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Item 7. Management’s Discussion and Analysis

2023-02-15 compared with 2022-02-22 · 201 added, 192 removed, 372 unchanged (51% of the section changed)

Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis provides a narrative of our results of operations and financial condition for the years ended December 31, 2021, December 31, 2020, and December 31, 2019.

The following discussion and analysis provides a narrative of our results of operations and financial condition for the years ended December 31, 2022 and December 31, 2021.

You should read the following discussion and analysis of our financial condition and results of operations together with our audited financial statements and related notes appearing elsewhere in this Annual Report.

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7, our two operating mines, had approximately 89.0 million metric tons of recoverable reserves and our undeveloped Blue Creek mine contained 68.2 million metric tons of recoverable reserves and 39.2 million metric tons of coal resources exclusive of reserves, which total 107.4 million metric tons.

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

As a result of our high quality coal, our realized price has historically been in line with, or at a slight discount to, the S&P Platts Premium Low Volatility ("LV") Free-On-Board Australian Index (the "S&P Platts Index").

Our HCC, mined from the Southern Appalachian portion of the Blue Creek coal seam, is characterized by low sulfur, low-to-medium ash, and LV to MV.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

intermediary banks.

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

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

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

As of the filing of this Form 10-K, we have not had to idle or temporarily idle our mines as a result of COVID-19.

In addition, future governmental policy changes in foreign countries may be detrimental to the global coal market and could thus impact our business, financial condition or results of operation.

For example, the Chinese government has from time to time implemented regulations and promulgated new laws or restrictions, such as the unofficial ban on Australian coal in November 2020, on their domestic coal industry, sometimes with little advance notice, which impacted worldwide coal demand, supply and prices.

The ban on Australian coal significantly impacted the global met coal market in recent years.

This unofficial ban was lifted in January 2023.

During the past several years, the Chinese government has initiated a number of anti-smog measures aimed at reducing hazardous air emissions through temporary production capacity restrictions with the steel, coal and coal-fired power sectors.

In February 2022, the war in Ukraine pushed seaborne met coal export prices to record levels.

After the invasion began, spot cargo requests for Australian met coals could not be filled.

The U.S., Canada and Indonesia were also not able to step up on short notice.

These supply shortages combined with the urgent purchases of non-Russian coal against a backdrop of mounting sanctions, trade finance problems and seaborne logistical constraints pushed the Queensland PLV HCC index price to over $660.00 per metric ton by mid-March.

On August 10, 2022, the European Union ban on the importation of Russian coal

became effective which significantly impacted coking coal markets by disrupting previously existing trading patterns.

The Queensland PLV HCC index price started the quarter at approximately $302.00 per metric ton falling to a floor of $188.00 per metric ton on August 2, 2022 and finishing the year at $294.50.

The resulting volatility, including market expectations of potential changes in coal prices and inflationary pressures on steel products, may significantly affect prices for our coal or the cost of supplies and equipment.

inflation surged to a new, four-decade record high of 9.1% in July 2022, driven by increased energy and food costs, supply constraints and strong consumer demand.

High inflation has been driven by growth in the economy as it bounces back from COVID-19, powered in part by low interest rates and government stimulus to counter the pandemic's impact.

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

We have estimated that inflation accounted for approximately $24.3 million of additional cost recognized in cost of sales in the Statements of Operations for the year ended December 31, 2022.

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

In 2023, we expect inflation to ease but it will continue to negatively impact our profitability, as we expect inflation to remain in steel prices, freight rates, labor and other materials and supplies.

Inflation affects, among others, the costs of belt structure, roof bolts, cable, magnetite, rock dust and other supplies, plus labor and parts on equipment repair and rebuilds.

During the year ended December 31, 2022, the global seaborne metallurgical coal market was characterized by significant volatility, primarily driven by a weakening global macroeconomic environment, inflation and trade disruptions following the previously mentioned sanctions imposed on Russian coal imports.

The lifting of the Chinese ban on Australian coal, the ongoing war in Ukraine, additional sanctions against Russia and a broader economic weakening as inflation rises or continue apace and stimulus falls are all likely to continue to impact the global met coal market and impact our business, financial condition or results of operations.

Collective Bargaining Agreement

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

Due to the strike, we idled Mine No.

As a result of the strike, we initially idled Mine No.

4 and scaled back operations at Mine No.

In connection with the idling of Mine No.

4 and reduced operations at Mine No.

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

In the first quarter of 2022, we restarted operations at Mine No.

Due to the reduced operations at Mine No.

4 and Mine No.

7, we incurred idle mine expenses of $12.1 million and $33.9 million for the years ended December 31, 2022 and 2021, respectively.

