What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2022-02-22 compared with 2021-02-24 · 257 added, 333 removed, 894 unchanged (40% of the section changed)

12 unchanged sentences

Our management has concluded that, as of December 31, 2021, our internal control over financial reporting is effective based on this assessment and these criteria.

Our independent registered public accounting firm, Ernst & Young LLP, has audited the effectiveness of our internal control over financial reporting, as stated in their attestation report included in this Annual Report on Form 10-K.

Our independent registered public accounting firm, Ernst & Young LLP (PCAOB ID:

00 42 ), has audited the effectiveness of our internal control over financial reporting, as stated in their attestation report included in this Annual Report on Form 10-K.

Changes in Internal Control over Financial Reporting

29 unchanged sentences

333-217389) filed with the Commission on April 19, 2017).

Certificate of Amendment of the Certificate of Incorporation of Warrior Met Coal, Inc.

(incorporated by reference to Exhibit 3.1 to the Registrant's Current Report on Form 8-K (File No.

001-38061) filed with the Commission on March 20, 2020).

Bylaws of Warrior Met Coal, Inc.

3 unchanged sentences

001-38061) filed with the Commission on February 14, 2020).

Indenture, dated as of November 2, 2017, by and among Warrior Met Coal, Inc., the Subsidiary Guarantors party thereto from time to time and Wilmington Trust, National Association, as trustee and as priority lien collateral trustee (incorporated by reference to Exhibit 4.1 to the Registrant's Current Report on Form 8-K (File No.

001-38061) filed with the Commission on November 6, 2017).

First Supplemental Indenture, dated as of March 1, 2018, among Warrior Met Coal, Inc., the Subsidiary Guarantors party thereto and Wilmington Trust, National Association, as trustee and as priority lien collateral trustee (incorporated by reference to Exhibit 4.1 to the Registrant's Current Report on Form 8-K (File No.

001-38061) filed with the Commission on March 6, 2018).

Second Supplemental Indenture, dated as of March 2, 2018, among Warrior Met Coal, Inc.

and Wilmington Trust, National Association, as trustee and as priority lien collateral trustee (incorporated by reference to Exhibit 4.2 to the Registrant's Current Report on Form 8-K (File No.

001-38061) filed with the Commission on March 6, 2018).

Indenture, dated as of December 6, 2021, by and among Warrior Met Coal, Inc.

the Subsidiary Guarantors party thereto from time to time and Wilmington Trust, National Association, as trustee and as priority lien collateral trustee (incorporated by reference to Exhibit 4.1 to the Registrant's Current Report on Form 8-K (File No.

001-38061) filed with the Commission on December 7, 2021).

Specimen Certificate for shares of common stock, par value $0.01 per share, of the Company (incorporated by reference to Exhibit 4.1 to the Registrant's Amendment No.

4 unchanged sentences

001-38061) filed with the Commission on February 14, 2020)).

Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934.

Amended and Restated Asset-Based Revolving Credit Agreement, dated as of October 15, 2018, among Warrior Met Coal, Inc.

and certain of its subsidiaries, as borrowers, the guarantors party thereto, Citibank, N.A., as administrative agent and collateral agent, each lender and letter of credit issuer party thereto and Citigroup Global Markets Inc.

and Credit Suisse Securities (USA) LLC as joint lead arrangers and joint book runners (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K (File No.

001-38061) filed with the Commission on October 16, 2018).

Intercreditor Agreement, dated as of November 2, 2017, among Citibank, N.A., initial ABL agent, Wilmington Trust National Association, as trustee and initial term agent, and each additional term debt agent from time to time party thereto (incorporated by reference to Exhibit 10.6 to the Registrant's Annual Report on Form 10-K (File No.

Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 (incorporated by reference to Exhibit 4.6 to the Registrant’s Annual Report on Form 10-K (File No.

001-38061) filed with the Commission on February 19, 2020).

Second Amended and Restated Asset-Based Revolving Credit Agreement, dated as of December 6, 2021, by and among Warrior Met Coal, Inc.

and certain of its subsidiaries, as borrower, the guarantors party thereto, the lenders party thereto and Citibank, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K (File No.

001-38061) filed with the Commission on December 7, 2021).

Intercreditor Agreement, dated as of December 6, 2021, among Citibank, N.A., initial ABL agent, Wilmington Trust, National Association, initial term agent and initial term representative, and each additional term agent and additional term representative from time to time party thereto.

Registration Rights Agreement, dated as of April 19, 2017, among Warrior Met Coal, Inc.

27 unchanged sentences

001-38061) filed with the Commission on April 29, 2020.)

Employment Agreement, dated June 5, 2019, by Warrior Met Coal, Inc.

and Phillip C.

Monroe (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K (File No.

001-38061) filed with the Commission on June 6, 2019).

Form of Warrior Met Coal, Inc.

25 unchanged sentences

333-216499) filed with the Commission on April 10, 2017).

Restricted Unit Award Agreement, dated April 19, 2017, by and between Warrior Met Coal, Inc.

Restricted Stock Unit Award Agreement, dated April 19, 2017, by and between Warrior Met Coal, Inc.

and Stephen D.

1 unchanged sentence

001-38061) filed with the commission on February 21, 2019).

Form of Restricted Unit Award Agreement (for non-employee directors), dated April 27, 2017 (incorporated by reference to Exhibit 10.24 to the Registrant's Annual Report on Form 10-K (File No.

Form of Restricted Stock Unit Award Agreement (for non-employee directors), dated April 27, 2017 (incorporated by reference to Exhibit 10.24 to the Registrant's Annual Report on Form 10-K (File No.

001-38061) filed with the commission on February 21, 2019).

Form of Restricted Unit Award Agreement (for non-employee directors) (incorporated by reference to Exhibit 10.25 to the Registrant's Annual Report on Form 10-K (File No.

Form of Restricted Stock Unit Award Agreement (for non-employee directors) (incorporated by reference to Exhibit 10.25 to the Registrant's Annual Report on Form 10-K (File No.

001-38061) filed with the commission on February 21, 2019).

Form of Amendment to Restricted Stock Unit Award Agreement (for non-employee directors).

Form of Warrior Met Coal, Inc.

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Consent of Marshall Miller & Associates, Inc.

Consent of Stantec Consulting Services, Inc.

Consent of McGehee Engineering Corp.

4 unchanged sentences

Mine Safety Disclosures Pursuant to Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K (17 CFR 299.104)

Technical Report Summary for Mine No.

7 - S-K 1300 Report

Technical Report Summary for Mine No.

4 - S-K 1300 Report

Technical Report Summary for Blue Creek - S-K 1300 Report

101INS* XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

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Director February 22, 2022

/s/ Gareth Turner

Gareth Turner

Director February 24, 2021

INDEX TO FINANCIAL STATEMENTS

5 unchanged sentences

Notes to Financial Statements F- 10

Supplemental Summary Quarterly Financial Information (Unaudited) F- 35

Report of Independent Registered Public Accounting Firm

21 unchanged sentences

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.

Asset Retirement Obligation

Asset Retirement Obligations

Description of the Matter At December 31, 2021, the Company had recorded asset retirement obligations of approximately $70.7 million for the estimated costs to reclaim surface lands and supporting infrastructure in accordance with applicable reclamation laws in the United States as defined by each mining permit.

1 unchanged sentence

The calculation of reclamation obligations requires significant judgment due to the inherent complexity in estimating the amount and timing of future costs and determining an appropriate rate to discount these costs back to their present value.

Auditing the Company's asset retirement obligation involved a high degree of subjectivity as estimates underlying the determination of the obligation were based on assumptions unique to mining operations and subject to various laws and regulations governing the protection of the applicable environment, including estimates of disturbed acreage as determined from engineering data, estimates of future costs to reclaim the disturbed acreage and the timing and amount of related cash flows, which are discounted using a credit-adjusted, risk-free rate.

