Item
1. Financial Statements (Unaudited)
RHINO
RESOURCE PARTNERS LP
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(in
thousands)
|
|
June
30, 2018
|
|
|
December
31, 2017
|
|
ASSETS
|
|
|
|
|
|
|
|
|
CURRENT
ASSETS:
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
3,114
|
|
|
$
|
8,796
|
|
Restricted
cash
|
|
|
3,652
|
|
|
|
7,116
|
|
Accounts
receivable, net of allowance for doubtful accounts ($-0- as of June 30, 2018 and December 31, 2017)
|
|
|
15,333
|
|
|
|
20,386
|
|
Inventories
|
|
|
15,862
|
|
|
|
12,860
|
|
Advance
royalties, current portion
|
|
|
819
|
|
|
|
495
|
|
Investment
in available for sale securities
|
|
|
3,535
|
|
|
|
11,165
|
|
Prepaid
expenses and other
|
|
|
3,898
|
|
|
|
2,891
|
|
Total
current assets
|
|
|
46,213
|
|
|
|
63,709
|
|
PROPERTY,
PLANT AND EQUIPMENT:
|
|
|
|
|
|
|
|
|
At
cost, including coal properties, mine development and construction costs
|
|
|
448,799
|
|
|
|
440,843
|
|
Less
accumulated depreciation, depletion and amortization
|
|
|
(270,137
|
)
|
|
|
(263,520
|
)
|
Net
property, plant and equipment
|
|
|
178,662
|
|
|
|
177,323
|
|
Advance
royalties, net of current portion
|
|
|
7,935
|
|
|
|
7,901
|
|
Deposit
- Workers’ Compensation Program
|
|
|
5,209
|
|
|
|
-
|
|
Investment
in unconsolidated affiliates
|
|
|
-
|
|
|
|
130
|
|
Restricted
cash
|
|
|
-
|
|
|
|
5,209
|
|
Other
non-current assets
|
|
|
28,981
|
|
|
|
28,508
|
|
TOTAL
|
|
$
|
267,000
|
|
|
$
|
282,780
|
|
LIABILITIES
AND EQUITY
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
14,116
|
|
|
$
|
9,329
|
|
Accrued
expenses and other
|
|
|
12,533
|
|
|
|
11,186
|
|
Accrued
preferred distributions
|
|
|
609
|
|
|
|
6,038
|
|
Current
portion of long-term debt
|
|
|
2,320
|
|
|
|
5,475
|
|
Current
portion of asset retirement obligations
|
|
|
498
|
|
|
|
498
|
|
Total
current liabilities
|
|
|
30,076
|
|
|
|
32,526
|
|
NON-CURRENT
LIABILITIES:
|
|
|
|
|
|
|
|
|
Long-term
debt, net of current portion
|
|
|
23,097
|
|
|
|
28,573
|
|
Asset
retirement obligations, net of current portion
|
|
|
18,645
|
|
|
|
18,164
|
|
Other
non-current liabilities
|
|
|
48,212
|
|
|
|
48,071
|
|
Total
non-current liabilities
|
|
|
89,954
|
|
|
|
94,808
|
|
Total
liabilities
|
|
|
120,030
|
|
|
|
127,334
|
|
COMMITMENTS
AND CONTINGENCIES (NOTE 13)
|
|
|
|
|
|
|
|
|
PARTNERS’
CAPITAL:
|
|
|
|
|
|
|
|
|
Limited
partners
|
|
|
124,024
|
|
|
|
130,233
|
|
General
partner
|
|
|
8,828
|
|
|
|
8,855
|
|
Preferred
partners
|
|
|
15,000
|
|
|
|
15,000
|
|
Investment
in Royal common stock (NOTE 11)
|
|
|
(4,126
|
)
|
|
|
(4,126
|
)
|
Common
unit warrants
|
|
|
1,264
|
|
|
|
1,264
|
|
Accumulated
other comprehensive income
|
|
|
1,980
|
|
|
|
4,220
|
|
Total
partners’ capital
|
|
|
146,970
|
|
|
|
155,446
|
|
TOTAL
|
|
$
|
267,000
|
|
|
$
|
282,780
|
|
See
notes to unaudited condensed consolidated financial statements.
RHINO
RESOURCE PARTNERS LP
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE
INCOME
(in
thousands, except per unit data)
|
|
Three
Months
|
|
|
Six
Months
|
|
|
|
Ended
June 30,
|
|
|
Ended
June 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
REVENUES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Coal
sales
|
|
$
|
54,245
|
|
|
$
|
54,299
|
|
|
$
|
108,517
|
|
|
$
|
105,554
|
|
Freight
and handling revenues
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Other
revenues
|
|
|
678
|
|
|
|
389
|
|
|
|
1,206
|
|
|
|
678
|
|
Total
revenues
|
|
|
54,923
|
|
|
|
54,688
|
|
|
|
109,723
|
|
|
|
106,232
|
|
COSTS
AND EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of operations (exclusive of depreciation, depletion and amortization shown separately below)
|
|
|
49,592
|
|
|
|
44,951
|
|
|
|
99,245
|
|
|
|
88,188
|
|
Freight
and handling costs
|
|
|
1,472
|
|
|
|
-
|
|
|
|
2,376
|
|
|
|
594
|
|
Depreciation,
depletion and amortization
|
|
|
5,677
|
|
|
|
5,470
|
|
|
|
11,104
|
|
|
|
10,977
|
|
Selling,
general and administrative (exclusive of depreciation, depletion and amortization shown separately above)
|
|
|
2,800
|
|
|
|
2,717
|
|
|
|
5,496
|
|
|
|
5,757
|
|
(Gain)/Loss
on sale/disposal of assets—net
|
|
|
(3,496
|
)
|
|
|
80
|
|
|
|
(6,434
|
)
|
|
|
45
|
|
Total
costs and expenses
|
|
|
56,045
|
|
|
|
53,218
|
|
|
|
111,787
|
|
|
|
105,561
|
|
(LOSS)/INCOME
FROM OPERATIONS
|
|
|
(1,122
|
)
|
|
|
1,470
|
|
|
|
(2,064
|
)
|
|
|
671
|
|
INTEREST
AND OTHER EXPENSE/(INCOME):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
1,913
|
|
|
|
965
|
|
|
|
3,798
|
|
|
|
2,120
|
|
Interest
income and other
|
|
|
-
|
|
|
|
-
|
|
|
|
(6
|
)
|
|
|
-
|
|
Equity
in net loss/(income) of unconsolidated affiliates
|
|
|
-
|
|
|
|
(40
|
)
|
|
|
-
|
|
|
|
(36
|
)
|
Total
interest and other expense
|
|
|
1,913
|
|
|
|
925
|
|
|
|
3,792
|
|
|
|
2,084
|
|
NET(
LOSS)/INCOME BEFORE INCOME TAXES FROM CONTINUING OPERATIONS
|
|
|
(3,035
|
)
|
|
|
545
|
|
|
|
(5,856
|
)
|
|
|
(1,413
|
)
|
INCOME
TAXES
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
NET
(LOSS)/INCOME FROM CONTINUING OPERATIONS
|
|
|
(3,035
|
)
|
|
|
545
|
|
|
|
(5,856
|
)
|
|
|
(1,413
|
)
|
DISCONTINUED
OPERATIONS (NOTE 3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from discontinued operations
|
|
|
-
|
|
|
|
(255
|
)
|
|
|
-
|
|
|
|
(326
|
)
|
NET
(LOSS)/INCOME
|
|
|
(3,035
|
)
|
|
|
290
|
|
|
|
(5,856
|
)
|
|
|
(1,739
|
)
|
Other
comprehensive (loss)/income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
market value adjustment for available-for-sale investment
|
|
|
198
|
|
|
|
554
|
|
|
|
4,380
|
|
|
|
2,021
|
|
Reclass
for disposition
|
|
|
(3,977
|
)
|
|
|
-
|
|
|
|
(6,621
|
)
|
|
|
-
|
|
Total
other comprehensive (loss)/income
|
|
|
(3,779
|
)
|
|
|
554
|
|
|
|
(2,241
|
)
|
|
|
2,021
|
|
COMPREHENSIVE
(LOSS)/INCOME
|
|
$
|
(6,814
|
)
|
|
$
|
844
|
|
|
$
|
(8,097
|
)
|
|
$
|
282
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
partner’s interest in net (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(loss) from continuing operations
|
|
$
|
(14
|
)
|
|
$
|
(3
|
)
|
|
$
|
(27
|
)
|
|
$
|
(16
|
)
|
Net
(loss) from discontinued operations
|
|
|
-
|
|
|
|
(1
|
)
|
|
|
-
|
|
|
|
(1
|
)
|
General
partner’s interest in net (loss)
|
|
$
|
(14
|
)
|
|
$
|
(4
|
)
|
|
$
|
(27
|
)
|
|
$
|
(17
|
)
|
Common
unitholders’ interest in net (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(loss) from continuing operations
|
|
$
|
(3,061
|
)
|
|
$
|
(738
|
)
|
|
$
|
(5,917
|
)
|
|
$
|
(3,533
|
)
|
Net
(loss) from discontinued operations
|
|
|
-
|
|
|
|
(232
|
)
|
|
|
-
|
|
|
|
(296
|
)
|
Common
unitholders’ interest in net (loss)
|
|
$
|
(3,061
|
)
|
|
$
|
(970
|
)
|
|
$
|
(5,917
|
)
|
|
$
|
(3,829
|
)
|
Subordinated
unitholders’ interest in net (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(loss) from continuing operations
|
|
$
|
(269
|
)
|
|
$
|
(70
|
)
|
|
$
|
(521
|
)
|
|
$
|
(338
|
)
|
Net
(loss) from discontinued operations
|
|
|
-
|
|
|
|
(23
|
)
|
|
|
-
|
|
|
|
(28
|
)
|
Subordinated
unitholders’ interest in net (loss)
|
|
$
|
(269
|
)
|
|
$
|
(93
|
)
|
|
$
|
(521
|
)
|
|
$
|
(366
|
)
|
Preferred
unitholders’ interest in net income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income from continuing operations
|
|
$
|
309
|
|
|
$
|
1,357
|
|
|
$
|
609
|
|
|
$
|
2,473
|
|
Net
income from discontinued operations
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Preferred
unitholders’ interest in net income
|
|
$
|
309
|
|
|
$
|
1,357
|
|
|
$
|
609
|
|
|
$
|
2,473
|
|
Net
(loss)/income per limited partner unit, basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
units:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(loss) per unit from continuing operations
|
|
$
|
(0.23
|
)
|
|
$
|
(0.06
|
)
|
|
$
|
(0.45
|
)
|
|
$
|
(0.28
|
)
|
Net
(loss) per unit from discontinued operations
|
|
|
-
|
|
|
|
(0.02
|
)
|
|
|
-
|
|
|
|
(0.02
|
)
|
Net
(loss) per common unit, basic
|
|
$
|
(0.23
|
)
|
|
$
|
(0.08
|
)
|
|
$
|
(0.45
|
)
|
|
$
|
(0.30
|
)
|
Subordinated
units
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(loss) per unit from continuing operations
|
|
|
(0.23
|
)
|
|
$
|
(0.06
|
)
|
|
$
|
(0.45
|
)
|
|
$
|
(0.28
|
)
|
Net
(loss) per unit from discontinued operations
|
|
|
-
|
|
|
|
(0.02
|
)
|
|
|
-
|
|
|
|
(0.02
|
)
|
Net
(loss) per subordinated unit, basic
|
|
$
|
(0.23
|
)
|
|
$
|
(0.08
|
)
|
|
$
|
(0.45
|
)
|
|
$
|
(0.30
|
)
|
Preferred
units
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income per unit from continuing operations
|
|
$
|
0.21
|
|
|
$
|
0.90
|
|
|
$
|
0.41
|
|
|
$
|
1.65
|
|
Net
income per unit from discontinued operations
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Net
income per preferred unit, basic
|
|
$
|
0.21
|
|
|
$
|
0.90
|
|
|
$
|
0.41
|
|
|
$
|
1.65
|
|
Net
(loss)/income per limited partner unit, diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
units
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(loss) per unit from continuing operations
|
|
$
|
(0.23
|
)
|
|
$
|
(0.06
|
)
|
|
$
|
(0.45
|
)
|
|
$
|
(0.28
|
)
|
Net
(loss) per unit from discontinued operations
|
|
|
-
|
|
|
|
(0.02
|
)
|
|
|
-
|
|
|
|
(0.02
|
)
|
Net
(loss) per common unit, diluted
|
|
$
|
(0.23
|
)
|
|
$
|
(0.08
|
)
|
|
$
|
(0.45
|
)
|
|
$
|
(0.30
|
)
|
Subordinated
units
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(loss) per unit from continuing operations
|
|
$
|
(0.23
|
)
|
|
$
|
(0.06
|
)
|
|
$
|
(0.45
|
)
|
|
$
|
(0.28
|
)
|
Net
(loss) per unit from discontinued operations
|
|
|
-
|
|
|
|
(0.02
|
)
|
|
|
-
|
|
|
|
(0.02
|
)
|
Net
(loss) per subordinated unit, diluted
|
|
$
|
(0.23
|
)
|
|
$
|
(0.08
|
)
|
|
$
|
(0.45
|
)
|
|
$
|
(0.30
|
)
|
Preferred
units
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income per unit from continuing operations
|
|
$
|
0.21
|
|
|
$
|
0.90
|
|
|
$
|
0.41
|
|
|
$
|
1.65
|
|
Net
income per unit from discontinued operations
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Net
income per preferred unit, diluted
|
|
$
|
0.21
|
|
|
$
|
0.90
|
|
|
$
|
0.41
|
|
|
$
|
1.65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of limited partner units outstanding, basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
units
|
|
|
13,055
|
|
|
|
12,964
|
|
|
|
13,009
|
|
|
|
12,920
|
|
Subordinated
units
|
|
|
1,146
|
|
|
|
1,236
|
|
|
|
1,146
|
|
|
|
1,236
|
|
Preferred
units
|
|
|
1,500
|
|
|
|
1,500
|
|
|
|
1,500
|
|
|
|
1,500
|
|
Weighted
average number of limited partner units outstanding, diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
units
|
|
|
13,055
|
|
|
|
12,964
|
|
|
|
13,009
|
|
|
|
12,920
|
|
Subordinated
units
|
|
|
1,146
|
|
|
|
1,236
|
|
|
|
1,146
|
|
|
|
1,236
|
|
Preferred
units
|
|
|
1,500
|
|
|
|
1,500
|
|
|
|
1,500
|
|
|
|
1,500
|
|
See
notes to unaudited condensed consolidated financial statements.
RHINO
RESOURCE PARTNERS LP
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in
thousands)
|
|
Six
Months Ended June 30,
|
|
|
|
2018
|
|
|
2017
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net
(loss)
|
|
$
|
(5,856
|
)
|
|
$
|
(1,739
|
)
|
Adjustments
to reconcile net (loss) to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation,
depletion and amortization
|
|
|
11,104
|
|
|
|
11,307
|
|
Accretion
on asset retirement obligations
|
|
|
639
|
|
|
|
948
|
|
Amortization
of advance royalties
|
|
|
378
|
|
|
|
567
|
|
Amortization
of debt issuance costs
|
|
|
815
|
|
|
|
670
|
|
Amortization
of common unit warrants
|
|
|
211
|
|
|
|
-
|
|
Reduction
of deferred revenue
|
|
|
(189
|
)
|
|
|
-
|
|
Equity
in net loss/(income) of unconsolidated affiliates
|
|
|
-
|
|
|
|
(36
|
)
|
Loss
on retirement of advance royalties
|
|
|
108
|
|
|
|
140
|
|
(Gain)
on sale/disposal of assets—net
|
|
|
64
|
|
|
|
43
|
|
(Gain)
on sale of Mammoth shares
|
|
|
(6,498
|
)
|
|
|
-
|
|
Equity
based compensation
|
|
|
230
|
|
|
|
260
|
|
Changes
in assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
5,148
|
|
|
|
(5,932
|
)
|
Inventories
|
|
|
(3,001
|
)
|
|
|
(2,421
|
)
|
Advance
royalties
|
|
|
(845
|
)
|
|
|
(855
|
)
|
Prepaid
expenses and other assets
|
|
|
(1,480
|
)
|
|
|
(1,359
|
)
|
Accounts
payable
|
|
|
4,163
|
|
|
|
2,227
|
|
Accrued
expenses and other liabilities
|
|
|
1,816
|
|
|
|
3,497
|
|
Asset
retirement obligations
|
|
|
(158
|
)
|
|
|
(34
|
)
|
Net
cash provided by operating activities
|
|
|
6,649
|
|
|
|
7,283
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Additions
to property, plant, and equipment
|
|
|
(16,000
|
)
|
|
|
(10,612
|
)
|
Proceeds
from sales of property, plant, and equipment
|
|
|
4,014
|
|
|
|
406
|
|
Proceeds
from business disposal
|
|
|
-
|
|
|
|
890
|
|
Proceeds
from sale of Mammoth shares
|
|
|
11,887
|
|
|
|
-
|
|
Net
cash used in investing activities
|
|
|
(99
|
)
|
|
|
(9,316
|
)
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Borrowings
on line of credit
|
|
|
-
|
|
|
|
64,750
|
|
Repayments
on line of credit
|
|
|
-
|
|
|
|
(62,500
|
)
|
Repayments
on long-term debt
|
|
|
(10,222
|
)
|
|
|
-
|
|
Proceeds
from issuance of other debt
|
|
|
1,329
|
|
|
|
-
|
|
Repayments
on other debt
|
|
|
(134
|
)
|
|
|
-
|
|
Deposit
for workers’ compensation program
|
|
|
(5,209
|
)
|
|
|
-
|
|
Payments
on debt issuance costs
|
|
|
(629
|
)
|
|
|
(227
|
)
|
Preferred
distributions paid
|
|
|
(6,039
|
)
|
|
|
-
|
|
Net
cash (used in)/provided by financing activities
|
|
|
(20,904
|
)
|
|
|
2,023
|
|
NET
(DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH
|
|
|
(14,354
|
)
|
|
|
(10
|
)
|
CASH,
CASH EQUIVALENTS AND RESTRICTED CASH—Beginning of period
|
|
|
21,120
|
|
|
|
47
|
|
CASH,
CASH EQUIVALENTS AND RESTRICTED CASH—End of period
|
|
$
|
6,766
|
|
|
$
|
37
|
|
|
|
|
|
|
|
|
|
|
Summary
Statement of Financial Position:
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
3,114
|
|
|
$
|
37
|
|
Restricted
cash
|
|
|
3,652
|
|
|
|
-
|
|
|
|
$
|
6,766
|
|
|
$
|
37
|
|
See
notes to unaudited condensed consolidated financial statements.
RHINO
RESOURCE PARTNERS LP
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS
OF JUNE 30, 2018 AND DECEMBER 31, 2017 AND FOR THE THREE AND SIX MONTHS ENDED
JUNE
30, 2018 AND 2017
1.
BASIS OF PRESENTATION AND ORGANIZATION
Basis
of Presentation and Principles of Consolidation.
The accompanying unaudited interim financial statements include the accounts
of Rhino Resource Partners LP and its subsidiaries (the “Partnership”). Intercompany transactions and balances have
been eliminated in consolidation.
Cash,
Cash Equivalents and Restricted Cash.
The Partnership considers all highly liquid investments purchased with original
maturities of three months or less to be cash equivalents. The Partnership early adopted ASU No. 2016-18,
Statement of Cash
Flows-Restricted Cash
as of December 31, 2017 and as such its unaudited condensed consolidated statement of cash flows for
all historical periods reflect restricted cash combined with cash and cash equivalents. The Partnership did not have any other
material impact from the early adoption of this ASU.
Unaudited
Interim Financial Information.
The accompanying unaudited interim financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information. The condensed consolidated statement of financial
position as of June 30, 2018, condensed consolidated statements of operations and comprehensive income for the three and six months
ended June 30, 2018 and 2017 and the condensed consolidated statements of cash flows for the six months ended June 30, 2018 and
2017 include all adjustments that the Partnership considers necessary for a fair presentation of the financial position, operating
results and cash flows for the periods presented. The condensed consolidated statement of financial position as of December 31,
2017 was derived from audited financial statements, but does not include all disclosures required by accounting principles generally
accepted in the United States of America (“U.S.”). The Partnership filed its Annual Report on Form 10-K for the year
ended December 31, 2017 with the Securities and Exchange Commission (“SEC”), which included all information and notes
necessary for such presentation. The results of operations for the interim periods are not necessarily indicative of the results
to be expected for the year or any future period. These unaudited interim financial statements should be read in conjunction with
the audited financial statements included in the Partnership’s Annual Report on Form 10-K for the year ended December 31,
2017 filed with the SEC.
Reclassifications.
Certain prior year amounts have been reclassified to discontinued operations on the unaudited condensed consolidated statements
of operations and comprehensive income related to the disposal of Sands Hill Mining LLC in 2017. See Note 3, “Discontinued
Operations” for further information on the disposal.
Organization.
Rhino Resource Partners LP is a Delaware limited partnership formed on April 19, 2010 to acquire Rhino Energy LLC (the
“Operating Company”). The Operating Company and its wholly owned subsidiaries produce and market coal from surface
and underground mines in Kentucky, Ohio, West Virginia and Utah. The majority of sales are made to electric utilities, coal brokers,
domestic and non-U.S. steel producers and other coal-related organizations in the United States. In addition, the Partnership
has increased its sales focus to U.S. export customers through brokers and direct end-user relationships.