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

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

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

We have also incurred business interruption expenses of approximately $23.5 million and $21.4 million for the years ended December 31, 2022 and 2021, respectively.

These expenses represent nonrecurring 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.

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We believe that we are well positioned to fulfill anticipated customer volume commitments for 2023.

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

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

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

In the current environment and without a new contract, the Company believes sales volume for 2023 are expected to be between 5.9 million and 6.5 million metric tons and production volumes are expected to be between 5.7 million and 6.3 million metric tons.

While we have business continuity plans in place, the strike may still cause disruption to production and shipping activities, and our plans may vary significantly from quarter to quarter in 2023.

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The consolidated financial statements included elsewhere in this Annual Report and the other financial information presented and discussed in this management's discussion and analysis includes the accounts of Warrior Met Coal, Inc.

and its subsidiaries (the "Company").

and its subsidiaries (the "Company" or "Warrior").

How We Evaluate Our Operations

Our primary business, the mining and exporting of met coal for the steel industry, is conducted in one business segment:

All other operations and results are reported under the “All Other” category as a reconciling item to consolidated amounts, which includes the business results from our sale of natural gas extracted as a byproduct from our underground coal mines and royalties from our leased properties.

Our natural gas and royalty businesses do not meet the criteria in ASC 280, Segment Reporting , to be considered as operating or reportable segments.

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Metric tons produced 5,729 5,084 7,132

Gross price realization (1)

92 % 96 % 98 %

Average net selling price per metric ton $ 334.89 $ 180.43 $ 113.12

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Adjusted EBITDA $ 994,221 $ 457,008 $ 108,276

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

Segment Adjusted EBITDA

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

We define Segment Adjusted EBITDA as net income (loss) adjusted for other revenues, cost of other revenues, depreciation and depletion, selling, general and administrative expenses, business interruption expenses, idle mine expenses, loss on early extinguishment of debt, other income, net interest expense, income tax (expense) benefit and certain transactions or adjustments that the CEO, our Chief Operating Decision Maker does not consider for the purposes of making decisions to allocate resources among segments or assessing segment performance.

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

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• the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities, such as Blue Creek.

Sales Volumes, Gross Price Realization and Average Net Selling Price

Sales Volumes and Average Net Selling Price

We evaluate our operations based on the volume of coal we can safely produce and sell in compliance with regulatory standards, and the prices we receive for our coal.

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The volume of coal we sell is also a function of the pricing environment in the international met coal markets and the amounts of LV and MV coal that we sell.

We evaluate the price we receive for our coal on two primary metrics:

first, our gross price realization and second, our average net selling price per metric ton.

Our gross price realization represents a volume weighted-average calculation of our daily realized price per ton based on the blended gross sales of our LV and MV coal, excluding demurrage and quality specification adjustments, as a percentage of the Platts Index daily price.

Our gross price realizations reflect the premiums and discounts we achieve on our LV and MV coal versus the Platts Index price because of the high quality premium products we sell into the export markets.

In addition, the premiums and discounts in a quarter or year can be impacted by a rising or falling price environment.

On a quarterly basis, our blended gross selling price per metric ton may differ from the Platts Index price per metric ton, primarily due to our gross sales price per ton being based on a blended average of gross sales price on our LV and MV coals as compared to the Platts Index price and due to the fact that many of our met coal supply agreements are based on a variety of indices.

We evaluate the price we receive for our coal based on our average net selling price per metric ton.

Our average net selling price per metric ton represents our coal net sales revenue divided by total metric tons of coal sold.

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Our cash cost of sales per metric ton is calculated as cash cost of sales divided by the metric tons sold.

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

Cash cost of sales is used as a

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

• our operating performance as compared to the operating performance of other companies in the coal industry, without regard to financing methods, historical cost basis or capital structure;

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

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

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

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

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Non-cash mark-to-market loss on gas hedges (4)

Loss on early extinguishment of debt (4)

27,708 1,595 —

Loss on early extinguishment of debt (5)

Business interruption (6)

23,455 21,372 —

Idle mine (7)

Other income and expenses (7)

12,137 33,899 —

Other income (8)

(675) (998) (2,468)

Adjusted EBITDA $ 994,221 $ 457,008 $ 108,276

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

(4) Represents non-cash mark-market losses recognized on our gas hedges (see Note 17 to our consolidated financial statements).

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

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

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

4 and reduced operations at Mine No.

(7) Represents idle mine expenses incurred in connection with reduced operations at Mine No 4 and Mine No.