Auditing the Company's asset retirement obligations involved a high degree of subjectivity as estimates underlying the determination of the obligation were based on assumptions unique to mining operations and subject to various laws and regulations governing the protection of the applicable environment, including estimates of disturbed acreage as determined from engineering data, estimates of future costs to reclaim the disturbed acreage and the timing and amount of related cash flows, which are discounted using a credit-adjusted, risk-free rate.

Actual costs incurred in future periods could differ from amounts estimated and future changes to environmental laws and regulations could increase the extent of reclamation work required.

2 unchanged sentences

To test the asset retirement obligations, our audit procedures included, among others, involving our specialist to assist us in evaluating the Company’s reclamation cost estimates, including estimates of disturbed acreage, the scope of estimated reclamation activities against regulatory requirements, the associated future reclamation costs, and the timing of related cash flows, and the Company's reclamation methodology against industry practice.

We also evaluated management’s methodology for determining the credit adjusted risk-free rate used to discount the asset retirement obligation.

We also evaluated management’s methodology for determining the credit adjusted risk-free rate used to discount the asset retirement obligations.

/s/ Ernst & Young LLP

37 unchanged sentences

Other receivables 7,991 5,142

Income tax receivable — 12,925

Inventories, net 59,619 118,713

3 unchanged sentences

Property, plant and equipment, net 603,412 637,108

Non-current income tax receivable — 11,349

Deferred income taxes 125,276 174,372

38 unchanged sentences

Selling, general and administrative 35,593 32,879 37,014

Transaction and other costs — — 9,068

Business interruption 21,372 — —

Idle mine 33,899 — —

Total costs and expenses 815,463 809,877 884,917

Operating (loss) income ( 27,139 ) 383,392 508,287

Operating income (loss) 243,753 ( 27,139 ) 383,392

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

1 unchanged sentence

Other income 1,291 3,544 22,815

(Loss) income before income taxes ( 55,905 ) 367,116 470,973

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

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

Basic and diluted net (loss) income per share:

Net (loss) income per share—basic $ ( 0.70 ) $ 5.87 $ 13.19

Net (loss) income per share—diluted $ ( 0.70 ) $ 5.86 $ 13.17

Income (loss) before income taxes 199,977 ( 55,905 ) 367,116

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

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

Basic and diluted net income (loss) per share:

Net income (loss) per share—basic $ 2.94 $ ( 0.70 ) $ 5.87

Net income (loss) per share—diluted $ 2.93 $ ( 0.70 ) $ 5.86

Weighted average number of shares outstanding—basic 51,382 51,168 51,363

16 unchanged sentences

Balance at December 31, 2019 $ 533 $ — $ ( 50,576 ) $ 243,932 $ 571,693 $ 765,582

Net income — — — — 301,699 301,699

Net loss — — — — ( 35,761 ) ( 35,761 )

Dividends paid ($ 0.20 per share)

4 unchanged sentences

Balance at December 31, 2020 $ 534 $ — $ ( 50,576 ) $ 249,746 $ 525,537 $ 725,241

Net loss — — — — ( 35,761 ) ( 35,761 )

Net income — — — — 150,881 150,881

Dividends paid ($ 0.20 per share)

10 unchanged sentences

OPERATING ACTIVITIES

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

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

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

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

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

Deferred income tax (benefit) expense ( 20,075 ) 68,483 ( 223,038 )

Deferred income tax expense (benefit) 49,096 ( 20,075 ) 68,483

Stock-based compensation expense 9,370 7,602 5,820

Mark-to-market loss on gas hedges 1,595 — —

Amortization of debt issuance costs and debt discount, net 1,741 1,546 1,361

9 unchanged sentences

Accrued expenses and other current liabilities ( 16,444 ) ( 3,936 ) ( 17,317 )

Non-current income tax receivable — — 17,945

Other 5,724 19,558 26,068

18 unchanged sentences

Other ( 3,042 ) ( 1,272 ) ( 1,138 )

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

Net increase (decrease) in cash and cash equivalents and restricted cash 18,533 ( 13,022 ) 170,141

Cash and cash equivalents and restricted cash at beginning of period 193,383 206,405 36,264

Cash and cash equivalents and restricted cash at end of period $ 211,916 $ 193,383 $ 206,405

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

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

Cash and cash equivalents at beginning of period 211,916 193,383 206,405

Cash and cash equivalents at end of period $ 395,839 $ 211,916 $ 193,383

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

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Warrior Met Coal, Inc.

(the "Company") is a U.S.-based, environmentally and socially minded supplier to the global steel industry.

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

The Company is dedicated entirely to mining non-thermal metallurgical (met) coal used as a critical component of steel production by metal manufacturers in Europe, South America and Asia.

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All significant intercompany transactions and balances have been eliminated in consolidation.

Impact of the COVID-19 Pandemic Upon our Financial Condition and Results of Operations

The global steelmaking industry's demand for met coal is 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.

Impact of the COVID-19 Pandemic on the Company's Financial Condition and Results of Operations

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.

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.

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.

The Company operates in a critical infrastructure industry, as defined by the U.S.

Department of Homeland Security.

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

In response to these measures and for the protection of employees, the Company has taken steps to ensure our employees remain safe.

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

The progression of COVID-19 could also negatively impact our business or results of operations through the temporary closure of one of our mines, customers or critical suppliers, or the McDuffie Coal Terminal at the Port of Mobile in Alabama, or a disruption to our rail and barge carriers, which would delay or prevent deliveries to our customers, among others.

In addition, the ability of our employees and our suppliers' and customers' employees to work may be significantly impacted by individuals contracting or being exposed to COVID-19, or as a result of the control measures noted above, which may significantly affect the demand for met coal.

Our customers may be directly impacted by business curtailments or weak market conditions and may not be willing or able to fulfill their contractual obligations or open letters of credit.

We may also experience delays in obtaining letters of credit or processing letter of credit payments due to the impacts of COVID-19 on foreign issuing and U.S.

intermediary banks.

Furthermore, the progression of, and global response to, the COVID-19 outbreak has begun to cause, and increases the risk of, further delays in construction activities and equipment deliveries related to our capital projects, including potential delays in obtaining permits from government agencies.

The extent of such delays and other

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.

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

The Company expected these and other impacts to continue and they could worsen, depending on the future course of the pandemic and actions taken in connection with it.

The Company continues to closely monitor and address the pandemic and related developments, including the impact on the Company, its employees, its customers, its suppliers and its 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 its customers, among others.

The Company has taken, and continues to take, robust actions to help protect the health, safety and well-being of its employees, to support continued performance, to support its suppliers and local communities, and to continue to serve its customers.

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

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 the Company's customers, which are primarily located in Europe, South America and Asia.

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

The progression of COVID-19 could also negatively impact the Company's business or results of operations through the temporary closure of one of its mines, customers or critical suppliers, or the McDuffie Coal Terminal at

WARRIOR MET COAL, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

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.

the Port of Mobile in Alabama, or a disruption to the Company's rail and barge carriers, which would delay or prevent deliveries to its customers, among others.

In addition, the ability of the Company's employees and its suppliers' and customers' employees to work may be significantly impacted by individuals contracting or being exposed to COVID-19, or as a result of the control measures noted above, which may significantly affect the demand for met coal.

The Company's customers may be directly impacted by business curtailments or weak market conditions and may not be willing or able to fulfill their contractual obligations or open letters of credit.

The Company may also experience delays in obtaining letters of credit or processing letter of credit payments due to the impacts of COVID-19 on foreign issuing and U.S.

intermediary banks.

Furthermore, the progression of, and global response to, the COVID-19 outbreak has begun to cause, and increases the risk of, further delays in construction activities and equipment deliveries related to the Company's capital projects, including potential delays in obtaining permits from government agencies.

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

Collective Bargaining Agreement

The Company's Collective Bargaining Agreement (“CBA”) contract with the United Mine Workers of America (“UMWA”) expired on April 1, 2021.

While the Company continues to engage in good faith negotiations with the UMWA, the Company has not reached a new contract and the UMWA is engaging in a strike.

As a result of the strike, the Company 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, the Company 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.

