What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-04-01 compared with 2021-02-18 · 117 added, 98 removed, 181 unchanged (54% of the section changed)

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Our primary source of revenue is the sale of metallurgical coal.

We have a 262 million ton reserve base of high-quality metallurgical coal and a development portfolio including four primary properties.

Our plan is to continue development of our existing properties and grow production to 4-4.5 million clean tons of metallurgical coal, subject to market conditions, permitting and additional capital deployment.

We are a pure play metallurgical coal company with 39 million and 769 million tons of high-quality metallurgical coal reserves and resources, respectively.

Our plan is to continue development of our existing properties and grow production to approximately 5 million clean tons of metallurgical coal, subject to market conditions, permitting and additional capital deployment in the medium-term.

We may make acquisitions of reserves or infrastructure that continue our focus on advantaged geology and lower costs.

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We also purchase coal from third parties for sale for our own account;

although, these volumes decreased in 2019 and 2020.

these volumes decreased slightly in 2021 from 2020.

Sales of higher margin Company produced coal made up 98% of total sales in 2021 as compared with 99% in 2020.

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dollar’s strength relative to other currencies and accelerating production cuts.

Metallurgical coal markets weakened significantly during 2020 due to the on-going severe global economic slowdown stemming from COVID-19 outbreak.

The global spread of COVID-19 has created significant market volatility and economic uncertainty and disruption since early-2020.

In response to the pandemic, governments worldwide have placed significant restrictions on both domestic and international travel and have taken action to restrict the movement of people and suspend some business operations, ranging from targeted restrictions to full national lockdowns.

These lockdowns, restrictions on public gatherings and stay-at-home measures, coupled with the spread and impact of the COVID-19 pandemic, have resulted in a significant worldwide economic slowdown.

In certain cases, states that had begun taking steps to reopen their economies experienced a subsequent surge in cases of COVID-19, causing these states to cease such reopening measures in some cases and reinstitute restrictions in others.

The COVID-19 pandemic may significantly worsen in the United States during the upcoming months, which may cause federal, state and local governments to reconsider imposing more severe restrictions on business and social activities.

In the event governments impose such restrictions, the re-opening of the economy may be further delayed.

The Company has been adversely affected by the deterioration and increased uncertainty in the macroeconomic environment as a result of the impact of COVID-19.

In 2020, two customers notified us that their contractual obligations to purchase metallurgical coal from us would be delayed or curtailed because of COVID-19.

These delays or curtailments reduced our total contracted sales volumes for 2020 by approximately 10% or almost 200,000 tons.

We took certain actions to limit our production and reduce capital expenditures in response to the COVID-19 pandemic and reduced global demand for metallurgical coal.

These included :

● an operational furlough of approximately 182 employees at the Elk Creek mining complex in West Virginia for most of the month of April 2020;

● a one-week operational furlough of approximately 157 employees at the Elk Creek mining complex in July 2020;

● the partial closure of our Berwind low volatile development mine complex affecting approximately 44 employees effective in July 2020;

● a reduction or deferral of non-essential capital expenditures, including cessation of the slope project at the Berwind mining complex to adapt to the current market conditions.

To date we have not had significant issues with any of our critical suppliers, but we continue to communicate with them and closely monitor their developments to ensure we have access to the goods and services required to maintain our operations.

We continue to actively monitor the situation and may take further actions altering our business operations if we determine they are in the best interests of our employees, customers, suppliers, and stakeholders, or as required by federal, state, or local authorities.

Additional measures we may take could include extensions of operational furloughs, temporary salary reductions for certain executives, staffing reductions and idling or realignment of additional mines as conditions dictate.

It is not clear what potential effects any such alterations or modifications may have on our business.

The impact on our results in future periods could be much more significant and cannot currently be quantified.

Metallurgical coal markets weakened significantly during 2020 due to the COVID-19 outbreak.

Demand for metallurgical coal greatly increased during 2021 as the economy recovered from the significant market volatility and economic uncertainty and disruption in 2020.

Spot pricing for U.S.

high-vol A metallurgical coal reached $340 per metric ton FOB port by year-end 2021, and over $500 per metric ton FOB port by early-2022.

The Company is responsible for rail and loadout costs for coal sold into export markets.

In the event COVID-19 lingers, metallurgical coal markets could see continued volatility in the future.

We continue to actively monitor the situation, including closely communicating with our critical suppliers.