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

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Total costs and expenses 937,314 53.9 % 815,463 77.0 %

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

Operating income 801,424 46.1 % 243,753 23.0 %

Interest expense, net (18,995) (1.1) % (35,389) (3.3) %

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Other income 675 — % 1,291 0.1 %

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

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

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

Income before income tax expense 783,104 45.0 % 199,977 18.9 %

Income tax expense 141,806 8.2 % 49,096 4.6 %

Net income $ 641,298 36.9 % 150,881 14.2 %

Sales, production and cost of sales components on a per unit basis for the year ended December 31, 2022 and 2021 were as follows:

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Metric tons produced 5,729 5,084

Gross price realization 92 % 96 %

Average net selling price per metric ton $ 334.89 $ 180.43

Cash cost of sales per metric ton $ 138.35 $ 96.43

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

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

The year ended December 31, 2022 was a record year in terms of financial performance.

The following list highlights our key accomplishments for the year ended December 31, 2022:

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

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

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

• we achieved strong net income of $641.3 million, or $12.40 per diluted share and all-time record adjusted EBITDA of $994.2 million;

• we delivered all-time record positive cash flows from operations of $841.9 million and all-time record positive free cash flow of $587.7 million while continuing to invest $254.2 million in property, plant and equipment and mine development;

• we maintained a strong balance sheet with total liquidity of $952.8 million, consisting of cash and cash equivalents of $829.5 million and $123.3 million available under our ABL Facility;

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

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

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

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

• we achieved a total reportable incidence rate of 1.74, which is 63% lower than the national total reportable incidence rate for all underground coal mines in the United States of 4.68 for the nine months ended September 30, 2022, which represents the latest data available;

• we relaunched the development of the Blue Creek mine;

• we demonstrated an ongoing commitment to returning capital to our stockholders paying a regular quarterly dividend of $0.06 per share, an increase of approximately 20% compared to the prior year and special dividends of $1.30 per share.

Sales were $1.7 billion for the year ended December 31, 2022, compared to $1.0 billion for the year ended December 31, 2021.

The $679.3 million increase in revenues was primarily driven by a $787.6 million increase related to a $154.46 increase in the average selling price per metric ton of met coal offset partially by a $108.3 million decrease due to a 0.6 million metric ton decrease in met coal sales volume.

Our sales volumes for the year ended December 31, 2022 were negatively impacted by shipment delays due to mechanical failures at the McDuffie Terminal at the Port of Mobile in Alabama and low rail transportation performance throughout the year.

These issues impacted our shipment volumes throughout the year ended December 31, 2022 and resulted in lower sales volumes and higher inventory levels.

In January 2023, we initiated a series of projects jointly with the McDuffie Terminal to address the mechanical failure issues.

In addition, we have committed both personnel and other resources towards these projects.

We have already seen significant progress with these joint efforts, and we expect the performance at the McDuffie Terminal to improve in 2023.

We are also diverting some of our met coal to alternative terminals to maintain our sales volumes.

Other revenues for the year ended December 31, 2022 were $31.2 million compared to $30.9 million for the year ended December 31, 2021.

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

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

Other revenues are comprised of revenue derived from our natural gas operations, gains and losses on our natural gas hedges and earned royalty revenue.

The $0.2 million increase in other revenues is primarily driven by an increase in gas revenues of $19.2 million related to a $3.27 or 90% increase in the average natural gas selling prices combined with an increase of $7.1 million in earned royalty revenue offset partially by an increase in losses of $26.1 million on our natural gas hedges.

Cost of sales (exclusive of items shown separately below) was $710.6 million, or 40.9% of total revenues for the year ended December 31, 2022, compared to $554.3 million, or 52.3% of total revenues for the year ended December 31, 2021.

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

The $156.3 million increase in cost of sales was primarily driven by a $213.8 million increase due to a $41.92 per metric ton increase in the average cash cost of sales per metric ton offset partially by a $57.9 million decrease due to a 0.6 million metric ton decrease in met coal sales volumes.

The increase in average cash cost of sales per metric ton is primarily due to our variable cost structure in our labor, royalties and logistics contracts that vary in response to changes in met coal prices combined with the impact of inflation which is estimated to be approximately $24.3 million of incremental cost.

Cost of other revenues was $27.0 million for the year ended December 31, 2022, compared to $28.9 million for the year ended December 31, 2021.

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

The $1.9 million decrease is primarily due to a decrease of $7.3 million in our black lung obligation valuation adjustment recorded annually in the fourth quarter primarily attributable to changes in discount rates and claims history offset partially by increases in cost from our natural gas operations.

Depreciation and depletion was $115.3 million, or 6.6% of total revenues, for the year ended December 31, 2022, compared to $141.4 million, or 13.4% of total revenues for the year ended December 31, 2021.

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

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

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

4 combined with a $0.6 million metric ton decrease in met coal sales volume as depreciation and depletion is first capitalized into coal inventory and relieved when tons are sold.