The Company has also incurred approximately $ 21.4 million of business interruption expenses for the year ended December 31, 2021, which represent non-recurring expenses that are directly attributable to the ongoing UMWA strike for incremental safety and security, labor negotiations and other expenses.

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

Note 2— Summary of Significant Accounting Policies

6 unchanged sentences

At December 31, 2021 approximately 97.0 % of trade receivables were related to these customers.

For the year ended December 31, 2020, our geographic customer mix was 56 % in Europe, 25 % in South America and 19 % in Asia.

For the year ended December 31, 2021, the Company's geographic customer mix was 52 % in Asia, 39 % in Europe and 9 % in South America.

During the year ended December 31, 2021, Xcoal Energy & Resources and Salzgitter Flachstahl GMBH accounted for $ 526.2 million, or 51.0 % and $ 118.1 million, or 11.4 % of total revenues, respectively.

During the year ended December 31, 2020, Xcoal Energy & Resources, Exiros BV Sucursal Uruguay, and Iskenderun Demir Ve Celik A.S.

1 unchanged sentence

During the year ended December 31, 2019, Xcoal Energy & Resources, Exiros BV Sucursal Uruguay, ArcelorMittal, and Thyssenkrupp Steel Europe AG accounted for $ 276.2 million, or 22.3 %, $ 159.6 million, or 12.9 %, $ 128.2 million, or 10.4 % and $ 125.5 million, or 10.1 % of total revenues, respectively.

During the year ended December 31, 2018, Xcoal Energy & Resources, Exiros BV Sucursal Uruguay and Huettenwerke Krupp Mannesmann GmbH accounted for $ 203.6 million, or 15.1 %, $ 148.5 million, or 11.0 %, and $ 141.3 million, or 10.5 % of total revenues, respectively.

The increase in sales to XCoal during the year ended December 31, 2021 is primarily driven by sales into China.

WARRIOR MET COAL, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

Revenue Recognition

Revenue is recognized when performance obligations under the terms of a contract with our customers are satisfied;

for all contracts this occurs when control of the promised goods have been transferred to our customers.

Revenue is recognized when performance obligations under the terms of a contract with the Company's customers are satisfied;

for all contracts this occurs when control of the promised goods have been transferred to the Company's customers.

For coal shipments to domestic customers via rail, control is transferred when the railcar is loaded.

2 unchanged sentences

Revenue is disaggregated between coal sales within the Company's mining segment and natural gas sales included in all other revenues, as disclosed in Note 21.

Our coal and gas sales generally include up to 45-day payment terms following the transfer of control of the goods to the customer.

We typically do not include extended payment terms in our contracts with customers.

The Company's coal and gas sales generally include up to 45-day payment terms following the transfer of control of the goods to the customer.

The Company typically does not include extended payment terms in its contracts with customers.

Trade Accounts Receivable and Allowance for Credit Losses

6 unchanged sentences

In order to estimate the allowance for credit losses on trade accounts receivable, the Company utilizes an aging approach in which potential impairment is calculated based on how long a receivable has been outstanding (e.g., current, 1-31, 31-60, etc.).

The Company calculates an expected credit loss rate based on the Company’s historical credit loss rate, the risk characteristics of our customers, and the current metallurgical coal and steel market environments.

The Company calculates an expected credit loss rate based on the Company’s historical credit loss rate, the risk characteristics of its customers, and the current metallurgical coal and steel market environments.

As of December 31, 2021, the estimated allowance for credit losses was immaterial and did not have a material impact on the Company's financial statements.

WARRIOR MET COAL, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

Shipping and Handling

7 unchanged sentences

Securities classified as held to maturity securities are those securities that management has the intent and ability to hold to maturity.

As of December 31, 2020 and 2019, the Company’s short-term investments of $ 8.5 million and $ 14.7 million, respectively, consisted of cash and fixed income securities.

As of December 31, 2021 and 2020, the Company’s short-term investments of $ 8.5 million consisted of cash and fixed income securities.

The short-term investments are posted as collateral for the self-insured black lung related claims asserted by or on behalf of former employees of Walter Energy, Inc.

("Walter Energy") and its subsidiaries, which were assumed by the Company and relate to periods prior to March 31, 2016.

WARRIOR MET COAL, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

Inventories are valued at the lower of cost or net realizable value.

15 unchanged sentences

Advance mining royalties are included in other long-term assets.

WARRIOR MET COAL, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

Property, Plant and Equipment

16 unchanged sentences

Lease agreements are generally long-term in nature (original terms range from 10 to 50 years) and substantially all of the leases contain provisions that allow for automatic extension of the lease term provided certain requirements are met.

Depletion expense was $ 9.3 million, $ 9.9 million, and $ 9.6 million for the years ended December 31, 2020, December 31, 2019, and December 31, 2018, respectively, and is included in depreciation and depletion in the accompanying Statements of Operations.

Depletion expense was $ 8.3 million, $ 9.3

WARRIOR MET COAL, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

million, and $ 9.9 million for the years ended December 31, 2021, December 31, 2020, and December 31, 2019, respectively, and is included in depreciation and depletion in the accompanying Statements of Operations.

Asset Retirement Obligations

12 unchanged sentences

For ongoing operations, adjustments to the liability result in an adjustment to the corresponding asset.

For some operations, adjustments to the liability are recognized as income or expense in the period the adjustment is recorded as no asset was recorded to offset the liability established during acquisition accounting related to the acquisition of certain assets of Walter

WARRIOR MET COAL, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

Energy as the operations were idle at that time.

Any difference between the recorded obligation and the actual cost of reclamation is recorded in profit or loss in the period the obligation is settled.

14 unchanged sentences

Compensation expense for equity awards with a service-only condition is recognized over the employee’s requisite service period using a graded vesting method.

For awards with a performance condition that affects vesting, the performance condition is not considered in determining the award’s grant-date fair value;

For awards with a performance condition that affects vesting, the performance

WARRIOR MET COAL, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

condition is not considered in determining the award’s grant-date fair value;

however, the performance conditions are considered when estimating the quantity of awards that are expected to vest.

2 unchanged sentences

Compensation expense for awards with a market condition is recognized straight-line over the derived or implied service period.

Compensation expense for equity awards is included in cost of sales (exclusive of items shown separately below) and selling, general and administrative in the accompanying Statements of Operations.

Compensation expense for equity awards is included in cost of sales (exclusive of items shown separately below) and selling, general and administrative costs in the accompanying Statements of Operations.

Deferred Financing Costs

The costs to obtain new debt financing or amend existing financing agreements are deferred and amortized to interest expense over the life of the related indebtedness or credit facility using the straight-line method.

As of December 31, 2020 and December 31, 2019, there were $ 2.7 million of unamortized origination fees related to the ABL Facility (as defined in Note 13) in other long-term assets on the accompanying Balance Sheet.

As of December 31, 2020 and December 31, 2019 there were $ 3.5 million and $ 4.2 million, respectively, of unamortized deferred financing costs and debt discount, net, related to the Notes (as defined in Note 13), which is presented as a net deduction from the carrying amount of the debt recognized in the accompanying Balance Sheet.

As of December 31, 2021 and December 31, 2020, there were $ 5.0 million and $ 2.7 million of unamortized origination fees related to the ABL Facility (as defined in Note 13) in other long-term assets on the accompanying Balance Sheet.

As of December 31, 2021 and December 31, 2020 there were $ 10.2 million and $ 3.5 million, respectively, of unamortized deferred financing costs and debt discount, net, related to the Notes (as defined in Note 13), which is presented as a net deduction from the carrying amount of the related debt recognized in the accompanying Balance Sheet.

The Company records a tax provision for the expected tax effects of the reported results of operations.

1 unchanged sentence

Deferred income tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in effect for the years in which those tax assets and liabilities are expected to be realized or settled.

The Company records a valuation allowance to reduce deferred income tax assets to the

WARRIOR MET COAL, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

amount that is believed more likely than not to be realized.

The Company records a valuation allowance to reduce deferred income tax assets to the amount that is believed more likely than not to be realized.