We may be required to take actions altering our business operations if we determine they are in the best interests of our employees, customers, suppliers, and stakeholders, or as required by federal, state, or local authorities.

The annual contracting season with North American steel producers generally occurs in late-summer through the fall.

As of December 31, 2020, we had entered into forward sales contracts with certain North American customers for 2021 on a fixed price basis for 1.3 million tons of metallurgical coal at an average realizable price of $84/ton FOB mine.

This level of pricing in 2021 is lower than we realized in 2020 and is due to a combination of factors, including the impact of COVID-19 discussed above, lower year-over-year steel prices, changes in types of coal qualities purchased by customers in 2021 and general economic concerns in the United States.

We anticipate placing a greater percentage of our overall sales in the spot markets in 2021.

In 2020, our capital expenditures totaled approximately $24.8 million, down from $45.7 million in 2019.

We continued to invest in infrastructure and mine equipment at our Elk Creek mining complex, primarily related to increasing our long-term refuse disposal.

In 2020, we suspended development at the Berwind mining complex due to lower pricing and demand largely caused by the COVID-19 pandemic.

As of December 31, 2021, we had entered into forward sales contracts with certain North American customers for 2022 on a fixed price basis for 1.8 million tons of coal at an average realizable price of $187/ton FOB mine.

Even despite some lower priced 2021 tons getting carried over into early 2022, this level of pricing in 2022 is significantly higher than the average price of $91 per ton FOB mine that was contracted for 2021.

This is due to a combination of factors, including the subsiding impact of COVID-19 as discussed above, stronger year-over-year steel prices, changes in types of coal qualities purchased by customers in 2021 and the strong economic upturn in the United States.

In 2021, our capital expenditures were $29.5 million, excluding cash paid for the acquisition of the Amonate assets which totaled $30.1 million.

Our capital expenditures in 2020 were $24.8 million.

We continued to invest in infrastructure and mine equipment at our Elk Creek Complex and development of the Berwind complex.

In 2021, we resumed development at the Berwind Complex due to higher pricing and greater demand driven by the recovery from COVID-19 pandemic in 2020.

This complex remains a key part of our anticipated future growth.

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We completed a permanent belt workaround and restored the preparation plant to its full processing capacity in mid-2019.

Our insurance carrier disputed our claim for coverage based on certain exclusions to the applicable policy and therefore on August 21, 2019, we filed suit seeking a declaratory judgment that the partial silo collapse was an insurable event and to require coverage under our policy.

Please see “Commitments and Contingencies,” Note 10 to the Notes to Consolidated Financial Statements for further discussion of this matter.

The insurance carrier disputed our claim for and on August 21, 2019 we filed suit.

The suit went to trial in late-June 2021.

In July 2021, the jury returned a verdict in our favor for a total of approximately $32.7 million.

On August 12, 2021, the defendants filed a post-trial motion for judgment as a matter of law or in the alternative to alter or amend the judgment or for a new trial.

The parties fully briefed the motion and it stood submitted on August 31, 2021.

On March 4, 2022, the court entered its memorandum opinion and order on the motion reducing the jury award to a total of $1.8 million, including pre-judgment interest, based largely on the court’s decision to vacate and set aside, in its entirety, the jury award of damages for inconvenience and aggravation.

The same day, the court entered the judgment in accordance with the memorandum opinion and order.

We are considering our options related to this decision, including an appeal to the US Court of Appeals for the 4th Circuit.

Results of Operations

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(In thousands)

Consolidated statement of operations data

Consolidated statement of operations data (unaudited)

Costs and expenses

Cost of sales (exclusive of items shown separately below)

Asset retirement obligation accretion

Asset retirement obligations accretion

Depreciation and amortization

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Net income (loss)

Earnings (loss) per common share

Adjusted EBITDA

Adjusted EBITDA was $18.5 million in 2020, which was 67% below that for 2019.

Net income was $39.8 million or $0.90 per diluted share in 2021 as compared with a net loss of $4.9 million or $0.12 per share in 2020.

Our improved results were principally due to higher pricing and volumes sold as compared with the prior year.

We sold 2.24 million tons of Company produced tons at realized pricing of $108/ton in 2021.

In 2020, we sold 1.72 million tons of Company produced tons at realized pricing of $85/ton.

The decrease in EBITDA is principally due to lower pricing and volumes sold in 2020.

