WARRIOR MET COAL, INC. 10-K

Item 9A. Controls and Procedures Disclosure Controls and Procedures As required by Rule 13a-15(b) under the Exchange Act, our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) under the Exchange Act) as of December 31, 2021. Based on the evaluation of our disclosure controls and procedures as of December 31, 2021, our Chief Executive Officer and Chief Financial Officer have concluded that, as of December 31, 2021, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and (2) accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosures. Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls over financial reporting will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. Management's Annual Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities and Exchange Act of 1934, as amended). Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2021. In making this assessment, our management used the criteria established in Internal Control - Integrated Framework (2013) issued by the COSO. 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 (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 There were no changes in our internal control over financial reporting during the quarter ended December 31, 2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information None. 86 Part III Item 10. Directors, Executive Officers and Corporate Governance Information regarding our Code of Business Conduct and Ethics and Corporate Governance Guidelines for our principal executive officer and principal financial and accounting officer are described in “Item 1. Business” in this Annual Report. Pursuant to paragraph 3 of General Instruction G to Form 10-K, we incorporate by reference into this Item 10 the information to be disclosed in our definitive proxy statement, which is to be filed pursuant to Regulation 14A with the SEC within 120 days after the close of the year ended December 31, 2021. Item 11. Executive Compensation Pursuant to paragraph 3 of General Instruction G to Form 10-K, we incorporate by reference into this Item 11 the information to be disclosed in our definitive proxy statement, which is to be filed pursuant to Regulation 14A with the SEC within 120 days after the close of the year ended December 31, 2021. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The equity compensation plan information as required by Item 201(d) of Regulation S-K is included in Part II, Item 5 of this Annual Report. Pursuant to paragraph 3 of General Instruction G to Form 10-K, we incorporate by reference into this Item 12 all other information to be disclosed in our definitive proxy statement, which is to be filed pursuant to Regulation 14A with the SEC within 120 days after the close of the year ended December 31, 2021. Item 13. Certain Relationships and Related Transactions, and Director Independence Pursuant to paragraph 3 of General Instruction G to Form 10-K, we incorporate by reference into this Item 13 the information to be disclosed in our definitive proxy statement, which is to be filed pursuant to Regulation 14A with the SEC within 120 days after the close of the year ended December 31, 2021. Item 14. Principal Accounting Fees and Services Pursuant to paragraph 3 of General Instruction G to Form 10-K, we incorporate by reference into this Item 14 the information to be disclosed in our definitive proxy statement, which is to be filed pursuant to Regulation 14A with the SEC within 120 days after the close of the year ended December 31, 2021. 87 Part IV Item 15. Exhibits and Financial Statement Schedules (a) (1) Financial Statements Our consolidated financial statements are included in this Annual Report beginning on page F-1. (a) (2) Financial Statement Schedules All schedules have been omitted because they are either not applicable, not required or the information called for therein appears in the consolidated financial statements or notes thereto. (a) (3) Exhibits Exhibit Number Description 2.1 # Amended and Restated Asset Purchase Agreement, dated as of March 31, 2016, by and among Warrior Met Coal, LLC and the other purchasers party thereto, as buyers, and Walter Energy, Inc. and certain subsidiaries of Walter Energy, Inc., as sellers (incorporated by reference to Exhibit 2.1 to the Registrant's Registration Statement on Form S-1 (File No. 333-216499) filed with the Commission on March 7, 2017). 2.2 Form of Certificate of Conversion of Warrior Met Coal, LLC (incorporated by reference to Exhibit 2.2 to the Registrant's Amendment No. 2 to the Registration Statement on Form S-1 (File No. 333-216499) filed with the Commission on April 3, 2017). 3.1 Certificate of Incorporation of Warrior Met Coal, Inc. (incorporated by reference to Exhibit 3.1 to the Registrant's Registration Statement on Form S-8 (File No. 333-217389) filed with the Commission on April 19, 2017). 3.2 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). 3.3 Bylaws of Warrior Met Coal, Inc. (incorporated by reference to Exhibit 3.2 to the Registrant's Registration Statement on Form S-8 (File No. 333-217389) filed with the Commission on April 19, 2017). 3.4 Certificate of Designations of Series A Junior Participating Preferred Stock of Warrior Met Coal, Inc., as filed with the Secretary of State of the State of Delaware on February 14, 2020 (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 February 14, 2020). 4.1 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). 4.2 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. 2 to the Registration Statement on Form S-1 (File No. 333-216499) filed with the Commission on April 3, 2017). 4.3 Rights Agreement, dated as of February 14, 2020, between Warrior Met Coal, Inc. and Computershare Trust Company, N.A., as rights agent (including the form of Certificate of Designations of Series A Junior Participating Preferred Stock attached thereto as Exhibit A, the form of Right Certificate attached thereto as Exhibit B and the Summary of Rights to Purchase Preferred Shares attached thereto as Exhibit C (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 February 14, 2020)). 4.4 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). 88 10.1# 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). 10.2 * 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. 10.3 Registration Rights Agreement, dated as of April 19, 2017, among Warrior Met Coal, Inc. and certain of its equity holders party thereto (incorporated by reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q (File No. 001-38061) filed with the Commission on August 3, 2017). 10.4 † Warrior Met Coal, Inc. 2017 Equity Incentive Plan (incorporated by reference to Exhibit 10.2 to the Registrant's Current Report on Form 8-K (File No. 001-38061) filed with the Commission on April 19, 2017). 10.5 † Warrior Met Coal, LLC 2016 Equity Incentive Plan (incorporated by reference to Exhibit 10.11 to the Registrant's Amendment No. 1 to the Registration Statement on Form S-1 (File No. 333-216499) filed with the Commission on March 27, 2017). 10.6 † Form of Director and Officer Indemnification Agreement (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 April 19, 2017). 10.7 † Employment Agreement, dated March 31, 2016 by and between Warrior Met Coal, LLC and Walter J. Scheller, III (incorporated by reference to Exhibit 10.7 to the Registrant's Registration Statement on Form S-1 (File No. 333-216499) filed with the Commission on March 7, 2017). 10.8 † Employment Agreement, dated March 31, 2016 by and between Warrior Met Coal, LLC and Jack K. Richardson (incorporated by reference to Exhibit 10.9 to the Registrant's Registration Statement on Form S-1 (File No. 333-216499) filed with the Commission on March 7, 2017). 10.9 † Employment Agreement, dated January 1, 2017, by and between Warrior Met Coal, LLC and Dale W. Boyles (incorporated by reference to Exhibit 10.10 to the Registrant's Registration Statement on Form S-1 (File No. 333-216499) filed with the Commission on March 7, 2017). 10.10 † Employment Agreement, dated March 31, 2016, by and between Warrior Met Coal, LLC and Kelli K. Gant (incorporated by reference to Exhibit 10.15 to the Registrant's Annual Report on Form 10-K (File No. 001-38061) filed with the Commission on February 14, 2018). 10.11 † Employment Agreement, dated March 31, 2016, by and between Warrior Met Coal, LLC and Brian M. Chopin (incorporated by reference to Exhibit 10.11 to the Registrant's Annual Report on Form 10-K (File No. 001-38061) filed with the Commission on February 19, 2020.) 10.12 † Employment Agreement, dated March, by and between Warrior Met Coal, Inc. and Charles Lussier (incorporated by reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q (File No. 001-38061) filed with the Commission on April 29, 2020.) 10.13 † Form of Warrior Met Coal, Inc. 2017 Equity Incentive Plan Restricted Stock Unit Award Agreement (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 5, 2017). 