Selling, general and administrative expenses were $48.8 million, or 2.8% of total revenues for the year ended December 31, 2022 compared to $35.6 million, or 3.4% of total revenues for the year ended December 31, 2021.

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

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

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

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

The $13.2 million increase in selling, general and administrative expenses is primarily driven by an increase in stock compensation expense of approximately $6.7 million due to an increase in the grant date fair value of awards and a higher award achievement percentage based on the Company's performance for the year ended December 31, 2022, an increase of $2.6 million in employee related expenses, an increase of $2.3 million in other professional services, and an increase of $1.1 million in charitable donations.

Business interruption expenses were $23.5 million, 1.3% of total revenues for the year ended December 31, 2022, compared to $21.4 million, or 2.0% of total revenues for the year ended December 31, 2021.

These expenses represent non-

recurring expenses that are directly attributable to the ongoing UMWA strike for incremental safety and security, labor negotiations and other expenses and the increase is primarily driven by twelve months of related expenses in the current year compared to only nine months in the prior year.

Idle mine expenses were $12.1 million, or 0.7% of total revenues for the year ended December 31, 2022, compared to $33.9 million, or 3.2% of total revenues for the year ended December 31, 2021.

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

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7, such as electricity, insurance and maintenance labor.

The decrease in idle mine expenses is primarily attributable to the restart of Mine No 4 in the first quarter of 2022 combined with an increase in production.

Interest expense, net was $19.0 million, or 1.1% of total revenues, for the year ended December 31, 2022, compared to $35.4 million, or 3.3% of total revenues, for the year ended December 31, 2021.

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

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

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

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

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

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

Each of these claims were asserted by us in the Walter Canada CCAA proceedings.

Walter Energy deemed these receivables to be uncollectible for the year ended December 31, 2015 and we did not assign any value to these receivables in acquisition accounting as collectability was deemed remote.

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

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

During the fourth quarter of 2020, we received $1.7 million in settlement proceeds related to other Walter Energy claims.

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

The $16.4 million decrease was primarily driven by an increase in interest income of $11.3 million and a decrease in interest expense of $3.3 million on our Notes due to the extinguishment of $39.4 million principal amount of our Notes.

For the year ended December 31, 2021, we recognized a loss on early extinguishment of debt of $9.7 million upon the extinguishment of $343.4 million of our 2017 Notes (as defined below).

The loss on early extinguishment of debt represents a premium paid to retire the debt, accelerated amortization of debt discount, net, and the write-off of 2017 Notes debt issuance costs.

Other income was $0.7 million for the year ended December 31, 2022 compared to $1.3 million or 0.1% of total revenues, for the year ended December 31, 2021.

Other income for the year ended December 31, 2022, represents proceeds received from the Chapter 11 Cases (as defined below) from Walter Energy, Inc.

("Walter Energy") and other income for the year ended December 31, 2021 represents proceeds received in connection with the settlement of a lawsuit offset partially by COVID-19 pandemic related expenses.

For the year ended December 31, 2022, we recognized income tax expense of $141.8 million or an effective tax rate of 18.1% primarily due to pre-tax income of $783.1 million offset partially by an income tax benefit due to $23.6 million of depletion.

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

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

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

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

At December 31, 2022, we had federal and state NOLs of approximately $122.1 million and $951.7 million, respectively.

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

Accordingly, we expect to continue to utilize our federal NOLs and credit carryforwards, and we believe we may become a cash tax payer in 2023 or 2024 based on our long-term forecast of met coal prices, sales volumes and performance.

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

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

In addition, the Company has approximately $23.4 million of general business credit carryforwards which begin to expire on December 31, 2026 and fully expire in December 31, 2041.

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

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

During the year ended December 31, 2022, we repurchased in the open market and extinguished approximately $39.4 million principal amount of our Notes at a discount to par value.

The discounts to par value and the interest expense savings from these open market purchases are estimated to be approximately $19.6 million through the maturity of our Notes.

In connection with the extinguishment of our Notes, we recognized a loss on early extinguishment of debt of $0.5 million which is included in interest expense, net in the Statements of Operations.

In the future, we may, at any time and from time to time, seek to retire or purchase additional Notes in open-market purchases, privately negotiated transactions or otherwise.

Such repurchases or exchanges, if any, will be upon such terms and at such prices as we may determine, and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions, if any, and other factors.

We are 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, we were 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, we had a deductible policy where we are responsible for the first $0.5 million for each black lung claim.

Since June 1, 2020, we have a deductible policy where we are 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, we assumed all black lung liabilities of Walter Energy and its U.S.

subsidiaries incurred prior to March 31, 2016, for which we are self-insured.

We have posted $18.6 million in surety bonds and $8.6 million of collateral recognized as short term investments in addition to maintaining a black lung trust of $2.1 million that was acquired from Walter Energy.

We received a letter from the Department of Labor ("DOL") on February 21, 2020 under its new process for self-insurance renewals that would require us to increase the amount of collateral posted to $39.8 million, but we have appealed such increase.

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

On February 9, 2022, the DOL held a conference with representatives from the Company related to our appeal.

On July 12, 2022, we received a decision on our appeal from the DOL lowering the amount of collateral required to be posted from $39.8 million to $28 million.

We appealed this decision.

In addition, on January 19, 2023, the DOL proposed revisions to regulations under the Black Lung Benefits Act governing authorization of self-insurers.

The proposed rules requires, among other requirements, all self-insured operators to post security equal to 120 percent of their projected black lung liabilities.

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

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As of December 31, 2022, we had outstanding surety bonds and letters of credit with parties for post-mining reclamation at all of our mining operations totaling $41.2 million, $18.6 million as collateral for self-insured black lung related claims and $4.2 million for miscellaneous purposes.

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

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

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

associated with our natural gas swap contracts.

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

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

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

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

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

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

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Net cash (used in) provided by financing activities (153,119) (96,474) 14,096

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

Net increase in cash and cash equivalents and restricted cash $ 433,641 $ 183,923 $ 18,533

Operating Activities

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

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

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

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

Net cash provided by operating activities was $841.9 million for the year ended December 31, 2022, and was primarily attributed to net income of $641.3 million adjusted for depreciation and depletion expense of $115.3 million, deferred income tax expense of $141.8 million, stock-based compensation expense of $17.6 million, mark-to-market loss on gas hedges of 4.0 million, amortization of debt issuance costs and debt discount of $3.2 million, accretion expense and valuation adjustment of asset retirement obligations of $1.9 million, an increase in other operating activities of $0.8 million and an increase in net working capital of $84.0 million.

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

The increase in inventories is due to an increase in production combined with a decrease in sales volumes due to the ongoing shipment delays caused by mechanical failures at the McDuffie Terminal at the Port of Mobile in Alabama and low rail transportation performance throughout the year and the increase in trade receivables is driven by the timing of sales and collections.

operating activities of $5.7 million and an increase in net working capital of $21.4 million.

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

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

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

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

The decrease in income tax receivable is due to the alternative minimum tax ("AMT") credit refund of $24.3 million received during the third quarter of 2020.

The decrease in trade accounts receivable and increase in inventories is due to a 0.5 million metric ton decrease in met coal sales volume.

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

Net cash provided by operating activities was $532.8 million for the year ended December 31, 2019, and was primarily attributed to net income of $301.7 million adjusted for depreciation and depletion expense of $97.3 million, deferred income tax expense of $68.5 million, an increase in other operating activities of $26.1 million, loss on early extinguishment of debt of $9.8

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

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

Investing Activities

Net cash used in investing activities was $255.1 million for the year ended December 31, 2022, primarily comprised of $205.2 million of purchases of property, plant and equipment and $48.9 million of capitalized mine development costs associated with our Mine No.

4 development.

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

4 and Blue Creek development.

We spent approximately $87.1 million in sustaining capital and spent an additional $118.1 million in other discretionary capital, which primarily included deposits on two extra sets of longwall shields of $55.3 million and capital spent on the development of Blue Creek of $47.1 million and the portal facilities at Mine No.

4 of $15.7 million.

The current period also includes $3.5 million cash payments in connection with the acquisition of leased mineral rights offset partially by $2.5 million net cash acquired in connection with the acquisition of the remaining 50% interest in Black Warrior Methane and Black Warrior Transmission.

Net cash used in investing activities was $71.1 million for the year ended December 31, 2021, primarily comprised of $57.9 million of purchases of property, plant and equipment and $13.5 million of capitalized mine development costs associated with our Mine No.

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

Net cash used in investing activities also includes $8.5 million of purchases of short-term investments offset partially by $14.7 million of sales of short-term investments and $0.2 million of proceeds from sale of property, plant and equipment.

Net cash used in investing activities was $134.2 million for the year ended December 31, 2019, primarily comprised

of $107.3 million of purchases of property, plant and equipment and $23.4 million of capitalized mine development costs associated with our Mine 4 development.

We spent approximately $89.0 million in sustaining capital and spent an additional $18.0 million in other discretionary capital, which included primarily the shaft construction at Mine No.

The cash capital expenditures exclude non-cash capital accruals and leases of approximately $45.5 million.

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

Financing Activities

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

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

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

Net cash used in financing activities was $153.1 million for the year ended December 31, 2022, primarily due to the payment of quarterly and special dividends of $79.7 million, retirements of debt related to our Notes of $39.4 million and principal repayments of financing lease obligations of $30.3 million.

Net cash used in financing activities was $96.5 million for the year ended December 31, 2021, primarily due to the redemption of the 2017 Notes of $350.3 million, the repayment of the ABL Draw of $40.0 million, principal repayments of financing lease obligations of $29.0 million, payment of quarterly dividends of $10.5 million and payment of debt issuance costs associated with the issuance of the Notes and the amendment of the ABL Facility of $11.4 million offset partially by $347.7 million in proceeds received from the issuance of the Notes.

Capital Allocation Policy

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

In February 2022, we announced that the Board approved an increase in the regular quarterly cash dividend by 20%, from $0.05 per share to $0.06 per share.

On May 3, 2022, we provided an update on our capital allocation strategy.

Our strategy continues to be focused on optimizing our capital structure to improve returns to stockholders, through special cash dividends, while allowing flexibility for us to develop our strategic growth project Blue Creek.

We intend on returning cash to stockholders in stronger price markets where we are generating significant amounts of cash flow, and less cash to stockholders during weaker markets.

We also intend on using stock repurchases when there is no short- or long-term use for additional cash that will deliver meaningful value to stockholders.

We have paid a regular quarterly cash dividend every quarter since the Board adopted the Capital Allocation Policy.

The Capital Allocation Policy states the following:

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

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

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

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

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

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

April 2019 Special Dividend

On April 23, 2019, the Board declared a special cash dividend of approximately $230.0 million which was paid with cash on hand and was paid on May 14, 2019 to stockholders of record as of the close of business on May 6, 2019.

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.

During the year ended December 31, 2022, we have paid $79.7 million of regular quarterly and special cash dividends under the Capital Allocation Policy .

Stock Repurchase Program

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

On August 16, 2022, President Biden signed the Inflation Reduction Act of 2022 (“IRA”) into law.

The IRA contains a number of revisions to the Internal Revenue Code, including a 15% corporate minimum income tax and a 1% excise tax on corporate stock repurchases in tax years beginning after December 31, 2022.

Therefore, any future repurchases of shares of our common stock are subject to the 1% excise tax.

As of December 31, 2022, we have repurchased 500,000 shares for approximately $10.6 million, leaving approximately $59.4 million of share repurchases authorized under the New Stock Repurchase Program.

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

Company has temporarily suspended its New Stock Repurchase Program.

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

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

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

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

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

On October 15, 2018, we entered into an Amended and Restated Asset-Based Revolving Credit Agreement (the "Amended and Restated Credit Agreement"), by and among us and certain of our subsidiaries, as borrowers, the guarantors party thereto, the lenders from time to time party thereto and Citibank, as administrative agent, which amended and restated in its entirety the existing ABL Facility and, among other things (i) increased the aggregate commitments available to be borrowed under the ABL Facility to $125.0 million, (ii) extended the maturity date of the 2016 ABL Credit Agreement to October 15, 2023;

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

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

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

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

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

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

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

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

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The reserves may include rent reserves, lower of cost or market reserve, port charges reserves and any other reserves that the Agent determines in its reasonable credit judgment to the extent such reserves relate to conditions that could reasonably be expected to have an adverse effect on the value of the collateral included in the borrowing base.

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

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

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

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

We are also required to use

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

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

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

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

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

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

We used the net proceeds of

the offering of the Notes, together with cash on hand, to fund the redemption of all of our outstanding 8.00% senior secured notes due 2024 (the “2017 Notes”), including payment of the redemption premium in connection with such redemption.

As a result, we recognized a loss on early extinguishment of debt of $9.7 million which represents the write-off of the previously capitalized 2017 Notes debt issuance costs and debt discount, net, along with the redemption premium.

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

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The Notes will mature on December 1, 2028.

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

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

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

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

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

We are also required to make offers to purchase the Notes (i) at a purchase price of 101.00% of the principal amount thereof in the event we experience specific kinds of change of control triggering events, (ii) at a purchase price of 103.00% of the principal amount thereof prior to making certain restricted payments, and (iii) at a purchase price of 100.00% of the principal amount thereof in the event we make certain asset sales or dispositions and do not reinvest the net proceeds therefrom or use such net proceeds to repay certain indebtedness, in each case, plus accrued and unpaid interest, if any, to, but excluding the date of purchase .

Offer to Purchase the Notes

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

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

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

During the year ended December 31, 2022, we repurchased in the open market and extinguished approximately $39.4 million principal amount of our Notes at a discount to par value.

The discounts to par value and the interest expense savings from these open market purchases are estimated to be approximately $19.6 million through the maturity of our Notes.

In connection with the extinguishment of our Notes, we recognized a loss on early extinguishment of debt of $0.5 million which is included in interest expense, net in the Statements of Operations.

Short-Term Investments

During the year ended December 31, 2021, we had $17.0 million of surety bonds with $8.5 million of collateral recognized as short term investments.

During the year ended December 31, 2022, we had $8.6 million of collateral recognized as short term investments.

These investments were posted as collateral for the self-insured black lung related claims asserted by or on behalf of former employees of Walter Energy and its subsidiaries, which were assumed in the acquisition of certain assets of Walter Energy and relate to periods prior to March 31, 2016.

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Specifically, the exploration, permitting and development of met coal reserves, mining costs, the maintenance of machinery and equipment and compliance with applicable laws and regulations require ongoing capital expenditures.

The cost of our capital expenditures are also impacted by inflation and any prolonged inflation could result in higher costs and decreased margins and earnings.

While a significant amount of the capital expenditures required at our mines has been spent, we must continue to invest capital to maintain our production.

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

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

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

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

4 service shaft, bathhouse and mine development.

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

Our capital expenditures were $205.2 million and $57.9 million for the year ended December 31, 2022 and December 31, 2021, respectively.

During 2022, we spent approximately $87.1 million in sustaining capital and an additional $118.1 million in other discretionary capital, which primarily included deposits on two extra sets of longwall shields of $55.3 million and capital spent on the development of Blue Creek of $47.1 million and the portal facilities at Mine No.

Our deferred mine development costs were $48.9 million and $13.5 million for the years ended December 31, 2022 and December 31, 2021, respectively, and primarily relate to the development of Blue Creek and Mine No.

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

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

Our capital spending is expected to range from $420.0 million to $450.0 million for the full year 2023, consisting of sustaining capital expenditures of approximately $95.0 to $105.0 million and discretionary capital expenditures of approximately $325.0 to $345.0 million for the development of Blue Creek and 4 North portal construction and payments on two extra sets of longwall shields.

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

Rights Agreement

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

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

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

Pursuant to the Rights Agreement, one preferred stock purchase right (a “Right” or the “Rights”) 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.

Amended Rights Agreement

On February 14, 2020, we adopted an NOL Rights Agreement, which was amended on March 4, 2022 by Amendment No.

1 to 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 and ratified the Amendment No.

1 to Rights Agreement at the 2022 Annual Meeting of Stockholders.

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

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

If the Rights become exercisable, each Right will initially entitle stockholders to buy one one-thousandth of a share of a newly created series of preferred stock designated as “Series A Junior Participating Preferred Stock” at an exercise price of $56.00 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.

While the Amended 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 Amended 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 Amended 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 Amended 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.

Additional details about the Rights Agreement is contained in the Company’s Current Report on Form 8-K filed with the SEC on February 14, 2020.

The Rights will expire on the earliest of (i) the close of business on April 19, 2026, (ii) the time at which the Rights are redeemed as provided in the Amended Rights Agreement, (iii) the time at which the Rights are exchanged as provided in the Amended Rights Agreement, (iv) the time at which the Board determines that the NOLs are fully utilized or no longer available under Section 382 of the Code, (v) the effective date of the repeal of Section 382 of the Code if the Board determines that the Amended Rights Agreement is no longer necessary or desirable for the preservation of NOLs, or (vi) the closing of any merger or other acquisition transaction involving the Company pursuant to an agreement of the type described in the Amended Rights Agreement.

Additional details about the Amended Rights Agreement are contained in our Current Reports on Form 8-K filed with the SEC on February 14, 2020 and March 4, 2022.

Designation of Series A Junior Participating Preferred Stock

In connection with the adoption of the Rights Agreement, the Board approved a certificate of designations of Series A Junior Participating Preferred Stock designating 140,000 shares of preferred stock, which was filed on February 14, 2020 with the Secretary of State of the State of Delaware and became effective on such date.

the Secretary of State of the State of Delaware and became effective on such date.

Each one one-thousandth of a share of Series A Junior Participating Preferred Stock, if issued:

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• if shares of common stock are exchanged via merger, consolidation, or a similar transaction, will entitle the holder to a payment equal to the payment made on one share of Common Stock.

Relaunch of Blue Creek

On May 3, 2022, we announced the relaunch of the development of our Blue Creek mine, a strategic growth project that we expect will deliver significant future returns to stockholders.

We believe that Blue Creek represents one of the few remaining untapped reserves of premium High Vol A met coal in the United States and that it has the potential to provide us with meaningful growth.

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According to our third party reserve report, and under the SEC's new rules governing mineral reserves, specifically subpart 1300 of Regulation S-K under the Modernization of Property Disclosures for Mining Registrants, Blue Creek has 68.2 million metric tons of recoverable reserves and 39.2 million metric tons of coal resources exclusive of reserves, which total 107.4 million metric tons.

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

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

Our third-party reserve report also indicates that, once developed, Blue Creek will produce a premium High Vol A met coal that is characterized by low-sulfur and high CSR.

We have the ability to acquire adjacent reserves that would increase total reserves to 144 million metric tons.

We expect that Blue Creek will have a mine life of 40 plus years assuming a single longwall operation.

Our third-party reserve report also indicates that, once developed, Blue Creek will produce a premium High Vol A met coal that is characterized by low-sulfur and high coke strength after reaction.

High Vol A met coal has traditionally priced at a discount to the Australian Premium Low Vol and the U.S.

Low Vol coals;

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

above these coals.

however, recently, it has been priced at or slightly above these coals.

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

This trend creates an opportunity for us to take advantage of favorable pricing dynamics driven by the declining supply of premium High Vol A met coal.

Between the initial announcement and the announced relaunch of the development of our Blue Creek mine, inflation in steel and other commodity prices, including labor costs have increased the total capital spending requirements of this project.

However, following a review of the project, we identified potential production increases of approximately 10% and we believe that we can accelerate the start of longwall production by approximately fifteen months based on design modifications and stronger available liquidity to fund the project.

Since the relaunch in May 2023, we have continued to see inflation in key materials and labor costs and are pursuing efforts in design to mitigate the actual impact on the total costs.

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

We expect that the new single longwall mine at Blue Creek will have the capacity to produce an average of 4.4 million metric tons per annum of premium High Vol A met coal over the first ten years of production, thereby increasing our annual production capacity by 60%.

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

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

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

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

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

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

We expect to invest approximately $650.0 to $700.0 million over five years to develop Blue Creek.

Based on the current schedule, we expect the first development tons from continuous miner units to occur in the third quarter of 2024 with the longwall scheduled to start up in the second quarter of 2026.

Our strong cash flow generation and current available liquidity, as well as the ability to finance $120.0 to $130.0 million of capital expenditures through equipment leases, allows us

to be opportunistic as we evaluate funding options for Blue Creek with the goal of maintaining an efficient and low-cost of capital.

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

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

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

inflation surged to a new, four-decade record high of 9.1% in July 2022, driven by increased energy and food costs, supply constraints and strong consumer demand.

High inflation has been driven by growth in the economy as it bounces back from COVID-19, powered in part by low interest rates and government stimulus to counter the pandemic's impact.

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

We have estimated that inflation accounted for an approximate $24.3 million of additional cost recognized in cost of sales in the Statements of Operations.

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

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

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

Inflation affects, among others, the costs of belt structure, roof bolts, cable, magnetite, rock dust and other supplies, plus labor and parts on equipment repair and rebuilds.

The Company believes that it is well positioned to fulfill anticipated customer volume commitments for 2023.

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

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

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

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

In the current operating environment and without a new labor contract, the Company believes that production and sales volume for 2023 could be between 5.7 million and 6.3 million metric tons and 5.9 million and 6.5 million metric tons, respectively.

While the Company has business continuity plans in place, the strike, COVID-19 and ongoing port issues and rail transportation delays may still cause disruption to production and shipment activities, and the plans may vary significantly from quarter to quarter for the full year of 2023.

Critical Accounting Policies and Estimates

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

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

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

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

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

Under Section 382 of the Code, these NOLs could be subject to annual limitations, further limitations, or elimination, as described below, if we were to undergo a subsequent ownership change in the future.

The Company has federal NOL carryforwards of approximately $122.1 million as of December 31, 2022, of which $33.7 million are indefinite lived and the remainder expire predominantly on December 31, 2034 through December 31, 2036.

The Company has state NOL carryforwards of approximately $951.7 million, which expire predominantly on December 31, 2029 through December 31, 2035.

In addition, the Company has approximately $23.4 million of general business credits which begin to expire on December 31, 2026 and fully expire on December 31, 2041.

In 2023 or 2024, we expect to fully utilize the federal NOLs and general business credits and become a cash tax payer based on our long-term forecast of met coal prices, sales volumes and performance.

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

Under Section 382 of the Code, these NOLs could be subject to annual limitations, further limitations, or elimination,

as described below, if we were to undergo a subsequent ownership change in the future.

To the extent we have taxable income in the future and can utilize these NOL carryforwards, subject to certain limitations, to reduce taxable income, our cash taxes will be significantly reduced in those future years.

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

At December 31, 2022, we have a valuation allowance against our state deferred income tax assets of approximately $41.4 million.

As of December 31, 2022, we considered all positive and negative evidence and concluded that our federal deferred income tax assets remain more likely than not to be realized and a valuation allowance was not required.

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

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

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

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

Recently Adopted Accounting Standards

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

What changed 10-K

Item 7. Management’s Discussion and Analysis