Adjusted EBITDA was $79.0 million in 2021, which was nearly 330% higher than 2020.

The increase in Adjusted EBITDA is principally due to higher pricing and volumes sold in 2021.

Year Ended December 31, 2021 compared to Year Ended December 31, 2020

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Coal sales information is summarized as follows:

Years ended December 31,

Year ended December 31,

(In thousands)

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Coal sales revenue

Metallurgical coal pricing and demand weakened significantly in mid- to late-2019 coinciding with the time that annual contracts for 2020 shipments of North American metallurgical coal were being entered.

Because of this, we contracted for fewer tons to domestic markets under annual contracts in 2020 as compared with 2019.

Modestly higher volumes were planned for sale in the spot market during 2020 as compared with 2019.

The aforementioned weakness in spot market demand and pricing, principally attributable to the COVID-19 pandemic, limited our overall sales results in 2020.

Metallurgical coal markets strengthened during 2021, particularly in the second half of the year, due to the ongoing global recovery following 2020’s severe global economic slowdown stemming from the COVID-19 outbreak and resultant pandemic.

While variants of the COVID-19 virus continue to evolve and emerge, the decreased severity of these variants along with increased vaccination rates have lessened the economic impacts of the virus compared to 2020.

Likewise, the responses by governments in order to slow and stop the spread of these variants have become less restrictive.

Many countries have increased stimulus and infrastructure spending in order to revitalize and grow their economies.

Coupled with pent-up consumer demand, this has created widespread economic growth in most geographies which has improved demand for steel and the raw materials required for its manufacture.

During 2021, steel prices achieved record highs due to strong demand, low inventories and long lead times on shipments.

For the full year 2021, global crude steel production reached a new all-time record level.

The strength in the global steel markets led to increased worldwide demand for metallurgical coal throughout the year, with metallurgical coal pricing attaining record high levels in the second half of 2021.

At the same time, metallurgical coal demand and pricing have remained robust, in part due to continuing supply chain challenges in the U.S.

and abroad as a result of strained logistics caused by the COVID-19 pandemic.

While the Company has not been immune to these logistical challenges, our performance during 2021 still led to record levels of tons sold, revenues and adjusted EBITDA.

Cost of sales.

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The total cash cost per ton sold (FOB mine) during 2021 was approximately $70 for Company produced coal as compared with $72 for 2020.

The cost of sales for coal we purchased from third parties declined to $1.6 million in 2020 from $8.9 million in 2019.

The cost of sales for coal we purchased from third parties increased to $4.1 million in 2021 from $1.6 million in 2020.

Asset retirement obligation accretion .

Our asset retirement obligation (“ARO”) accretion was $0.6 million for 2020 as compared to $0.5 million for 2019.

ARO accretion was $0.6 million for both 2020 and 2021.

Depreciation and amortization .

Depreciation of our plant and equipment totaled $17.9 million for the year ended December 31, 2021 as compared with $17.1 million for the previous year.

Higher depreciation expense for 2020 was principally due to the increase in employment of additional mining equipment.

Higher depreciation expense for 2021 was principally due to the increase in deployment of additional mining equipment.

Amortization of capitalized development costs totaled $7.2 million in 2021 as compared with $3.8 million for the previous year.

The decrease in amortization of development costs in 2020 was driven by lower coal production from our properties and the full amortization of certain preparation plant assets in 2019.

In addition, the Company entered into several financing leases in 2021.

Capitalized equipment under these leases increased depreciation expense by $1.1 million.

Selling, general and administrative expenses .

Selling, general and administrative expenses were $21.6 million for the year ended December 31, 2021 as compared with $21.0 million for 2020.

This increase reflects the growth of our organization including higher fees for professional services.

This increase reflects the growth of our

organization including higher stock compensation expense of $1.1 million offset by lower professional services $0.6 million.

Other income.

Other income was $7.4 million for 2021 and $11.9 million in 2020.

We recognized $8.4 million of other income during 2020 for the anticipated full forgiveness of the $8.4 million loan (the “PPP Loan”) we received pursuant to the Paycheck Protection Program based on our usage of loan proceeds for eligible payroll expenses, lease, interest and utility payments.

Other income also includes third-party royalty income and rail rebates received, each of which increased modestly in 2020.

We recognized $5.4 million associated with the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) Employee Retention Tax Credit in 2021.

