluded from Alabama taxable income without the need to utilize Alabama NOLs.

As a result of the repeal of the throwback rule, we remeasured our Alabama deferred income tax assets and liabilities and recorded a non-cash income tax benefit of $22.4 million.

Additionally, we determined that it is not more likely than not that we would have sufficient taxable income to utilize all of our Alabama deferred income tax assets prior to expiration.

Therefore, we established a non-cash valuation allowance of $46.0 million against such deferred income tax assets.

As of December 31, 2021, we considered all positive and negative evidence and concluded that our federal deferred income tax assets remain more likely than not to be realized and a valuation allowance was not required.

Certain factors, could change or circumstances could arise that could further limit or eliminate the amount of the available NOLs to us, such as an ownership change or an adjustment by a tax authority.

Also, certain circumstances, such as the COVID-19 pandemic, the Chinese ban on Australian coal, the ongoing UMWA strike and the unknown duration and overall impact on our operations,

including our failing to generate sufficient future taxable income from operations, could limit our ability to fully utilize our deferred tax assets before expiration.

Recently Adopted Accounting Standards

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis