Item 2.02.
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Results of Operations and Financial Condition.
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Preliminary Estimated Selected Results for the
Quarter Ended September 30, 2017.
As previously disclosed in the Quarterly Report on Form
10-Q
for the quarterly period ended June 30, 2017 of CNX Coal Resources LP (the Partnership, we, our), CONSOL Energy Inc., the owner of our general partner
(CONSOL Energy), intends to separate into two separate publicly-traded companies: (i) a natural gas exploration and production (E&P) company, and (ii) a coal company whose assets will include CONSOL Energys remaining
ownership in the Pennsylvania Mining Complex and CONSOL Energys current ownership of an approximate 1.7% general partner interest and 59.8% limited partner interest in the Partnership (the
spin-off).
In connection with the proposed
spin-off,
CONSOL Mining Corporation (CONSOL Mining), a newly formed wholly owned subsidiary of CONSOL
Energy that will hold the coal business at the time of the
spin-off,
filed a Registration Statement on Form 10 with the United States Securities and Exchange Commission (the SEC) on July 11,
2017 (as amended, the Form 10) that includes information about CONSOL Mining and the business and assets that CONSOL Mining will own upon completion of the
spin-off.
The Registration Statement on
Form 10 has not yet been declared effective by the SEC, and completion of the
spin-off
is subject to various conditions including approval by the board of directors of CONSOL Energy.
As further described in the Form 10, it is anticipated that CONSOL Mining will enter into various financing arrangements in connection with
the
spin-off.
In furtherance of CONSOL Minings financing arrangements, CONSOL Energy intends to provide certain potential lenders and debt investors of CONSOL Mining with preliminary estimates of certain
financial and operating results relating to the Pennsylvania Mining Complex for the quarter ended September 30, 2017 as presented below (the preliminary estimated financial information), although the Partnership has not yet
finalized its financial results for the quarter ended September 30, 2017.
This Current Report on Form
8-K
sets forth select preliminary estimated financial information that reflects assumptions and estimates based only upon the information available to us as of October 16, 2017 and is not final. This
information should not be viewed as a substitute for full interim financial statements prepared in accordance with accounting principles generally accepted in the United States. Our independent registered public accounting firm has not reviewed the
preliminary estimated financial information, or expressed any opinion or any other form of assurance on the preliminary estimated financial information presented. As a result of the foregoing, while the preliminary estimated financial information is
presented within ranges that we believe are reasonable, actual financial results related to the Pennsylvania Mining Complex for the quarter ended September 30, 2017, when finalized, may differ materially from the preliminary estimated financial
information. Items or events may be identified or occur after issuance of the preliminary estimated financial information. Due to the completion of our operational and financial closing procedures, final adjustments and other developments may arise
that would require us to make material adjustments to the final third quarter financial and operational information. Therefore, actual results may differ materially from the current expectations expressed in this Current Report.
Set forth below is the preliminary estimated financial information for the quarter ended September 30, 2017:
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Net Income
. Net Income, for the quarter ended September 30, 2017 of between $3,300 thousand and $3,900 thousand. Net Income, for the quarter ended September 30, 2016 was $6,401 thousand.
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Sales Tons
. Sales Tons for the quarter ended September 30, 2017 were between 1,500 thousand Tons and 1,650 thousand Tons. Sales Tons for the quarter ended September 30, 2016 were
1,511 thousand Tons.
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Average Sales Price Per Ton Sold.
Average Sales Price Per Ton Sold for the quarter ended September 30, 2017 was between $44.00 per ton and $44.30 per ton. Average Sales Price Per Ton Sold for the quarter
ended September 30, 2016 was $44.30 per ton.
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Capital Expenditures.
Capital Expenditures for the quarter ended September 30, 2017 were between $6,000 thousand and $7,500 thousand. Capital Expenditures for the quarter ended September 30,
2016 were $24,568 thousand, including the $21,500 thousand acquisition of 5% interest in the Pennsylvania Mining Complex.
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Adjusted EBITDA*
. Adjusted EBITDA for the quarter ended September 30, 2017 of between $17,500 thousand and $19,500 thousand. Adjusted EBITDA for the quarter ended September 30, 2016 was
$19,505 thousand. See the reconciliation table below for additional information regarding Adjusted EBITDA by segment.