Through
a series of transactions completed in the first quarter of 2016, Royal Energy Resources, Inc. (“Royal”) acquired a
majority ownership and control of the Partnership and 100% ownership of the Partnership’s general partner. The Partnership’s
common units trade on the OTCQB Marketplace under the ticker symbol “RHNO.”
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND GENERAL
Revenue
Recognition.
The Partnership adopted ASU 2014-09, Topic 606 on January 1, 2018, using the modified retrospective method.
The adoption of Topic 606 has no impact on revenue amounts recorded on the Partnership’s financial statements (See Note
15 for additional discussion). Most of the Partnership’s revenues are generated under coal sales contracts with electric
utilities, coal brokers, domestic and non-U.S. steel producers, industrial companies or other coal-related organizations. Revenue
is recognized and recorded when shipment or delivery to the customer has occurred, prices are fixed or determinable and the title
or risk of loss has passed in accordance with the terms of the sales agreement. Under the typical terms of these agreements, risk
of loss transfers to the customers at the mine or port, when the coal is loaded on the rail, barge, truck or other transportation
source that delivers coal to its destination. Advance payments received are deferred and recognized in revenue as coal is shipped
and title has passed.
Freight
and handling costs paid directly to third-party carriers and invoiced separately to coal customers are recorded as freight and
handling costs and freight and handling revenues, respectively. Freight and handling costs billed to customers as part of the
contractual per ton revenue of customer contracts is included in coal sales revenue.
Other
revenues generally consist of coal royalty revenues, coal handling and processing revenues, rebates and rental income. With respect
to other revenues recognized in situations unrelated to the shipment of coal, the Partnership carefully reviews the facts and
circumstances of each transaction and does not recognize revenue until the following criteria are met: persuasive evidence of
an arrangement exists, delivery has occurred or services have been rendered, the seller’s price to the buyer is fixed or
determinable and collectability is reasonably assured.
Investments
in Unconsolidated Affiliates.
Investments in other entities are accounted for using the consolidation, equity method or
cost basis depending upon the level of ownership, the Partnership’s ability to exercise significant influence over the operating
and financial policies of the investee and whether the Partnership is determined to be the primary beneficiary of a variable interest
entity. Equity investments are recorded at original cost and adjusted periodically to recognize the Partnership’s proportionate
share of the investees’ net income or losses after the date of investment. Any losses from the Partnership’s equity
method investments are absorbed by the Partnership based upon its proportionate ownership percentage. If losses are incurred that
exceed the Partnership’s investment in the equity method entity, then the Partnership continues to record its proportionate
share of losses in excess of its investment. Investments are written down only when there is clear evidence that a decline in
value that is other than temporary has occurred.
Recently
Issued Accounting Standards.
In February 2016, the FASB issued ASU 2016-02,
Leases (Topic 842)
. ASU 2016-02 requires
that lessees recognize all leases (other than leases with a term of twelve months or less) on the balance sheet as lease liabilities,
based upon the present value of the lease payments, with corresponding right of use assets. ASU 2016-02 also makes targeted changes
to other aspects of current guidance, including identifying a lease and lease classification criteria as well as the lessor accounting
model, including guidance on separating components of a contract and consideration in the contract. The amendments in ASU 2016-02
will be effective for the Partnership on January 1, 2019 and will require modified retrospective application as of the beginning
of the earliest period presented in the financial statements. Early application is permitted. The Partnership is currently evaluating
this guidance and compiling information on its portfolio of leases. The Partnership currently believes this new guidance will
not have a material impact on its financial results when adopted, but will require additional assets and liabilities to be recognized
for certain agreements where the Partnership has the rights to use assets. The majority of the Partnership’s rights to use
assets relate to coal reserves, which are exempt from the requirements of ASU 2016-02.
In
January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805).” ASU 2017-01 clarifies the definition
of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted
for as acquisitions (or disposals) of assets or businesses. ASU 2017-01 is effective for fiscal years beginning after December
15, 2017, including interim periods within those fiscal years. The Partnership has adopted this standard on its unaudited condensed
consolidated financial statements, which has no current period impact but may impact future periods in which acquisitions are
completed.
In
July 2017, the FASB issued ASU 2017-11, “Earnings Per Share (Topic 260): Distinguishing Liabilities from Equity (Topic 480),
I. Derivatives and Hedging (Topic 815): Accounting for Certain Financial Instruments with Down Round Features and II. Replacement
of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily
Redeemable Noncontrolling Interests with a Scope Exception.” Part I of ASU 2017-11 will result in freestanding equity-linked
financial instruments, such as warrants, and conversion options in convertible debt or preferred stock to no longer be accounted
for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity-classified
financial instruments, the amendments require entities that present earnings per share (EPS) in accordance with Topic 260 to recognize
the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available
to common shareholders in basic EPS. The amendments in Part II recharacterize the indefinite deferral of certain provisions of
Topic 480 that now are presented as pending content in the Codification. The amendments in Part II do not require any transition
guidance as the amendments do not have an accounting effect. The amendments in ASU 2017-11 will be effective on January 1, 2020,
and the Part I amendments must be applied retrospectively. Early application is permitted. The Partnership early adopted ASU 2017-11,
which did not have any material impact.
3.
DISCONTINUED OPERATIONS
Sands
Hill Mining LLC
Major
components of net (loss) from discontinued operations for the three and six months ended
June
30, 2018 and 2017 are summarized as follows:
|
|
Three
Months Ended June 30,
|
|
|
Six
Months Ended June 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
Major
line items constituting (loss) from discontinued operations for the Sands Hill Mining disposal:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Coal
sales
|
|
$
|
-
|
|
|
$
|
411
|
|
|
$
|
-
|
|
|
$
|
937
|
|
Limestone
sales
|
|
|
-
|
|
|
|
1,007
|
|
|
|
-
|
|
|
|
2,085
|
|
Other
revenues
|
|
|
-
|
|
|
|
429
|
|
|
|
-
|
|
|
|
831
|
|
Total
revenues
|
|
|
-
|
|
|
|
1,847
|
|
|
|
-
|
|
|
|
3,853
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of operations (exclusive of depreciation, depletion and amortization shown separately below)
|
|
|
-
|
|
|
|
1,721
|
|
|
|
-
|
|
|
|
3,422
|
|
Depreciation,
depletion and amortization
|
|
|
-
|
|
|
|
139
|
|
|
|
-
|
|
|
|
330
|
|
Selling,
general and administrative (exclusive of depreciation, depletion and amortization shown separately above)
|
|
|
-
|
|
|
|
14
|
|
|
|
-
|
|
|
|
26
|
|
Freight
and handling costs
|
|
|
|
|
|
|
228
|
|
|
|
-
|
|
|
|
403
|
|
(Gain)
on sale/disposal of assets, net
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2
|
)
|
Total
costs and expenses
|
|
|
-
|
|
|
|
2,102
|
|
|
|
-
|
|
|
|
4,179
|
|
(Loss)
from discontinued operations before income taxes for the Sands Hill Mining disposal
|
|
|
-
|
|
|
|
(255
|
)
|
|
|
-
|
|
|
|
(326
|
)
|
Income
taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Net
(loss) from discontinued operations
|
|
$
|
-
|
|
|
$
|
(255
|
)
|
|
$
|
-
|
|
|
$
|
(326
|
)
|
Cash
Flows
The
depreciation, depletion and amortization amounts for Sands Hill Mining LLC for each period presented are listed in the previous
table. The Partnership did not fund any material capital expenditures for Sands Hill Mining LLC for any period presented. Sands
Hill Mining LLC did not have any material non-cash operating items or non-cash investing items for any period presented.
4.
PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid
expenses and other current assets as of June 30, 2018 and December 31, 2017 consisted of the following:
|
|
June
30, 2018
|
|
|
December
31, 2017
|
|
|
|
(in
thousands)
|
|
Other
prepaid expenses
|
|
$
|
1,678
|
|
|
$
|
920
|
|
Prepaid
insurance
|
|
|
1,827
|
|
|
|
1,445
|
|
Prepaid
leases
|
|
|
87
|
|
|
|
92
|
|
Supply
inventory
|
|
|
306
|
|
|
|
434
|
|
Total
Prepaid expenses and other
|
|
$
|
3,898
|
|
|
$
|
2,891
|
|
5.
PROPERTY, PLANT AND EQUIPMENT
Property,
plant and equipment, including coal properties and mine development and construction costs, as of June 30, 2018 and December 31,
2017 are summarized by major classification as follows:
|
|
Useful
Lives
|
|
|
June
30, 2018
|
|
|
December
31, 2017
|
|
|
|
|
|
|
(in
thousands)
|
|
Land
|
|
|
|
|
|
$
|
14,050
|
|
|
$
|
14,687
|
|
Mining
and other equipment and related facilities
|
|
|
2
- 20 Years
|
|
|
|
305,554
|
|
|
|
298,293
|
|
Mine
development costs
|
|
|
1
- 15 Years
|
|
|
|
60,040
|
|
|
|
58,566
|
|
Coal
properties
|
|
|
1
- 15 Years
|
|
|
|
64,070
|
|
|
|
64,070
|
|
Construction
work in process
|
|
|
|
|
|
|
5,085
|
|
|
|
5,227
|
|
Total
|
|
|
|
|
|
|
448,799
|
|
|
|
440,843
|
|
Less
accumulated depreciation, depletion and amortization
|
|
|
|
|
|
|
(270,137
|
)
|
|
|
(263,520
|
)
|
Net
|
|
|
|
|
|
$
|
178,662
|
|
|
$
|
177,323
|
|
Depreciation
expense for mining and other equipment and related facilities, depletion expense for coal properties, amortization expense for
mine development costs and amortization expense for asset retirement costs for the three and six months ended June 30, 2018 and
2017 were as follows:
|
|
Three
Months Ended June 30,
|
|
|
Six
Months Ended June 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|
|
(in
thousands)
|
|
Depreciation
expense-mining and other equipment and related facilities
|
|
$
|
4,244
|
|
|
$
|
4,220
|
|
|
$
|
8,331
|
|
|
$
|
8,480
|
|
Depletion
expense for coal properties
|
|
|
481
|
|
|
|
415
|
|
|
|
953
|
|
|
|
770
|
|
Amortization
expense for mine development costs
|
|
|
821
|
|
|
|
788
|
|
|
|
1,570
|
|
|
|
1,545
|
|
Amortization
expense for asset retirement costs
|
|
|
131
|
|
|
|
47
|
|
|
|
250
|
|
|
|
182
|
|
Total
depreciation, depletion and amortization
|
|
$
|
5,677
|
|
|
$
|
5,470
|
|
|
$
|
11,104
|
|
|
$
|
10,977
|
|
On
May 17, 2018, the Partnership entered into a sale leaseback agreement with Wintrust Commercial Finance for certain equipment previously
owned by the Partnership. The Partnership received approximately $3.7 million of proceeds, of which $1.7 million was used to reduce
debt. The lease agreement has a thirty-six month term. The Partnership recorded a loss of $0.2 million on the sale of the equipment
which is included on the (Gain)/Loss on sale/disposal of assets-net line in the Partnership’s unaudited condensed consolidated
statements of operations and comprehensive income.
6.
OTHER NON-CURRENT ASSETS
Other
non-current assets as of June 30, 2018 and December 31, 2017 consisted of the following:
|
|
June
30,
2018
|
|
|
December
31,
2017
|
|
|
|
(in
thousands)
|
|
Deposits
and other
|
|
$
|
919
|
|
|
$
|
423
|
|
Due
(to)/from Rhino GP
|
|
|
(68
|
)
|
|
|
(61
|
)
|
Non-current
receivable
|
|
|
27,806
|
|
|
|
27,806
|
|
Deferred
expenses
|
|
|
324
|
|
|
|
340
|
|
Total
|
|
$
|
28,981
|
|
|
$
|
28,508
|
|
Non-current
receivable
. The non-current receivable balance of $27.8 million as of June 30, 2018 and December 31, 2017 consisted of
the amount due from the Partnership’s workers’ compensation insurance providers for potential claims against the Partnership
that are the primary responsibility of the Partnership, which are covered under the Partnership’s insurance policies. The
$27.8 million is also included in the Partnership’s accrued workers’ compensation benefits liability balance, which
is included in the other non-current liabilities section of the Partnership’s unaudited condensed consolidated statements
of financial position. The Partnership presents this amount on a gross asset and liability basis since a right of setoff does
not exist per the accounting guidance in ASC Topic 210,
Balance Sheet
. This presentation has no impact on the Partnership’s
results of operations or cash flows.
7.
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued
expenses and other current liabilities as of June 30, 2018 and December 31, 2017 consisted of the following:
|
|
June
30, 2018
|
|
|
December
31, 2017
|
|
|
|
(in
thousands)
|
|
Payroll,
bonus and vacation expense
|
|
$
|
2,299
|
|
|
$
|
2,633
|
|
Non
income taxes
|
|
|
3,548
|
|
|
|
2,738
|
|
Royalty
expenses
|
|
|
2,222
|
|
|
|
2,410
|
|
Accrued
interest
|
|
|
86
|
|
|
|
132
|
|
Health
claims
|
|
|
680
|
|
|
|
871
|
|
Workers’
compensation & pneumoconiosis
|
|
|
1,750
|
|
|
|
1,750
|
|
Deferred
revenues
|
|
|
985
|
|
|
|
-
|
|
Other
|
|
|
963
|
|
|
|
652
|
|
Total
|
|
$
|
12,533
|
|
|
$
|
11,186
|
|
8.
DEBT
Debt
as of June 30, 2018 and December 31, 2017 consisted of the following:
|
|
June
30, 2018
|
|
|
December
31,
2017
|
|
|
|
(in
thousands)
|
|
Note
payable -Financing Agreement
|
|
$
|
29,778
|
|
|
$
|
40,000
|
|
Note
payable-Other
|
|
|
1,195
|
|
|
|
-
|
|
Net
unamortized debt issuance costs
|
|
|
(4,502
|
)
|
|
|
(4,688
|
)
|
Original
Issue Discount
|
|
|
(1,054
|
)
|
|
|
(1,264
|
)
|
Total
|
|
|
25,417
|
|
|
|
34,048
|
|
Less
current portion
|
|
|
(2,320
|
)
|
|
|
(5,475
|
)
|
Long-term
debt
|
|
$
|
23,097
|
|
|
$
|
28,573
|
|
Financing
Agreement
On
December 27, 2017, the Operating Company, a wholly-owned subsidiary of the Partnership, certain of the Operating Company’s
subsidiaries identified as Borrowers (together with the Operating Company, the “Borrowers”), the Partnership and certain
other Operating Company subsidiaries identified as Guarantors (together with the Partnership, the “Guarantors”), entered
into a Financing Agreement (the “Financing Agreement”) with Cortland Capital Market Services LLC, as Collateral Agent
and Administrative agent, CB Agent Services LLC, as Origination Agent and the parties identified as Lenders therein (the “Lenders”),
pursuant to which the Lenders agreed to provide the Borrowers with a multi-draw term loan in the aggregate principal amount of
$80 million, subject to the terms and conditions set forth in the Financing Agreement. The total principal amount is divided into
a $40 million commitment, the conditions of which were satisfied at the execution of the Financing Agreement (the “Effective
Date Term Loan Commitment”) and an additional $40 million commitment that is contingent upon the satisfaction of certain
conditions precedent specified in the Financing Agreement (“Delayed Draw Term Loan Commitment”). Loans made pursuant
to the Financing Agreement are secured by substantially all of the Borrowers’ and Guarantors’ assets. The Financing
Agreement terminates on December 27, 2020.
Loans
made pursuant to the Financing Agreement are, at the Operating Company’s option, either “Reference Rate Loans”
or “LIBOR Rate Loans.” Reference Rate Loans bear interest at the greatest of (a) 4.25% per annum, (b) the Federal
Funds Rate plus 0.50% per annum, (c) the LIBOR Rate (calculated on a one-month basis) plus 1.00% per annum or (d) the Prime Rate
(as published in the Wall Street Journal) or if no such rate is published, the interest rate published by the Federal Reserve
Board as the “bank prime loan” rate or similar rate quoted therein, in each case, plus an applicable margin of 9.00%
per annum (or 12.00% per annum if the Operating Company has elected to capitalize an interest payment pursuant to the PIK Option,
as described below). LIBOR Rate Loans bear interest at the greater of (x) the LIBOR for such interest period divided by 100% minus
the maximum percentage prescribed by the Federal Reserve for determining the reserve requirements in effect with respect to eurocurrency
liabilities for any Lender, if any, and (y) 1.00%, in each case, plus 10.00% per annum (or 13.00% per annum if the Borrowers have
elected to capitalize an interest payment pursuant to the PIK Option). Interest payments are due on a monthly basis for Reference
Rate Loans and one-, two- or three-month periods, at the Operating Company’s option, for LIBOR Rate Loans. If there is no
event of default occurring or continuing, the Operating Company may elect to defer payment on interest accruing at 6.00% per annum
by capitalizing and adding such interest payment to the principal amount of the applicable term loan (the “PIK Option”).
Commencing
December 31, 2018, the principal for each loan made under the Financing Agreement will be payable on a quarterly basis in an amount
equal to $375,000 per quarter, with all remaining unpaid principal and accrued and unpaid interest due on December 27, 2020. In
addition, the Borrowers must make certain prepayments over the term of any loans outstanding, including: (i) the payment of 25%
of Excess Cash Flow (as that term is defined in the Financing Agreement) of the Partnership and its subsidiaries for each fiscal
year, commencing with respect to the year ending December 31, 2019, (ii) subject to certain exceptions, the payment of 100% of
the net cash proceeds from the dispositions of certain assets, the incurrence of certain indebtedness or receipts of cash outside
of the ordinary course of business, and (iii) the payment of the excess of the outstanding principal amount of term loans outstanding
over the amount of the Collateral Coverage Amount (as that term is defined in the Financing Agreement). In addition, the Lenders
are entitled to (i) certain fees, including 1.50% per annum of the unused Delayed Draw Term Loan Commitment for as long as such
commitment exists, (ii) for the 12-month period following the execution of the Financing Agreement, a make-whole amount equal
to the interest and unused Delayed Draw Term Loan Commitment fees that would have been payable but for the occurrence of certain
events, including among others, bankruptcy proceedings or the termination of the Financing Agreement by the Operating Company,
and (iii) audit and collateral monitoring fees and origination and exit fees.
The
Financing Agreement requires the Borrowers and Guarantor to comply with several affirmative covenants at any time loans are outstanding,
including, among others: (i) the requirement to deliver monthly, quarterly and annual financial statements, (ii) the requirement
to periodically deliver certificates indicating, among other things, (a) compliance with terms of the Financing Agreement and
ancillary loan documents, (b) inventory, accounts payable, sales and production numbers, (c) the calculation of the Collateral
Coverage Amount (as that term is defined in the Financing Agreement), (d) projections for the Partnership and its subsidiaries
and (e) coal reserve amounts; (iii) the requirement to notify the Administrative Agent of certain events, including events of
default under the Financing Agreement, dispositions, entry into material contracts, (iv) the requirement to maintain insurance,
obtain permits, and comply with environmental and reclamation laws (v) the requirement to sell up to $5.0 million of shares in
Mammoth Energy Services Inc. and use the net proceeds therefrom to prepay outstanding term loans, which was completed during the
first half of 2018 and (vi) establish and maintain cash management services and establish a cash management account and deliver
a control agreement with respect to such account to the Collateral Agent. The Financing Agreement also contains negative covenants
that restrict the Borrowers and Guarantors ability to, among other things: (i) incur liens or additional indebtedness or make
investments or restricted payments, (ii) liquidate or merge with another entity, or dispose of assets, (iii) change the nature
of their respective businesses; (iv) make capital expenditures in excess, or, with respect to maintenance capital expenditures,
lower than, specified amounts, (v) incur restrictions on the payment of dividends, (vi) prepay or modify the terms of other indebtedness,
(vii) permit the Collateral Coverage Amount to be less than the outstanding principal amount of the loans outstanding under the
Financing Agreement or (viii) permit the trailing six month Fixed Charge Coverage Ratio of the Partnership and its subsidiaries
to be less than 1.20 to 1.00 commencing with the six-month period ending June 30, 2018. See Note 19 for information relating to
the lenders’ waiver of the Fixed Charge Coverage Ratio for the six-month period ending June 30, 2018.
The
Financing Agreement contains customary events of default, following which the Collateral Agent may, at the request of lenders,
terminate or reduce all commitments and accelerate the maturity of all outstanding loans to become due and payable immediately
together with accrued and unpaid interest thereon and exercise any such other rights as specified under the Financing Agreement
and ancillary loan documents. The Partnership entered into a warrant agreement with certain parties that are also parties to the
Financing Agreement discussed above. (See Note 11 for further discussion)
On
April 17, 2018, Rhino amended its Financing Agreement to allow for certain activities including a sale leaseback of certain pieces
of equipment, the extension of the due date for lease consents required under the Financing Agreement to June 30, 2018 and the
distribution to holders of the Series A preferred units of $6.0 million (accrued in the consolidated financial statements at December
31, 2017). Additionally, the amendments provided that the Partnership could sell additional shares of Mammoth Energy Services
Inc. stock and retain 50% of the proceeds with the other 50% used to reduce debt. The Partnership reduced its outstanding debt
by $3.4 million with proceeds from the sale of Mammoth Energy Services Inc. stock in the second quarter of 2018.
At
June 30, 2018, the Partnership had $29.8 million of borrowings outstanding at a variable interest rate of Libor plus 10.00% (11.97%).
Letter
of Credit Facility-PNC Bank
On
December 27, 2017, the Partnership entered into a master letter of credit facility, security agreement and reimbursement agreement
(the “LoC Facility Agreement”) with PNC Bank, National Association (“PNC”), pursuant to which PNC agreed
to provide the Partnership with a facility for the issuance of standby letters of credit used in the ordinary course of its business
(the “LoC Facility”). The LoC Facility Agreement provides that the Partnership pay a quarterly fee at a rate equal
to 5% per annum calculated based on the daily average of letters of credit outstanding under the LoC Facility, as well as administrative
costs incurred by PNC and a $100,000 closing fee. The LoC Facility Agreement provides that the Partnership reimburse PNC for any
drawing under a letter of credit by a specified beneficiary as soon as possible after payment is made. The Partnership’s
obligations under the LoC Facility Agreement are secured by a first lien security interest on a cash collateral account that is
required to contain no less than 105% of the face value of the outstanding letters of credit. In the event the amount in such
cash collateral account is insufficient to satisfy the Partnership’s reimbursement obligations, the amount outstanding bears
interest at a rate per annum equal to the Base Rate (as that term is defined in the LoC Facility Agreement) plus 2.0%. The Partnership
will indemnify PNC for any losses which PNC may incur as a result of the issuance of a letter of credit or PNC’s failure
to honor any drawing under a letter of credit, subject in each case to certain exceptions. The LoC Facility Agreement expires
on December 31, 2018.
The
Partnership had outstanding letters of credit of approximately $3.0 million at a fixed interest rate of 5.00% at June 30, 2018.
9.
ASSET RETIREMENT OBLIGATIONS
The
changes in asset retirement obligations for the six months ended June 30, 2018 and the year ended December 31, 2017 are as follows:
|
|
Six
months ended
|
|
|
Year
ended
|
|
|
|
June
30, 2018
|
|
|
December
31, 2017
|
|
|
|
(in
thousands)
|
|
Balance
at beginning of period (including current portion)
|
|
$
|
18,662
|
|
|
$
|
19,108
|
|
Accretion
expense
|
|
|
639
|
|
|
|
1,493
|
|
Adjustment
resulting from disposal of property
|
|
|
-
|
|
|
|
(223
|
)
|
Adjustments
to the liability from annual recosting and other
|
|
|
-
|
|
|
|
(1,656
|
)
|
Liabilities
settled
|
|
|
(158
|
)
|
|
|
(60
|
)
|
Balance at
end of period
|
|
|
19,143
|
|
|
|
18,662
|
|
Less
current portion of asset retirement obligation
|
|
|
(498
|
)
|
|
|
(498
|
)
|
Long-term
portion of asset retirement obligation
|
|
$
|
18,645
|
|
|
$
|
18,164
|
|
10.
EMPLOYEE BENEFITS
401(k)
Plans
The
Operating Company sponsors a defined contribution savings plans for all employees. Under the defined contribution savings plan,
the Operating Company matches voluntary contributions of participants up to a maximum contribution based upon a percentage of
a participant’s salary with an additional matching contribution possible at the Partnership’s discretion. The expense
under these plans for the three and six months ended June 30, 2018 and 2017 is included in Cost of operations and Selling, general
and administrative expense in the Partnership’s unaudited condensed consolidated statements of operations and comprehensive
income and was as follows:
|
|
Three
months ended June 30,
|
|
|
Six
months ended June 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|
|
(in
thousands)
|
|
401(k)
plan expense
|
|
$
|
393
|
|
|
$
|
336
|
|
|
$
|
829
|
|
|
$
|
693
|
|
11.
PARTNERS’ CAPITAL
Common
Unit Warrants
In
December 2017, the Partnership entered into a warrant agreement with certain parties that are also parties to the Financing Agreement
discussed above. The warrant agreement included the issuance of a total of 683,888 warrants for common units (“Common Unit
Warrants”) of the Partnership at an exercise price of $1.95 per unit, which was the closing price of the Partnership’s
common units on the OTC market as of December 27, 2017. The Common Unit Warrants have a five year expiration date. The Common
Unit Warrants and the Partnership’s common units after exercise are both transferable, subject to applicable US securities
laws. The Common Unit Warrant exercise price is $1.95 per unit, but the price per unit will be reduced by future common unit distributions
and other further adjustments in price included in the warrant agreement for transactions that are dilutive to the amount of the
Partnership’s common units outstanding. The warrant agreement includes a provision for a cashless exercise where the warrant
holders can receive a net number of common units. Per the warrant agreement, the warrants are detached from the Financing Agreement
and fully transferable. The Partnership analyzed the Common Unit Warrants in accordance with the applicable accounting literature
and concluded the Common Unit Warrants should be classified as equity. The Partnership allocated the $40.0 million proceeds from
the Financing Agreement between the Common Unit Warrants and the Financing Agreement based upon their relative fair values. The
allocation based upon relative fair values resulted in approximately $1.3 million being recorded for the Common Unit Warrants
in the Partner’s Capital equity section and a corresponding reduction in Long-term debt, net on the Partnership’s
consolidated statements of financial position.
Series
A Preferred Units
On
December 30, 2016, the general partner entered into the Fourth Amended and Restated Agreement of Limited Partnership of the Partnership
(“Amended and Restated Partnership Agreement”) to create, authorize and issue the Series A preferred units.
The
Series A preferred units rank senior to all classes or series of equity securities of the Partnership with respect to distribution
rights and rights upon liquidation. The holders of the Series A preferred units are entitled to receive annual distributions equal
to the greater of (i) 50% of the CAM Mining free cash flow (as defined below) and (ii) an amount equal to the number of outstanding
Series A preferred units multiplied by $0.80. “CAM Mining free cash flow” is defined in the Amended and Restated Partnership
Agreement as (i) the total revenue of the Partnership’s Central Appalachia business segment, minus (ii) the cost of operations
(exclusive of depreciation, depletion and amortization) for the Partnership’s Central Appalachia business segment, minus
(iii) an amount equal to $6.50, multiplied by the aggregate number of coal tons sold by the Partnership from its Central Appalachia
business segment. If the Partnership fails to pay any or all of the distributions in respect of the Series A preferred units,
such deficiency will accrue until paid in full and the Partnership will not be permitted to pay any distributions on its Partnership
interests that rank junior to the Series A preferred units, including its common units. The Series A preferred units will be liquidated
in accordance with their capital accounts and upon liquidation will be entitled to distributions of property and cash in accordance
with the balances of their capital accounts prior to such distributions on equity securities that rank junior to the Series A
preferred units.
The
Series A preferred units vote on an as-converted basis with the common units, and the Partnership is restricted from taking certain
actions without the consent of the holders of a majority of the Series A preferred units, including: (i) the issuance of additional
Series A preferred units, or securities that rank senior or equal to the Series A preferred units; (ii) the sale or transfer of
CAM Mining or a material portion of its assets; (iii) the repurchase of common units, or the issuance of rights or warrants to
holders of common units entitling them to purchase common units at less than fair market value; (iv) consummation of a spin off;
(v) the incurrence, assumption or guaranty of indebtedness for borrowed money in excess of $50.0 million except indebtedness relating
to entities or assets that are acquired by the Partnership or its affiliates that is in existence at the time of such acquisition
or (vi) the modification of CAM Mining’s accounting principles or the financial or operational reporting principles of the
Partnership’s Central Appalachia business segment, subject to certain exceptions.
The
Partnership has the option to convert the outstanding Series A preferred units at any time on or after the time at which the amount
of aggregate distributions paid in respect of each Series A preferred unit exceeds $10.00 per unit. Each Series A preferred unit
will convert into a number of common units equal to the quotient (the “Series A Conversion Ratio”) of (i) the sum
of $10.00 and any unpaid distributions in respect of such Series A Preferred Unit divided by (ii) 75% of the volume-weighted average
closing price of the common units for the preceding 90 trading days (the “VWAP”); provided however, that the VWAP
will be capped at a minimum of $2.00 and a maximum of $10.00. On December 31, 2021, all outstanding Series A preferred units will
convert into common units at the then applicable Series A Conversion Ratio.
During
the first quarter of 2018, the Partnership paid $6.0 million in distributions earned for the year ended December 31, 2017 to holders
of the Series A preferred units. The Partnership has accrued $0.6 million for distributions to holders of the Series A preferred
units for the six months ended June 30, 2018.
Investment
in Royal Common Stock
On
September 1, 2017, Royal elected to convert certain obligations to the Partnership totaling $4.1 million to shares of Royal common
stock. Royal issued 914,797 shares of its common stock to the Partnership at a conversion price of $4.51 per share. The price
per share was equal to the outstanding balance multiplied by seventy-five percent (75%) of the volume-weighted average closing
price of Royal’s common stock for the 90 days preceding the date of conversion (“Royal VWAP”), subject to a
minimum Royal VWAP of $3.50 and a maximum Royal VWAP of $7.50. The Partnership recorded the $4.1 million conversion as Investment
in Royal common stock in the Partners’ Capital section of the Partnership’s unaudited condensed consolidated statements
of financial position since Royal does not have significant economic activity apart from its investment in the Partnership.
Other
Comprehensive Income
On
April 12, 2018 the Partnership sold 232,347 shares of Mammoth Energy Services, Inc. (NASDAQ: TUSK) (“Mammoth Inc.”)
for net cash consideration of $7.1 million. The Partnership used $3.4 million of the proceeds to reduce its debt balance. The
Partnership recorded a gain on the sale of approximately $3.6 million and reduced Other Comprehensive income by $4.0 million as
a result of the disposition. On January 19, 2018 the Partnership sold 232,347 shares of Mammoth Inc. for net cash consideration
of $4.8 million. The proceeds were used to reduce the Partnership’s debt balance. The Partnership recorded a gain on the
sale of $2.9 million and reduced Other Comprehensive income by $2.6 million as a result of the disposition. As of June 30, 2018
and December 31, 2017, the Partnership recorded fair market value adjustments of $4.4 million and $2.6 million, respectively,
for its available-for-sale investment in Mammoth Inc. based on the market value of the shares at June 30, 2018 and December 31,
2017, respectively, which was recorded in Other Comprehensive Income. As of June 30, 2018 and December 31, 2017, the Partnership
recorded its investment in Mammoth Inc. as a current asset, which was classified as available-for-sale. The Partnership has included
its investment in Mammoth Inc. in its Other category for segment reporting purposes. As of June 30, 2018, the Partnership owned
104,100 shares of Mammoth Inc.
Accumulated
Distribution Arrearages
Pursuant
to the Partnership’s partnership agreement, the Partnership’s common units accrue arrearages every quarter when the
distribution level is below the minimum level of $4.45 per unit. Beginning with the quarter ended June 30, 2015 and continuing
through the quarter ended June 30, 2018, the Partnership has suspended the cash distribution on its common units. For each of
the quarters ended September 30, 2014, December 31, 2014 and March 31, 2015, the Partnership announced cash distributions per
common unit at levels lower than the minimum quarterly distribution. The Partnership has not paid any distribution on its subordinated
units for any quarter after the quarter ended March 31, 2012. As of June 30, 2018, the Partnership had accumulated arrearages
of $556.0 million.
12.
EARNINGS PER UNIT (“EPU”)
The
following table presents a reconciliation of the numerators and denominators of the basic and diluted EPU calculations for the
periods ended June 30, 2018 and 2017:
Three
months ended June 30, 2018
|
|
General
Partner
|
|
|
Common
Unitholders
|
|
|
Subordinated
Unitholders
|
|
|
Preferred
Unitholders
|
|
|
|
(in
thousands, except per unit data)
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
in net (loss)/income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(loss)/income from continuing operations
|
|
$
|
(14
|
)
|
|
$
|
(3,061
|
)
|
|
$
|
(269
|
)
|
|
$
|
309
|
|
Net(loss)/income
from discontinued operations
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
interest in net (loss)/income
|
|
$
|
(14
|
)
|
|
$
|
(3,061
|
)
|
|
$
|
(269
|
)
|
|
$
|
309
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average units used to compute basic EPU
|
|
|
n/a
|
|
|
|
13,055
|
|
|
|
1,146
|
|
|
|
1,500
|
|
Weighted
average units used to compute diluted EPU
|
|
|
n/a
|
|
|
|
13,055
|
|
|
|
1,146
|
|
|
|
1,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(loss)/income per limited partner unit, basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(loss)/income per unit from continuing operations
|
|
|
n/a
|
|
|
$
|
(0.23
|
)
|
|
$
|
(0.23
|
)
|
|
$
|
0.21
|
|
Net(loss/income)
per unit from discontinued operations
|
|
|
n/a
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Net
(loss)/income per common unit, basic
|
|
|
n/a
|
|
|
$
|
(0.23
|
)
|
|
$
|
(0.23
|
)
|
|
$
|
0.21
|
|
Net
(loss)/income per limited partner unit, diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(loss)/income per unit from continuing operations
|
|
|
n/a
|
|
|
$
|
(0.23
|
)
|
|
$
|
(0.23
|
)
|
|
|
0.21
|
|
Net
(loss)/income per unit from discontinued operations
|
|
|
n/a
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Net
(loss)/income per common unit, diluted
|
|
|
n/a
|
|
|
$
|
(0.23
|
)
|
|
$
|
(0.23
|
)
|
|
|
0.21
|
|
Three
months ended June 30, 2017
|
|
General
Partner
|
|
|
Common
Unitholders
|
|
|
Subordinated
Unitholders
|
|
|
Preferred
Unitholders
|
|
|
|
(in
thousands, except per unit data)
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
in net (loss)/income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(loss)/income from continuing operations
|
|
$
|
(3
|
)
|
|
$
|
(738
|
)
|
|
$
|
(70
|
)
|
|
$
|
1,357
|
|
Net
(loss) from discontinued operations
|
|
|
(1
|
)
|
|
|
(232
|
)
|
|
|
(23
|
)
|
|
|
-
|
|
Total
interest in net (loss)/income
|
|
$
|
(4
|
)
|
|
$
|
(970
|
)
|
|
$
|
(93
|
)
|
|
|
1,357
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average units used to compute basic EPU
|
|
|
n/a
|
|
|
|
12,964
|
|
|
|
1,236
|
|
|
|
1,500
|
|
Weighted
average units used to compute diluted EPU
|
|
|
n/a
|
|
|
|
12,964
|
|
|
|
1,236
|
|
|
|
1,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(loss)/income per limited partner unit, basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(loss)/income per unit from continuing operations
|
|
|
n/a
|
|
|
$
|
(0.06
|
)
|
|
$
|
(0.06
|
)
|
|
$
|
0.90
|
|
Net
(loss) per unit from discontinued operations
|
|
|
n/a
|
|
|
|
(0.02
|
)
|
|
|
(0.02
|
)
|
|
|
-
|
|
Net
(loss)/income per common unit, basic
|
|
|
n/a
|
|
|
$
|
(0.08
|
)
|
|
$
|
(0.08
|
)
|
|
$
|
0.90
|
|
Net
(loss)/income per limited partner unit, diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(loss)/income per unit from continuing operations
|
|
|
n/a
|
|
|
$
|
(0.06
|
)
|
|
$
|
(0.06
|
)
|
|
$
|
0.90
|
|
Net
(loss) per unit from discontinued operations
|
|
|
n/a
|
|
|
|
(0.02
|
)
|
|
|
(0.02
|
)
|
|
|
-
|
|
Net
(loss)/income per common unit, diluted
|
|
|
n/a
|
|
|
$
|
(0.08
|
)
|
|
$
|
(0.08
|
)
|
|
$
|
0.90
|
|
Six
months ended June 30, 2018
|
|
General
Partner
|
|
|
Common
Unitholders
|
|
|
Subordinated
Unitholders
|
|
|
Preferred
Unitholders
|
|
|
|
(in
thousands, except per unit data)
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
in net (loss)/income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(loss)/income from continuing operations
|
|
$
|
(27
|
)
|
|
$
|
(5,917
|
)
|
|
$
|
(521
|
)
|
|
$
|
609
|
|
Net
(loss)/income from discontinued operations
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
interest in net (loss)/income
|
|
$
|
(27
|
)
|
|
$
|
(5,917
|
)
|
|
$
|
(521
|
)
|
|
$
|
609
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average units used to compute basic EPU
|
|
|
n/a
|
|
|
|
13,009
|
|
|
|
1,146
|
|
|
|
1,500
|
|
Weighted
average units used to compute diluted EPU
|
|
|
n/a
|
|
|
|
13,009
|
|
|
|
1,146
|
|
|
|
1,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(loss)/income per limited partner unit, basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(loss)/income per unit from continuing operations
|
|
|
n/a
|
|
|
$
|
(0.45
|
)
|
|
$
|
(0.45
|
)
|
|
$
|
0.41
|
|
Net
(loss)/income per unit from discontinued operations
|
|
|
n/a
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Net
(loss)/income per common unit, basic
|
|
|
n/a
|
|
|
$
|
(0.45
|
)
|
|
$
|
(0.45
|
)
|
|
$
|
0.41
|
|
Net
(loss)/income per limited partner unit, diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(loss)/income per unit from continuing operations
|
|
|
n/a
|
|
|
$
|
(0.45
|
)
|
|
$
|
(0.45
|
)
|
|
|
0.41
|
|
Net
(loss)/income per unit from discontinued operations
|
|
|
n/a
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Net
(loss)/income per common unit, diluted
|
|
|
n/a
|
|
|
$
|
(0.45
|
)
|
|
$
|
(0.45
|
)
|
|
|
0.41
|
|
Six
months ended June 30, 2017
|
|
General
Partner
|
|
|
Common
Unitholders
|
|
|
Subordinated
Unitholders
|
|
|
Preferred
Unitholders
|
|
|
|
(in
thousands, except per unit data)
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
in net (loss/income):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(loss)/income from continuing operations
|
|
$
|
(16
|
)
|
|
$
|
(3,533
|
)
|
|
$
|
(338
|
)
|
|
|
2,473
|
|
Net
(loss) from discontinued operations
|
|
|
(1
|
)
|
|
|
(296
|
)
|
|
|
(28
|
)
|
|
|
-
|
|
Total
interest in net (loss)/income
|
|
$
|
(17
|
)
|
|
$
|
(3,829
|
)
|
|
$
|
(366
|
)
|
|
|
2,473
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average units used to compute basic EPU
|
|
|
n/a
|
|
|
|
12,920
|
|
|
|
1,236
|
|
|
|
1,500
|
|
Weighted
average units used to compute diluted EPU
|
|
|
n/a
|
|
|
|
12,920
|
|
|
|
1,236
|
|
|
|
1,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(loss)/income per limited partner unit, basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(loss)/income per unit from continuing operations
|
|
|
n/a
|
|
|
$
|
(0.28
|
)
|
|
$
|
(0.28
|
)
|
|
$
|
1.65
|
|
Net
(loss) per unit from discontinued operations
|
|
|
n/a
|
|
|
|
(0.02
|
)
|
|
|
(0.02
|
)
|
|
|
-
|
|
Net
(loss)/income per common unit, basic
|
|
|
n/a
|
|
|
$
|
(0.30
|
)
|
|
$
|
(0.30
|
)
|
|
$
|
1.65
|
|
Net
(loss)/income per limited partner unit, diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(loss)/income per unit from continuing operations
|
|
|
n/a
|
|
|
$
|
(0.28
|
)
|
|
$
|
(0.28
|
)
|
|
$
|
1.65
|
|
Net
(loss) per unit from discontinued operations
|
|
|
n/a
|
|
|
|
(0.02
|
)
|
|
|
(0.02
|
)
|
|
|
-
|
|
Net
(loss)/income per common unit, diluted
|
|
|
n/a
|
|
|
$
|
(0.30
|
)
|
|
$
|
(0.30
|
)
|
|
$
|
1.65
|
|
Diluted
EPU gives effect to all dilutive potential common units outstanding during the period using the treasury stock method. Diluted
EPU excludes all dilutive potential units calculated under the treasury stock method if their effect is anti-dilutive. Since the
Partnership incurred a total net loss for three and six months ended June 30, 2018 and the six months ended June 30, 2017, all
potential dilutive units were excluded from the diluted EPU calculation for these periods because when an entity incurs a net
loss in a period, potential dilutive units shall not be included in the computation of diluted EPU since their effect will always
be anti-dilutive. The Partnership incurred total net income for the three months ended June 30, 2017 but did not have any potential
dilutive units outstanding during the period. There were 683,888 potential dilutive common units related to the Common Unit Warrants
as discussed in Note 11 for the six months ended June 30, 2018.
13.
COMMITMENTS AND CONTINGENCIES
Coal
Sales Contracts and Contingencies
—As of June 30, 2018, the Partnership had commitments under sales contracts to
deliver annually scheduled base quantities of coal as follows:
Year
|
|
|
Tons
(in thousands)
|
|
|
Number
of customers
|
|
|
2018
Q3-Q4
|
|
|
|
2,475
|
|
|
|
18
|
|
|
2019
|
|
|
|
2,020
|
|
|
|
8
|
|
|
2020
|
|
|
|
1,146
|
|
|
|
5
|
|
Some
of the contracts have sales price adjustment provisions, subject to certain limitations and adjustments, based on a variety of
factors and indices.
Purchased
Coal Expenses
—The Partnership incurs purchased coal expense from time to time related to coal purchase contracts.
In addition, the Partnership incurs expense from time to time related to coal purchased on the over-the-counter market (“OTC”).
The Partnership incurred no purchase coal expense from coal purchase contracts or expense from OTC purchases for the three and
six months ended June 30, 2018 and 2017.
Leases
—The
Partnership leases various mining, transportation and other equipment under operating leases. The Partnership also leases coal
reserves under agreements that call for royalties to be paid as the coal is mined. Lease and royalty expense for the three and
six months ended June 30, 2018 and 2017 are included in Cost of operations in the Partnership’s unaudited condensed consolidated
statements of operations and comprehensive income and was as follows:
|
|
Three
months ended June 30,
|
|
|
Six
months ended June 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|
|
(in
thousands)
|
|
Lease
expense
|
|
$
|
976
|
|
|
$
|
968
|
|
|
$
|
1,406
|
|
|
$
|
2,472
|
|
Royalty
expense
|
|
$
|
3,467
|
|
|
$
|
3,924
|
|
|
$
|
7,111
|
|
|
$
|
7,286
|
|
14.
MAJOR CUSTOMERS
The
Partnership had sales or receivables from the following major customers that in each period equaled or exceeded 10% of revenues:
|
|
June
30
|
|
|
December
31
|
|
|
Six
months
|
|
|
Six
months
|
|
|
|
2018
|
|
|
2017
|
|
|
ended
|
|
|
ended
|
|
|
|
Receivable
|
|
|
Receivable
|
|
|
June
30
|
|
|
June
30
|
|
|
|
Balance
|
|
|
Balance
|
|
|
2018
Sales
|
|
|
2017
Sales
|
|
|
|
(in
thousands)
|
|
Javelin
Global
|
|
$
|
3,727
|
|
|
$
|
2,470
|
|
|
$
|
16,554
|
|
|
$
|
-
|
|
Dominion
Energy
|
|
|
1,958
|
|
|
|
1,232
|
|
|
|
14,013
|
|
|
|
11,123
|
|
Integrity
Coal
|
|
|
-
|
|
|
|
2,238
|
|
|
|
11,364
|
|
|
|
12,268
|
|
Big
Rivers Electric Corporation
|
|
|
932
|
|
|
|
-
|
|
|
|
10,817
|
|
|
|
13,234
|
|
LG&E
|
|
|
234
|
|
|
|
1,483
|
|
|
|
6,559
|
|
|
|
21,162
|
|
15.
REVENUE
The
Partnership adopted ASC Topic 606 on January 1, 2018, using the modified retrospective method. The adoption of Topic 606 has no
impact on revenue amounts recorded on the Partnership’s financial statements. The new disclosures required by ASC Topic
606, as applicable, are presented below. The majority of the Partnership’s revenues are generated under coal sales contracts.
Coal sales accounted for approximately 99.0% of the Partnership’s total revenues for the three and six months ended June
30, 2018 and 2017. Other revenues generally consist of coal royalty revenues, coal handling and processing revenues, rebates and
rental income, which accounted for approximately 1.0% of the Partnership’s total revenues for the three and six months ended
June 30, 2018 and 2017.
The
majority of the Partnership’s coal sales contracts have a single performance obligation (shipment or delivery of coal according
to terms of the sales agreement) and as such, the Partnership is not required to allocate the contract’s transaction price
to multiple performance obligations. All of the Partnership’s coal sales revenue is recognized when shipment or delivery
to the customer has occurred, prices are fixed or determinable and the title or risk of loss has passed in accordance with the
terms of the coal sales agreement. With respect to other revenues recognized in situations unrelated to the shipment of coal,
the Partnership carefully reviews the facts and circumstances of each transaction and does not recognize revenue until the following
criteria are met: persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the seller’s
price to the buyer is fixed or determinable and collectability is reasonably assured.
In
the tables below, the Partnership has disaggregated its revenue by category for each reportable segment as required by ASC Topic
606.
The
following table disaggregates revenue by type for each reportable segment for the three months ended June 30, 2018:
|
|
Central
Appalachia
|
|
|
Northern
Appalachia
|
|
|
Rhino
Western
|
|
|
Illinois
Basin
|
|
|
Other
|
|
|
Total
Consolidated
|
|
|
|
(in
thousands)
|
|
Coal
sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steam
coal
|
|
$
|
13,200
|
|
|
$
|
3,904
|
|
|
$
|
8,656
|
|
|
$
|
13,608
|
|
|
$
|
-
|
|
|
$
|
39,368
|
|
Met
coal
|
|
|
14,877
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
14,877
|
|
Other
revenue
|
|
|
56
|
|
|
|
517
|
|
|
|
-
|
|
|
|
-
|
|
|
|
105
|
|
|
|
678
|
|
Total
|
|
$
|
28,133
|
|
|
$
|
4,421
|
|
|
$
|
8,656
|
|
|
$
|
13,608
|
|
|
$
|
105
|
|
|
$
|
54,923
|
|
The
following table disaggregates revenue by type for each reportable segment for the three months ended June 30, 2017:
|
|
Central
Appalachia
|
|
|
Northern
Appalachia
|
|
|
Rhino
Western
|
|
|
Illinois
Basin
|
|
|
Other
|
|
|
Total
Consolidated
|
|
|
|
(in
thousands)
|
|
Coal
sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steam
coal
|
|
$
|
10,380
|
|
|
$
|
2,325
|
|
|
$
|
8,760
|
|
|
$
|
17,604
|
|
|
$
|
-
|
|
|
$
|
39,070
|
|
Met
coal
|
|
|
15,229
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
15,229
|
|
Other
revenue
|
|
|
65
|
|
|
|
317
|
|
|
|
3
|
|
|
|
-
|
|
|
|
4
|
|
|
|
389
|
|
Total
|
|
$
|
25,674
|
|
|
$
|
2,642
|
|
|
$
|
8,763
|
|
|
$
|
17,604
|
|
|
$
|
4
|
|
|
$
|
54,688
|
|
The
following table disaggregates revenue by type for each reportable segment for the six months ended June 30, 2018:
|
|
Central
Appalachia
|
|
|
Northern
Appalachia
|
|
|
Rhino
Western
|
|
|
Illinois
Basin
|
|
|
Other
|
|
|
Total
Consolidated
|
|
|
|
(in
thousands)
|
|
Coal
sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steam
coal
|
|
$
|
24,861
|
|
|
$
|
7,592
|
|
|
$
|
16,716
|
|
|
$
|
25,219
|
|
|
$
|
-
|
|
|
$
|
74,388
|
|
Met
coal
|
|
|
34,129
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
34,129
|
|
Other
revenue
|
|
|
118
|
|
|
|
974
|
|
|
|
9
|
|
|
|
-
|
|
|
|
105
|
|
|
|
1,206
|
|
Total
|
|
$
|
59,108
|
|
|
$
|
8,566
|
|
|
$
|
16,725
|
|
|
$
|
25,219
|
|
|
$
|
105
|
|
|
$
|
109,723
|
|
The
following table disaggregates revenue by type for each reportable segment for the six months ended June 30, 2017:
|
|
Central
Appalachia
|
|
|
Northern
Appalachia
|
|
|
Rhino
Western
|
|
|
Illinois
Basin
|
|
|
Other
|
|
|
Total
Consolidated
|
|
|
|
(in
thousands)
|
|
Coal
sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steam
coal
|
|
$
|
17,055
|
|
|
$
|
6,184
|
|
|
$
|
16,058
|
|
|
$
|
34,412
|
|
|
$
|
-
|
|
|
$
|
73,708
|
|
Met
coal
|
|
|
31,846
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
31,846
|
|
Other
revenue
|
|
|
88
|
|
|
|
578
|
|
|
|
3
|
|
|
|
-
|
|
|
|
9
|
|
|
|
678
|
|
Total
|
|
$
|
48,989
|
|
|
$
|
6,762
|
|
|
$
|
16,061
|
|
|
$
|
34,412
|
|
|
$
|
9
|
|
|
$
|
106,232
|
|
16.
FAIR VALUE MEASUREMENTS
The
Partnership determines the fair value of assets and liabilities based on the exchange price that would be received for an asset
or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an
orderly transaction between market participants. The fair values are based on assumptions that market participants would use when
pricing an asset or liability, including assumptions about risk and the risks inherent in valuation techniques and the inputs
to valuations. The fair value hierarchy is based on whether the inputs to valuation techniques are observable or unobservable.
Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Partnership’s
assumptions of what market participants would use.
The
fair value hierarchy includes three levels of inputs that may be used to measure fair value as described below:
Level
One - Quoted prices for identical instruments in active markets.
Level
Two - The fair value of the assets and liabilities included in Level 2 are based on standard industry income approach models that
use significant observable inputs.
Level
Three - Unobservable inputs significant to the fair value measurement supported by little or no market activity.
In
those cases when the inputs used to measure fair value meet the definition of more than one level of the fair value hierarchy,
the lowest level input that is significant to the fair value measurement in its totality determines the applicable level in the
fair value hierarchy.
The
book values of cash and cash equivalents, accounts receivable and accounts payable are considered to be representative of their
respective fair values because of the immediate short-term maturity of these financial instruments. The fair value of the Partnership’s
Financing Agreement was determined based upon a market approach and approximates the carrying value at June 30, 2018. The fair
value of the Partnership’s Financing Agreement is a Level 2 measurement.
As
of June 30, 2018 and December 31, 2017, the Partnership had a recurring fair value measurement relating to its investment in Mammoth
Inc. As discussed in Note 11, the Partnership owned 104,100 shares of Mammoth Inc. as of June 30, 2018. The Partnership’s
shares of Mammoth Inc. are classified as an available-for-sale investment on the Partnership’s unaudited condensed consolidated
statements of financial position. Based on the availability of a quoted price, the recurring fair value measurement of the Mammoth
Inc. shares is a Level 1 measurement.
17.
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash
payments for interest were $2.8 million and $1.4 million for the six months ended June 30, 2018 and 2017, respectively.
The
unaudited condensed consolidated statement of cash flows for the six months ended June 30, 2018 and 2017 excludes approximately
$1.6 million and $1.1 million, respectively, of property, plant and equipment additions which are recorded in Accounts payable.
18.
SEGMENT INFORMATION
The
Partnership primarily produces and markets coal from surface and underground mines in Kentucky, West Virginia, Ohio and Utah.
The Partnership sells primarily to electric utilities in the United States.
As
of June 30, 2018, the Partnership has four reportable business segments: Central Appalachia, Northern Appalachia, Rhino Western
and Illinois Basin. Additionally, the Partnership has an Other category that includes its ancillary businesses.
The
Partnership’s Other category as reclassified is comprised of the Partnership’s ancillary businesses. Held for sale
assets are included in the applicable segment for reporting purposes. The Partnership has not provided disclosure of total expenditures
by segment for long-lived assets, as the Partnership does not maintain discrete financial information concerning segment expenditures
for long lived assets, and accordingly such information is not provided to the Partnership’s chief operating decision maker.
The information provided in the following tables represents the primary measures used to assess segment performance by the Partnership’s
chief operating decision maker.
Reportable
segment results of operations for the three months ended June 30, 2018 are as follows (Note: “DD&A” refers to
depreciation, depletion and amortization):
|
|
Central
|
|
|
Northern
|
|
|
Rhino
|
|
|
Illinois
|
|
|
|
|
|
Total
|
|
|
|
Appalachia
|
|
|
Appalachia
|
|
|
Western
|
|
|
Basin
|
|
|
Other
|
|
|
Consolidated
|
|
|
|
(in
thousands)
|
|
Total
revenues
|
|
$
|
28,133
|
|
|
$
|
4,422
|
|
|
$
|
8,656
|
|
|
$
|
13,608
|
|
|
$
|
104
|
|
|
$
|
54,923
|
|
DD&A
|
|
|
2,263
|
|
|
|
300
|
|
|
|
1,041
|
|
|
|
1,979
|
|
|
|
94
|
|
|
|
5,677
|
|
Interest
expense
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,913
|
|
|
|
1,913
|
|
Net
income (loss) from continuing operations
|
|
$
|
997
|
|
|
$
|
(1,477
|
)
|
|
$
|
(63
|
)
|
|
$
|
(1,880
|
)
|
|
$
|
(612
|
)
|
|
$
|
(3,035
|
)
|
Reportable
segment results of operations for the three months ended June 30, 2017 are as follows:
|
|
Central
|
|
|
Northern
|
|
|
Rhino
|
|
|
Illinois
|
|
|
|
|
|
Total
|
|
|
|
Appalachia
|
|
|
Appalachia
|
|
|
Western
|
|
|
Basin
|
|
|
Other
|
|
|
Consolidated
|
|
|
|
(in
thousands)
|
|
Total
revenues
|
|
$
|
25,675
|
|
|
$
|
2,642
|
|
|
$
|
8,763
|
|
|
$
|
17,604
|
|
|
$
|
4
|
|
|
$
|
54,688
|
|
DD&A
|
|
|
1,949
|
|
|
|
279
|
|
|
|
1,200
|
|
|
|
1,949
|
|
|
|
93
|
|
|
|
5,470
|
|
Interest
expense
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
965
|
|
|
|
965
|
|
Net
income (loss) from continuing operations
|
|
$
|
3,337
|
|
|
$
|
(1,321
|
)
|
|
$
|
740
|
|
|
$
|
975
|
|
|
$
|
(3,186
|
)
|
|
$
|
545
|
|
Reportable
segment results of operations for the six months ended June 30, 2018 are as follows:
|
|
Central
|
|
|
Northern
|
|
|
Rhino
|
|
|
Illinois
|
|
|
|
|
|
Total
|
|
|
|
Appalachia
|
|
|
Appalachia
|
|
|
Western
|
|
|
Basin
|
|
|
Other
|
|
|
Consolidated
|
|
|
|
(in
thousands)
|
|
Total
revenues
|
|
$
|
59,108
|
|
|
$
|
8,566
|
|
|
$
|
16,725
|
|
|
$
|
25,219
|
|
|
$
|
105
|
|
|
$
|
109,723
|
|
DD&A
|
|
|
4,459
|
|
|
|
441
|
|
|
|
2,102
|
|
|
|
3,918
|
|
|
|
184
|
|
|
|
11,104
|
|
Interest
expense
|
|
|
1
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,797
|
|
|
|
3,798
|
|
Net
income (loss) from continuing operations
|
|
$
|
1,927
|
|
|
$
|
(2,592
|
)
|
|
$
|
900
|
|
|
$
|
(4,209
|
)
|
|
$
|
(1,882
|
)
|
|
$
|
(5,856
|
)
|
Reportable
segment results of operations for the six months ended June 30, 2017 are as follows:
|
|
Central
|
|
|
Northern
|
|
|
Rhino
|
|
|
Illinois
|
|
|
|
|
|
Total
|
|
|
|
Appalachia
|
|
|
Appalachia
|
|
|
Western
|
|
|
Basin
|
|
|
Other
|
|
|
Consolidated
|
|
|
|
(in
thousands)
|
|
Total
revenues
|
|
$
|
48,988
|
|
|
$
|
6,762
|
|
|
$
|
16,061
|
|
|
$
|
34,412
|
|
|
$
|
9
|
|
|
$
|
106,232
|
|
DD&A
|
|
|
3,922
|
|
|
|
586
|
|
|
|
2,316
|
|
|
|
3,954
|
|
|
|
199
|
|
|
|
10,977
|
|
Interest
expense
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,120
|
|
|
|
2,120
|
|
Net
income (loss) from continuing operations
|
|
$
|
5,631
|
|
|
$
|
(2,030
|
)
|
|
$
|
154
|
|
|
$
|
1,628
|
|
|
$
|
(6,796
|
)
|
|
$
|
(1,413
|
)
|
19.
SUBSEQUENT EVENTS
On
July 27, 2018, the Partnership entered into a consent with its Lenders related to the Financing Agreement. The consent includes
the lenders agreement to make a $5 million loan from the Delayed Draw Term Loan Commitment; provided, however, that the loan is
required to be repaid in full by October 26, 2018. The consent also includes a waiver of the requirements relating to the use
of proceeds of any sale of the shares of Mammoth Inc. set forth in the consent to the Financing Agreement, dated as of April 17,
2018 and also waived any Event of Default that arose or would otherwise arise under the Financing Agreement for failing to comply
with the Fixed Charge Coverage Ratio for the six months ended June 30, 2018.
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Unless
the context clearly indicates otherwise, references in this report to “we,” “our,” “us” or
similar terms refer to Rhino Resource Partners LP and its subsidiaries. References to “our general partner” refer
to Rhino GP LLC, the general partner of Rhino Resource Partners LP. The following discussion of the historical financial condition
and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and notes
thereto presented in this Quarterly Report on Form 10-Q as well as the audited consolidated financial statements and accompanying
notes included in our Annual Report on Form 10-K for the year ended December 31, 2017 and the section “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” included in such Annual Report on Form 10-K.
In
addition, this discussion includes forward looking statements that are subject to risks and uncertainties that may result in actual
results differing from statements we make. Please read the section “Cautionary Note Regarding Forward Looking Statements”.
In addition, factors that could cause actual results to differ include those risks and uncertainties discussed in Part I, Item
1A. “Risk Factors” also included in our Annual Report on Form 10-K for the year ended December 31, 2017.
On
November 7, 2017, we closed an agreement with a third party to transfer 100% of the membership interests and related assets and
liabilities in our Sands Hill Mining entity to the third party in exchange for a future override royalty for any mineral sold,
excluding coal, from Sands Hill Mining after the closing date. Our unaudited condensed consolidated statement of operations and
comprehensive income have been retrospectively adjusted to reclassify our Sands Hill Mining operation to discontinued operations
for the three and six months ended June 30, 2017.
Overview
Through
a series of transactions completed in the first quarter of 2016, Royal Energy Resources, Inc. (“Royal”) acquired a
majority ownership and control of us and 100% ownership of our general partner.
We
are a diversified coal producing limited partnership formed in Delaware that is focused on coal and energy related assets and
activities. We produce, process and sell high quality coal of various steam and metallurgical grades. We market our steam coal
primarily to electric utility companies as fuel for their steam powered generators. Customers for our metallurgical coal are primarily
steel and coke producers who use our coal to produce coke, which is used as a raw material in the steel manufacturing process.
Our investments have included joint ventures that provide for the transportation of hydrocarbons and drilling support services
in the Utica Shale region. We have also invested in joint ventures that provide sand for fracking operations to drillers in the
Utica Shale region and other oil and natural gas basins in the United States.
We
have a geographically diverse asset base with coal reserves located in Central Appalachia, Northern Appalachia, the Illinois Basin
and the Western Bituminous region. As of December 31, 2017, we controlled an estimated 252.7 million tons of proven and probable
coal reserves, consisting of an estimated 200.1 million tons of steam coal and an estimated 52.6 million tons of metallurgical
coal. In addition, as of December 31, 2017, we controlled an estimated 185.2 million tons of non-reserve coal deposits.
We
operate underground and surface mines located in Kentucky, Ohio, West Virginia and Utah. The number of mines that we operate may
vary from time to time depending on a number of factors, including the demand for and price of coal, depletion of economically
recoverable reserves and availability of experienced labor.
Our
principal business strategy is to safely, efficiently and profitably produce and sell both steam and metallurgical coal from our
diverse asset base in order to resume, and, over time, increase our quarterly cash distributions. In addition, we continue to
seek opportunities to expand and diversify our operations through strategic acquisitions, including the acquisition of long-term,
cash generating natural resource assets. We believe that such assets will allow us to grow our cash available for distribution
and enhance stability of our cash flow.
For
the three and six months ended June 30, 2018, we generated revenues of approximately $54.9 million and $109.7 million, respectively,
and we generated net losses of $3.0 million and $5.9 million for the three and six months ended June 30, 2018. For the three months
ended June 30, 2018, we produced and sold approximately 1.1 million tons of coal, of which approximately 68% were sold pursuant
to supply contracts. For the six months ended June 30, 2018, we produced and sold approximately 2.2 million tons of coal, of which
approximately 79% were sold pursuant to supply contracts.
Current
Liquidity and Outlook
As
of June 30, 2018, our available liquidity was $3.1 million. We also have a delayed draw term loan commitment in the amount of
$40 million contingent upon the satisfaction of certain conditions precedent specified in the Financing Agreement discussed below.
(See Note 19 for further discussion)
On
December 27, 2017, we entered into a financing agreement (“Financing Agreement”), which provides us with a multi-draw
loan in the aggregate principal amount of $80 million. The total principal amount is divided into a $40 million commitment, the
conditions for which were satisfied at the execution of the Financing Agreement and an additional $40 million commitment that
is contingent upon the satisfaction of certain conditions precedent specified in the Financing Agreement. We used approximately
$17.3 million of the net proceeds thereof to repay all amounts outstanding and terminate the Amended and Restated Credit Agreement
with PNC Bank, National Association, as Administrative Agent. The Financing Agreement terminates on December 27, 2020. For more
information about our new Financing Agreement, please read “— Liquidity and Capital Resources—Financing Agreement.”
We
continue to take measures, including the suspension of cash distributions on our common and subordinated units and cost and productivity
improvements, to enhance and preserve our liquidity so that we can fund our ongoing operations and necessary capital expenditures
and meet our financial commitments and debt service obligations.
Recent
Developments
Financing
Agreement
On
December 27, 2017, we entered into a Financing Agreement with Cortland Capital Market Services LLC, as Collateral Agent and Administrative
agent, CB Agent Services LLC, as Origination Agent and the parties identified as Lenders therein (the “Lenders”),
pursuant to which Lenders agreed to provide us with a multi-draw term loan in the aggregate principal amount of $80 million, subject
to the terms and conditions set forth in the Financing Agreement. The total principal amount is divided into a $40 million commitment,
the conditions for which were satisfied at the execution of the Financing Agreement (the “Effective Date Term Loan Commitment”)
and an additional $40 million commitment that is contingent upon the satisfaction of certain conditions precedent specified in
the Financing Agreement (“Delayed Draw Term Loan Commitment”). Loans made pursuant to the Financing Agreement are
secured by substantially all of our assets. The Financing Agreement terminates on December 27, 2020. For more information about
our new Financing Agreement, please read “— Liquidity and Capital Resources—Financing Agreement.”
On
April 17, 2018, we amended the Financing Agreement to allow for certain activities including a sale leaseback of certain pieces
of equipment, the due date for the lease consents was extended to June 30, 2018 and confirmation of the distribution to holders
of the Series A preferred units of $6.0 million (accrued in our consolidated financial statements at December 31, 2017). Additionally,
the amendments provide that we can sell additional shares of Mammoth Inc. stock and retain 50% of the proceeds with the other
50% used to reduce debt. We reduced the debt by $3.4 million with proceeds from the sale of Mammoth Inc. stock in the second quarter
of 2018.
On
July 27, 2018, we entered into a consent with our Lenders related to the Financing Agreement. The consent includes the lenders
agreement to make a $5 million loan from the Delayed Draw Term Loan Commitment; provided, however, that the loan is required to
be repaid in full by October 26, 2018. The consent also includes a waiver of the requirements relating to the use of proceeds
of any sale of the shares of Mammoth Inc. set forth in the consent to the Financing Agreement, dated as of April 17, 2018 and
also waived any Event of Default that arose or would otherwise arise under the Financing Agreement for failing to comply with
the Fixed Charge Coverage Ratio for the six months ended June 30, 2018.
Common
Unit Warrants
In
December 2017, we entered into a warrant agreement with certain parties that are also parties to the Financing Agreement discussed
above. The warrant agreement included the issuance of a total of 683,888 warrants of our common units (“Common Unit Warrants”)
at an exercise price of $1.95 per unit, which was the closing price of our common units on the OTC market as of December 27, 2017.
The Common Unit Warrants have a five year expiration date. The Common Unit Warrants and our common units after exercise are both
transferable, subject to applicable US securities laws. The Common Unit Warrant exercise price is $1.95 per unit, but the price
per unit will be reduced by future common unit distributions and other further adjustments in price included in the warrant agreement
for transactions that are dilutive to the amount of Rhino’s common units outstanding. The warrant agreement includes a provision
for a cashless exercise where the warrant holders can receive a net number of common units. Per the warrant agreement, the warrants
are detached from the Financing Agreement and fully transferable.
Letter
of Credit Facility – PNC Bank
On
December 27, 2017, we entered into a master letter of credit facility, security agreement and reimbursement agreement (the “LoC
Facility Agreement”) with PNC Bank, National Association (“PNC”), pursuant to which PNC agreed to provide us
with a facility for the issuance of standby letters of credit used in the ordinary course of our business (the “LoC Facility”).
The LoC Facility Agreement provides that we pay a quarterly fee at a rate equal to 5% per annum calculated based on the daily
average of letters of credit outstanding under the LoC Facility, as well as administrative costs incurred by PNC and a $100,000
closing fee. The LoC Facility Agreement provides that we reimburse PNC for any drawing under a letter of credit by a specified
beneficiary as soon as possible after payment is made. Our obligations under the LoC Facility Agreement are secured by a first
lien security interest on a cash collateral account that is required to contain no less than 105% of the face value of the outstanding
letters of credit. In the event the amount in such cash collateral account is insufficient to satisfy our reimbursement obligations,
the amount outstanding bears interest at a rate per annum equal to the Base Rate (as that term is defined in the LoC Facility
Agreement) plus 2.0%. We will indemnify PNC for any losses which PNC may incur as a result of the issuance of a letter of credit
or PNC’s failure to honor any drawing under a letter of credit, subject in each case to certain exceptions. The LoC Facility
Agreement expires on December 31, 2018. We had $3.0 million of letters of credit at June 30, 2018 under the LoC Facility with
cash collateral in the amount of $3.7 million. We anticipate providing collateral with our counterparties prior to the expiration
of the LoC Facility on December 31, 2018.
Distribution
Suspension
Pursuant
to the Partnership agreement, our common units accrue arrearages every quarter when the distribution level is below the minimum
level of $4.45 per unit. Beginning with the quarter ended June 30, 2015 and continuing through the quarter ended June 30, 2018,
we have suspended the cash distribution on our common units. For each of the quarters ended September 30, 2014, December 31, 2014
and March 31, 2015, we announced cash distributions per common unit at levels lower than the minimum quarterly distribution. We
have not paid any distribution on our subordinated units for any quarter after the quarter ended March 31, 2012. As of June 30,
2018, we had accumulated arrearages of $556.0 million.
Factors
That Impact Our Business
Our
results of operations in the near term could be impacted by a number of factors, including (1) our ability to fund our ongoing
operations and necessary capital expenditures, (2) the availability of transportation for coal shipments, (3) poor mining conditions
resulting from geological conditions or the effects of prior mining, (4) equipment problems at mining locations, (5) adverse weather
conditions and natural disasters or (6) the availability and costs of key supplies and commodities such as steel, diesel fuel
and explosives.
On
a long-term basis, our results of operations could be impacted by, among other factors, (1) our ability to fund our ongoing operations
and necessary capital expenditures, (2) changes in governmental regulation, (3) the availability and prices of competing electricity-generation
fuels, (4) the world-wide demand for steel, which utilizes metallurgical coal and can affect the demand and prices of metallurgical
coal that we produce, (5) our ability to secure or acquire high-quality coal reserves and (6) our ability to find buyers for coal
under favorable supply contracts.
We
have historically sold a majority of our coal through long-term supply contracts, although we have starting selling a larger percentage
of our coal under short-term and spot agreements. As of June 30, 2018, we had commitments under supply contracts to deliver annually
scheduled base quantities of coal as follows:
Year
|
|
|
Tons
(in thousands)
|
|
|
Number
of customers
|
|
|
2018
Q3-Q4
|
|
|
|
2,475
|
|
|
|
18
|
|
|
2019
|
|
|
|
2,020
|
|
|
|
8
|
|
|
2020
|
|
|
|
1,146
|
|
|
|
5
|
|
Some
of the contracts have sales price adjustment provisions, subject to certain limitations and adjustments, based on a variety of
factors and indices.
Results
of Operations
Segment
Information
As
of June 30, 2018, we have four reportable business segments: Central Appalachia, Northern Appalachia, Rhino Western and Illinois
Basin. Additionally, we have an Other category that includes our ancillary businesses. Our Central Appalachia segment consists
of two mining complexes: Tug River and Rob Fork, which, as of June 30, 2018, together included one underground mine, three surface
mines and three preparation plants and loadout facilities in eastern Kentucky and southern West Virginia. Our Northern Appalachia
segment consists of the Hopedale mining complex and the Leesville field. The Hopedale mining complex, located in northern Ohio,
included one underground mine and one preparation plant and loadout facility as of June 30, 2018. Our Rhino Western segment includes
one underground mine in the Western Bituminous region at our Castle Valley mining complex in Utah. Our Illinois Basin segment
includes one underground mine, preparation plant and river loadout facility at our Pennyrile mining complex located in western
Kentucky, as well as our Taylorville field reserves located in central Illinois. Our Other category is comprised of our ancillary
businesses.
Evaluating
Our Results of Operations
Our
management uses a variety of non-GAAP financial measurements to analyze our performance, including (1) Adjusted EBITDA, (2) coal
revenues per ton and (3) cost of operations per ton.
Adjusted
EBITDA.
The discussion of our results of operations below includes references to, and analysis of, our segments’
Adjusted EBITDA results. Adjusted EBITDA represents net income before deducting interest expense, income taxes and depreciation,
depletion and amortization, while also excluding certain non-cash and/or non-recurring items. Adjusted EBITDA is used by management
primarily as a measure of our segments’ operating performance. Adjusted EBITDA should not be considered an alternative to
net income, income from operations, cash flows from operating activities or any other measure of financial performance or liquidity
presented in accordance with GAAP. Because not all companies calculate Adjusted EBITDA identically, our calculation may not be
comparable to similarly titled measures of other companies. Please read “—Reconciliations of Adjusted EBITDA”
for reconciliations of Adjusted EBITDA to net income by segment for each of the periods indicated.
Coal
Revenues Per Ton
.
Coal revenues per ton represents coal revenues divided by tons of coal sold. Coal revenues per
ton is a key indicator of our effectiveness in obtaining favorable prices for our product.
Cost
of Operations Per Ton
.
Cost of operations per ton sold represents the cost of operations (exclusive of depreciation,
depletion and amortization) divided by tons of coal sold. Management uses this measurement as a key indicator of the efficiency
of operations.
Summary.
(The following discussions of financial and operational data for the three months ended June 30, 2018 and 2017 pertain to continuing
operations unless otherwise specified.)
The
following table sets forth certain information regarding our revenues, operating expenses, other income and expenses, and operational
data for the three months ended June 30, 2018 and 2017:
|
|
Three
months ended
|
|
|
Three
months ended
|
|
|
Increase/(Decrease)
|
|
|
|
June
30, 2018
|
|
|
June
30, 2017
|
|
|
$
|
|
|
%
*
|
|
|
|
(in
millions, except per ton data and %)
|
|
Statement
of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Coal
revenues
|
|
$
|
54.2
|
|
|
$
|
54.3
|
|
|
|
(0.1
|
)
|
|
|
(0.1
|
%)
|
Other
revenues
|
|
|
0.7
|
|
|
|
0.4
|
|
|
|
0.3
|
|
|
|
74.4
|
%
|
Total
revenues
|
|
|
54.9
|
|
|
|
54.7
|
|
|
|
0.2
|
|
|
|
0.4
|
%
|
Costs
and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of operations (exclusive of DD&A shown separately below)
|
|
|
49.6
|
|
|
|
44.9
|
|
|
|
4.7
|
|
|
|
10.3
|
%
|
Freight
and handling costs
|
|
|
1.4
|
|
|
|
-
|
|
|
|
1.4
|
|
|
|
n/a
|
|
Depreciation,
depletion and amortization
|
|
|
5.7
|
|
|
|
5.5
|
|
|
|
0.2
|
|
|
|
3.8
|
%
|
Selling,
general and administrative (exclusive of DD&A shown separately above)
|
|
|
2.8
|
|
|
|
2.7
|
|
|
|
0.1
|
|
|
|
3.0
|
%
|
(Gain)/loss
on sale/disposal of assets
|
|
|
(3.5
|
)
|
|
|
0.1
|
|
|
|
(3.6
|
)
|
|
|
(4494.7
|
%)
|
(Loss)/income
from operations
|
|
|
(1.1
|
)
|
|
|
1.5
|
|
|
|
(2.6
|
)
|
|
|
(176.3
|
%)
|
Interest
and other (income) expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense and other
|
|
|
1.9
|
|
|
|
0.9
|
|
|
|
1.0
|
|
|
|
98.3
|
%
|
Interest
income and other
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
n/a
|
|
Equity
in net (income) of unconsolidated affiliates
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(100.0
|
%)
|
Total
interest and other (income) expense
|
|
|
1.9
|
|
|
|
0.9
|
|
|
|
1.0
|
|
|
|
106.9
|
%
|
Net
(loss)/income from continuing operations
|
|
|
(3.0
|
)
|
|
|
0.6
|
|
|
|
(3.6
|
)
|
|
|
656.6
|
%
|
Net
(loss) from discontinued operations
|
|
|
-
|
|
|
|
(0.3
|
)
|
|
|
0.3
|
|
|
|
(100.0
|
%)
|
Net
(loss)/income
|
|
$
|
(3.0
|
)
|
|
$
|
0.3
|
|
|
|
(3.3
|
)
|
|
|
(1148.2
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
tons sold
|
|
|
1,102.8
|
|
|
|
1,026.0
|
|
|
|
76.8
|
|
|
|
7.5
|
%
|
Coal
revenues per ton
|
|
$
|
49.19
|
|
|
$
|
52.92
|
|
|
$
|
(3.73
|
)
|
|
|
(7.1
|
%)
|
Cost of operations
per ton
|
|
$
|
44.97
|
|
|
$
|
43.81
|
|
|
$
|
1.16
|
|
|
|
2.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Financial Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA from continuing operations
|
|
$
|
4.6
|
|
|
$
|
7.0
|
|
|
$
|
(2.4
|
)
|
|
|
(34.8
|
%)
|
Adjusted
EBITDA from discontinued operations
|
|
|
-
|
|
|
|
(0.1
|
)
|
|
|
0.1
|
|
|
|
(100.0
|
%)
|
Adjusted
EBITDA
|
|
$
|
4.6
|
|
|
$
|
6.9
|
|
|
$
|
(2.3
|
)
|
|
|
(33.7
|
%)
|
*
|
Percentages
and per ton amounts are calculated based on actual amounts and not the rounded amounts presented in this table.
|
Three
Months Ended June 30, 2018 Compared to Three Months Ended June 30, 2017
Revenues.
Our coal revenues for the three months ended June 30, 2018 decreased by approximately $0.1 million, or 0.1%, to approximately
$54.2 million from approximately $54.3 million for the three months ended June 30, 2017. The decrease in coal revenues was primarily
due to a decrease in contracted sale prices for tons sold. In addition, the increase in production and sales tons and realization
of our coal revenues was limited during the second quarter due to ongoing rail transportation constraints that caused some met
and steam coal shipments from our Central Appalachia and Northern Appalachia operations to be delayed into the third quarter of
2018. Coal revenues per ton was $49.19 for the three months ended June 30, 2018, a decrease of $3.73 or 7.1%, from $52.92 per
ton for the three months ended June 30, 2017. This decrease in coal revenues per ton was primarily the result of lower contracted
sales prices at our Pennyrile operation in the Illinois Basin during the second quarter of 2018 compared to the same period in
2017.
Cost
of Operations
. Total cost of operations increased by $4.7 million or 10.3% to $49.6 million for the three months ended
June 30, 2018 as compared to $44.9 million for the three months ended June 30, 2017. Our cost of operations per ton was $44.97
for the three months ended June 30, 2018, an increase of $1.16, or 2.6%, from the three months ended June 30, 2017. The increase
in cost of operations was primarily due to the $2.8 million increase in cost of production at our Central Appalachia operations
as cost for diesel fuel, contract services and equipment maintenance increased in the second quarter of 2018.
Freight
and Handling.
Total freight and handling cost increased to $1.4 million for the three months ended June 30, 2018, while
we did not incur any freight and handling costs for the three months ended June 30, 2017. The increase in freight and handling
costs was primarily the result of rail transportation costs in our Central Appalachia operations as we executed more export coal
sales in the period that required us to pay for railroad transportation to the port of export.
Depreciation,
Depletion and Amortization.
Total DD&A expense for the three months ended June 30, 2018 was $5.7 million as compared
to $5.5 million for the three months ended June 30, 2017.
For
the three months ended June 30, 2018, our depreciation expense remained relatively flat at approximately $4.3 million compared
to the three months ended June 30, 2017.
For
the three months ended June 30, 2018 and 2017, our depletion expense remained relatively flat at approximately $0.5 million.
For
the three months ended June 30, 2018 and 2017, our amortization expense remained flat at approximately $0.9 million.
Selling,
General and Administrative.
SG&A expense for the three months ended June 30, 2018 increased slightly to $2.8 million
as compared to $2.7 million for the three months ended June 30, 2017.
Interest
Expense
.
Interest expense for the three months ended June 30, 2018 increased to $1.9 million as compared to $0.9
million for the three months ended June 30, 2017. This increase was primarily due to the higher outstanding debt balance and effective
interest rate on the new Financing Agreement.
Net
Loss.
Net loss was $3.0 million for the three months ended June 30, 2018 compared to net income of $0.6 million for the
three months ended June 30, 2017. Our net loss increased during the three months ended June 30, 2018 compared to 2017 primarily
due to a decrease in contracted prices for tons sold from our Pennyrile mine. The increase in net loss was partially offset by
a gain of $3.6 million on the sale of 232,347 shares of Mammoth Inc. during the second quarter of 2018.
Adjusted
EBITDA
. Adjusted EBITDA for the three months ended June 30, 2018 decreased by $2.4 million to $4.6 million from $7.0 million
for the three months ended June 30, 2017. Adjusted EBITDA decreased period over period primarily due to the decrease in net income
at our Pennyrile mining operation in western Kentucky as discussed below. Adjusted EBITDA for the three months ended June 30,
2017 was $6.9 million once the results from discontinued operations were included. We did not incur a gain or loss from discontinued
operations for the three months ended June 30, 2018. Please read “—Reconciliations of Adjusted EBITDA” for reconciliations
of Adjusted EBITDA from continuing operations to net income/(loss) from continuing operations on a segment basis.
Segment
Results
The
following tables set forth certain information regarding our revenues, operating expenses, other income and expenses, and operational
data by reportable segment for the three months ended June 30, 2018 and 2017:
Central
Appalachia
|
|
Three
months ended
|
|
|
Three
months ended
|
|
|
Increase/(Decrease)
|
|
|
|
June
30, 2018
|
|
|
June
30, 2017
|
|
|
$
|
|
|
%
*
|
|
|
|
(in
millions, except per ton data and %)
|
|
Coal
revenues
|
|
$
|
28.1
|
|
|
$
|
25.6
|
|
|
$
|
2.5
|
|
|
|
9.6
|
%
|
Freight
and handling revenues
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
n/a
|
|
Other
revenues
|
|
|
0.1
|
|
|
|
-
|
|
|
|
0.1
|
|
|
|
n/a
|
|
Total
revenues
|
|
|
28.2
|
|
|
|
25.6
|
|
|
|
2.6
|
|
|
|
9.6
|
%
|
Coal
revenues per ton
|
|
$
|
67.05
|
|
|
$
|
66.42
|
|
|
$
|
0.63
|
|
|
|
1.0
|
%
|
Cost
of operations (exclusive of depreciation, depletion and amortization shown separately below)
|
|
|
23.3
|
|
|
|
20.5
|
|
|
|
2.8
|
|
|
|
14.0
|
%
|
Freight
and handling costs
|
|
|
1.4
|
|
|
|
-
|
|
|
|
1.4
|
|
|
|
n/a
|
|
Depreciation,
depletion and amortization
|
|
|
2.3
|
|
|
|
2.0
|
|
|
|
0.3
|
|
|
|
16.1
|
%
|
Selling,
general and administrative costs
|
|
|
0.1
|
|
|
|
-
|
|
|
|
0.1
|
|
|
|
125.3
|
%
|
Cost of operations
per ton
|
|
$
|
55.69
|
|
|
$
|
53.05
|
|
|
$
|
2.64
|
|
|
|
5.0
|
%
|
Net
income from continuing operations
|
|
|
1.0
|
|
|
|
3.3
|
|
|
|
(2.3
|
)
|
|
|
(70.1
|
%)
|
Adjusted
EBITDA from continuing operations
|
|
|
3.3
|
|
|
|
5.3
|
|
|
|
(2.0
|
)
|
|
|
(38.3
|
%)
|
Tons
sold
|
|
|
418.8
|
|
|
|
385.6
|
|
|
|
33.2
|
|
|
|
8.6
|
%
|
*
|
Percentages
and per ton amounts are calculated based on actual amounts and not the rounded amounts presented in this table.
|
Tons
of coal sold in our Central Appalachia segment increased by approximately 8.6% to approximately 0.4 million tons for the three
months ended June 30, 2018 compared to the three months ended June 30, 2017, primarily due to an increase in demand for steam
coal tons from this region.
Coal
revenues increased by approximately $2.5 million, or 9.6%, to approximately $28.1 million for the three months ended June 30,
2018 from approximately $25.6 million for the three months ended June 30, 2017. This increase was primarily due to the increase
in demand for steam coal tons sold from this region. Coal revenues per ton for our Central Appalachia segment increased by $0.63,
or 1.0%, to $67.05 per ton for the three months ended June 30, 2018 as compared to $66.42 for the three months ended June 30,
2017. This increase was primarily due to the increase in contract prices for our met coal from this region. However, the increase
in production and sales in Central Appalachia and realization of our coal revenues was limited due to ongoing rail transportation
constraints that caused some met coal shipments to be delayed into early third quarter of 2018.
Cost
of operations increased by $2.8 million, or 14.0%, to $23.3 million for the three months ended June 30, 2018 from $20.5 million
for the three months ended June 30, 2017. This increase was primarily due to the increase in cost for diesel fuel, contract services
and equipment maintenance during the second quarter of 2018. Our cost of operations per ton of $55.69 for the three months ended
June 30, 2018 increased 5.0% compared to $53.05 per ton for the three months ended June 30, 2017. Total cost of operations increased
period over period as we increased sales in this region and as we experienced an increase in costs discussed above during the
three months ended June 30, 2018.
For
our Central Appalachia segment, net income was approximately $1.0 million for the three months ended June 30, 2018, a decrease
of $2.3 million in net income as compared to the three months ended June 30, 2017. The decrease in net income was primarily due
to lower contracted sales prices for steam coal tons sold from our Central Appalachia mining operations and an increase in cost
of operations discussed above.
Central
Appalachia Overview of Results by Product.
Additional information for the Central Appalachia segment detailing the types
of coal produced and sold, premium high-vol met coal and steam coal for the three months ended June 30, 2018, is presented below.
Note that our Northern Appalachia, Rhino Western and Illinois Basin segments currently produce and sell only steam coal.
(In
thousands, except per ton data and %)
|
|
Three
months ended
June 30, 2018
|
|
|
Three
months ended
June 30, 2017
|
|
|
Increase
(Decrease)
%*
|
|
Met
coal tons sold
|
|
|
151.6
|
|
|
|
182.5
|
|
|
|
(16.9
|
%)
|
Steam
coal tons sold
|
|
|
267.2
|
|
|
|
203.1
|
|
|
|
31.5
|
%
|
Total
tons sold
|
|
|
418.8
|
|
|
|
385.6
|
|
|
|
8.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Met
coal revenue
|
|
$
|
14,878
|
|
|
$
|
15,229
|
|
|
|
(2.3
|
%)
|
Steam
coal revenue
|
|
$
|
13,199
|
|
|
$
|
10,380
|
|
|
|
27.2
|
%
|
Total
coal revenue
|
|
$
|
28,077
|
|
|
$
|
25,609
|
|
|
|
9.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Met
coal revenues per ton
|
|
$
|
98.12
|
|
|
$
|
83.45
|
|
|
|
17.6
|
%
|
Steam
coal revenues per ton
|
|
$
|
49.41
|
|
|
$
|
51.11
|
|
|
|
(3.3
|
%)
|
Total
coal revenues per ton
|
|
$
|
67.05
|
|
|
$
|
66.42
|
|
|
|
0.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Met
coal tons produced
|
|
|
124.0
|
|
|
|
171.7
|
|
|
|
(27.8
|
%)
|
Steam
coal tons produced
|
|
|
358.2
|
|
|
|
227.6
|
|
|
|
57.4
|
%
|
Total
tons produced
|
|
|
482.2
|
|
|
|
399.3
|
|
|
|
20.8
|
%
|
Northern
Appalachia
|
|
Three
months ended
|
|
|
Three
months ended
|
|
|
Increase/(Decrease)
|
|
|
|
June
30, 2018
|
|
|
June
30, 2017
|
|
|
$
|
|
|
%
*
|
|
|
|
(in
millions, except per ton data and %)
|
|
Coal
revenues
|
|
$
|
3.9
|
|
|
$
|
2.3
|
|
|
$
|
1.6
|
|
|
|
67.9
|
%
|
Freight
and handling revenues
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
n/a
|
|
Other
revenues
|
|
|
0.5
|
|
|
|
0.4
|
|
|
|
0.1
|
|
|
|
63.3
|
%
|
Total
revenues
|
|
|
4.4
|
|
|
|
2.7
|
|
|
|
1.7
|
|
|
|
67.4
|
%
|
Coal
revenues per ton
|
|
$
|
40.79
|
|
|
$
|
42.49
|
|
|
$
|
(1.70
|
)
|
|
|
(4.0
|
%)
|
Cost
of operations (exclusive of depreciation, depletion and amortization shown separately below)
|
|
|
5.6
|
|
|
|
3.6
|
|
|
|
2.0
|
|
|
|
52.6
|
%
|
Freight
and handling costs
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
n/a
|
|
Depreciation,
depletion and amortization
|
|
|
0.3
|
|
|
|
0.3
|
|
|
|
-
|
|
|
|
7.8
|
%
|
Selling,
general and administrative costs
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(8.0
|
%)
|
Cost of operations
per ton
|
|
$
|
58.40
|
|
|
$
|
66.94
|
|
|
$
|
(8.54
|
)
|
|
|
(12.8
|
%)
|
Net
loss from continuing operations
|
|
|
(1.5
|
)
|
|
|
(1.3
|
)
|
|
|
(0.2
|
)
|
|
|
11.8
|
%
|
Adjusted
EBITDA from continuing operations
|
|
|
(1.2
|
)
|
|
|
(1.1
|
)
|
|
|
(0.1
|
)
|
|
|
13.0
|
%
|
Tons
sold
|
|
|
95.7
|
|
|
|
54.7
|
|
|
|
41.0
|
|
|
|
74.9
|
%
|
*
|
Percentages
and per ton amounts are calculated based on actual amounts and not the rounded amounts presented in this table.
|
For
our Northern Appalachia segment, tons of coal sold increased by approximately 74.9% for the three months ended June 30, 2018 compared
to the three months ended June 30, 2017 as we experienced increased demand for coal from this region.
Coal
revenues were approximately $3.9 million for the three months ended June 30, 2018, an increase of approximately $1.6 million,
or 67.9%, from approximately $2.3 million for the three months ended June 30, 2017. Coal revenues per ton decreased by $1.70 or
4.0% to $40.79 per ton for the three months ended June 30, 2108, as compared to $42.49 for the three months ended June 30, 2017,
which was primarily due to lower prices for tons sold from our Hopedale complex compared to the prior year. However, the increase
in production and sales in Northern Appalachia and realization of our coal revenues was limited due to ongoing rail transportation
constraints that caused some steam coal shipments to be delayed into the third quarter of 2018.
Cost
of operations increased by $2.0 million, or 52.6%, to $5.6 million for the three months ended June 30, 2018 from $3.6 million
for the three months ended June 30, 2017. Our cost of operations per ton was $58.40 for the three months ended June 30, 2018,
a decrease of $8.54, or 12.8%, compared to $66.94 for the three months ended June 30, 2017. The increase in total cost of operations
Northern Appalachia was due to an increase in maintenance costs and costs for outside services. The decrease in the cost of operations
per ton was primarily due to fixed operating costs being allocated to higher tons of coal sold during the current period.
Net
loss in our Northern Appalachia segment was $1.5 million for the three months ended June 30, 2018 compared to net loss of $1.3
million for the three months ended June 30, 2017. The increase in net loss for the three months ended June 30, 2018 was primarily
due to the decrease in the contracted sales price of tons sold and the increase of cost of operations compared to the same period
in 2017.
Rhino
Western
|
|
Three
months ended
|
|
|
Three
months ended
|
|
|
Increase/(Decrease)
|
|
|
|
June
30, 2018
|
|
|
June
30, 2017
|
|
|
$
|
|
|
%
*
|
|
|
|
(in
millions, except per ton data and %)
|
|
Coal
revenues
|
|
$
|
8.6
|
|
|
$
|
8.8
|
|
|
$
|
(0.2
|
)
|
|
|
(1.2
|
%)
|
Freight
and handling revenues
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
n/a
|
|
Other
revenues
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
n/a
|
|
Total
revenues
|
|
|
8.6
|
|
|
|
8.8
|
|
|
|
(0.2
|
)
|
|
|
(1.2
|
%)
|
Coal
revenues per ton
|
|
$
|
35.86
|
|
|
$
|
38.31
|
|
|
$
|
(2.45
|
)
|
|
|
(6.4
|
%)
|
Cost
of operations (exclusive of depreciation, depletion and amortization shown separately below)
|
|
|
7.6
|
|
|
|
6.7
|
|
|
|
0.9
|
|
|
|
13.9
|
%
|
Freight
and handling costs
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
n/a
|
|
Depreciation,
depletion and amortization
|
|
|
1.0
|
|
|
|
1.2
|
|
|
|
(0.2
|
)
|
|
|
(13.3
|
%)
|
Selling,
general and administrative costs
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
66.5
|
%
|
Cost of operations
per ton
|
|
$
|
31.44
|
|
|
$
|
29.13
|
|
|
$
|
2.31
|
|
|
|
7.9
|
%
|
Net
income/(loss) from continuing operations
|
|
|
-
|
|
|
|
0.7
|
|
|
|
(0.7
|
)
|
|
|
(108.5
|
%)
|
Adjusted
EBITDA from continuing operations
|
|
|
1.0
|
|
|
|
1.9
|
|
|
|
(0.9
|
)
|
|
|
(49.6
|
%)
|
Tons
sold
|
|
|
241.3
|
|
|
|
228.7
|
|
|
|
12.6
|
|
|
|
5.5
|
%
|
*
|
Percentages
and per ton amounts are calculated based on actual amounts and not the rounded amounts presented in this table.
|
Tons
of coal sold from our Rhino Western segment increased by approximately 5.5% for the three months ended June 30, 2018 compared
to the same period in 2017 primarily due to an increase in demand for coal from this region.
Coal
revenues decreased by approximately $0.2 million, or 1.2%, to approximately $8.6 million for the three months ended June 30, 2018
from approximately $8.8 million for the three months ended June 30, 2018 primarily due to a decrease in contracted prices for
tons sold from the Castle Valley mine compared to the three months ended June 30, 2017. Coal revenues per ton for our Rhino Western
segment decreased by $2.45 or 6.4% to $35.86 per ton for the three months ended June 30, 2018 as compared to $38.31 per ton for
the three months ended June 30, 2017 due to lower contracted sales prices.
Cost
of operations increased by $0.9 million, or 13.9%, to $7.6 million for the three months ended June 30, 2018 from $6.7 million
for the three months ended June 30, 2017. Our cost of operations per ton was $31.44 for the three months ended June 30, 2018,
an increase of $2.31, or 7.9%, compared to $29.13 for the three months ended June 30, 2017. Total cost of operations and cost
of operations per ton increased for the three months ended June 30, 2018 compared to the same period in 2017 due to higher operating
expenses.
Net
income in our Rhino Western segment was $63,000 for the three months ended June 30, 2018, compared to net income of $0.7 million
for the three months ended June 30, 2017. This decrease in net income was primarily the result of higher operating costs our Castle
Valley operation.
Illinois
Basin
|
|
Three
months ended
|
|
|
Three
months ended
|
|
|
Increase/(Decrease)
|
|
|
|
June
30, 2018
|
|
|
June
30, 2017
|
|
|
$
|
|
|
%
*
|
|
|
|
(in
millions, except per ton data and %)
|
|
Coal
revenues
|
|
$
|
13.6
|
|
|
$
|
17.6
|
|
|
$
|
(4.0
|
)
|
|
|
(22.7
|
%)
|
Freight
and handling revenues
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
n/a
|
|
Other
revenues
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
n/a
|
|
Total
revenues
|
|
|
13.6
|
|
|
|
17.6
|
|
|
|
(4.0
|
)
|
|
|
(22.7
|
%)
|
Coal
revenues per ton
|
|
$
|
39.22
|
|
|
$
|
49.30
|
|
|
$
|
(10.08
|
)
|
|
|
(20.4
|
%)
|
Cost
of operations (exclusive of depreciation, depletion and amortization shown separately below)
|
|
|
13.5
|
|
|
|
14.6
|
|
|
|
(1.1
|
)
|
|
|
(7.6
|
%)
|
Freight
and handling costs
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
n/a
|
|
Depreciation,
depletion and amortization
|
|
|
2.0
|
|
|
|
1.9
|
|
|
|
0.1
|
|
|
|
1.5
|
%
|
Selling,
general and administrative costs
|
|
|
0.1
|
|
|
|
0.1
|
|
|
|
-
|
|
|
|
(6.0
|
%)
|
Cost of operations
per ton
|
|
$
|
38.86
|
|
|
$
|
40.85
|
|
|
$
|
(1.99
|
)
|
|
|
(4.9
|
%)
|
Net
(loss)/income from continuing operations
|
|
|
(1.9
|
)
|
|
|
1.0
|
|
|
|
(2.9
|
)
|
|
|
(292.9
|
%)
|
Adjusted
EBITDA from continuing operations
|
|
|
0.1
|
|
|
|
2.9
|
|
|
|
(2.8
|
)
|
|
|
(96.6
|
%)
|
Tons
sold
|
|
|
347.0
|
|
|
|
357.0
|
|
|
|
(10.0
|
)
|
|
|
(2.8
|
%)
|
*
|
Percentages
and per ton amounts are calculated based on actual amounts and not the rounded amounts presented in this table.
|
For
our Illinois Basin segment, tons of coal sold decreased by approximately 2.8% for the three months ended June 30, 2018 compared
to the three months ended June 30, 2017 due to timing of shipments.
Coal
revenues of approximately $13.6 million for the three months ended June 30, 2018 decreased by approximately $4.0 million, or 22.7%,
compared to $17.6 million for the three months ended June 30, 2018. Coal revenues per ton for our Illinois Basin segment were
$39.22 for the three months ended June 30, 2018, a decrease of $10.08, or 20.4%, from $49.30 for the three months ended June 30,
2017. The decrease in coal revenues and coal revenues per ton were primarily due to lower contracted prices for tons sold from
our Pennyrile mine in western Kentucky.
Cost
of operations was $13.5 million while cost of operations per ton was $38.86 for the three months ended June 30, 2018, both of
which related to our Pennyrile mining complex in western Kentucky. For the three months ended June 30, 2017, cost of operations
in our Illinois Basin segment was $14.6 million and cost of operations per ton was $40.85. The decrease in cost of operations
and cost of operations per ton for the three months ended June 30, 2018 was primarily the result of a decrease in operating expenses
during the second quarter of 2018.
For
our Illinois Basin segment, we generated a net loss of $1.9 million for the three months ended June 30, 2018, which was a decrease
of $2.9 million compared to the three months ended June 30, 2017. This decrease in net income was primarily the result of a decrease
in the contracted sales price for tons sold during the second quarter of 2018 compared to the same period in 2017.
Other
|
|
Three
months ended
|
|
|
Three
months ended
|
|
|
Increase/(Decrease)
|
|
|
|
June
30, 2018
|
|
|
June
30, 2017
|
|
|
$
|
|
|
%
*
|
|
|
|
(in
millions, except per ton data and %)
|
|
Coal
revenues
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
Freight
and handling revenues
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
Other
revenues
|
|
$
|
0.1
|
|
|
$
|
-
|
|
|
$
|
0.1
|
|
|
|
2452.3
|
%
|
Total
revenues
|
|
|
0.1
|
|
|
|
-
|
|
|
|
0.1
|
|
|
|
2452.3
|
%
|
Coal
revenues per ton**
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
Cost
of operations (exclusive of depreciation, depletion and amortization shown separately below)
|
|
|
(0.4
|
)
|
|
|
(0.5
|
)
|
|
|
0.1
|
|
|
|
(5.8
|
%)
|
Freight
and handling costs
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
n/a
|
|
Depreciation,
depletion and amortization
|
|
|
0.1
|
|
|
|
0.1
|
|
|
|
-
|
|
|
|
0.7
|
%
|
Selling,
general and administrative costs
|
|
|
2.6
|
|
|
|
2.6
|
|
|
|
-
|
|
|
|
1.2
|
%
|
Cost of operations
per ton**
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
Net
loss from continuing operations
|
|
|
(0.6
|
)
|
|
|
(3.1
|
)
|
|
|
2.5
|
|
|
|
(80.7
|
%)
|
Adjusted
EBITDA from continuing operations
|
|
|
1.4
|
|
|
|
(2.0
|
)
|
|
|
3.4
|
|
|
|
(165.5
|
%)
|
Tons
sold
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
*
|
Percentages
and per ton amounts are calculated based on actual amounts and not the rounded amounts presented in this table.
|
|
|
**
|
The
Other category includes results for our ancillary businesses. The activities performed
by these ancillary businesses do not directly relate to coal production. As a result,
coal revenues and coal revenues per ton are not presented for the Other category. Cost
of operations presented for our Other category includes costs incurred by our ancillary
businesses. As a result, cost per ton measurements are not presented for this category.
|
Other
revenues for our Other category were relatively flat for the three months ended June 30, 2018 as compared to the three months
ended June 30, 2017.
For
the Other category, we had net loss from continuing operations of $0.6 million for the three months ended June 30, 2018 as compared
to net loss from continuing operations of $3.1 million for the three months ended June 30, 2017. The decrease in net loss for
the three months ended June 30, 2018 was primarily due to a gain of $3.6 million recognized on the sale of Mammoth Inc. shares
during the second quarter of 2018.
Summary.
(The following discussions of financial and operational data for the six months ended June 30, 2018 and 2017 pertain to continuing
operations unless otherwise specified.)
The
following table sets forth certain information regarding our revenues, operating expenses, other income and expenses, and operational
data for the six months ended June 30, 2018 and 2017:
|
|
Six
months ended
|
|
|
Six
months ended
|
|
|
Increase/(Decrease)
|
|
|
|
June
30, 2018
|
|
|
June
30, 2017
|
|
|
$
|
|
|
%
*
|
|
|
|
(in
millions, except per ton data and %)
|
|
Statement
of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Coal
revenues
|
|
$
|
108.5
|
|
|
$
|
105.6
|
|
|
|
2.9
|
|
|
|
2.8
|
%
|
Other
revenues
|
|
|
1.2
|
|
|
|
0.6
|
|
|
|
0.6
|
|
|
|
77.9
|
%
|
Total
revenues
|
|
|
109.7
|
|
|
|
106.2
|
|
|
|
3.5
|
|
|
|
3.3
|
%
|
Costs
and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of operations (exclusive of DD&A shown separately below)
|
|
|
99.3
|
|
|
|
88.2
|
|
|
|
11.1
|
|
|
|
12.5
|
%
|
Freight
and handling costs
|
|
|
2.3
|
|
|
|
0.5
|
|
|
|
1.8
|
|
|
|
299.5
|
%
|
Depreciation,
depletion and amortization
|
|
|
11.1
|
|
|
|
11.0
|
|
|
|
0.1
|
|
|
|
1.2
|
%
|
Selling,
general and administrative (exclusive of DD&A shown separately above)
|
|
|
5.5
|
|
|
|
5.8
|
|
|
|
(0.3
|
)
|
|
|
(4.5
|
%)
|
(Gain)
on sale/disposal of assets
|
|
|
(6.4
|
)
|
|
|
-
|
|
|
|
(6.4
|
)
|
|
|
n/a
|
|
(Loss/income)
from operations
|
|
|
(2.1
|
)
|
|
|
0.7
|
|
|
|
(2.8
|
)
|
|
|
(408.0
|
%)
|
Interest
and other (income) expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense and other
|
|
|
3.8
|
|
|
|
2.1
|
|
|
|
1.7
|
|
|
|
79.2
|
%
|
Interest
income and other
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
n/a
|
|
Equity
in net (income) of unconsolidated affiliates
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
n/a
|
|
Total
interest and other (income) expense
|
|
|
3.8
|
|
|
|
2.1
|
|
|
|
1.7
|
|
|
|
82.0
|
%
|
Net
(loss) from continuing operations
|
|
|
(5.9
|
)
|
|
|
(1.4
|
)
|
|
|
(4.5
|
)
|
|
|
314.4
|
%
|
Net
(loss) from discontinued operations
|
|
|
-
|
|
|
|
(0.3
|
)
|
|
|
0.3
|
|
|
|
(100.0
|
%)
|
Net
(loss)
|
|
$
|
(5.9
|
)
|
|
$
|
(1.7
|
)
|
|
|
(4.2
|
)
|
|
|
236.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
tons sold
|
|
|
2,175.4
|
|
|
|
1,972.6
|
|
|
|
202.8
|
|
|
|
10.3
|
%
|
Coal
revenues per ton
|
|
$
|
49.88
|
|
|
$
|
53.51
|
|
|
$
|
(3.63
|
)
|
|
|
(6.8
|
%)
|
Cost of operations
per ton
|
|
$
|
45.62
|
|
|
$
|
44.71
|
|
|
$
|
0.91
|
|
|
|
2.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Financial Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA from continuing operations
|
|
$
|
9.0
|
|
|
$
|
11.7
|
|
|
$
|
(2.7
|
)
|
|
|
(22.7
|
%)
|
Adjusted
EBITDA from discontinued operations
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(100.0
|
%)
|
Adjusted
EBITDA
|
|
$
|
9.0
|
|
|
$
|
11.7
|
|
|
$
|
(2.7
|
)
|
|
|
(22.7
|
%)
|
*
|
Percentages
and per ton amounts are calculated based on actual amounts and not the rounded amounts presented in this table.
|
Six
Months Ended June 30, 2018 Compared to Six Months Ended June 30, 2017
Revenues.
Our coal revenues for the six months ended June 30, 2018 increased by approximately $2.9 million, or 2.8%, to approximately
$108.5 million from approximately $105.6 million for the six months ended June 30, 2017. The increase in coal revenues was primarily
due to an increase in met and steam coal tons sold in Central Appalachia as we saw increased demand for met and steam coal from
this region during the period. However, the increase in production and sales tons and realization of our coal revenues was limited
during the six months ended June 30, 2018 due to adverse weather conditions in the first quarter of 2018 that affected coal shipments
as well as ongoing rail transportation constraints that caused some met and steam coal shipments from our Central Appalachia and
Northern Appalachia operations to be delayed into the third quarter of 2018. Coal revenues per ton was $49.88 for the six months
ended June 30, 2018, a decrease of $3.63, or 6.8%, from $53.51 per ton for the six months ended June 30, 2017. This decrease in
coal revenues per ton was primarily the result of lower contracted sales prices at our Pennyrile operation in the Illinois Basin
during the first half of 2018 compared to the same period in 2017.
Cost
of Operations
. Total cost of operations increased by $11.1 million or 12.5% to $99.3 million for the six months ended
June 30, 2018 as compared to $88.2 million for the six months ended June 30, 2017. Our cost of operations per ton was $45.62 for
the six months ended June 30, 2018, an increase of $0.91, or 2.0%, from the six months ended June 30, 2017. The increase in cost
of operations was primarily due to the $11.4 million increase in cost of operations at our Central Appalachia segment as demand
for met and steam coal increased in this region.
Freight
and Handling.
Total freight and handling cost increased to $2.3 million for the six months ended June 30, 2018 as compared
to $0.5 million for the six months ended June 30, 2017. The increase in freight and handling costs was primarily the result of
rail transportation costs in our Central Appalachia operations as we executed more export coal sales in the period that required
us to pay for railroad transportation to the port of export.
Depreciation,
Depletion and Amortization.
Total DD&A expense for the six months ended June 30, 2018 was $11.1 million as compared
to $11.0 million for the six months ended June 30, 2017.
For
the six months ended June 30, 2018, our depreciation expense decreased to $8.3 million compared to $8.5 million for the six months
ended June 30, 2017. This decrease is primarily the result of assets becoming fully depreciated.
For
the six months ended June 30, 2018, our depletion expense increased to $1.0 million compared to $0.8 million for the six months
ended June 30, 2017. This increase is primarily due to increased production and sales tons for 2018 compared to 2017.
For
the six months ended June 30, 2018, our amortization expense increased slightly to $1.8 million as compared to $1.7 million for
the three months ended June 30, 2017.