We recognized $8.4 million of other income during 2020 for the anticipated full forgiveness of the Paycheck Protection Program loan (the “PPP Loan”) we received.

Other income also includes third-party royalty income and rail rebates received, which were about unchanged in 2021 as compared to 2020.

Interest expense, net.

Interest expense, net was approximately $1.2 million in 2020, which was approximately equal that of the prior year.

Interest expense, net was approximately $2.6 million in 2021 as compared to $1.2 million in 2020 principally due to closing of our Senior Notes and additional equipment financings during 2021.

Income tax expense.

We recognized an income tax benefit of $3.5 million in 2020 as compared with income tax expense of $5.2 million in 2019.

The income tax benefit for 2020 includes $1.8 million of benefit associated with the recognition of other income for the anticipated PPP Loan forgiveness.

In December 2020, the President signed new legislation making the PPP Loan forgiveness income tax free.

Excluding this impact, our effective tax rate was 20.4% for 2020, compared to 17.2% for 2019.

The primary difference from the statutory rate of 21% is related to permanent differences for state income taxes, non-deductible expenses and the difference in depletion expense between U.S.

We recognized an income tax expense of $4.6 million in 2021 as compared with income tax benefit of $3.5 million in 2020.

The income tax expense for 2021 includes a $2.3 million benefit associated with changes in state income tax regulations for Virginia and West Virginia and $194 thousand benefit for stock-based compensation.

The income tax benefit for 2020 included a $1.8 million benefit associated with the recognition of other income for the anticipated PPP Loan forgiveness.

Excluding these discrete items, our effective tax rate was 16% for 2021, compared to 20% for 2020.

The primary difference from the statutory rate of 21% is related to permanent differences for state income taxes, non-deductible expenses and the difference in depletion expense between generally accepted accounting principles in the U.S.(“U.S.

GAAP”) and federal income tax purposes.

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Interest expense, net

Income tax expense (benefit)

Stock-based compensation

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2022 Sales Commitments

As of December 31, 2020, we had entered into forward sales contracts with North American customers for 2021 on a fixed price basis for 1.3 million tons at an average realizable price of $84/ton FOB mine.

These volumes were all metallurgical quality coal.

As of December 31, 2021, we had entered into forward sales contracts for 1.8 million tons at an average realizable price of $188/ton FOB mine.

The majority of these 2022 sales are to North American customers on a fixed price basis.

These volumes were mostly metallurgical quality coal.

Liquidity and Capital Resources

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Net change in cash and cash equivalents and restricted cash

Cash flows from operating activities during 2020 decreased from the comparable period of the prior year primarily resulting from lower cash earnings and reduced amounts required for working capital (receivables, inventories and accounts payable).

Cash flows from operating activities during 2021 increased from the comparable period of the prior year primarily resulting from higher cash earnings and offset by higher amounts required for working capital (receivables, inventories and accounts payable).

Net cash used in investing activities, all of which was used for capital expenditures, was $59.6 million for the year ended December 31, 2021 as compared with $24.8 million for 2020.

Cash flows from financing activities were $11.3 million for 2020, which was primarily due to net borrowings during the period and proceeds from the PPP Loan.

The increase is principally due to the acquisition of the Amonate assets for $30.1 million in late-2021.

Cash flows from financing activities were $22.4 million for 2021, which was primarily due to proceeds of $34.5 million from the issuance of our Senior Notes offset by payments made on our revolving credit facilities.

Cash flows from financing activities were $11.3 million for 2020, which was due to net proceeds from short term borrowings.

Restricted cash balances at December 31, 2021 and 2020 were $0.9 million and $1.4 million, respectively, consisted of funds held in escrow for potential future workers’ compensation claims and were classified in other current assets in the consolidated balance sheets.

Revolving Credit Facility and Term Loan — On November 2, 2018, we entered into a Credit and Security Agreement (as amended, the “Revolving Credit Facility”) with KeyBank National Association (“KeyBank”).

The Revolving Credit Facility was amended on February 20, 2020, and consists of a $10.0 million term loan (the “Term Loan”) and up to $30.0 million revolving line of credit, including $3.0 million letter of credit availability.

Revolving Credit Facility and Term Loan — On November 2, 2018, we entered into a Credit and Security Agreement (as amended or amended and restated, the “Revolving Credit Facility” or the “Credit Agreement”) with KeyBank National Association (“KeyBank”), as the administrative agent, and other lenders party thereto.

The Credit Agreement was amended on February 20, 2020 and March 19, 2021.

On October 29, 2021, we entered into an Amended and Restated Credit and Security Agreement (the “Amendment and Restatement”) with KeyBank.

Prior to the Amendment and Restatement, the Credit Agreement consisted of a $10.0 million term loan (the “Term Loan”) and up to $30.0 million revolving line of credit, including $3.0 million letter of credit availability.

The Amendment and Restatement increased the overall availability under the revolving credit line to $40.0 million and extended the maturity date to December 31, 2024.

All personal property assets, including, but not limited to accounts receivable, coal inventory and certain mining equipment are pledged to secure the Revolving Credit Facility.

The Revolving Credit Facility has a maturity date of December 31, 2023 and bears interest based on LIBOR + 2.0% or Base Rate + 1.5%.

Base Rate is the highest of (i) KeyBank’s prime rate, (ii) Federal Funds Effective Rate + 0.5%, or (iii) LIBOR + 2.0%.

Advances under the Revolving Credit Facility are made initially as base rate loans, but may be converted to LIBOR rate loans at certain times at our discretion.

As of December 31, 2020, $7.0 million was outstanding on the Revolving Credit Facility and we had remaining availability of $16.7 million.

The Revolving Credit Facility has a maturity date of December 31, 2024 and bears interest based on Secure Overnight Financing Rate (“SOFR”) + 2.0% or Base Rate + 1.5%.

“Base Rate” is the highest of (i) KeyBank’s prime rate, (ii) Federal Funds Effective Rate + 0.5%, or (iii) SOFR + 2.0%.

Advances under the Revolving Credit Facility are made initially as base rate loans but may be converted to SOFR rate loans at certain times at our discretion.

At December 31, 2021, there was no amount outstanding under the Revolving Credit Facility and we had remaining availability of $39.1 million.

The Term Loan is secured under a Master Security Agreement with a pledge of certain underground and surface mining equipment, bears interest at LIBOR + 5.15% and is required to be repaid in monthly installments of $278 thousand including accrued interest.

The outstanding principal balance of the Term Loan was $6.7 million at December 31, 2020.

The Revolving Credit Facility contains usual and customary covenants including limitations on liens, additional indebtedness, investments , restricted payments, asset sales, mergers, affiliate transactions and other customary limitations, as well as financial covenants.

As of December 31, 2020, we were in compliance with all debt covenants.

Equipment Financing Loan — On April 16, 2020, we entered into an equipment loan with Key Equipment Finance, a division of KeyBank, as lender, in the principal amount of approximately $4.7 million for the financing of existing underground and surface equipment.

The outstanding principal balance under the Term Loan was $3.3 million at December 31, 2021.

The Credit Agreement contains usual and customary covenants including limitations on liens, additional indebtedness, investments, restricted payments, asset sales, mergers, affiliate transactions and other customary

limitations, as well as financial covenants.

At December 31, 2021, we were in compliance with all debt covenants under the Credit Agreement.

Key Equipment Finance Loan— On April 16, 2020, we entered into an equipment loan with Key Equipment Finance, a division of KeyBank, as lender, in the principal amount of approximately $4.7 million for the financing of existing underground and surface equipment (the “Equipment Loan”).

The Equipment Loan bears interest at 7.45% per annum and is payable in 36 monthly installments of $147 thousand.

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This premium declines by 1% during each successive 12-month period.

The outstanding principal balance of the Equipment Financing Loan was $3.8 million at December 31, 2020.

SBA Paycheck Protection Program Loan — On April 20, 2020, we received proceeds from a PPP Loan in the amount of approximately $8.4 million from KeyBank, as lender, pursuant to the PPP of the CARES Act.

The purpose of the PPP is to encourage the continued employment of workers.

Based upon receipt of this funding, we elected to recall our furloughed workers at our Elk Creek complex.

We used all proceeds from the PPP Loan to retain employees, maintain payroll and make lease, interest and utility payments.

The PPP Loan matures on April 16, 2022 and bears interest at a rate of 1% per annum.

Pursuant to the subsequently enacted Paycheck Protection Flexibility Act of 2020 , we are permitted to defer required monthly payments of principal and interest until such time as an approval or denial of forgiveness is received from the SBA.

The PPP Loan is evidenced by a promissory note dated April 16, 2020, which contains customary events of default relating to, among other things, payment defaults and breaches of representations and warranties.

The PPP Loan may be prepaid by the Company at any time prior to maturity with no prepayment penalties.

All or a portion of the PPP Loan and accrued interest thereon may be forgiven by the SBA upon documentation of expenditures in accordance with the SBA requirements and proper application by the Company.

Under the CARES Act and Paycheck Protection Flexibility Act of 2020 , loan forgiveness is available for the sum of documented payroll costs, covered rent payments, covered mortgage interest and covered utilities during either the eight week period or 24-week period beginning on the date of loan funding.

For purposes of the PPP Loan, payroll costs exclude cash compensation of an individual employee in excess of $100 thousand, prorated annually.

Not more than 40% of the forgiven amount may be for non-payroll costs.

Forgiveness could be reduced if full-time headcount declines, or if salaries and wages for employees with salaries of $100 thousand or less annually are reduced by more than 25%.

Our application for forgiveness was approved by KeyBank and is currently being reviewed by the SBA.

We anticipate that the full amount of the PPP Loan principal, together with accrued interest thereon, will be forgiven.

Accordingly, we recognized $8.4 million as other income in the consolidated statement of operations for 2020 .

The outstanding principal balance under the Equipment Loan was $2.2 million at December 31, 2021.

9.00% Senior Unsecured Notes due 2026— On July 13, 2021, we completed an offering of $34.5 million, in the aggregate, of the Company’s 9.00% Senior Unsecured Notes due 2026 (the “Senior Notes”), less $2.4 million for note offering costs.

The Senior Notes mature on July 30, 2026, unless redeemed prior to maturity.

The Senior Notes bear interest at a rate of 9.00% per annum, payable quarterly in arrears on the 30 th day of January, April, July and October of each year, commencing on July 30, 2021.

We may redeem the Senior Notes in whole or in part, at our option, at any time on or after July 30, 2023, or upon certain change of control events, at a redemption price equal to 100% of the principal amount plus accrued and unpaid interest to, but not including, the date of redemption The outstanding principal balance under the Senior Notes was $34.5 million at December 31, 2021.

Fletcher & Co.

Loan— On July 23, 2021 and November 24, 2021, we entered into an equipment loans with J.

Fletcher & Co., as lender, in the principal amount of approximately $0.9 million and $3.9 million, respectively, for the financing of underground equipment (the “Fletcher Equipment Loan”).

The Fletcher Equipment Loan bears interest at 0% per annum and is payable in 24 monthly installments totaling $200 thousand.

The outstanding principal balance under the Fletcher Equipment Loan was approximately $4.6 million at December 31, 2021.

Komatsu Financial Limited Partnership Loan— On August 16, 2021, we entered into an equipment loan with Komatsu Financial Limited Partnership, as lender, in the principal amount of approximately $1.0 million for the financing of surface equipment (the “Komatsu Equipment Loan”).

The Komatsu Equipment Loan bears interest at 4.6% per annum and is payable in 36 monthly installments of $36 thousand for the first six months and then at $28 thousand until maturity.

The outstanding principal balance under the Komatsu Equipment Loan was approximately $0.9 million at December 31, 2021.

SBA Paycheck Protection Program Loan— On April 20, 2020, we received proceeds from the PPP Loan in the amount of approximately $8.4 million from KeyBank, as lender, pursuant to the PPP of the CARES Act.

The purpose of the PPP was to encourage the continued employment of workers.

We used all of the PPP Loan proceeds for eligible payroll expenses, lease, interest and utility payments.

On July 29, 2021, we were notified by KeyBank that full forgiveness had been approved by the SBA.

Refer to Notes 6 and 7 to the Consolidated Financial Statements included in Item 8 of Part I in this Annual Report on Form 10-K for additional information on indebtedness.

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Our primary use of cash includes capital expenditures for mine development and for ongoing operating expenses.

During 2020 we spent $24.8 million primarily for the purchase of mining equipment, infrastructure and development of mines at our Elk Creek and Berwind mining complexes.

We anticipate capital expenditures of approximately $15 million in 2021, with the potential to increase this amount depending on market conditions.

As of the date of this Annual Report on Form 10-K, management believes that current cash on hand, cash flow from operations and available liquidity under our Revolving Credit Facility will be sufficient to meet its capital expenditure and operating plans.