10.14 † Restricted Unit Award Agreement, dated March 31, 2016, by and between Warrior Met Coal, LLC and Walter J. Scheller, III (incorporated by reference to Exhibit 10.13 to the Registrant's Amendment No. 3 to the Registration Statement on Form S-1 (File No. 333-216499) filed with the Commission April 10, 2017). 10.15 † Restricted Unit Award Agreement, dated April 20, 2016, by and between Warrior Met Coal, LLC and Jack K. Richardson (incorporated by reference to Exhibit 10.15 to the Registrant's Amendment No. 3 to the Registration Statement on Form S-1 (File No. 333-216499) filed with the Commission on April 10, 2017). 10.16 † Restricted Unit Award Agreement, dated January 1, 2017, by and between Warrior Met Coal, LLC and Dale W. Boyles (incorporated by reference to Exhibit 10.16 to the Registrant's Amendment No. 3 to the Registration Statement on Form S-1 (File No. 333-216499) filed with the Commission on April 10, 2017). 10.17 † Restricted Unit Award Agreement, dated March 31, 2016, by and between Warrior Met Coal, LLC and Stephen D. Williams (incorporated by reference to Exhibit 10.17 to the Registrant's Amendment No. 3 to the Registration Statement on Form S-1 (File No. 333-216499) filed with the Commission on April 10, 2017). 89 10.18 † Restricted Unit Award Agreement, dated February 24, 2017, by and between Warrior Met Coal, LLC and Stephen D. Williams (incorporated by reference to Exhibit 10.18 to the Registrant's Amendment No. 3 to the Registration Statement on Form S-1 (File No. 333-216499) filed with the Commission on April 10, 2017). 10.19 † Phantom Unit Award Agreement, dated March 31, 2016, by and between Warrior Met Coal, LLC and Stephen D. Williams (incorporated by reference to Exhibit 10.19 to the Registrant's Amendment No. 3 to the Registration Statement on Form S-1 (File No. 333-216499) filed with the Commission on April 10, 2017). 10.20 † Restricted Stock Unit Award Agreement, dated April 19, 2017, by and between Warrior Met Coal, Inc. and Stephen D. Williams (incorporated by reference to Exhibit 10.23 to the Registrant's Annual Report on Form 10-K (File No. 001-38061) filed with the commission on February 21, 2019). 10.21 † 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). 10.22 † 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). 10.23 †* Form of Amendment to Restricted Stock Unit Award Agreement (for non-employee directors). 10.24 † Form of Warrior Met Coal, Inc. 2017 Equity Incentive Plan Restricted Stock Unit Award Agreement (Time-Based Vesting Award) (incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q (File No. 001-38061) filed with the Commission on May 2, 2018). 10.25 † Form of Warrior Met Coal, Inc. 2017 Equity Incentive Plan Restricted Stock Unit Award Agreement (Performance-Based Vesting Award) (incorporated by reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q (File No. 001-38061) filed with the Commission on May 2, 2018). 10.26 † Form of Warrior Met Coal, Inc. 2017 Equity Plan Restricted Stock Unit Award Agreement (Performance-Based Vesting Award - 2019 Retention Grant) (incorporated by reference to Exhibit 10.26 to the Registrant's Annual Report on Form 10-K (File No. 001-38061) filed with the commission on February 21, 2020). 10.27 † Form of Amendment to Restricted Stock Unit Award Agreements (for executive officers), effective January 1, 2020 (incorporated by reference to Exhibit 10.27 to the Registrant's Annual Report on Form 10-K (File No. 001-38061) filed with the commission on February 21, 2020). 10.28 † Form of Warrior Met Coal, Inc. 2017 Equity Plan Restricted Stock Unit Award Agreement (Time-Based Vesting Award - Revised) (incorporated by reference to Exhibit 10.26 to the Registrant's Annual Report on Form 10-K (File No. 001-38061) filed with the commission on February 21, 2020). 10.29 † Form of Warrior Met Coal, Inc. 2017 Equity Plan Restricted Stock Unit Award Agreement (Performance-Based Vesting Award - Revised)(incorporated by reference to Exhibit 10.26 to the Registrant's Annual Report on Form 10-K (File No. 001-38061) filed with the commission on February 21, 2020). 21.1 * List of Subsidiaries of the Company. 23.1 * Consent of Ernst & Young LLP. 23.2 * Consent of Marshall Miller & Associates, Inc. 23.3 * Consent of McGehee Engineering Corp. 31.1 * Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended. 31.2 * Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended. 32.1 ** Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18. U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 95 * 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) 96.1 * Technical Report Summary for Mine No. 7 - S-K 1300 Report 96.2 * Technical Report Summary for Mine No. 4 - S-K 1300 Report 96.3 * Technical Report Summary for Blue Creek - S-K 1300 Report 90 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. 101.SCH* Inline XBRL Taxonomy Extension Schema Document 101.CAL* Inline XBRL Taxonomy Extension Calculation LinkBase Document 101.DEF* Inline XBRL Taxonomy Extension Definition LinkBase Document 101.LAB* Inline XBRL Taxonomy Extension Label LinkBase Document 101.PRE* Inline XBRL Taxonomy Extension Presentation LinkBase Document 104* Cover Page Interactive Data File (formatted Inline XBRL and included in the Interactive Data Files submitted under Exhibit 101). * Filed herewith. ** Furnished herewith. † Management contract, compensatory plan or arrangement. # The schedules to this agreement have been omitted for this filing pursuant to Item 601(b)(2) of Regulation S-K. The Company will furnish copies of such schedules to the SEC upon request. Item 16. Form 10-K Summary None. 91 SIGNATURES Pursuant to the requirements of the Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Warrior Met Coal, Inc. By: /s/ Dale W. Boyles Dale W. Boyles Chief Financial Officer (on behalf of the registrant) Date: February 22, 2022 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Walter J. Scheller, III Walter J. Scheller, III Chief Executive Officer (Principal Executive Officer) and Director February 22, 2022 /s/ Dale W. Boyles Dale W. Boyles Chief Financial Officer (Principal Financial and Accounting Officer) February 22, 2022 /s/ Stephen D. Williams Stephen D. Williams Director February 22, 2022 /s/ Ana B. Amicarella Ana B. Amicarella Director February 22, 2022 /s/ J. Brett Harvey J. Brett Harvey Director February 22, 2022 /s/ Alan H. Schumacher Alan H. Schumacher Director February 22, 2022 92 INDEX TO FINANCIAL STATEMENTS Reports of Independent Registered Public Accounting Firm F- 2 Balance Sheets at December 31, 2021 and December 31, 2020 F- 5 Statements of Operations for the years ended December 31, 2021, December 31, 2020, and December 31, 2019 F- 6 Statements of Changes in Equity for the years ended December 31, 2021, December 31, 2020, and December 31, 2019 F- 7 Statements of Cash Flows for the years ended December 31, 2021, December 31, 2020, and December 31, 2019 F- 8 Notes to Financial Statements F- 10 F-1 Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Warrior Met Coal, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Warrior Met Coal, Inc. (the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations, changes in equity, and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 22, 2022 expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. 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. F-2 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. Changes in the asset retirement obligations are more fully described in Note 8 to the consolidated financial statements. 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 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. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s process for evaluating the asset retirement obligations. For example, we tested controls over management’s review of the assumptions described above. 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 obligations. /s/ Ernst & Young LLP We have served as the Company's auditor since 2016. Birmingham, Alabama February 22, 2022 F-3 Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Warrior Met Coal, Inc. Opinion on Internal Control over Financial Reporting We have audited Warrior Met Coal, Inc.’