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Contracted Position
. We are fully contracted for 2017. For 2018 and 2019, our contracted position as of October 9, 2017 is at 80% and 41%, respectively, assuming a 6.75 million ton coal sales volume.
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*Adjusted EBITDA is a
non-GAAP
financial measure, that is, a financial measure that
either excludes or includes amounts that are not excluded or included in the most directly comparable measure calculated and presented in accordance with accounting principles generally accepted in the United States (GAAP). See
Non-GAAP
Financial Measures below for an explanation of this measure and a reconciliation of adjusted EBITDA to the most directly comparable GAAP financial measure.
Non-GAAP
Financial Measures
The information contained herein includes financial measures of the Partnership that are not calculated in accordance with GAAP. The
Partnerships management believes that these
non-GAAP
financial measures provide meaningful supplemental information that enhances managements, investors and prospective lenders ability
to evaluate the Partnerships operating results and ability to repay its obligations.
These
non-GAAP
financial measures are not intended to be used in isolation and should not be considered a substitute for any other performance measure determined in accordance with GAAP. Investors and potential
investors are cautioned that there are material limitations associated with the use of
non-GAAP
financial measures as an analytical tool, including that other companies may calculate similar
non-GAAP
financial measures differently than the Partnership, limiting their usefulness as a comparative tool. The Partnership compensates for these limitations by providing specific information regarding the GAAP
amounts excluded from the
non-GAAP
financial measures. The Partnership further compensates for the limitations of its use of
non-GAAP
financial measures by presenting
comparable GAAP measures. Investors and potential investors are encouraged to review the reconciliation of
non-GAAP
financial measures to the most directly comparable GAAP financial measures contained herein.
We define Adjusted EBITDA as (i) net income (loss) before net interest expense, depreciation, depletion and amortization, as
adjusted for (ii) certain
non-cash
items, such as long-term incentive awards including phantom units under the CNX Coal Resources LP 2015 Long-Term Incentive Plan. The GAAP measure most directly
comparable to Adjusted EBITDA is net income.
The following table presents a reconciliation of Adjusted EBITDA to net income, the most
directly comparable GAAP financial measure, on a historical basis for each of the periods indicated (in thousands).
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Three Months Ended
September 30, 2017
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LOW
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HIGH
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Net Income
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$
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3,300
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$
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3,900
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Plus:
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Interest Expense
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2,200
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2,600
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Depreciation, Depletion and Amortization
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10,000
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10,800
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Unit Based Compensation
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2,000
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2,200
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Adjusted EBITDA
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$
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17,500
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$
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19,500
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Forward-Looking Statements
Certain statements in this Current Report on Form
8-K
are forward-looking statements within
the meaning of the federal securities laws. With the exception of historical matters, the matters discussed in this Current Report on Form
8-K
are forward-looking statements (as defined in Section 21E of
the Exchange Act) that involve risks and uncertainties that could cause actual results to differ materially from projected results. Accordingly, investors should not place undue reliance on forward-looking statements as a prediction of actual
results. The forward-looking statements may include projections and estimates concerning the timing and success of specific projects and our future production, revenues, income and capital spending. When we use the words believe,
intend, expect, may, should, anticipate, could, estimate, plan, predict, project, or their negatives, or other similar
expressions, the statements which include those words are usually forward-looking statements. When we describe strategy that involves risks or uncertainties, we are making forward-looking statements. The forward-looking statements in this Current
Report on Form
8-K
speak only as of the date of this Current Report on Form
8-K;
we disclaim any obligation to update these statements unless required by securities law,
and we caution you not to rely on them unduly. We have based these forward-looking statements on our current expectations and assumptions about future events. While our management considers these expectations and assumptions to be reasonable, they
are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. These risks, contingencies and
uncertainties relate to, among other matters, the factors discussed in the Partnerships Annual Report on Form
10-K
for the year ended December 31, 2016 under Risk Factors, as updated by
any subsequent Quarterly Reports on Form
10-Q
of the Partnership, all of which are on file with the SEC.