When the Company concludes that all or part of the net deferred income tax assets are not realizable in the future, the Company makes an adjustment to the valuation allowance that is charged to earnings in the period that such determination was made.

8 unchanged sentences

Unobservable inputs that are supported by little or no market activity that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

WARRIOR MET COAL, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

The Company determines if an arrangement is a lease at inception.

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New Accounting Pronouncements

The Company adopted Accounting Standards Update ("ASU") 2016-13, "Financial Instruments-Credit Losses (Topic

Measurement of Credit Losses on Financial Instruments" as of January 1, 2020 using the modified retrospective approach.

The ASU requires the use of an “expected loss” model for instruments measured at amortized cost, in which companies will be

required to estimate the lifetime expected credit loss and record an allowance to offset the amortized cost basis, resulting in a

net presentation of the amount expected to be collected on the financial asset.

The adoption of the new standard did not have a

material impact on the Company's financial statements, including accounting policies, processes and systems.

In December 2019, the Financial Accounting Standards Board ("FASB") issued ASU 2019-12, “Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes,” which is intended to simplify various aspects related to accounting for income taxes.

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The ASU is effective for fiscal years beginning after December 15, 2020.

The Company expects to adopt the standard as of January 1, 2021 with no material impact to the Company's results of operations, financial condition, cash flows or financial statement presentation.

WARRIOR MET COAL, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

The Company adopted the standard as of January 1, 2021 with no material impact to the Company's results of operations, financial condition, cash flows or financial statement presentation.

Note 3— Inventories, net

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Prepaid deposits 49 6,937

Current hedge asset 4,043 —

Other 5,821 6,169

Total prepaid expenses and other $ 33,097 $ 39,910

WARRIOR MET COAL, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

Note 5— Mineral Interests and Property, Plant and Equipment, net

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Other long-term assets consisted of the following (in thousands):

WARRIOR MET COAL, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

December 31, 2021 December 31, 2020

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Note 7— Income Taxes

On March 27, 2020, former President Trump signed and enacted into law the Coronavirus Aid, Relief and

Economic Security Act (the "CARES Act").

The CARES Act, among other things, provides temporary relief from certain

aspects of the Tax Cuts and Jobs Act of 2017 that had imposed limitations on the utilization of certain losses, interest expense

deductions and alternative minimum tax ("AMT") credits.

The CARES Act also provides opportunities for businesses to

improve their cash flows by obtaining refunds for prior taxable years and reducing their income and deferring payroll tax

liabilities for the current taxable year.

Specifically, Section 2305 of the CARES Act accelerates the ability to receive refunds of

remaining AMT credits for tax years 2019, 2020 and 2021.

During the third quarter of 2020, the Company received approximately $ 24.3 million for refunds of AMT credits.

As of December 31, 2020, the Company had no current income tax receivable and no non-current income tax receivable for AMT credits.

Income Tax (Benefit) Expense

Income tax (benefit) expense consisted of the following (in thousands):

Income tax expense (benefit) consisted of the following (in thousands):

For the years ended December 31,

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Total $ 49,096 $ ( 20,144 ) $ 65,417

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 %.

WARRIOR MET COAL, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

Total income tax (benefit) expense differs from the expected tax (benefit) expense (computed by multiplying the U.S.

federal statutory rate of 21% by (loss) income before income taxes) as a result of the following (in thousands):

For the year ended December 31, 2021, the Company recognized an income tax expense of $ 49.1 million or an effective tax rate of 24.6 %.

Total income tax expense (benefit) differs from the expected tax expense (benefit) (computed by multiplying the U.S.

federal statutory rate of 21% by income (loss) before income taxes) as a result of the following (in thousands):

For the years ended December 31,

2021 2020 2019

(Loss) income before income tax (benefit) expense $ ( 55,905 ) $ 367,116 $ 470,973

Tax (benefit) expense at statutory tax rate ( 11,740 ) 77,094 98,904

Income (loss) before income tax expense (benefit) $ 199,977 $ ( 55,905 ) $ 367,116

Tax expense (benefit) at statutory tax rate 41,995 ( 11,740 ) 77,094

Depletion ( 12,227 ) ( 1,504 ) ( 16,198 )

Tax Cuts and Jobs Act impact — — ( 2,775 )

State and local income tax, net of federal effect ( 22,387 ) ( 2,637 ) 11,747

Valuation allowance on deferred tax assets 45,952 — —

Non-deductible transaction costs

Impact of Walter Energy IRS Settlement (1)

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Other 465 ( 286 ) ( 611 )

Tax (benefit) expense recognized $ ( 20,144 ) $ 65,417 $ ( 225,814 )

Tax expense (benefit) recognized $ 49,096 $ ( 20,144 ) $ 65,417

(1) In the fourth quarter of 2019, an adjustment of $ 6.6 million was recorded to recognize additional alternative minimum tax credits, general business credits and NOLs available to the Company in connection with a settlement agreement between Walter Energy and the Internal Revenue Service.

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Significant components of the Company's deferred income tax assets and liabilities were (in thousands):

WARRIOR MET COAL, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

December 31, 2021 December 31, 2020

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Total deferred income tax assets 256,329 286,495

valuation allowance for deferred income tax assets ( 45,952 ) —

Net deferred income tax assets 210,377 286,495

Deferred income tax liabilities:

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The Company has federal net operating loss ("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 $ 995.8 million, of which

WARRIOR MET COAL, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

$ 27.8 million are indefinite lived and the remainder expire predominantly in December 31, 2029 through December 31, 2031.

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.

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.

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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.

If the Rights become exercisable, each Right will initially entitle stockholders to buy one one-thousandth of a share of a newly created series of preferred stock designated as “Series A Junior Participating Preferred Stock” at an exercise price of $ 31.00 per Right.

If the Rights become exercisable, each Right will initially entitle stockholders to buy one one-thousandth of a share of a newly created series

WARRIOR MET COAL, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

of preferred stock designated as “Series A Junior Participating Preferred Stock” at an exercise price of $ 31.00 per Right.

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.

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The distribution of the Rights is not a taxable event for stockholders of the Company and will not affect the Company’s’ financial condition or results of operations (including earnings per share).

The Rights will expire on the earliest of (i) the close of business on February 14, 2023,(ii) the close of business on the first anniversary of the date of entry into the Rights Agreement, if stockholder approval of the Rights Agreement has not been received by or on such date, (iii) the time at which the Rights are redeemed as provided in the Rights Agreement, (iv) the time at which the Rights are exchanged as provided in the Rights Agreement, (v) the time at which the Board determines that the NOLs are fully utilized or no longer available under Section 382 of the Code, (vi) the effective date of the repeal of Section 382 of the Code if the Board determines that the Rights Agreement is no longer necessary or desirable for the preservation of NOLs,

WARRIOR MET COAL, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

or (vii) the closing of any merger or other acquisition transaction involving the Company pursuant to an agreement of the type described in the Rights Agreement.

Valuation Allowance

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The Company considers, among other things, all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, the overall business environment, its historical financial results, the industry's historically cyclical financial results, its 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.

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, the Company 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, the Company remeasured its Alabama deferred income tax assets and liabilities and recorded a non-cash income tax benefit of $ 22.4 million.

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

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

As of December 31, 2021, the Company considered all positive and negative evidence and concluded that its 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 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.

The following table shows the balance of our valuation allowance and the associated activity during 2018:

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 the Company's operations, including its failing to generate sufficient future taxable income from operations, could limit its ability to fully utilize its deferred tax assets before expiration.

The following table shows the balance of the Company's valuation allowance and the associated activity during 2021:

WARRIOR MET COAL, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

December 31, 2021

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Addition/(Reduction) - current tax expense/(benefit) 45,952

Release $ ( 225,814 )

Ending balance $ 45,952

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Changes in the asset retirement obligations (“ARO”) were as follows (in thousands):

WARRIOR MET COAL, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

December 31, 2021 December 31, 2020

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At December 31, 2021, the Company had outstanding surety bonds and letters of credit with parties for post-mining reclamation at all of its mining operations totaling $ 40.9 million, and $ 3.6 million for miscellaneous purposes.