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Warrior Met Coal, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2021 and 2020, the related consolidated statements of operations, changes in equity, and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and our report dated February 22, 2022 expressed an unqualified opinion thereon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst & Young LLP Birmingham, Alabama February 22, 2022 F-4 WARRIOR MET COAL, INC. BALANCE SHEETS (in thousands) December 31, 2021 December 31, 2020 ASSETS Current assets: Cash and cash equivalents $ 395,839 $ 211,916 Short-term investments 8,505 8,504 Trade accounts receivable 122,150 83,298 Other receivables 7,991 5,142 Inventories, net 59,619 118,713 Prepaid expenses and other 33,097 39,910 Total current assets 627,201 467,483 Mineral interests, net 93,180 100,855 Property, plant and equipment, net 603,412 637,108 Deferred income taxes 125,276 174,372 Other long-term assets 15,142 14,118 Total assets $ 1,464,211 $ 1,393,936 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 33,829 $ 59,110 Accrued expenses 54,847 86,108 Asset retirement obligations 5,141 4,354 Short-term financing lease obligations 23,622 14,385 Other current liabilities 4,689 6,361 Total current liabilities 122,128 170,318 Long-term debt 339,806 379,908 Asset retirement obligations 65,536 57,553 Black lung obligations 34,482 34,567 Financing lease obligations 28,434 24,091 Other long-term liabilities 1,842 2,258 Total liabilities 592,228 668,695 Stockholders’ Equity: Common stock, $ 0.01 par value per share (Authorized - 140,000,000 shares, 53,659,643 issued and 51,437,802 outstanding as of December 31, 2021 and 53,408,040 issued and 51,186,199 outstanding as of December 31, 2020) 537 534 Preferred stock, $ 0.01 par value per share ( 10,000,000 shares authorized, no shares issued and outstanding) — — Treasury stock, at cost ( 2,221,841 shares as of December 31, 2021 and December 31, 2020) ( 50,576 ) ( 50,576 ) Additional paid in capital 256,059 249,746 Retained earnings 665,963 525,537 Total stockholders’ equity 871,983 725,241 Total liabilities and stockholders’ equity $ 1,464,211 $ 1,393,936 The accompanying notes are an integral part of these consolidated financial statements. F-5 WARRIOR MET COAL, INC. STATEMENTS OF OPERATIONS (in thousands, except per share amounts) For the years ended December 31, 2021 2020 2019 Revenues: Sales $ 1,028,283 $ 761,871 $ 1,235,998 Other revenues 30,933 20,867 32,311 Total revenues 1,059,216 782,738 1,268,309 Costs and expenses: Cost of sales (exclusive of items shown separately below) 554,282 625,170 720,745 Cost of other revenues (exclusive of items shown separately below) 28,899 33,736 29,828 Depreciation and depletion 141,418 118,092 97,330 Selling, general and administrative 35,593 32,879 37,014 Business interruption 21,372 — — Idle mine 33,899 — — Total costs and expenses 815,463 809,877 884,917 Operating income (loss) 243,753 ( 27,139 ) 383,392 Interest expense, net ( 35,389 ) ( 32,310 ) ( 29,335 ) Loss on early extinguishment of debt ( 9,678 ) — ( 9,756 ) Other income 1,291 3,544 22,815 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 Weighted average number of shares outstanding— diluted 51,445 51,168 51,493 Dividends per share: $ 0.20 $ 0.20 $ 4.61 The accompanying notes are an integral part of these consolidated financial statements. F-6 WARRIOR MET COAL, INC. STATEMENTS OF CHANGES IN EQUITY (in thousands) Common Stock Preferred Stock Treasury Stock Additional Paid in Capital Retained Earnings Total Stockholders’ Equity Balance at December 31, 2018 $ 533 $ — $ ( 38,030 ) $ 239,827 $ 510,282 $ 712,612 Net income — — — — 301,699 301,699 Dividends paid ($ 4.61 per share) — — — — ( 240,394 ) ( 240,394 ) Stock compensation — — — 5,349 — 5,349 Treasury stock purchase — — ( 12,546 ) — — ( 12,546 ) Other — — — ( 1,244 ) 106 ( 1,138 ) Balance at December 31, 2019 $ 533 $ — $ ( 50,576 ) $ 243,932 $ 571,693 $ 765,582 Net loss — — — — ( 35,761 ) ( 35,761 ) Dividends paid ($ 0.20 per share) — — — — ( 10,395 ) ( 10,395 ) Stock compensation — — — 7,087 — 7,087 Treasury stock purchase — — — — — — Other 1 — — ( 1,273 ) — ( 1,272 ) Balance at December 31, 2020 $ 534 $ — $ ( 50,576 ) $ 249,746 $ 525,537 $ 725,241 Net income — — — — 150,881 150,881 Dividends paid ($ 0.20 per share) — — — — ( 10,455 ) ( 10,455 ) Stock compensation — — — 9,355 — 9,355 Other 3 — — ( 3,042 ) — ( 3,039 ) Balance at December 31, 2021 $ 537 $ — $ ( 50,576 ) $ 256,059 $ 665,963 $ 871,983 The accompanying notes are an integral part of these consolidated financial statements. F-7 WARRIOR MET COAL, INC. STATEMENTS OF CASH FLOWS (in thousands) For the years ended December 31, 2021 2020 2019 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 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 Accretion and valuation adjustment of ARO 3,427 2,631 ( 7,891 ) Loss on early extinguishment of debt 9,678 — 9,756 Changes in operating assets and liabilities: Trade accounts receivable ( 38,852 ) 16,173 38,928 Other receivables ( 2,849 ) ( 3,308 ) ( 224 ) Income tax receivable — 24,274 21,795 Inventories 45,693 ( 13,465 ) ( 30,491 ) Prepaid expenses and other current assets 11,387 ( 16,066 ) 4,088 Accounts payable ( 20,322 ) 15,361 13,409 Accrued expenses and other current liabilities ( 16,444 ) ( 3,936 ) ( 17,317 ) Other 5,724 19,558 26,068 Net cash provided by operating activities 351,543 112,626 532,814 INVESTING ACTIVITIES Purchase of property, plant and equipment ( 57,893 ) ( 87,488 ) ( 107,278 ) Deferred mine development costs ( 13,462 ) ( 27,093 ) ( 23,392 ) Proceeds from sale of property, plant and equipment 209 159 3,127 Sale of short-term investments — 14,733 17,501 Purchases of short-term investments — ( 8,500 ) ( 24,171 ) Net cash used in investing activities ( 71,146 ) ( 108,189 ) ( 134,213 ) FINANCING ACTIVITIES Dividends paid ( 10,455 ) ( 10,395 ) ( 240,394 ) Proceeds from issuance of debt 347,701 — — Borrowings under ABL Facility — 70,000 — Repayments under ABL Facility ( 40,000 ) ( 30,000 ) — Retirements of debt ( 350,304 ) — ( 140,272 ) Principal repayments of financing lease obligations ( 29,022 ) ( 14,237 ) ( 17,273 ) Debt issuance costs paid ( 11,352 ) — — Common shares repurchased — — ( 12,546 ) Other ( 3,042 ) ( 1,272 ) ( 1,138 ) 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. F-8 WARRIOR MET COAL, INC. STATEMENTS OF CASH FLOWS (CONTINUED) (in thousands) For the years ended December 31, 2021 2020 2019 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest paid, net of capitalized interest $ 36,359 $ 30,523 $ 33,544 Cash paid for income taxes $ — $ 69 $ 85 SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Financing leases - equipment $ 46,961 $ 18,967 $ 45,523 The accompanying notes are an integral part of these consolidated financial statements. F-9 WARRIOR MET COAL, INC. NOTES TO FINANCIAL STATEMENTS Note 1— Business and Basis of Presentation Description of the Business Warrior Met Coal, Inc. 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. The Company is a large-scale, low-cost producer and exporter of premium met coal, also known as hard-coking coal ("HCC"), operating highly efficient longwall operations in its underground mines based in Alabama. The HCC that the Company produces from the Blue Creek coal seam contains very low sulfur, has strong coking properties and is of a similar quality to coal referred to as the premium HCC produced in Australia. The Company also generates ancillary revenues from the sale of natural gas extracted as a byproduct from the underground coal mines and royalty revenues from leased properties. Basis of Presentation The accompanying consolidated financial statements include the accounts of Warrior Met Coal, Inc and its subsidiaries (the "Company"). All significant intercompany transactions and balances have been eliminated in consolidation. 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. 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. 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 F-10 WARRIOR MET COAL, INC. NOTES TO FINANCIAL STATEMENTS (Continued) 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. 7. 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 Use of Estimates The Company prepares its financial statements in conformity with GAAP, which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. Due to the inherent uncertainty involved in making estimates, actual results could differ from those estimates. Concentrations of Credit Risk and Major Customers The Company’s principal line of business is mining and marketing met coal to foreign steel producers. For the year ended December 31, 2021, approximately 97.1 % of sales were derived from coal shipments to customers, located primarily in Europe, South America and Asia. At December 31, 2021 approximately 97.0 % of trade receivables were related to these customers. 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. accounted for $ 146.5 million, or 18.7 %, $ 117.7 million, or 15.0 %, and $ 89.1 million, or 11.4 % of total revenues, respectively. 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. The increase in sales to XCoal during the year ended December 31, 2021 is primarily driven by sales into China. F-11 WARRIOR MET COAL, INC. NOTES TO FINANCIAL STATEMENTS (Continued) Revenue Recognition 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. For coal shipments to international customers via ocean vessel, control is transferred when the vessel is loaded at the Port of Mobile in Alabama. For natural gas sales, control is transferred when the gas has been transferred to the pipeline. 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. 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 Trade accounts receivable represent customer obligations that are derived from revenue recognized from contracts with customers. Credit is extended based on an evaluation of the individual customer's financial condition. The Company maintains trade credit insurance on the majority of its customers and the geographic regions of coal shipments to these customers. In some instances, the Company requires letters of credit, cash collateral or prepayments from its customers on or before shipment to mitigate the risk of loss. These efforts have consistently resulted in the Company recognizing no historical credit losses. The Company also has never had to have a claim against its trade credit insurance policy. 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 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. Shipping and Handling Costs incurred to transport coal to the point of sale at the Port of Mobile, Alabama, are included in cost of sales and the gross amounts billed to customers, if any, to cover shipping and handling to the ultimate/final destination are included in sales. Cash and Cash Equivalents Cash and cash equivalents include short-term deposits and highly liquid investments that have original maturities of three months or less when purchased and are stated at cost, which approximates fair value. Short-Term Investments Instruments with maturities greater than three months, but less than twelve months, are included in short-term investments. The Company purchases United States Treasury bills with maturities ranging from six to twelve months which are classified as held to maturity and are carried at amortized cost, which approximates fair value. The Company also purchases fixed income securities and certificates of deposits with varying maturities that are classified as available for sale and are carried at fair value. 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, 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. F-12 WARRIOR MET COAL, INC. NOTES TO FINANCIAL STATEMENTS (Continued) Inventories Inventories are valued at the lower of cost or net realizable value. Coal inventory costs include labor, supplies, equipment costs, operating overhead, freight, royalties, depreciation and depletion and other related costs. Coal inventories are valued using the first-in, first-out (“FIFO”) inventory valuation method. The valuation of coal inventories is subject to estimates due to possible gains and losses resulting from inventory movements from the mine site to storage facilities, inherent inaccuracies in belt scales and aerial surveys used to measure quantities and fluctuations in moisture content. Periodic adjustments to coal tonnages on hand are made for an estimate of coal shortages and overages due to these inherent gains and losses, primarily based on historical results from aerial surveys and periodic coal pile clean-ups. Supplies inventories are valued using the average cost method of accounting. Management evaluates its supplies inventory in terms of excess and obsolete exposures which includes such factors as anticipated usage, inventory turnover, inventory levels and ultimate market value. A reserve for excess and obsolete supplies inventory is established and charged to cost of sales in the Statements of Operations. Deferred Longwall Move Expenses Direct costs, including labor and supplies, associated with moving longwall equipment and the related equipment refurbishment costs are deferred and included in prepaid expenses. These deferred costs are amortized on a units-of-production basis into cost of sales over the life of the subsequent panel of coal mined by the longwall equipment. See Note 4 for further disclosures related to deferred longwall move expenses. Advanced Mining Royalties Lease rights to coal reserves are often acquired in exchange for royalty payments. Advance mining royalties are advance payments made to lessors under terms of mineral lease agreements that are recoupable against future production royalties. These advance payments are deferred and charged to operations as the coal reserves are mined. Advance mining royalties are included in other long-term assets. Property, Plant and Equipment Property, Plant and Equipment Property, plant and equipment are recorded at cost. Depreciation is recorded principally on the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized on the straight-line method over the lesser of the useful life of the improvement or the remaining lease term. Estimated useful lives used in computing depreciation expense range from three to ten years for machinery and equipment, and from fifteen to thirty years for land improvements and buildings. Well life is used to estimate the useful life for gas properties and related development, and mine life is used for amortizing mine development costs. Gains and losses upon disposition are reflected in the Statements of Operations in the period of disposition. Maintenance and repair expenditures are charged to cost of sales as incurred. Deferred Mine Development Costs of developing new underground mines and certain underground expansion projects are capitalized. Underground development costs, which are costs incurred to make the coal physically accessible, may include construction permits and licenses, mine design, construction of access roads, main entries, airshafts, roof protection and other facilities. Mine development costs are amortized primarily on a units-of-production basis over the estimated reserve tons directly benefiting from the capital expenditures. Costs amortized during the production phase of a mine are capitalized into inventory and expensed to cost of sales as the coal is sold. Coal sales revenue related to incidental production during the development phase are recorded as sales with an offset to cost of sales based on the estimated cost per ton sold for the mine when the asset is in place for its intended use. Owned and Leased Mineral Interests Costs to obtain coal reserves and lease mineral rights are capitalized based on cost or the fair value at acquisition and depleted using the units-of-production method over the life of proven and probable reserves. 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 $ 8.3 million, $ 9.3 F-13 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 The Company has certain asset retirement obligations primarily related to mine closing reclamation costs, perpetual water care costs and other costs associated with dismantling and removing facilities. Asset retirement obligations are determined for each mine using various estimates and assumptions, including estimates of disturbed acreage as determined from engineering data, estimates of future costs to reclaim the disturbed acreage and the timing of related cash flows, discounted using a credit-adjusted, risk-free rate. The Company's asset retirement obligations also include estimates to reclaim gas wells in accordance with the Oil and Gas Board of Alabama. On at least an annual basis, the Company reviews the entire asset retirement obligation liability and makes necessary adjustments for permit changes, the anticipated timing of mine closures, and revisions to cost estimates and productivity assumptions to reflect current experience. As changes in estimates occur, the carrying amount of the obligation and asset are revised to reflect the new estimate after applying the appropriate credit-adjusted, risk-free discount rate. The future costs of these obligations are accrued at the estimated fair value in the period in which they are incurred if a reasonable estimate of fair value can be made. The present value of the estimated asset retirement cost is capitalized as part of the carrying amount of the long-lived asset. For sites where there is no asset, expense or income is recognized for changes in estimates. Capitalized asset retirement costs are amortized on a units-of-production basis over the estimated reserves. Accretion of the asset retirement obligation is recognized over time and generally will escalate over the life of the producing asset, typically as production declines. Accretion is included in cost of sales on the Statements of Operations. Accrued mine closing costs, perpetual care costs and reclamation costs and other costs of dismantling and removing facilities are regularly reviewed by management and revised for changes in future estimated costs and regulatory requirements, as necessary. 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 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. See Note 8 for further disclosures related to asset retirement obligations. Impairment of Long-Lived Assets Property, plant and equipment and other long-lived assets are reviewed for impairment at least annually or whenever events or changes in circumstances indicate that the book value of the asset may not be recoverable. The Company periodically evaluates whether events and circumstances have occurred that would indicate possible impairment. When impairment indicators exist, the Company uses an estimate of the future undiscounted cash flows of the related asset or asset group over the remaining life in measuring whether or not the asset values are recoverable. If the carrying amount of an asset or asset group exceeds its estimated future cash flows, impairment is recognized equal to the amount by which the carrying amount of the asset exceeds the fair value of the asset or asset group. Fair value is generally determined using market quotes, if available, or a discounted cash flow approach. The Company’s estimate of future undiscounted cash flows is based on assumptions including long-term met coal pricing forecasts, anticipated production volumes and mine operating costs for the life of the mine or estimated useful life of the asset. Equity Award Compensation The Company accounts for equity award-based compensation to employees and non-employee/directors in accordance with ASC 718 requiring employee equity awards to be accounted for under the fair value method. The Company recognizes forfeitures as they occur. The Company recognizes compensation expense associated with equity awards for all awards made to employees as the requisite service, performance and market vesting conditions are met. For units granted containing only service and performance conditions, the fair value of the award is equal to the market price of the Company's common stock at the date of grant. For units granted containing only a market condition, the fair value of the award is determined utilizing a Monte Carlo simulation model which incorporates the total stockholder return hurdles set for each grant. 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 F-14 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. No compensation expense is recorded for awards with performance conditions until the performance condition is determined to be probable of achievement. For awards with a market condition that affects vesting, the market condition is considered in determining the award’s grant-date fair value. 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 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, 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. Income Taxes The Company records a tax provision for the expected tax effects of the reported results of operations. The provision for income taxes is determined using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax impact of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating losses and tax credit carryforwards. 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 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. The Company recognizes tax benefits from uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. Fair Value Measurements Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three level hierarchy has been established for valuing assets and liabilities based on how transparent (observable) the inputs are that are used to determine fair value, with the inputs considered most observable categorized as Level 1 and those that are the least observable categorized as Level 3. Hierarchy levels are defined as follows: Level 1: Quoted prices in active markets for identical assets and liabilities. Level 2: Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data. Level 3: 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. F-15 WARRIOR MET COAL, INC. NOTES TO FINANCIAL STATEMENTS (Continued) Leases The Company determines if an arrangement is a lease at inception. The Company has an accounting policy election that leases with an initial term of 12 months or less remain off its balance sheet and lease payments are recognized in the Statements of Operations on a straight-line basis over the lease term. A right-of-use asset represents the Company's right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized at the lease commencement date based on the present value of the lease payments over the lease term. For purpose of calculating such present values, lease payments include components that vary based on an index or rate, using the prevailing index or rate at the commencement date and exclude components that vary based upon other factors. For those leases that do not contain a readily determinable implicit rate, the Company uses its incremental borrowing rate at commencement to determine the present value of lease payments. Variable lease payments not included within lease contracts are expensed as incurred. The Company's leases may include options to extend or terminate the lease, and such options are reflected in the term when their exercise is reasonably certain. Lease expense is recognized on a straight-line basis over the lease term. New Accounting Pronouncements 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. This ASU removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. The ASU is effective for fiscal years beginning after December 15, 2020. 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 Inventories, net are summarized as follows (in thousands): December 31, 2021 December 31, 2020 Coal $ 24,185 $ 86,272 Raw materials, parts, supplies and other, net 35,434 32,441 Total inventories, net $ 59,619 $ 118,713 Note 4— Prepaid Expenses and Other Prepaid expenses and other consisted of the following (in thousands): December 31, 2021 December 31, 2020 Deferred longwall move expenses $ 20,901 $ 22,972 Prepaid insurance 2,283 3,832 Prepaid deposits 49 6,937 Current hedge asset 4,043 — Other 5,821 6,169 Total prepaid expenses and other $ 33,097 $ 39,910 F-16 WARRIOR MET COAL, INC. NOTES TO FINANCIAL STATEMENTS (Continued) Note 5— Mineral Interests and Property, Plant and Equipment, net Mineral interests totaled $ 144.2 million and $ 144.2 million and the related accumulated depletion totaled $ 51.0 million and $ 43.4 million as of December 31, 2021 and December 31, 2020, respectively. Property, plant and equipment are summarized as follows (in thousands): December 31, 2021 December 31, 2020 Land $ 72,262 $ 71,886 Land improvements 18,368 18,024 Building and leasehold improvements 83,649 77,556 Mine development and infrastructure costs 38,336 29,893 Machinery and equipment 742,890 679,393 Financing lease right of use asset 93,367 56,528 Construction in progress 47,814 82,367 Total 1,096,686 1,015,647 Less: Accumulated depreciation ( 493,274 ) ( 378,539 ) Property, plant and equipment, net $ 603,412 $ 637,108 Depreciation and depletion expense was $ 141.4 million, $ 118.1 million, and $ 97.3 million, for the years ended December 31, 2021 and December 31, 2020, and December 31, 2019, respectively. Note 6— Other Long-Term Assets Other long-term assets consisted of the following (in thousands): December 31, 2021 December 31, 2020 Advance mining royalties $ 7,297 $ 7,305 ABL Facility origination fees 5,004 2,667 Other 2,841 4,146 Total other long-term assets $ 15,142 $ 14,118 Note 7— Income Taxes Income tax expense (benefit) consisted of the following (in thousands): For the years ended December 31, 2021 2020 2019 Current Federal $ — $ ( 74 ) $ ( 3,151 ) State — 5 85 — ( 69 ) ( 3,066 ) Deferred Federal 19,031 ( 16,731 ) 53,677 State 30,065 ( 3,344 ) 14,806 49,096 ( 20,075 ) 68,483 Total $ 49,096 $ ( 20,144 ) $ 65,417 F-17 WARRIOR MET COAL, INC. NOTES TO FINANCIAL STATEMENTS (Continued) 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 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 Effect of: Depletion ( 12,227 ) ( 1,504 ) ( 16,198 ) State and local income tax, net of federal effect ( 22,387 ) ( 2,637 ) 11,747 Valuation allowance on deferred tax assets 45,952 — — Impact of Walter Energy IRS Settlement (1) — — ( 6,615 ) IRC Section 451 marginal well credit ( 4,702 ) ( 3,977 ) — Other 465 ( 286 ) ( 611 ) 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. Deferred Taxes Deferred income tax assets and liabilities reflect the effects of tax losses, credits, and the future income tax effects of temporary differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases. Deferred income tax assets and liabilities are measured using enacted tax rates that apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Significant components of the Company's deferred income tax assets and liabilities were (in thousands): F-18 WARRIOR MET COAL, INC. NOTES TO FINANCIAL STATEMENTS (Continued) December 31, 2021 December 31, 2020 Deferred income tax assets: Net operating loss and credit carryforwards $ 226,438 $ 253,756 Inventory 494 — Asset retirement obligations 14,930 15,547 Black lung obligations 7,834 9,275 Accrued expenses 6,365 4,303 Other 268 3,614 Total deferred income tax assets 256,329 286,495 Less: valuation allowance for deferred income tax assets ( 45,952 ) — Net deferred income tax assets 210,377 286,495 Deferred income tax liabilities: Inventory — ( 558 ) Prepaid expenses ( 8,444 ) ( 10,470 ) Property, plant and equipment ( 74,339 ) ( 98,637 ) Other ( 2,318 ) ( 2,458 ) Total deferred income tax liabilities ( 85,101 ) ( 112,123 ) Net deferred income tax asset $ 125,276 $ 174,372 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 $ 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. The increase in the general business credits from the prior year is due to a $ 4.7 million income tax benefit from the Internal Revenue Code ("IRC") Section 451 Marginal Well Credit. The Marginal Well Credit is a production-based tax credit that provides a credit for qualified natural gas production. The credit is phased out when natural gas prices exceed certain levels. Under the IRC of 1986, as amended (the "Code"), a company is generally allowed a deduction for NOLs against its federal taxable income. A company’s ability to deduct its NOLs and utilize certain other available tax attributes can be substantially constrained under the general annual limitation rules of Section 382 of the Code if it undergoes an “ownership change” as defined in Section 382 or if similar provisions of state law apply. While the Company does not believe an ownership change has occurred since April 1, 2016, because the rules under Section 382 are highly complex and actions of the Company's stockholders which are beyond its control or knowledge could impact whether an ownership change has occurred, the Company cannot give you any assurance that another Section 382 ownership change has not occurred or will not occur in the future. As a result of the Company qualifying for the aforementioned exception, were the Company to have undergone a subsequent ownership change prior to April 1, 2018, its NOLs would effectively be reduced to zero. An ownership change after such date would severely limit the Company's ability to utilize its NOLs and other tax attributes. Rights Agreement On February 14, 2020, we adopted the Rights Agreement in an effort to prevent the imposition of significant limitations under Section 382 of the Code on our ability to utilize our current NOLs to reduce our future tax liabilities. The Company's stockholders ratified the Rights Agreement at the 2020 Annual Meeting of Stockholders. The Rights Agreement is intended to supplement the 382 Transfer Restrictions and is designed to serve the interests of all stockholders by preserving the availability of our NOLs and is similar to plans adopted by other companies with significant NOLs. Pursuant to the Rights Agreement, one preferred stock purchase right (a “Right” or the “Rights”) 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 F-19 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. In such an event, each Right will entitle its holder to buy, at the exercise price, common stock having a market value of two times the then current exercise price of the Right and the Rights held by such Acquiring Person will become void. The Rights Agreement also gives discretion to the Board to determine that someone is an Acquiring Person even if they do not own 4.99 % or more of the common stock but do own 4.99 % or more in value of the outstanding stock, as determined pursuant to Section 382 of the Code and the regulations promulgated thereunder. In addition, the Board has established procedures to consider requests to exempt certain acquisitions of the Company’s securities from the Rights Agreement if the Board determines that doing so would not limit or impair the availability of the NOLs or is otherwise in the best interests of the Company. The Board may redeem the Rights for $ 0.01 per Right at any time before any person or group triggers the Rights Agreement. 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, 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 The Company periodically assesses whether it is more likely than not that it will generate sufficient taxable income to realize its deferred income tax assets. The Company establishes valuation allowances if it is not likely it will realize its deferred income tax assets. In making this determination, the Company considers all available positive and negative evidence and makes certain assumptions. 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. 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, 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: F-20 WARRIOR MET COAL, INC. NOTES TO FINANCIAL STATEMENTS (Continued) December 31, 2021 Beginning balance $ — Addition/(Reduction) - current tax expense/(benefit) 45,952 Release $ — Ending balance $ 45,952 Uncertain Tax Positions The Company has filed income tax returns in the U.S. and in various state and local jurisdictions which are routinely examined by tax authorities in these jurisdictions. NOLs and carryforwards are subject to adjustments based on examination and the statute of limitations is currently open for all such loss and credit carryforwards. The Company had no unrecognized tax benefits or accruals for unrecognized tax benefits as of December 31, 2021 and 2020, respectively. The Company did not record any interest or penalties associated with income taxes for years ended December 31, 2021, 2020 and 2019, respectively, but would record interest and penalties within income tax expense. Note 8— Asset Retirement Obligations Changes in the asset retirement obligations (“ARO”) were as follows (in thousands): December 31, 2021 December 31, 2020 Balance at Beginning of Period $ 61,907 $ 56,206 Accretion expense 3,237 3,004 Revisions to estimates 5,567 2,973 Obligations settled ( 34 ) ( 276 ) Balance at End of Period $ 70,677 $ 61,907 The portion of costs expected to be paid within a year as of December 31, 2021 is $ 5.1 million. The portion of costs expected to be incurred beyond one year as of December 31, 2021 is $ 65.5 million. There were no assets that were legally restricted for purposes of settling asset retirement obligations at December 31, 2021. Alabama's regulatory framework technically allows for self-bonding. However, as a practical matter, due to the onerous regulatory requirements for self-bonding, mining companies in Alabama utilize surety bonds, collateral bonds, or letters of credit to meet their financial assurance requirements. 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, 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. This portion of the liability relates to operations that were idle at the time of purchase accounting for the acquisition of certain assets of Walter Energy and no value was attributed to any asset as an offset for the asset retirement obligation. Note 9— Accrued Expenses Accrued expenses consisted of the following (in thousands): F-21 WARRIOR MET COAL, INC. NOTES TO FINANCIAL STATEMENTS (Continued) December 31, 2021 December 31, 2020 Accrued wages and employee benefits $ 31,456 $ 25,539 Accrued operating expenses 8,720 46,285 Accrued royalties 8,267 3,484 Accrued freight 767 2,724 Accrued interest 2,297 4,981 Accrued non-income taxes 3,340 3,095 Total accrued expenses $ 54,847 $ 86,108 Note 10— Pneumoconiosis ("Black Lung") Obligations The Company is responsible for medical and disability benefits for black lung disease under the Federal Coal Mine Health and Safety Act of 1969, as amended. Beginning on April 1, 2016 through May 31, 2018, the Company was insured under a guaranteed cost insurance policy, through a third-party insurance carrier, for black lung claims raised by any employee subsequent to the acquisition of certain assets of Walter Energy. Beginning on June 1, 2018 through May 31, 2020, the Company had a deductible policy where the Company is responsible for the first $ 0.5 million for each black lung claim. Since June 1, 2020, the Company has a deductible policy where the Company is responsible for the first $ 1.0 million for each black lung claim. In addition, in connection with the acquisition of certain assets of Walter Energy, the Company assumed all black lung liabilities of Walter Energy and its U.S. 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 ("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 $ 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. The Company performs an annual evaluation of its black lung liabilities at each balance sheet date. The calculation uses assumptions regarding rates of successful claims, discount factors, benefit increases and mortality rates, among others. Note 11— Employee Benefit Plans Defined Contribution Plans 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 $ 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 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. F-22 WARRIOR MET COAL, INC. NOTES TO FINANCIAL STATEMENTS (Continued) As a result of the strike, the Company idled Mine No. 4 and scaled back operations at Mine No. 7. 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. 