Selling,
General and Administrative.
SG&A expense for the six months ended June 30, 2018 decreased to $5.5 million as compared
to $5.8 million for the three months ended June 30, 2017 primarily due to lower corporate overhead expenses.
Interest
Expense
.
Interest expense for the six months ended June 30, 2018 increased to $3.8 million as compared to $2.1
million for the six months ended June 30, 2017. This increase was primarily due to the higher outstanding debt balance and effective
interest rate on the new Financing Agreement.
Net
Loss.
Net loss was $5.9 million for the six months ended June 30, 2018 compared to net loss from of $1.4 million for the
six months ended June 30, 2017. Our net loss increased during the six months ended June 30, 2018 compared to 2017 primarily due
to a decrease in contracted prices for tons sold during the period.
Adjusted
EBITDA
. Adjusted EBITDA for the six months ended June 30, 2018 decreased by $2.7 million to $9.0 million from $11.7 million
for the six months ended June 30, 2017. Adjusted EBITDA decreased period over period primarily due to the decrease in net income
at our Pennyrile and Central Appalachia mining operations as discussed below. Please read “—Reconciliations of Adjusted
EBITDA” for reconciliations of Adjusted EBITDA from continuing operations to net income/(loss) from continuing operations
on a segment basis.
Segment
Results
The
following tables set forth certain information regarding our revenues, operating expenses, other income and expenses, and operational
data by reportable segment for the six months ended June 30, 2018 and 2017:
Central
Appalachia
|
|
Six
months ended
|
|
|
Six
months ended
|
|
|
Increase/(Decrease)
|
|
|
|
June
30, 2018
|
|
|
June
30, 2017
|
|
|
$
|
|
|
%
*
|
|
|
|
(in
millions, except per ton data and %)
|
|
Coal
revenues
|
|
$
|
59.0
|
|
|
$
|
48.9
|
|
|
$
|
10.1
|
|
|
|
20.6
|
%
|
Freight
and handling revenues
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
n/a
|
|
Other
revenues
|
|
|
0.1
|
|
|
|
0.1
|
|
|
|
-
|
|
|
|
34.2
|
%
|
Total
revenues
|
|
|
59.1
|
|
|
|
49.0
|
|
|
|
10.1
|
|
|
|
20.7
|
%
|
Coal
revenues per ton
|
|
$
|
67.25
|
|
|
$
|
68.96
|
|
|
$
|
(1.71
|
)
|
|
|
(2.5
|
%)
|
Cost
of operations (exclusive of depreciation, depletion and amortization shown separately below)
|
|
|
50.2
|
|
|
|
38.8
|
|
|
|
11.4
|
|
|
|
29.3
|
%
|
Freight
and handling costs
|
|
|
2.3
|
|
|
|
0.5
|
|
|
|
1.8
|
|
|
|
299.5
|
%
|
Depreciation,
depletion and amortization
|
|
|
4.5
|
|
|
|
3.9
|
|
|
|
0.6
|
|
|
|
13.7
|
%
|
Selling,
general and administrative costs
|
|
|
0.1
|
|
|
|
0.1
|
|
|
|
-
|
|
|
|
6.6
|
%
|
Cost of operations
per ton
|
|
$
|
57.25
|
|
|
$
|
54.77
|
|
|
$
|
2.48
|
|
|
|
4.5
|
%
|
Net
income from continuing operations
|
|
|
1.9
|
|
|
|
5.6
|
|
|
|
(3.7
|
)
|
|
|
(65.8
|
%)
|
Adjusted
EBITDA from continuing operations
|
|
|
6.4
|
|
|
|
9.6
|
|
|
|
(3.2
|
)
|
|
|
(33.1
|
%)
|
Tons
sold
|
|
|
877.2
|
|
|
|
709.1
|
|
|
|
168.1
|
|
|
|
23.7
|
%
|
*
|
Percentages
and per ton amounts are calculated based on actual amounts and not the rounded amounts presented in this table.
|
Tons
of coal sold in our Central Appalachia segment increased by approximately 23.7% to approximately 0.9 million tons for the six
months ended June 30, 2018 compared to the six months ended June 30, 2017, primarily due to an increase in demand for steam coal
tons from this region.
Coal
revenues increased by approximately $10.1 million, or 20.6%, to approximately $59.0 million for the six months ended June 30,
2018 from approximately $48.9 million for the six months ended June 30, 2017. This increase was primarily due to the increase
in demand for met and steam coal tons sold from this region. However, the increase in production and sales in Central Appalachia
was somewhat limited by adverse weather conditions during the first quarter of 2018 that affected coal shipments as well as ongoing
rail transportation constraints that caused some met coal shipments from our Central Appalachia operations to be delayed into
early third quarter of 2018. Coal revenues per ton for our Central Appalachia segment decreased by $1.71, or 2.5%, to $67.25 per
ton for the six months ended June 30, 2018 as compared to $68.96 for the six months ended June 30, 2017, which was primarily due
to a higher mix of lower priced steam coal tons sold in Central Appalachia compared to the prior period.
Cost
of operations increased by $11.4 million, or 29.3%, to $50.2 million for the six months ended June 30, 2018 from $38.8 million
for the six months ended June 30, 2017. This increase was primarily due to the increase in cost of production at our Central Appalachia
operations as cost for diesel fuel, contract services and equipment maintenance increased during the six months ended June 30,
2018. Our cost of operations per ton of $57.25 for the six months ended June 30, 2018 increased 4.5% compared to $54.77 per ton
for the six months ended June 30, 2017. Total cost of operations increased period over period as we increased sales in this region
and as we experienced an increase in costs discussed above during the six months ended June 30, 2018.
For
our Central Appalachia segment, net income was approximately $1.9 million for the six months ended June 30, 2018, a decrease of
$3.7 million in net income as compared to the six months ended June 30, 2017. The decrease in net income was primarily due to
higher cost of operations and mix of coal tons sold as discussed above.
Central
Appalachia Overview of Results by Product.
Additional information for the Central Appalachia segment detailing the types
of coal produced and sold, premium high-vol met coal and steam coal for the six months ended June 30, 2018, is presented below.
Note that our Northern Appalachia, Rhino Western and Illinois Basin segments currently produce and sell only steam coal.
(In
thousands, except per ton data and %)
|
|
Six
months ended June 30, 2018
|
|
|
Six
months ended June 30, 2017
|
|
|
Increase
(Decrease) %*
|
|
Met
coal tons sold
|
|
|
364.2
|
|
|
|
378.4
|
|
|
|
(3.8
|
%)
|
Steam
coal tons sold
|
|
|
513.0
|
|
|
|
330.7
|
|
|
|
55.1
|
%
|
Total
tons sold
|
|
|
877.2
|
|
|
|
709.1
|
|
|
|
23.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Met
coal revenue
|
|
$
|
34,129
|
|
|
$
|
31,846
|
|
|
|
7.2
|
%
|
Steam
coal revenue
|
|
$
|
24,861
|
|
|
$
|
17,055
|
|
|
|
45.8
|
%
|
Total
coal revenue
|
|
$
|
58,990
|
|
|
$
|
48,901
|
|
|
|
20.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Met
coal revenues per ton
|
|
$
|
93.72
|
|
|
$
|
84.16
|
|
|
|
11.4
|
%
|
Steam
coal revenues per ton
|
|
$
|
48.46
|
|
|
$
|
51.57
|
|
|
|
(6.0
|
%)
|
Total
coal revenues per ton
|
|
$
|
67.25
|
|
|
$
|
68.96
|
|
|
|
(2.5
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Met
coal tons produced
|
|
|
250.5
|
|
|
|
352.7
|
|
|
|
(29.0
|
%)
|
Steam
coal tons produced
|
|
|
639.1
|
|
|
|
378.0
|
|
|
|
69.1
|
%
|
Total
tons produced
|
|
|
889.6
|
|
|
|
730.7
|
|
|
|
21.8
|
%
|
Northern
Appalachia
|
|
Six
months ended
|
|
|
Six
months ended
|
|
|
Increase/(Decrease)
|
|
|
|
June
30, 2018
|
|
|
June
30, 2017
|
|
|
$
|
|
|
%
*
|
|
|
|
(in
millions, except per ton data and %)
|
|
Coal
revenues
|
|
$
|
7.6
|
|
|
$
|
6.2
|
|
|
$
|
1.4
|
|
|
|
22.8
|
%
|
Freight
and handling revenues
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
n/a
|
|
Other
revenues
|
|
|
0.9
|
|
|
|
0.5
|
|
|
|
0.5
|
|
|
|
68.5
|
%
|
Total
revenues
|
|
|
8.5
|
|
|
|
6.7
|
|
|
|
1.9
|
|
|
|
26.7
|
%
|
Coal
revenues per ton
|
|
$
|
40.96
|
|
|
$
|
42.38
|
|
|
$
|
(1.42
|
)
|
|
|
(3.3
|
%)
|
Cost
of operations (exclusive of depreciation, depletion and amortization shown separately below)
|
|
|
10.7
|
|
|
|
8.2
|
|
|
|
2.5
|
|
|
|
31.2
|
%
|
Freight
and handling costs
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
n/a
|
|
Depreciation,
depletion and amortization
|
|
|
0.4
|
|
|
|
0.6
|
|
|
|
(0.2
|
)
|
|
|
(24.7
|
%)
|
Selling,
general and administrative costs
|
|
|
-
|
|
|
|
0.1
|
|
|
|
(0.1
|
)
|
|
|
(98.6
|
%)
|
Cost of operations
per ton
|
|
$
|
57.82
|
|
|
$
|
55.99
|
|
|
$
|
1.83
|
|
|
|
3.3
|
%
|
Net
loss from continuing operations
|
|
|
(2.5
|
)
|
|
|
(2.1
|
)
|
|
|
(0.4
|
)
|
|
|
27.7
|
%
|
Adjusted
EBITDA from continuing operations
|
|
|
(2.2
|
)
|
|
|
(1.4
|
)
|
|
|
(0.8
|
)
|
|
|
49.9
|
%
|
Tons
sold
|
|
|
185.3
|
|
|
|
145.9
|
|
|
|
39.4
|
|
|
|
27.0
|
%
|
*
|
Percentages
and per ton amounts are calculated based on actual amounts and not the rounded amounts presented in this table.
|
For
our Northern Appalachia segment, tons of coal sold increased by approximately 27.0% for the six months ended June 30, 2018 compared
to the six months ended June 30, 2017 due to increase in demand for coal from this region during the second quarter of 2018.
Coal
revenues were approximately $7.6 million for the six months ended June 30, 2018, an increase of approximately $1.4 million, or
22.8%, from approximately $6.2 million for the six months ended June 30, 2017. However, the increase in production and sales in
Northern Appalachia was somewhat limited by adverse weather conditions during the first quarter of 2018 that affected coal shipments
as well as ongoing rail transportation constraints that caused some coal shipments to be delayed into the third quarter of 2018.
Coal revenues per ton decreased by $1.42 or 3.3% to $40.96 per ton for the six months ended June 30, 2108, as compared to $42.38
for the six months ended June 30, 2017, which was primarily due to lower contracted prices for tons sold during the first half
of 2018.
Cost
of operations increased by $2.5 million, or 31.2%, to $10.7 million for the six months ended June 30, 2018 from $8.2 million for
the six months ended June 30, 2017. Our cost of operations per ton was $57.82 for the six months ended June 30, 2018, an increase
of $1.83, or 3.3%, compared to $55.99 for the six months ended June 30, 2017. The increase in total cost of operations and cost
of operations per ton in Northern Appalachia was primarily due to the increase in maintenance costs and costs for outside services
during the six months ended June 30, 2018.
Net
loss in our Northern Appalachia segment was $2.5 million for the six months ended June 30, 2018 compared to net loss of $2.1 million
for the six months ended June 30, 2017. The increase in net loss from continuing operations for the six months ended June 30,
2018 was primarily due to the increase in operating expenses and lower revenues per ton sold as discussed above compared to the
same period in 2017.
Rhino
Western
|
|
Six
months ended
|
|
|
Six
months ended
|
|
|
Increase/(Decrease)
|
|
|
|
June
30, 2018
|
|
|
June
30, 2017
|
|
|
$
|
|
|
%
*
|
|
|
|
(in
millions, except per ton data and %)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Coal
revenues
|
|
$
|
16.7
|
|
|
$
|
16.1
|
|
|
$
|
0.6
|
|
|
|
4.1
|
%
|
Freight
and handling revenues
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
n/a
|
|
Other
revenues
|
|
|
0.1
|
|
|
|
-
|
|
|
|
0.1
|
|
|
|
217.5
|
%
|
Total
revenues
|
|
|
16.8
|
|
|
|
16.1
|
|
|
|
0.7
|
|
|
|
4.1
|
%
|
Coal
revenues per ton
|
|
$
|
35.90
|
|
|
$
|
38.26
|
|
|
$
|
(2.36
|
)
|
|
|
(6.2
|
%)
|
Cost
of operations (exclusive of depreciation, depletion and amortization shown separately below)
|
|
|
13.6
|
|
|
|
13.4
|
|
|
|
0.2
|
|
|
|
1.6
|
%
|
Freight
and handling costs
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
n/a
|
|
Depreciation,
depletion and amortization
|
|
|
2.1
|
|
|
|
2.3
|
|
|
|
(0.2
|
)
|
|
|
(9.3
|
%)
|
Selling,
general and administrative costs
|
|
|
0.1
|
|
|
|
-
|
|
|
|
0.1
|
|
|
|
29.9
|
%
|
Cost of operations
per ton
|
|
$
|
29.24
|
|
|
$
|
31.92
|
|
|
$
|
(2.68
|
)
|
|
|
(8.4
|
%)
|
Net
income/(loss) from continuing operations
|
|
|
0.9
|
|
|
|
0.2
|
|
|
|
0.7
|
|
|
|
485.9
|
%
|
Adjusted
EBITDA from continuing operations
|
|
|
3.0
|
|
|
|
2.5
|
|
|
|
0.5
|
|
|
|
21.5
|
%
|
Tons
sold
|
|
|
465.6
|
|
|
|
419.7
|
|
|
|
45.9
|
|
|
|
10.9
|
%
|
*
|
Percentages
and per ton amounts are calculated based on actual amounts and not the rounded amounts presented in this table.
|
Coal
sales from our Rhino Western segment increased by approximately 10.9% for the six months ended June 30, 2018 compared to the same
period in 2017 primarily due to increased customer demand.
Coal
revenues increased by approximately $0.6 million, or 4.1%, to approximately $16.7 million for the six months ended June 30, 2018
from approximately $16.1 million for the six months ended June 30, 2017 primarily due to an increase in tons sold from the Castle
Valley mine for the six months ended June 30, 2018. Coal revenues per ton for our Rhino Western segment decreased by $2.36 or
6.2% to $35.90 per ton for the six months ended June 30, 2018 as compared to $38.26 per ton for the six months ended June 30,
2017 due to lower contracted sales prices.
Cost
of operations increased by $0.2 million, or 1.6%, to $13.6 million for the six months ended June 30, 2018 from $13.4 million for
the six months ended June 30, 2017. Our cost of operations per ton was $29.24 for the six months ended June 30, 2018, a decrease
of $2.68, or 8.4%, compared to $31.92 for the six months ended June 30, 2017. The decrease in the cost of operations per ton was
primarily due to fixed operating costs being allocated to higher tons of coal sold during the six months ended June 30, 2018.
Net
income in our Rhino Western segment was $0.9 million for the six months ended June 30, 2018, compared to net income of $0.2 million
for the six months ended June 30, 2017. This increase in net income from continuing operations was primarily the result of the
increase in tons sold at our Castle Valley operation.
Illinois
Basin
|
|
Six
months ended
|
|
|
Six
months ended
|
|
|
Increase/(Decrease)
|
|
|
|
June
30, 2018
|
|
|
June
30, 2017
|
|
|
$
|
|
|
%
*
|
|
|
|
(in
millions, except per ton data and %)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Coal
revenues
|
|
$
|
25.2
|
|
|
$
|
34.4
|
|
|
$
|
(9.2
|
)
|
|
|
(26.7
|
%)
|
Freight
and handling revenues
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
n/a
|
|
Other
revenues
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
n/a
|
|
Total
revenues
|
|
|
25.2
|
|
|
|
34.4
|
|
|
|
(9.2
|
)
|
|
|
(26.7
|
%)
|
Coal
revenues per ton
|
|
$
|
38.97
|
|
|
$
|
49.31
|
|
|
$
|
(10.34
|
)
|
|
|
(21.0
|
%)
|
Cost
of operations (exclusive of depreciation, depletion and amortization shown separately below)
|
|
|
25.5
|
|
|
|
28.7
|
|
|
|
(3.2
|
)
|
|
|
(11.3
|
%)
|
Freight
and handling costs
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
n/a
|
|
Depreciation,
depletion and amortization
|
|
|
3.9
|
|
|
|
4.0
|
|
|
|
(0.1
|
)
|
|
|
(0.9
|
%)
|
Selling,
general and administrative costs
|
|
|
0.1
|
|
|
|
0.1
|
|
|
|
-
|
|
|
|
(6.7
|
%)
|
Cost of operations
per ton
|
|
$
|
39.39
|
|
|
$
|
41.19
|
|
|
$
|
(1.80
|
)
|
|
|
(4.4
|
%)
|
Net
(loss)/income from continuing operations
|
|
|
(4.2
|
)
|
|
|
1.6
|
|
|
|
(5.8
|
)
|
|
|
(358.5
|
%)
|
Adjusted
EBITDA from continuing operations
|
|
|
(0.3
|
)
|
|
|
5.6
|
|
|
|
(5.9
|
)
|
|
|
(105.2
|
%)
|
Tons
sold
|
|
|
647.3
|
|
|
|
697.9
|
|
|
|
(50.6
|
)
|
|
|
(7.3
|
%)
|
*
|
Percentages
and per ton amounts are calculated based on actual amounts and not the rounded amounts presented in this table.
|
For
our Illinois Basin segment, tons of coal sold decreased by approximately 7.3% for the six months ended June 30, 2018 compared
to the six months ended June 30, 2017 as adverse weather conditions limited barge shipments from our Pennyrile mine during the
first quarter of 2018.
Coal
revenues of approximately $25.2 million for the six months ended June 30, 2018 decreased by approximately $9.2 million, or 26.7%,
compared to $34.4 million for the six months ended June 30, 2017. Coal revenues per ton for our Illinois Basin segment were $38.97
for the six months ended June 30, 2018, a decrease of $10.34, or 21.0%, from $49.31 for the six months ended June 30, 2017. The
decrease in coal revenues and coal revenues per ton was primarily due to lower contracted prices for tons sold from our Pennyrile
mine in western Kentucky during the first half of 2018.
Cost
of operations was $25.5 million while cost of operations per ton was $39.39 for the six months ended June 30, 2018, both of which
related to our Pennyrile mining complex in western Kentucky. For the six months ended June 30, 2017, cost of operations in our
Illinois Basin segment was $28.7 million and cost of operations per ton was $41.19. The decrease in cost of operations for the
six months ended June 30, 2018 was primarily the result of a decrease in production and sales as adverse weather conditions limited
barge shipments in the first quarter of 2018.
For
our Illinois Basin segment, we generated net loss from continuing operations of $4.2 million for the six months ended June 30,
2018, which was a decrease in net income of $5.8 million compared to the six months ended June 30, 2017. This decrease in net
income was primarily the result of a decrease in the contracted sales price for tons sold and a decrease in tons shipped due to
adverse weather conditions during the first quarter of 2018 compared to the same period in 2017.
Other
|
|
Six
months ended
|
|
|
Six
months ended
|
|
|
Increase/(Decrease)
|
|
|
|
June
30, 2018
|
|
|
June
30, 2017
|
|
|
$
|
|
|
%
*
|
|
|
|
(in
millions, except per ton data and %)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Coal
revenues
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
Freight
and handling revenues
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
Other
revenues
|
|
$
|
0.1
|
|
|
$
|
-
|
|
|
$
|
0.1
|
|
|
|
1042.1
|
%
|
Total
revenues
|
|
|
0.1
|
|
|
|
-
|
|
|
|
0.1
|
|
|
|
1042.1
|
%
|
Coal
revenues per ton**
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
Cost
of operations (exclusive of depreciation, depletion and amortization shown separately below)
|
|
|
(0.7
|
)
|
|
|
(0.9
|
)
|
|
|
0.2
|
|
|
|
(16.9
|
%)
|
Freight
and handling costs
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
n/a
|
|
Depreciation,
depletion and amortization
|
|
|
0.2
|
|
|
|
0.2
|
|
|
|
-
|
|
|
|
(7.5
|
%)
|
Selling,
general and administrative costs
|
|
|
5.2
|
|
|
|
5.5
|
|
|
|
(0.3
|
)
|
|
|
(4.6
|
%)
|
Cost of operations
per ton**
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
Net
loss from continuing operations
|
|
|
(2.0
|
)
|
|
|
(6.7
|
)
|
|
|
4.7
|
|
|
|
(72.3
|
%)
|
Adjusted
EBITDA from continuing operations
|
|
|
2.2
|
|
|
|
(4.6
|
)
|
|
|
6.8
|
|
|
|
(146.9
|
%)
|
Tons
sold
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
*
|
Percentages
and per ton amounts are calculated based on actual amounts and not the rounded amounts presented in this table.
|
|
|
**
|
The
Other category includes results for our ancillary businesses. The activities performed by these ancillary businesses do
not directly relate to coal production. As a result, coal revenues and coal revenues per ton are not presented for the
Other category. Cost of operations presented for our Other category includes costs incurred by our ancillary businesses.