For the year ended December 31, 2020 and December 31, 2019, the change to the liability was primarily attributable to the net impact of changes in discount rates and current estimates of the costs and scope of remaining reclamation work.

For the year ended December 31, 2021 and December 31, 2020, the change to the liability was primarily attributable to the net impact of changes in discount rates, changes in the timing of scheduled reclamation and current estimates of the costs and scope of remaining reclamation work.

For the years ended December 31, 2021 and December 31, 2020, $ 0.2 million or $ 0.004 per share and $ 0.4 million or $ 0.01 per share, respectively, of the adjustment to the liability was reflected as income in the period because there was no asset recorded to offset the adjustment to the respective liability.

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Accrued expenses consisted of the following (in thousands):

WARRIOR MET COAL, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

December 31, 2021 December 31, 2020

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subsidiaries incurred prior to March 31, 2016, for which the Company is self-insured.

Due to a limited operating history as a stand-alone company and as a result of being self-insured for these historical black lung claims, the Department of Labor required the Company to post $ 17.0 million in the form of Treasury bills or surety bonds as collateral, in addition to maintaining a black lung trust acquired in the Walter Energy acquisition.

We received a letter from the Department of Labor on February 21, 2020 under its new process for self-insurance renewals that would require us to increase

WARRIOR MET COAL, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

the amount of collateral posted to $ 39.8 million, but we have appealed such increase.

As of December 31, 2020, the Company had $ 17.0 million of surety bonds and $ 8.5 million of collateral recognized as short term investments.

As of December 31, 2019, the Company had $ 17.0 million of surety bonds and $ 14.5 million of collateral recognized as short term investments.

Due to a limited operating history as a stand-alone company and as a result of being self-insured for these historical black lung claims, the Department of Labor ("DOL") required the Company to post $ 17.0 million in the form of Treasury bills or surety bonds as collateral, in addition to maintaining a black lung trust acquired in the Walter Energy acquisition.

The Company received a letter from the DOL on February 21, 2020 under its new process for self-insurance renewals that would require it to increase the amount of collateral posted to $ 39.8 million, but the Company has appealed such increase.

The Company received another letter from the DOL on December 8, 2021 requesting additional information to support its appeal of the collateral requested by the DOL.

As of December 31, 2021 and December 31, 2020, the Company had $ 17.0 million of surety bonds and $ 8.5 million of collateral recognized as short term investments.

There were also $ 2.6 million and $ 3.0 million of assets held in a black lung trust, which is offset against the long-term portion of the black lung obligations within the Balance Sheet as of December 31, 2021 and December 31, 2020, respectively.

The estimated total black lung liabilities (net of black lung trust assets) were $ 36.9 million as of December 31, 2020, of which $ 2.4 million is classified in other current liabilities and the remainder of $ 34.6 million is shown as a long-term liability in a separate line item in the Consolidated Balance Sheet.

For the year ended December 31, 2019, the estimated black lung liabilities (net of the black lung trust assets) were $ 32.5 million, of which $ 2.3 million is classified in other current liabilities and $ 30.2 million is displayed as a long-term liability in a separate line item in the Balance Sheet.

The estimated total black lung liabilities (net of black lung trust assets) were $ 37.1 million as of December 31, 2021, of which $ 2.6 million is classified in other current liabilities and the remainder of $ 34.5 million is shown as a long-term liability in a separate line item in the Balance Sheets.

For the year ended December 31, 2020, the estimated black lung liabilities (net of the black lung trust assets) were $ 36.9 million, of which $ 2.4 million is classified in other current liabilities and $ 34.6 million is displayed as a long-term liability in a separate line item in the Balance Sheets.

Accretion of the black lung liabilities is included in cost of other revenues on the Statements of Operations.

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Defined Contribution Plans

The Company sponsors a defined contribution plan to assist its eligible employees in providing for retirements.

The Company sponsors a defined contribution plan to assist its eligible employees in providing for retirement.

Generally, under the terms of the plan, employees make voluntary contributions through payroll deductions and the Company makes matching contributions, as defined by the plan.

Contributions to these defined contribution plans amounted to $ 3.0 million for the year ended December 31, 2020, $ 2.9 million for the year ended December 31, 2019 and $ 3.1 million for the year ended December 31, 2018 accounted for in cost of sales and selling, general and administrative costs.

Contributions to these defined contribution plans amounted to $ 2.5 million for the year ended December 31, 2021, $ 3.0 million for the year ended December 31, 2020 and $ 2.9 million for the year ended December 31, 2019 accounted for in cost of sales and selling, general and administrative costs in the Statements of Operations.

Collective Bargaining Agreement

In connection with the acquisition of certain assets of Walter Energy, the Company negotiated a new initial collective bargaining agreement (“CBA”) with the United Mine Workers of America ("UMWA") (the “UMWA CBA”), which was ratified by UMWA’s members on February 16, 2016 and expires on March 31, 2021.

Approximately 67.2 % and 68.2 % of the Company's employees were represented by the UMWA as of December 31, 2020 and December 31, 2019, respectively.

Note 12— Equity Award Plans

Warrior Met Coal, LLC 2016 Equity Incentive Plan

The Company adopted the Warrior Met Coal, LLC 2016 Equity Incentive Plan (the “2016 Equity Plan”).

Under the 2016 Equity Plan, employees, directors and officers of the Company were granted equity interests in Warrior Met Coal, LLC in the form of restricted shares and phantom shares.

The restricted shares have certain service-based, performance-based and market-based vesting conditions, including the occurrence of an initial public offering or a change in control as set forth in the 2016 Equity Plan and the applicable award agreements.

As of December 31, 2020, 805,083 shares were issued, of which, approximately 30,199 have been forfeited, 722,663 have vested and 52,221 remain unvested.

Upon effectiveness of the 2017 Equity Plan (defined below), no further awards were granted under the 2016 Equity Plan.

Restricted shares were issued proportionally as Tranche A, Tranche B and Tranche C shares.

Tranche B and C shares fully vested in 2017.

As of December 31, 2020, 268,352 Tranche A shares were issued, of which, approximately 25,551 have been forfeited, 190,580 have vested and 52,221 remain unvested.

The Tranche A shares have service and performance based vesting conditions and the awards vest in equal installments on each of the first five anniversaries of the grant date that occurs prior to an IPO and thereafter, subject to the employee’s continued employment or the director’s continued service with the Company.

Vesting is conditioned and contingent upon at least 50 % of the shares originally acquired in the acquisition of certain assets of Walter Energy having been disposed of to an independent third party, whether before or after an IPO.

In the event of a change in control, any Tranche A shares that have not previously vested shall become fully vested at the time of such change in control, subject to the employee’s continued employment or the director's continued service with the Company through the change in

The Company's CBA contract with the UMWA expired on April 1, 2021.

While the Company continues to engage in good faith negotiations with the UMWA, the Company has not reached a new contract and the UMWA is engaging in a strike.

WARRIOR MET COAL, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

control date.

During the second quarter of 2018, certain stockholders of the Company sold in two separate transactions an aggregate of 13,000,000 shares of the Company's common stock in public secondary offerings (see Note 17).

In connection with the first of these secondary offerings, the performance based vesting condition was met resulting in approximately $ 3.6 million of incremental stock compensation expense in 2018.

The remaining awards shall vest over the remaining time based vesting conditions.

The Company recognized stock compensation expense of $ 0.3 million for the year ended December 31, 2020 associated with the Tranche A shares.

As of December 31, 2020, unrecognized compensation expense related to the 2016 Equity Plan amounted to approximately $ 0.1 million.

Holders of phantom shares have the right to receive shares of the Company on the earlier of (i) a change in control as defined by the 2016 Equity Plan or (ii) the fifth anniversary of the grant date of the phantom share.

The phantom shares are settled in the Company’s shares.

As of December 31, 2020, there were 43,580 phantom shares issued to a director of the Company, all of which were fully vested upon issuance.