2017 Equity Incentive Plan In connection with the Company's initial public offering, the Company adopted the Warrior Met Coal, Inc. 2017 Equity Incentive Plan (the “2017 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. in the form of stock options, stock appreciation rights, restricted stock, restricted stock units, stock bonus awards, and performance awards. The total number of shares of common stock, including incentive stock options, available for grant of awards under the 2017 Equity Plan as of December 31, 2021 is 4,740,814 . If any outstanding award expires, is canceled, forfeited, or settled in cash, the shares allocable to that award will again be available for grant under the 2017 Equity Plan. As of December 31, 2021, the equity awards granted under the 2017 Equity Plan are comprised of common stock, restricted stock awards, and restricted stock unit awards. The Company recognized stock compensation expense of $ 9.3 million for the year ended December 31, 2021 associated with awards granted under the 2017 Equity Plan. 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: Shares Weighted Average Grant Date Fair Value Non-vested at December 31, 2020 799,240 $ 18.95 Granted 430,929 $ 13.51 Canceled ( 31,207 ) $ 25.31 Forfeited ( 22,010 ) $ 15.09 Vested ( 348,550 ) $ 21.02 Outstanding at December 31, 2021 828,402 Note 13— Debt Debt consisted of the following (in thousands): F-23 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 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 2026 Debt discount, net ( 10,194 ) ( 3,527 ) Total debt 339,806 379,908 Less: current debt — — 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): Payments Due 2022 2023 2024 2025 2026 Thereafter Senior secured notes $ — $ — $ — $ — $ — $ 350,000 ABL facility — — — — — — Total $ — $ — $ — $ — $ — $ 350,000 ABL Facility 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 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. 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 F-24 WARRIOR MET COAL, INC. NOTES TO FINANCIAL STATEMENTS (Continued) 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; (iv) restrictions on making certain restricted payments; (v) restrictions on making certain investments; (vi) restrictions on certain mergers, consolidations and asset dispositions; (vii) restrictions on certain transactions with affiliates; and (viii) restrictions on modifications to certain indebtedness. Additionally, the ABL Facility contains a springing fixed charge coverage ratio of not less than 1.00 to 1.00, which ratio is tested if availability under the ABL Facility is less than a certain amount. As of December 31, 2021, the Company was not subject to this covenant. Subject to customary grace periods and notice requirements, the ABL Facility also contains customary events of default. The Company was in compliance with all applicable covenants under the ABL Facility as of December 31, 2021. Senior Secured Notes 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 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). 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 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 F-25 WARRIOR MET COAL, INC. NOTES TO FINANCIAL STATEMENTS (Continued) 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 The Company primarily enters into rental agreements for certain mining equipment that are for periods of 12 months or less, some of which include options to extend the leases. Leases that are for periods of 12 months or less are not recorded on the balance sheet in accordance with the Company's accounting policy election described in Note 2. The Company recognizes lease expense on these agreements on a straight-line basis over the lease term. Additionally, the Company has certain finance leases for mining equipment that expire over various contractual periods. These leases have remaining lease terms of one to five years and do not include an option to renew. Amortization expense for finance leases is included in depreciation and depletion expense. Supplemental balance sheet information related to leases was as follows (in thousands): December 31, 2021 December 31, 2020 Finance lease right-of-use assets, net (1) $ 75,692 $ 46,746 Finance lease liabilities Current 23,622 14,385 Noncurrent 28,434 24,091 Total finance lease liabilities $ 52,056 $ 38,476 Weighted average remaining lease term - finance leases (in months) 35.1 42.9 Weighted average discount rate - finance leases (2) 6.11 % 5.77 % (1) Finance lease right-of-use assets, recorded net of accumulated amortization of $ 17.7 million and $ 9.8 million, are included in property, plant and equipment, net in the Balance Sheets as of December 31, 2021 and December 31, 2020, respectively. See Note 5 for additional disclosure. (2) When an implicit discount rate is not readily available in a lease, the Company uses its incremental borrowing rate based on information available at the commencement date when determining the present value of lease payments. The components of lease expense were as follows (in thousands): For the year ended December 31, 2021 2020 Operating lease cost (1): $ 4,271 $ 2,980 Finance lease cost: Amortization of leased assets 13,941 12,730 Interest on lease liabilities 3,902 1,988 Net lease cost $ 22,114 $ 17,698 (1) Includes leases that are for periods of 12 months or less. F-26 WARRIOR MET COAL, INC. NOTES TO FINANCIAL STATEMENTS (Continued) Maturities of lease liabilities were as follows (in thousands): Finance Leases (1) 2022 26,622 2023 25,640 2024 3,195 2025 1,353 Thereafter 156 Total 56,966 Less: amount representing interest ( 4,910 ) Present value of lease liabilities $ 52,056 (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): For the year ended December 31, 2021 2020 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from finance leases $ 3,902 $ 1,988 Financing cash flows from finance leases $ 29,022 $ 14,237 Non-cash right-of-use assets obtained in exchange for lease obligations: Finance leases $ 46,961 $ 18,967 Note 15— Related Party Transactions In connection with the acquisition of certain assets of Walter Energy, the Company acquired a 50 % interest in Black Warrior Methane (“BWM”) and Black Warrior Transmission (“BWT”), which are accounted for under the proportionate consolidation method and equity method, respectively. The Company has granted the rights to produce and sell methane gas from its coal mines to BWM and BWT. The Company’s net investments in, advances to/from and equity in earnings or loss of BWT are not material to the Company. 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 $ 2.1 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 Environmental Matters The Company is subject to a wide variety of laws and regulations concerning the protection of the environment, both with respect to the construction and operation of its plants, mines and other facilities and with respect to remediating environmental conditions that may exist at its own and other properties. The Company believes that it is in substantial compliance with federal, state and local environmental laws and regulations. The Company accrues for environmental expenses resulting from existing conditions that relate to past operations when the costs are probable and can be reasonably estimated. As of December 31, 2021 and December 31, 2020, there were no accruals for environmental matters other than asset retirement obligations for mine reclamation. F-27 WARRIOR MET COAL, INC. NOTES TO FINANCIAL STATEMENTS (Continued) Miscellaneous Litigation From time to time, the Company is party to a number of lawsuits arising in the ordinary course of their businesses. The Company records costs relating to these matters when a loss is probable and the amount can be reasonably estimated. The effect of the outcome of these matters on the Company’s future results of operations cannot be predicted with certainty as any such effect depends on future results of operations and the amount and timing of the resolution of such matters. As of December 31, 2021 and December 31, 2020, there were no items accrued for miscellaneous litigation. Walter Canada Settlement Proceeds On July 15, 2015, Walter Energy and certain of its wholly owned U.S. subsidiaries, including Jim Walter Resources, Inc. (“JWR”) filed voluntary petitions for relief under Chapter 11 of Title 11 of the U.S. Bankruptcy Code (the “Chapter 11 Cases”) in the Northern District of Alabama, Southern Division. On December 7, 2015, Walter Energy Canada Holdings, Inc., Walter Canadian Coal Partnership and their Canadian affiliates (collectively “Walter Canada”) applied for and were granted protection under the Companies’ Creditors Arrangement Act (the “CCAA”) pursuant to an Initial Order of the Supreme Court of British Columbia. In connection with the Company’s acquisition of certain core operating assets of Walter Energy, the Company acquired a receivable owed to Walter Energy by Walter Canada for certain shared services provided by Walter Energy to Walter Canada (the “Shared Services Claim”) and a receivable for unpaid interest owed to Walter Energy