During 2021 we spent $29.5 million primarily for the purchase of mining equipment, infrastructure and development of mines at our Elk Creek and Berwind Complexes.

We also used cash to acquire the Amonate assets for $30.1 million.

We anticipate capital expenditures of approximately $65-85 million in 2022 as we continue to grow production and take advantage of strong coal markets conditions and refurbish the Amonate preparation plant acquired in December 2021.

As of the date of this Annual Report, management believes that current cash on hand, cash flow from operations and available liquidity under our Revolving Credit Facility will be sufficient to meet its capital expenditure and operating plans.

We expect to fund any new reserve acquisitions from cash on hand, cash from operations and potential future issuances of debt or equity securities.

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Contractual Obligations

The following table summarizes our contractual obligations as of December 31, 2020:

The following table summarizes our contractual obligations, excluding debt, as of December 31, 2021:

Payments due by period

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Take or pay obligations

Minimum royalties represent the contractual minimum amounts to be paid monthly, quarterly or annually for the right to access mineral properties and mine certain reserves and resources.

The amounts are generally recoupable against future production royalties to be paid.

Asset retirement obligations represent those costs to be paid in the future to retire a tangible long-lived asset.

Take or pay obligations represent those liquidated damage obligations as determined by contract volume minimums for transportation of coal at the representative rates of transportation or a portion thereof.

Off-Balance Sheet Arrangements

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Mine development costs represent the costs incurred to prepare future mine sites and/or seams of coal for mining.

These costs include costs of acquiring, permitting, planning, research, and developing access to identified mineral reserves and other preparations for commercial production as necessary to develop and permit the properties for mining activities.

permit the properties for mining activities.

Mine development costs are capitalized and amortized on a units-of-production basis as mining of the associated mine’s assigned reserves takes place.

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To the extent future revisions to these assumptions impact the fair value of the existing ARO liability, a corresponding adjustment is made to the related asset.

Occupational Disease (Pneumoconiosis) Obligations .

We recognize as a liability to provide for occupational illness (pneumoconiosis) benefits to eligible employees, former employees and dependents as required by the Mine Act.

The occupational illness benefit obligation represents the present value of the actuarially computed present and future liabilities for such benefits over the employees’ applicable years of service using a discount rate.

Estimating the future occupational disease (pneumoconiosis) benefits requires management to make estimates and judgments regarding timing and existence of a liability utilizing third-party actuaries assist in preparing what constitutes adequate liability amounts.

Inherent in the fair value calculation are numerous assumptions and judgments including the ultimate costs, inflation factors, credit adjusted discount rates, timing of settlement awards in the legal and regulatory environments.

Impairment of Long-lived Assets.

We review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

These events and circumstances

include, but are not limited to, a current expectation that a long-lived asset will be disposed of significantly before the end of its previously estimated useful life, a significant adverse change in the extent or manner in which we use a long-lived asset or a change in its physical condition.

These events and circumstances include, but are not limited to, a current expectation that a long-lived asset will be disposed of significantly before the end of its previously estimated useful life, a significant adverse change in the extent or manner in which we use a long-lived asset or a change in its physical condition.

When such events or changes in circumstances occur, a recoverability test is performed comparing projected undiscounted cash flows from the use and eventual disposition of an asset or asset group to its carrying amount.

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The assumptions about future cash flows and growth rates are based on the current and long-term business plans related to the long-lived assets.

Stock-based compensation expense .

Compensation cost for equity incentive awards is based on the fair value of the equity instrument generally on the date of grant and is recognized over the requisite service period.

The fair value of restricted stock awards is determined using the publicly-traded price of our common stock on the grant date.

The fair value of option awards is calculated using the Black-Scholes option-pricing model.

The Black-Scholes model requires us to make assumptions and judgments about the variables used in the calculation, including the expected term, expected volatility, risk-free interest rate, dividend rate and service period.

Income Taxes.

We provide for deferred income taxes for temporary differences arising from differences between the financial statement and tax basis of assets and liabilities existing at each balance sheet date using enacted tax rates.

We initially recognize the effects of a tax position when it is more than 50 percent likely, based on the technical merits that the position will be sustained upon examination.

We initially recognize the effects of a tax position when it is more than 50% likely, based on the technical merits that the position will be sustained upon examination.

Our determination of whether or not a tax position has met the recognition threshold depends on the facts, circumstances, and information available at the reporting date.

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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