As a result of the strike, the Company idled Mine No.

4 and scaled back operations at Mine No.

Approximately 67.2 % of the Company's employees were represented by the UMWA as of December 31, 2020.

Note 12— Equity Award Plans

Warrior Met Coal, Inc.

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2017 Equity Incentive Plan (the “2017 Equity Plan”).

Awards previously issued and outstanding under the 2016 Equity Plan will continue to be governed by the 2016 Equity Plan.

However, no further awards will be granted under the 2016 Equity Plan.

Under the 2017 Equity Plan, directors, officers, employees, consultants and advisors and those of affiliated companies, as well as those who have accepted offers of employment or consultancy from the Company or the Company’s affiliated companies, may be granted equity interest in Warrior Met Coal, Inc.

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Unrecognized compensation expense related to the 2017 Equity Plan amounted to approximately $ 1.6 million as of December 31, 2021.

During the second quarter of 2021, certain employees and directors reached retirement eligibility which resulted in incremental stock compensation expense of $ 1.2 million as of December 31, 2021 that would have otherwise been recorded in future years.

This amount is included in selling, general and administrative expenses within the Condensed Statements of Operations.

A summary of activity related to restricted stock unit award grants under the 2017 Equity Incentive Plan during the year ended December 31, 2021 is as follows:

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Outstanding at December 31, 2021 828,402

WARRIOR MET COAL, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

Note 13— Debt

Debt consisted of the following (in thousands):

WARRIOR MET COAL, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

December 31, 2021 December 31, 2020 Weighted Average Interest Rate at December 31, 2021 Final Maturity

Senior secured notes $ 343,435 $ 343,435 8 % 2024

ABL facility 40,000 — 4 % 2023

7.875 % senior secured notes due 2028

$ 350,000 $ — 7.875 % 2028

8 % senior secured notes due 2024

— $ 343,435 8 % 2024

ABL facility — 40,000 Varies 1

Debt discount, net ( 10,194 ) ( 3,527 )

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Total long-term debt $ 339,806 $ 379,908

1 Borrowing under the ABL Facility bear interest at a rate equal to Secured Overnight Financing Rate, plus a credit adjustment spread, ranging currently from 0.11448 % to 0.26161 %, 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 1.5 % and 2.0 % or 0.5 % to 1.0 %, respectively.

The Company's minimum debt repayment schedule, excluding interest, as of December 31, 2021 is as follows (in thousands):

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Total $ — $ — $ — $ — $ — $ 350,000

On October 15, 2018, the Company entered into an Amended and Restated Asset-Based Revolving Credit Agreement, by and among the Company and certain of its subsidiaries, as borrowers, the guarantors party thereto, the lenders from time to time party thereto and Citibank, N.A, as administrative agent and collateral agent (in such capacities, 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, (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, and (iv) amended certain covenants and other terms and provisions.

On December 19, 2019, the Company 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 (as defined below), solely for purposes of incurring unsecured debt based upon the Fixed Charge Coverage Ratio and added customary language in connections 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.

On December 6, 2021, the Company entered into the Second Amended and Restated Asset-Based Revolving Credit Agreement (the “Second Amended and Restated Credit Agreement”), by and among the Company 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 a London Inter-Bank Offered Rate to be based on a Secured Overnight Financing Rate, 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 governing the Notes.

The Second Amended and Restated Credit Agreement also allows the Company 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 and up to $ 65.0 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 an aggregate principal amount of $ 40.0 million drawn under the ABL Facility and there were $ 9.4 million of letters of credit issued and outstanding under the ABL Facility.

The ABL Facility will mature on December 6, 2026.

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.

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

(i) requirements to deliver financial statements, other reports and notices;

(ii) restrictions on the existence or incurrence

Subject to permitted exceptions, the obligations of the borrowers under the ABL Facility are guaranteed by each of the Company's 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 the

WARRIOR MET COAL, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

of certain indebtedness;

Company 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 the Company and the guarantors.

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

(i) requirements to deliver financial statements, other reports and notices;

(ii) restrictions on the existence or incurrence of certain indebtedness;

(iii) restrictions on the existence or incurrence of certain liens;

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Senior Secured Notes

On November 2, 2017, the Company 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, the Company 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 (the "November Special Dividend").

On March 1, 2018, the Company 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 at 103.00 % 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 "April Special Dividend").

In connection with the issuance of the New Notes, the Company incurred transaction costs of $ 6.4 million for the year ended December 31, 2018, which consists of legal fees and structuring fees, and is included in transaction and other expenses in the Statements of Operations.

In addition, the Company incurred debt issuance costs of approximately $ 3.7 million, which consists of consent solicitation fees paid to holders of the Existing Notes (as defined below), and is included in long-term debt in the Balance Sheet.

The New Notes and the $ 350.0 million in aggregate principal amount of the Company’s existing 8.00 % Senior Secured Notes due 2024 (the “Existing Notes” and, together with the New Notes, the "Notes"), rank pari passu in right of payment and constitute a single class of securities for all purposes under the Indenture, including, without limitation, waivers, amendments, redemptions, offers to purchase and collateral matters, and are fungible (except that the New Notes issued pursuant to Regulation S traded separately under different CUSIP/ISIN numbers until 40 days after the issue date, but thereafter any such holders may transfer their New Notes pursuant to Regulation S into the same CUSIP/ISIN numbers as the Existing Notes issued pursuant to Regulation S).

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 Company used the net proceeds of the offering of the Notes, together with cash on hand, to fund the redemption of all of the Company’s 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, the Company recognized a loss on early extinguishment of debt of $ 9.7 million which represents the write-off of previously capitalized Existing Notes debt issuance costs and debt discount, along with the redemption premium.

In connection with the issuance of the Notes, the Company incurred debt issuance costs of $ 8.1 million for the year ended December 31, 2021, which consists primarily of structuring fees and legal fees, and is included as a reduction in long-term debt on 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.

The Notes are fully and unconditionally guaranteed on a joint and several basis by each of the Company's direct and indirect wholly-owned domestic restricted subsidiaries that are guarantors under the ABL Facility (subject to customary release provisions).

The Notes are redeemable at the Company's 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.

The Company is also required to make offers to purchase the Notes (i) at a purchase price of 101.00 % of the principal

WARRIOR MET COAL, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

amount thereof in the event it experiences 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 it makes certain asset sales or dispositions and does 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.

At any time prior to December 1, 2024, the Company 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 the Company’s option, in whole or in part, from time to time, on or after December 1, 2024, at redemption prices specified in the indenture, plus accrued and unpaid interest, if any, to, but excluding the redemption date.

At any time on or prior to December 1, 2024, the Company 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.

The Company is 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 it experiences 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 it makes certain asset sales or dispositions and does 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 .

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;

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 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

WARRIOR MET COAL, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

(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.

date of repurchase.

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 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, the Company 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.

Note 14— Leases

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Finance Leases (1)

2021 $ 16,276

Thereafter 156

amount representing interest ( 4,910 )

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(1) Finance lease payments include $ 4.5 million of future payments required under signed lease agreements that have not yet commenced.

These finance leases will commence during fiscal year 2022 with lease terms between one to two years .

Supplemental cash flow information related to leases was as follows (in thousands):

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Finance leases $ 46,961 $ 18,967

As of December 31, 2020 the Company had additional commitments for finance leases, primarily for mining equipment, that have not yet commenced, of $ 1.6 million.

These finance leases will commence during fiscal year 2021 with lease terms between one to two years .

Note 15— Related Party Transactions

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The Company supplied labor to BWM and incurred costs, including property and liability insurance, to support the joint venture.

The Company charged the joint venture for such costs on a monthly basis, which were $ 2.6 million for the year ended December 31, 2020, $ 1.5 million for the year ended December 31, 2019, $ 3.2 million for the year ended December 31, 2018.

The Company charged the joint venture for such costs on a monthly basis, which were $ 2.1 million for the year ended December 31, 2021, $ 2.6 million for the year ended December 31, 2020, and $ 1.5 million for the year ended December 31, 2019.