from Walter Canada in respect of a promissory note (the “Hybrid Debt Claim”). Each of these claims were asserted by the Company in the Walter Canada CCAA proceedings. Walter Energy deemed these receivables to be uncollectable for the year ended December 31, 2015 and the Company did not assign any value to these receivables in acquisition accounting as collectability was deemed remote. In March 2020, the Company received approximately $ 1.8 million in settlement proceeds for the Shared Services Claim and Hybrid Debt Claim and an additional $ 1.7 million in the fourth quarter of 2020, which are reflected as other income in the Statements of Operations. These settlement proceeds are in addition to the $ 22.8 million received in 2019 which are reflected as other income in the Statements of Operations. The collectability of additional amounts, if any, related to the Shared Services Claim and Hybrid Debt Claim depends on the outcome of, and the timing of any resolutions of, the Walter Canada CCAA proceedings and cannot be predicted with certainty. Commitments and Contingencies—Other The Company is party to various transportation and throughput agreements with rail and barge transportation providers and the Alabama State Port Authority. These agreements contain annual minimum tonnage guarantees with respect to coal transported from the mine sites to the Port of Mobile in Alabama, unloading of rail cars or barges, and the loading of vessels. If the Company does not meet its minimum throughput obligations, which are based on annual minimum amounts, it is required to pay the transportation providers or the Alabama State Port Authority a contractually specified amount per metric ton for the difference between the actual throughput and the minimum throughput requirement. At December 31, 2021 and December 31, 2020, the Company had no liability recorded for minimum throughput requirements. Royalty Obligations A substantial amount of the coal that the Company mines is produced from mineral reserves leased from third-party land owners. These leases convey mining rights to the Company in exchange for royalties to be paid to the land owner as either a fixed amount per ton or as a percentage of the sales price. Although coal leases have varying renewal terms and conditions, they generally last for the economic life of the reserves. 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 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 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. F-28 WARRIOR MET COAL, INC. NOTES TO FINANCIAL STATEMENTS (Continued) 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. The Company’s repurchases may be executed using open market purchases or privately negotiated transactions in accordance with applicable securities laws and regulations, including Rule 10b-18 of the Exchange Act and repurchases may be executed pursuant to Rule 10b5-1 under the Exchange Act. Repurchases will be subject to limitations in the ABL Facility and the Indenture. 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 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 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 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 Assets: 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 assets or liabilities. The following methods and assumptions were used to estimate the fair value for which the fair value option was not elected: F-29 WARRIOR MET COAL, INC. NOTES TO FINANCIAL STATEMENTS (Continued) Cash and cash equivalents, short-term investments, restricted cash, receivables and accounts payable— The carrying amounts reported in the Balance Sheet approximate fair value due to the short-term nature of these assets and liabilities. Debt— The Company's outstanding debt is carried at cost. 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 income (loss) per share was calculated as follows (in thousands, except per share data): For the years ended December 31, 2021 2020 2019 Numerator: Net income (loss) $ 150,881 $ ( 35,761 ) $ 301,699 Denominator: 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) 63 — 130 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; therefore, the effect of dilutive securities is zero for such periods. As of December 31, 2021, there were 295,632 restricted stock unit awards for which the service-based vesting conditions for these awards were not met as of the measurement date. 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. 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. These awards are vested and as such have been included in the weighted-average shares used to compute basic and diluted net (loss) income per share. F-30 WARRIOR MET COAL, INC. NOTES TO FINANCIAL STATEMENTS (Continued) Dividends 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. Any future dividends or stock repurchases will be at the discretion of the Board and subject to consideration of a number of factors, including business and market conditions, future financial performance and other strategic investment opportunities. The Company will also seek to optimize its capital structure to improve returns to stockholders while allowing flexibility for the Company to pursue very selective strategic growth opportunities that can provide compelling stockholder returns. The Company has paid a regular quarterly cash dividend of $ 0.05 per share every quarter since the Board adopted the 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. Note 21— Segment Information The Company identifies a business as an operating segment if: i) it engages in business activities from which it may earn revenues and incur expenses; ii) its operating results are regularly reviewed by the Chief Operating Decision Maker (“CODM”), who is the Company’s Chief Executive Officer, to make decisions about resources to be allocated to the segment and assess its performance; and iii) it has available discrete financial information. The Company has determined that its two underground mining operations are its operating segments. The CODM reviews financial information at the operating segment level to allocate resources and to assess the operating results and financial performance for each operating segment. Operating segments are aggregated into a reportable segment if the operating segments have similar quantitative economic characteristics and if the operating segments are similar in the following qualitative characteristics: i) nature of products and services; ii) nature of production processes; iii) type or class of customer for their products and services; iv) methods used to distribute the products or provide services; and v) if applicable, the nature of the regulatory environment. The Company has determined that the two operating segments are similar in both quantitative and qualitative characteristics and thus the two operating segments have been aggregated into one reportable segment. The Company has determined that its natural gas and royalty businesses and other unallocated activities did not meet the criteria in ASC 280 to be considered as operating or reportable segments. Therefore, the Company has included their results in an “all other” category as a reconciling item to consolidated amounts. The Company does not allocate all of its assets, or its depreciation and depletion expense, selling, general and administrative expenses, other post-retirement benefits, transactions costs, restructuring costs, interest expense, reorganization items, net and income tax expense by segment. The following tables include reconciliations of segment information to consolidated amounts (in thousands): For the years ended December 31, 2021 2020 2019 Revenues Mining $ 1,028,283 $ 761,871 $ 1,235,998 All other 30,933 20,867 32,311 Total revenues $ 1,059,216 $ 782,738 $ 1,268,309 F-31 WARRIOR MET COAL, INC. NOTES TO FINANCIAL STATEMENTS (Continued) For the years ended December 31, 2021 2020 2019 Capital Expenditures Mining $ 55,344 $ 78,015 $ 100,768 All other 2,549 9,473 6,510 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 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 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, 2021 2020 2019 Segment Adjusted EBITDA $ 474,001 $ 136,701 $ 515,253 Other revenues 30,933 20,867 32,311 Cost of other revenues ( 28,899 ) ( 33,736 ) ( 29,828 ) Depreciation and depletion ( 141,418 ) ( 118,092 ) ( 97,330 ) Selling, general and administrative ( 35,593 ) ( 32,879 ) ( 37,014 ) Business interruption ( 21,372 ) — — Idle mine ( 33,899 ) — — Loss on early extinguishment of debt ( 9,678 ) — ( 9,756 ) Other income 1,291 3,544 22,815 Interest expense, net ( 35,389 ) ( 32,310 ) ( 29,335 ) Income tax (expense) benefit ( 49,096 ) 20,144 ( 65,417 ) Net income (loss) $ 150,881 $ ( 35,761 ) $ 301,699 Note 22— Subsequent Events Regular Quarterly Dividend 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. 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