Note 16— Commitments and Contingencies

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Although coal leases have varying renewal terms and conditions, they generally last for the economic life of the reserves.

Coal royalty expense was $ 49.5 million, $ 87.3 million, $ 101.0 million, for the years ended December 31, 2020, December 31, 2019, and December 31, 2018, respectively.

Coal royalty expense was $ 65.4 million, $ 49.5 million, and $ 87.3 million, for the years ended December 31, 2021, December 31, 2020, and December 31, 2019, respectively.

Note 17— Stockholders' Equity

New Stock Repurchase Program

On March 26, 2019, the Board approved the Company's second stock repurchase program (the “New Stock Repurchase Program”) that authorizes repurchases of up to an aggregate of $ 70.0 million of the Company's outstanding common stock.

The Company fully exhausted its previous stock repurchase program (the "First Stock Repurchase Program") of $ 40.0 million of its outstanding common stock.

The New Stock Repurchase Program does not require the Company to

The New Stock Repurchase Program does not require the Company to repurchase a specific number of shares or have an expiration date.

The New Stock Repurchase Program may be suspended or discontinued by the Board at any time without prior notice.

WARRIOR MET COAL, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

repurchase a specific number of shares or have an expiration date.

The New Stock Repurchase Program may be suspended or discontinued by the Board at any time without prior notice.

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

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The Company intends to fund repurchases under the New Stock Repurchase Program from cash on hand and/or other sources of liquidity.

During the year ended December 31, 2019, the Company repurchased 500,000 shares for approximately $ 10.6 million, leaving $ 58.8 million of share repurchases authorized under the New Stock Repurchase Program.

During the year ended December 31, 2019, the Company repurchased the remaining shares authorized under the First Stock Repurchase Program for approximately $ 1.9 million and repurchased 500,000 shares under the New Stock Repurchase Program for approximately $ 10.6 million, leaving $ 58.8 million of share repurchases authorized under the New Stock Repurchase Program.

In light of the uncertainties resulting from COVID-19 and as a precautionary measure to preserve liquidity, the

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.

First Stock Repurchase Program

On May 2, 2018, the Board approved the First Stock Repurchase Program that authorized repurchases of up to an aggregate of $ 40.0 million of the Company's outstanding common stock.

During the first quarter of 2019, the Company repurchased the remaining share repurchases authorized under the First Stock Repurchase Program for approximately $ 1.9 million.

Secondary Equity Offerings

On May 10, 2018 certain stockholders of the Company sold 8,000,000 shares of the Company's common stock in a public secondary offering at a price to the underwriter of $ 24.20 per share.

The Company did not receive any of the proceeds from this offering.

In connection with this offering, the Company repurchased 500,000 shares of common stock under the First Stock Repurchase Program, funded with cash on hand for the aggregate amount of $ 12.1 million (the "Stock Repurchase").

The shares repurchased by the Company in the Stock Repurchase are reflected as Treasury Stock on the Balance Sheets.

On June 14, 2018, certain stockholders of the Company sold 5,000,000 shares of the Company's common stock in a public secondary offering at a price to the underwriter of $ 28.35 per share.

The Company did not receive any of the proceeds from the offering.

On August 8, 2018, certain stockholders of the Company sold 2,204,806 shares of the Company's common stock in a public secondary offering at a price to the underwriter of $ 25.40 per share.

The Company did not receive any of the proceeds from the offering.

We refer to these offerings herein collectively as the "Secondary Equity Offerings." In connection with the Secondary Equity Offerings, we incurred transaction costs of approximately $ 2.7 million for the year December 31, 2018.

Company temporarily suspended its New Stock Repurchase Program.

The Company will continue to monitor its liquidity in light of the COVID-19 pandemic, the Chinese ban on Australian coal and the current CBA contract negotiations with the UMWA and will consider when to reinstate the program.

Note 18— Derivative Instruments

The Company enters into natural gas swap contracts from time to time to hedge the exposure to variability in expected

future cash flows associated with the fluctuations in the price of natural gas related to the Company’s forecasted sales.

As of December 31, 2021, the Company had natural gas swap contracts outstanding with notional amounts totaling 6,100,000 metric million British thermal units maturing in 2022.

As of December 31, 2020, the Company had no natural gas swap contracts outstanding.

The Company’s natural gas swap contracts economically hedge certain risks but are not designated as hedges for

financial reporting purposes.

All changes in the fair value of these derivative instruments are recorded as other revenues in the

Condensed Statements of Operations.

The Company recognized a loss of $ 1.6 million for the year ended December 31, 2021.

The Company records all derivative instruments at fair value and had an asset of $ 4.0 million as of December 31, 2021 in prepaid expenses and other in the accompanying Balance Sheets and no asset or liability as of December 31, 2020.

Note 19— Fair Value of Financial Instruments

The Company has no significant assets or other liabilities measured at fair value on a recurring basis as of December 31, 2020 or December 31, 2019.

The following table presents information about the Company’s financial liabilities measured at fair value on a recurring basis as of December 31, 2021 and indicates the level of the fair value hierarchy utilized to determine such fair value (in thousands):

Fair Value Measurements as of December 31, 2021 Using:

Level 1 Level 2 Level 3 Total

Natural gas swap contracts $ — $ 4,043 $ — $ 4,043

The Company had no significant assets or other liabilities measured at fair value on a recurring basis as of December 31, 2020.

During the year ended December 31, 2021, there were no transfers between Level 1, Level 2 and Level 3.

The Company uses quoted dealer prices for similar contracts in active over-the-counter markets for determining fair value of Level 2 liabilities.

The Company uses quoted dealer prices for similar contracts in active over-the-counter markets for determining fair value of Level 2 assets or liabilities.

The following methods and assumptions were used to estimate the fair value for which the fair value option was not elected:

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Debt— The Company's outstanding debt is carried at cost.

As of December 31, 2020, the Company had $ 40.0 million outstanding under the ABL Facility, with $ 31.6 million available, net of $ 9.4 million of letters of credit issued and outstanding at such time.

The estimated fair value of the Notes is approximately $ 352.5 million based upon observable market data (Level 2) and the carrying amount of the ABL Facility approximates fair value as these securities are not traded.

Note 19— Net (Loss) Income per Share

The computation of basic net (loss) income per share is based on the number of weighted average common shares outstanding during the period.

The computation of diluted net (loss) income per share is based on the weighted average number of shares outstanding plus the incremental shares that would be outstanding assuming issuance of restricted stock.

As of December 31, 2021, the Company had no borrowings outstanding under the ABL Facility, with $ 83.2 million available, net of $ 9.4 million of letters of credit issued and outstanding at such time.

The estimated fair value of the Notes as of December 31, 2021 is approximately $ 359.6 million based upon observable market data (Level 2).

Note 20— Net Income (Loss) per Share

The computation of basic net income (loss) per share is based on the number of weighted average common shares outstanding during the period.

The computation of diluted net income (loss) per share is based on the weighted average number of shares outstanding plus the incremental shares that would be outstanding assuming issuance of restricted stock.

The number of incremental shares is calculated by applying the treasury stock method.

Basic and diluted net (loss) income per share was calculated as follows (in thousands, except per share data):

Basic and diluted net income (loss) per share was calculated as follows (in thousands, except per share data):

For the years ended December 31,

2021 2020 2019

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

Weighted-average shares used to compute net (loss) income per share—basic 51,168 51,363 52,812

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

Weighted-average shares used to compute net income (loss) per share—basic 51,382 51,168 51,363

Dilutive restricted stock awards and units (1)

Weighted-average shares used to compute net (loss) income per share—diluted 51,168 51,493 52,918

Net (loss) income per share—basic $ ( 0.70 ) $ 5.87 $ 13.19

Net (loss) income per share—diluted $ ( 0.70 ) $ 5.86 $ 13.17

Weighted-average shares used to compute net income (loss) per share—diluted 51,445 51,168 51,493

Net income (loss) per share—basic $ 2.94 $ ( 0.70 ) $ 5.87

Net income (loss) per share—diluted $ 2.93 $ ( 0.70 ) $ 5.86

(1) In periods of net loss, the number of shares used to calculate diluted earnings per share is the same as basic earnings per share;

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As such, these awards were excluded from basic earnings per share.

These awards had a 54,984 share impact on dilutive weighted average shares for the year ended December 31, 2021.

As of December 31, 2021, there were 513,322 shares granted under the 2017 Equity Plan to employees, for which neither the service based nor performance based vesting conditions were met as of the measurement date.

As such, these shares have been excluded from basic and diluted earnings per share.

As of December 31, 2020, there were 52,221 shares of common stock issued under the 2016 Equity Plan to certain directors and employees, for which the service based vesting conditions were not met as of the measurement date.

As such, these awards were excluded from basic earnings per share.

As of December 31, 2020, there were 43,580 shares of common stock contingently issuable upon the settlement of a vested phantom unit award under the 2016 Equity Plan and 13,157 shares of common stock contingently issuable upon the settlement of a vested restricted stock unit award under the 2017 Equity Plan.

The Company has $ 0.5 million of restricted stock unit awards under the 2017 Equity Plan that can be settled in shares or in cash at the election of employees.

These awards have certain service-based and performance-based vesting conditions and can be earned no later than December 31, 2024.

If the Company were to settle these awards in shares these awards would represent 19,448 shares based on the Company's closing share price as of December 31, 2021.

The Company considered the impact on diluted earnings as if the award was settled in shares.

These awards had a 7,376 share impact on dilutive weighted average shares for the year ended December 31, 2021.

As of December 31, 2021, there were 13,157 shares of common stock contingently issuable upon the settlement of a vested restricted stock unit award under the 2017 Equity Plan.

The settlement date is the earlier of a change in control as described in the 2016 Equity Plan and 2017 Equity Plan or five years from the grant date.

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NOTES TO FINANCIAL STATEMENTS (Continued)

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

The Dividend Policy also states the following:

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

The Capital Allocation Policy also states the following:

In addition to the regular quarterly dividend and to the extent that the Company generates excess cash that is beyond the then current requirements of the business, the Board may consider returning all or a portion of such excess cash to stockholders through a special dividend or implementation of a stock repurchase program.

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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.

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 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.

On April 23, 2019, the Board declared a special cash dividend of $ 4.41 per share (the "April 2019 Special Dividend"), totaling approximately $ 230.0 million, which was paid on May 14, 2019 to stockholders of record as of the close of business on May 6, 2019.

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The following tables include reconciliations of segment information to consolidated amounts (in thousands):

WARRIOR MET COAL, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

For the years ended December 31,

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Total revenues $ 1,059,216 $ 782,738 $ 1,268,309

WARRIOR MET COAL, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

For the years ended December 31,

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Total capital expenditures $ 57,893 $ 87,488 $ 107,278

The Company evaluates the performance of its segment based on Segment Adjusted EBITDA, which is defined as net (loss) income adjusted for other revenues, cost of other revenues, depreciation and depletion, selling, general and administrative, other postretirement benefits, and certain transactions or adjustments that the CODM does not consider for the purposes of making decisions to allocate resources among segments or assessing segment performance.

The Company evaluates the performance of its segment based on Segment Adjusted EBITDA, which is defined as net income (loss) adjusted for other revenues, cost of other revenues, depreciation and depletion, selling, general and administrative, other postretirement benefits, and certain transactions or adjustments that the CODM does not consider for the purposes of making decisions to allocate resources among segments or assessing segment performance.

Segment Adjusted EBITDA does not represent and should not be considered as an alternative to cost of sales under GAAP and may not be comparable to other similarly titled measures used by other companies.

Below is a reconciliation of Segment Adjusted EBITDA to net (loss) income, which is its most directly comparable financial measure calculated and presented in accordance with GAAP (in thousands):

Below is a reconciliation of Segment Adjusted EBITDA to net income (loss), which is its most directly comparable financial measure calculated and presented in accordance with GAAP (in thousands):

For the years ended December 31,

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Selling, general and administrative ( 35,593 ) ( 32,879 ) ( 37,014 )

Transaction and other costs — — ( 9,068 )

Business interruption ( 21,372 ) — —

Idle mine ( 33,899 ) — —

Loss on early extinguishment of debt ( 9,678 ) — ( 9,756 )

2 unchanged sentences

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

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

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

Note 22— Subsequent Events

Regular Quarterly Dividend

On February 18, 2021, the Board declared a regular quarterly cash dividend of $ 0.05 per share, totaling $ 2.6 million, which will be paid on March 8, 2021, to stockholders of record as of the close of business on March 1, 2021.

WARRIOR MET COAL, INC.

NOTES TO FINANCIAL STATEMENTS (Continued)

Alabama House Bill

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.

While the Company expects that the Act, in its entirety, will not adversely affect the Company, the Company is closely monitoring whether any provisions of the Act could adversely impact the Company.

Thus, prior to repeal of the throwback rule, the Company 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.

If it is determined that as a result of the repeal of the throwback rule it is more likely than not that the Company would not have sufficient taxable income to utilize the Company’s state deferred income tax assets, the Company may be required to establish a valuation allowance against such state deferred income tax assets.

SUPPLEMENTAL SUMMARY QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

(in thousands, except per share amounts)

Quarter Ended

Fiscal Year 2020 March 31 June 30 September 30 December 31

Total revenues $ 226,720 $ 163,701 $ 180,064 $ 212,253

Gross profit (1)

$ 67,645 $ 25,282 $ 21,630 $ 9,275

Operating income (loss) $ 30,497 $ ( 5,331 ) $ ( 14,527 ) $ ( 37,778 )

Net income (loss) (2)

$ 21,545 $ ( 9,161 ) $ ( 14,434 ) $ ( 33,711 )

Net income (loss) per share—basic (4)

$ 0.42 $ ( 0.18 ) $ ( 0.28 ) $ ( 0.66 )

Net income (loss) per share—diluted (4)

$ 0.42 $ ( 0.18 ) $ ( 0.28 ) $ ( 0.66 )

Quarter Ended

Fiscal Year 2019 March 31 June 30 September 30 December 31

Total revenues $ 378,290 $ 397,613 $ 287,506 $ 204,901

Gross profit (1)

$ 187,917 $ 184,406 $ 89,702 $ 55,713

Operating income $ 156,779 $ 147,945 $ 54,599 $ 24,071

Net income (3)

$ 110,447 $ 125,481 $ 45,022 $ 20,751

Net income per share—basic (4)

$ 2.14 $ 2.43 $ 0.88 $ 0.41

Net income per share—diluted (4)

$ 2.14 $ 2.43 $ 0.87 $ 0.41

(1) Represents total revenues less cost of sales (exclusive of items shown separately below) and cost of other revenues (exclusive of items shown separately below) for each respective period.

(2) Net income for the three months ended March 31, 2020 includes proceeds received for the Shared Services Claim and Hybrid Debt Claim of $ 1.8 million.

Net loss for the three months ended December 31, 2020 includes settlement proceeds of $ 1.7 million related to other Walter Energy claims.

(3) Net income for the three months ended March 31, 2019 includes a loss on early extinguishment of debt of $ 9.8 million.

Net income includes proceeds received for the Shared Services Claim and Hybrid Debt Claim of $ 17.5 million and $ 5.3 million for the three months ended June 30, 2019 and September 30, 2019, respectively.

Net income for the three months ended December 31, 2019 includes a change in ARO due to revisions to estimates of $ 7.8 million which is discussed further in Note 8.

(4) The sum of quarterly amounts may not equal the annual amounts reported due to rounding.

In addition, the sum of quarterly EPS amounts may be different than annual amounts as a result of the impact of variations in shares outstanding.

On February 18, 2022, the Board declared a regular quarterly cash dividend of $ 0.06 per share, totaling approximately $ 3.1 million, which will be paid on March 10, 2022, to stockholders of record as of the close of business on March 3, 2022.

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 9A. Controls and Procedures