As a result, cost per ton measurements are not presented for this category.
|
Other
revenues for our Other category were $0.1 million for the six months ended June 30, 2018 as compared to $9,000 for the six months
ended June 30, 2017.
For
the Other category, we had net loss of $2.0 million for the six months ended June 30, 2018 as compared to net loss of $6.7 million
for the six months ended June 30, 2017. The decrease in net loss for the six months ended June 30, 2018 was primarily due to a
gain of $6.5 million recognized on the sale of Mammoth Inc. shares during the first half of 2018.
Reconciliations
of Adjusted EBITDA
The
following tables present reconciliations of Adjusted EBITDA to the most directly comparable GAAP financial measures for each of
the periods indicated:
|
|
Central
|
|
|
Northern
|
|
|
Rhino
|
|
|
Illinois
|
|
|
|
|
|
|
|
Three
months ended June 30, 2018
|
|
Appalachia
|
|
|
Appalachia
|
|
|
Western
|
|
|
Basin
|
|
|
Other
|
|
|
Total
|
|
|
|
(in
millions)
|
|
Net
income/(loss) from continuing operations
|
|
$
|
1.0
|
|
|
$
|
(1.5
|
)
|
|
$
|
-
|
|
|
$
|
(1.9
|
)
|
|
$
|
(0.6
|
)
|
|
$
|
(3.0
|
)
|
Plus:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DD&A
|
|
|
2.3
|
|
|
|
0.3
|
|
|
|
1.0
|
|
|
|
2.0
|
|
|
|
0.1
|
|
|
|
5.7
|
|
Interest
expense
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1.9
|
|
|
|
1.9
|
|
EBITDA
from continuing operations†
|
|
$
|
3.3
|
|
|
$
|
(1.2
|
)
|
|
$
|
1.0
|
|
|
$
|
0.1
|
|
|
$
|
1.4
|
|
|
$
|
4.6
|
|
Adjusted
EBITDA from continuing operations†
|
|
|
3.3
|
|
|
|
(1.2
|
)
|
|
|
1.0
|
|
|
|
0.1
|
|
|
|
1.4
|
|
|
|
4.6
|
|
EBITDA
from discontinued operations
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Adjusted
EBITDA †
|
|
$
|
3.3
|
|
|
$
|
(1.2
|
)
|
|
$
|
1.0
|
|
|
$
|
0.1
|
|
|
$
|
1.4
|
|
|
$
|
4.6
|
|
|
|
Central
|
|
|
Northern
|
|
|
Rhino
|
|
|
Illinois
|
|
|
|
|
|
|
|
Three
months ended June 30, 2017
|
|
Appalachia
|
|
|
Appalachia
|
|
|
Western
|
|
|
Basin
|
|
|
Other
|
|
|
Total
|
|
|
|
(in
millions)
|
|
Net
income/(loss) from continuing operations
|
|
$
|
3.3
|
|
|
$
|
(1.3
|
)
|
|
$
|
0.7
|
|
|
$
|
1.0
|
|
|
$
|
(3.1
|
)
|
|
$
|
0.6
|
|
Plus:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DD&A
|
|
|
2.0
|
|
|
|
0.3
|
|
|
|
1.2
|
|
|
|
1.9
|
|
|
|
0.1
|
|
|
|
5.5
|
|
Interest
expense
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
0.9
|
|
|
|
0.9
|
|
EBITDA
from continuing operations†
|
|
$
|
5.3
|
|
|
$
|
(1.0
|
)
|
|
$
|
1.9
|
|
|
$
|
2.9
|
|
|
$
|
(2.1
|
)
|
|
$
|
7.0
|
|
Adjusted
EBITDA from continuing operations†
|
|
|
5.3
|
|
|
|
(1.0
|
)
|
|
|
1.9
|
|
|
|
2.9
|
|
|
|
(2.1
|
)
|
|
|
7.0
|
|
EBITDA
from discontinued operations
|
|
|
-
|
|
|
|
(0.1
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(0.1
|
)
|
Adjusted
EBITDA
|
|
$
|
5.3
|
|
|
$
|
(1.1
|
)
|
|
$
|
1.9
|
|
|
$
|
2.9
|
|
|
$
|
(2.1
|
)
|
|
$
|
6.9
|
|
|
|
Central
|
|
|
Northern
|
|
|
Rhino
|
|
|
Illinois
|
|
|
|
|
|
|
|
Six
months ended June 30, 2018
|
|
Appalachia
|
|
|
Appalachia
|
|
|
Western
|
|
|
Basin
|
|
|
Other
|
|
|
Total
|
|
|
|
(in
millions)
|
|
Net
income/(loss) from continuing operations
|
|
$
|
1.9
|
|
|
$
|
(2.5
|
)
|
|
$
|
0.9
|
|
|
$
|
(4.2
|
)
|
|
$
|
(2.0
|
)
|
|
$
|
(5.9
|
)
|
Plus:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DD&A
|
|
|
4.5
|
|
|
|
0.4
|
|
|
|
2.1
|
|
|
|
3.9
|
|
|
|
0.2
|
|
|
|
11.1
|
|
Interest
expense
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3.8
|
|
|
|
3.8
|
|
EBITDA
from continuing operations†
|
|
$
|
6.4
|
|
|
$
|
(2.1
|
)
|
|
$
|
3.0
|
|
|
$
|
(0.3
|
)
|
|
$
|
2.0
|
|
|
$
|
9.0
|
|
Adjusted
EBITDA from continuing operations†
|
|
|
6.4
|
|
|
|
(2.1
|
)
|
|
|
3.0
|
|
|
|
(0.3
|
)
|
|
|
2.0
|
|
|
|
9.0
|
|
EBITDA
from discontinued operations
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Adjusted
EBITDA †
|
|
$
|
6.4
|
|
|
$
|
(2.1
|
)
|
|
$
|
3.0
|
|
|
$
|
(0.3
|
)
|
|
$
|
2.0
|
|
|
$
|
9.0
|
|
|
|
Central
|
|
|
Northern
|
|
|
Rhino
|
|
|
Illinois
|
|
|
|
|
|
|
|
Six
months ended June 30, 2017
|
|
Appalachia
|
|
|
Appalachia
|
|
|
Western
|
|
|
Basin
|
|
|
Other
|
|
|
Total
|
|
|
|
(in
millions)
|
|
Net
income/(loss) from continuing operations
|
|
$
|
5.6
|
|
|
$
|
(2.1
|
)
|
|
$
|
0.2
|
|
|
$
|
1.6
|
|
|
$
|
(6.7
|
)
|
|
$
|
(1.4
|
)
|
Plus:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DD&A
|
|
|
3.9
|
|
|
|
0.6
|
|
|
|
2.3
|
|
|
|
4.0
|
|
|
|
0.2
|
|
|
|
11.0
|
|
Interest
expense
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2.1
|
|
|
|
2.1
|
|
EBITDA
from continuing operations†
|
|
$
|
9.5
|
|
|
$
|
(1.5
|
)
|
|
$
|
2.5
|
|
|
$
|
5.6
|
|
|
$
|
(4.4
|
)
|
|
$
|
11.7
|
|
Adjusted
EBITDA from continuing operations†
|
|
|
9.5
|
|
|
|
(1.5
|
)
|
|
|
2.5
|
|
|
|
5.6
|
|
|
|
(4.4
|
)
|
|
|
11.7
|
|
EBITDA
from discontinued operations
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Adjusted
EBITDA †
|
|
$
|
9.5
|
|
|
$
|
(1.5
|
)
|
|
$
|
2.5
|
|
|
$
|
5.6
|
|
|
$
|
(4.4
|
)
|
|
$
|
11.7
|
|
*
|
Totals
may not foot due to rounding.
|
|
|
†
|
EBITDA
is calculated based on actual amounts and not the rounded amounts presented in this table.
|
|
|
Three
months ended June 30,
|
|
|
Six
months ended June 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|
|
(in
millions)
|
|
Net
cash (used in)/provided by operating activities
|
|
$
|
(1.7
|
)
|
|
$
|
6.0
|
|
|
$
|
6.6
|
|
|
$
|
7.3
|
|
Plus:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
in net operating assets
|
|
|
1.9
|
|
|
|
1.4
|
|
|
|
-
|
|
|
|
4.9
|
|
Gain
on sale of assets
|
|
|
3.5
|
|
|
|
-
|
|
|
|
6.4
|
|
|
|
-
|
|
Interest
expense
|
|
|
1.9
|
|
|
|
1.0
|
|
|
|
3.8
|
|
|
|
2.1
|
|
Decrease
in deferred revenue
|
|
|
0.2
|
|
|
|
-
|
|
|
|
0.2
|
|
|
|
-
|
|
Equity
in net income of unconsolidated affiliate
|
|
|
-
|
|
|
|
0.1
|
|
|
|
-
|
|
|
|
0.1
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease
in net operating assets
|
|
|
-
|
|
|
|
-
|
|
|
|
5.7
|
|
|
|
-
|
|
Amortization
of advance royalties
|
|
|
0.2
|
|
|
|
0.3
|
|
|
|
0.4
|
|
|
|
0.6
|
|
Amortization
of debt issuance costs
|
|
|
0.4
|
|
|
|
0.4
|
|
|
|
0.8
|
|
|
|
0.7
|
|
Amortization
of common unit warrants
|
|
|
0.1
|
|
|
|
-
|
|
|
|
0.2
|
|
|
|
-
|
|
Loss
on retirement of advanced royalties
|
|
|
-
|
|
|
|
-
|
|
|
|
0.1
|
|
|
|
0.1
|
|
Loss
on sale of assets
|
|
|
-
|
|
|
|
0.1
|
|
|
|
-
|
|
|
|
0.1
|
|
Equity-based
compensation
|
|
|
0.2
|
|
|
|
0.3
|
|
|
|
0.2
|
|
|
|
0.3
|
|
Accretion
on asset retirement obligations
|
|
|
0.3
|
|
|
|
0.5
|
|
|
|
0.6
|
|
|
|
0.9
|
|
EBITDA†
|
|
$
|
4.6
|
|
|
$
|
6.9
|
|
|
$
|
9.0
|
|
|
$
|
11.7
|
|
Adjusted
EBITDA†
|
|
|
4.6
|
|
|
|
6.9
|
|
|
|
9.0
|
|
|
|
11.7
|
|
Less:
EBITDA from discontinued operations
|
|
|
-
|
|
|
|
(0.1
|
)
|
|
|
-
|
|
|
|
-
|
|
Adjusted
EBITDA from continuing operations †
|
|
$
|
4.6
|
|
|
$
|
7.0
|
|
|
$
|
9.0
|
|
|
$
|
11.7
|
|
†
EBITDA is calculated based on actual amounts and not the rounded amounts presented in this table.
Liquidity
and Capital Resources
Liquidity
As
of June 30, 2018, our available liquidity was $3.1 million. We also have a delayed draw term loan commitment in the amount of
$40 million (under which we have drawn approximately $5 million) contingent upon the satisfaction of certain conditions precedent
specified in the Financing Agreement discussed below.
On
December 27, 2017, we entered into a Financing Agreement, which provides us with a multi-draw loan in the aggregate principal
amount of $80 million. The total principal amount is divided into a $40 million commitment, the conditions for which were satisfied
at the execution of the Financing Agreement and an additional $40 million commitment that is contingent upon the satisfaction
of certain conditions precedent specified in the Financing Agreement. We used approximately $17.3 million of the net proceeds
thereof to repay all amounts outstanding and terminate the Amended and Restated Credit Agreement with PNC Bank. The Financing
Agreement terminates on December 27, 2020. For more information about our new Financing Agreement, please read “—Financing
Agreement” below.
Our
business is capital intensive and requires substantial capital expenditures for purchasing, upgrading and maintaining equipment
used in developing and mining our reserves, as well as complying with applicable environmental and mine safety laws and regulations.
Our principal liquidity requirements are to finance current operations, fund capital expenditures, including acquisitions from
time to time, and service our debt. Historically, our sources of liquidity included cash generated by our operations, cash available
on our balance sheet and issuances of equity securities. Our ability to access the capital markets on economic terms in the future
will be affected by general economic conditions, the domestic and global financial markets, our operational and financial performance,
the value and performance of our equity securities, prevailing commodity prices and other macroeconomic factors outside of our
control. Failure to maintain financing or to generate sufficient cash flow from operations could cause us to significantly reduce
our spending and to alter our short- or long-term business plan. We may also be required to consider other options, such as selling
assets or merger opportunities, and depending on the urgency of our liquidity constraints, we may be required to pursue such an
option at an inopportune time.
We
continue to take measures, including the suspension of cash distributions on our common and subordinated units and cost and productivity
improvements, to enhance and preserve our liquidity so that we can fund our ongoing operations and necessary capital expenditures
and meet our financial commitments and debt service obligations.
Cash
Flows
Net
cash provided by operating activities was $6.6 million for the six months ended June 30, 2018 as compared to $7.3 million for
the six months ended June 30, 2017. This decrease in cash provided by operating activities was primarily the result of lower net
income as discussed above.
Net
cash used in investing activities was $0.1 million for the six months ended June 30, 2018 as compared to net cash used in investing
activities of $9.3 million for the six months ended June 30, 2017. The decrease in cash used in investing activities was primarily
due to the proceeds received from the sale of Mammoth Inc. shares partially offset by an increase in capital expenditures for
the six months ended June 30, 2018.
Net
cash used in financing activities was $20.9 million for the six months ended June 30, 2018, which was primarily attributable to
repayments on our Financing Agreement and payment of the distribution on the Series A preferred units. Net cash provided by financing
activities was $2.0 million for the six months ended June 30, 2017, which was primarily due to net borrowings on our former revolving
credit facility.
Capital
Expenditures
Our
mining operations require investments to expand, upgrade or enhance existing operations and to meet environmental and safety regulations.
Maintenance capital expenditures are those capital expenditures required to maintain our long-term operating capacity. For example,
maintenance capital expenditures include expenditures associated with the replacement of equipment and coal reserves, whether
through the expansion of an existing mine or the acquisition or development of new reserves, to the extent such expenditures are
made to maintain our long-term operating capacity. Expansion capital expenditures are those capital expenditures that we expect
will increase our operating capacity over the long term. Examples of expansion capital expenditures include the acquisition of
reserves, acquisition of equipment for a new mine or the expansion of an existing mine to the extent such expenditures are expected
to expand our long-term operating capacity.
Actual
maintenance capital expenditures for the six months ended June 30, 2018 were approximately $7.7 million. These amounts were primarily
used to rebuild, repair or replace older mining equipment. Expansion capital expenditures for the six months ended June 30, 2018
were approximately $8.3 million, which were primarily related to the purchase of additional equipment to expand production at
one of our Central Appalachia mines.
Series
A Preferred Unit Purchase Agreement
On
December 30, 2016, we entered into a Series A Preferred Unit Purchase Agreement (“Preferred Unit Agreement”) with
Weston Energy LLC (“Weston”), an entity wholly owned by certain investment partnerships managed by Yorktown, and Royal.
Under the Preferred Unit Agreement, Weston and Royal agreed to purchase 1,300,000 and 200,000, respectively, of Series A preferred
units representing limited partner interests in us at a price of $10.00 per Series A preferred unit. The Series A preferred units
have the preferences, rights and obligations set forth in our Fourth Amended and Restated Agreement of Limited Partnership, which
is described below. In exchange for the Series A preferred units, Weston and Royal paid cash of $11.0 million and $2.0 million,
respectively, to us and Weston assigned to us a $2.0 million note receivable from Royal originally dated September 30, 2016.
The
Preferred Unit Agreement contains customary representations, warrants and covenants, which include among other things, that, for
as long as the Series A preferred units are outstanding, we will cause CAM Mining, one of our subsidiaries, to conduct its business
in the ordinary course consistent with past practice and use reasonable best efforts to maintain and preserve intact its current
organization, business and franchise and to preserve the rights, franchises, goodwill and relationships of its employees, customers,
lenders, suppliers, regulators and others having business relationships with CAM Mining.
The
Preferred Unit Agreement stipulates that upon the request of the holder of the majority of our common units following their conversion
from Series A preferred units, as outlined in our partnership agreement, we will enter into a registration rights agreement with
such holder. Such majority holder has the right to demand two shelf registration statements and registration statements on Form
S-1, as well as piggyback registration rights.
Fourth
Amended and Restated Partnership Agreement of Limited Partnership
On
December 30, 2016, our general partner entered into the Fourth Amended and Restated Agreement of Limited Partnership of the Partnership
(“Amended and Restated Partnership Agreement”) to create, authorize and issue the Series A preferred units.
The
Series A preferred units rank senior to all classes or series of our equity securities with respect to distribution rights and
rights upon liquidation. The holders of the Series A preferred units are entitled to receive annual distributions equal to the
greater of (i) 50% of the CAM Mining free cash flow (as defined below) and (ii) an amount equal to the number of outstanding Series
A preferred units multiplied by $0.80. “CAM Mining free cash flow” is defined in our partnership agreement as (i)
the total revenue of our Central Appalachia business segment, minus (ii) the cost of operations (exclusive of depreciation, depletion
and amortization) for our Central Appalachia business segment, minus (iii) an amount equal to $6.50, multiplied by the aggregate
number of met coal and steam coal tons sold by us from our Central Appalachia business segment. If we fail to pay any or all of
the distributions in respect of the Series A preferred units, such deficiency will accrue until paid in full and we will not be
permitted to pay any distributions on our partnership interests that rank junior to the Series A preferred units, including our
common units. The Series A preferred units will be liquidated in accordance with their capital accounts and upon liquidation will
be entitled to distributions of property and cash in accordance with the balances of their capital accounts prior to such distributions
to equity securities that rank junior to the Series A preferred units.
The
Series A preferred units vote on an as-converted basis with the common units, and we are restricted from taking certain actions
without the consent of the holders of a majority of the Series A preferred units, including: (i) the issuance of additional Series
A preferred units, or securities that rank senior or equal to the Series A preferred units; (ii) the sale or transfer of CAM Mining
or a material portion of its assets; (iii) the repurchase of common units, or the issuance of rights or warrants to holders of
common units entitling them to purchase common units at less than fair market value; (iv) consummation of a spin off; (v) the
incurrence, assumption or guaranty of indebtedness for borrowed money in excess of $50.0 million except indebtedness relating
to entities or assets that are acquired by us or our affiliates that is in existence at the time of such acquisition or (vi) the
modification of CAM Mining’s accounting principles or the financial or operational reporting principles of our Central Appalachia
business segment, subject to certain exceptions.
We
will have the option to convert the outstanding Series A preferred units at any time on or after the time at which the amount
of aggregate distributions paid in respect of each Series A preferred unit exceeds $10.00 per unit. Each Series A preferred unit
will convert into a number of common units equal to the quotient (the “Series A Conversion Ratio”) of (i) the sum
of $10.00 and any unpaid distributions in respect of such Series A Preferred Unit divided by (ii) 75% of the volume-weighted average
closing price of the common units for the preceding 90 trading days (the “VWAP”); provided however, that the VWAP
will be capped at a minimum of $2.00 and a maximum of $10.00. On December 31, 2021, all outstanding Series A preferred units will
convert into common units at the then applicable Series A Conversion Ratio.
During
the first quarter of 2018, we paid $6.0 million in distributions earned for the year ended December 31, 2017 to holders of the
Series A preferred units. We have accrued $0.6 million for distributions to holders of the Series A preferred units for the six
months ended June 30, 2018.
Financing
Agreement
On
December 27, 2017, we entered into a Financing Agreement with Cortland Capital Market Services LLC, as Collateral Agent and Administrative
agent, CB Agent Services LLC, as Origination Agent and the parties identified as Lenders therein (the “Lenders”),
pursuant to which Lenders have agreed to provide us with a multi-draw term loan in the aggregate principal amount of $80 million,
subject to the terms and conditions set forth in the Financing Agreement. The total principal amount is divided into a $40 million
commitment, the conditions for which were satisfied at the execution of the Financing Agreement (the “Effective Date Term
Loan Commitment”) and an additional $40 million commitment that is contingent upon the satisfaction of certain conditions
precedent specified in the Financing Agreement (“Delayed Draw Term Loan Commitment”). Loans made pursuant to the Financing
Agreement are secured by substantially all of our assets. The Financing Agreement terminates on December 27, 2020.
Loans
made pursuant to the Financing Agreement are, at our option, either “Reference Rate Loans” or “LIBOR Rate Loans.”
Reference Rate Loans bear interest at the greatest of (a) 4.25% per annum, (b) the Federal Funds Rate plus 0.50% per annum, (c)
the LIBOR Rate (calculated on a one-month basis) plus 1.00% per annum or (d) the Prime Rate (as published in the Wall Street Journal)
or if no such rate is published, the interest rate published by the Federal Reserve Board as the “bank prime loan”
rate or similar rate quoted therein, in each case, plus an applicable margin of 9.00% per annum (or 12.00% per annum if we have
elected to capitalize an interest payment pursuant to the PIK Option, as described below). LIBOR Rate Loans bear interest at the
greater of (x) the LIBOR for such interest period divided by 100% minus the maximum percentage prescribed by the Federal Reserve
for determining the reserve requirements in effect with respect to eurocurrency liabilities for any Lender, if any, and (y) 1.00%,
in each case, plus 10.00% per annum (or 13.00% per annum if we have elected to capitalize an interest payment pursuant to the
PIK Option). Interest payments are due on a monthly basis for Reference Rate Loans and one-, two- or three-month periods, at our
option, for LIBOR Rate Loans. If there is no event of default occurring or continuing, we may elect to defer payment on interest
accruing at 6.00% per annum by capitalizing and adding such interest payment to the principal amount of the applicable term loan
(the “PIK Option”).
Commencing
December 31, 2018, the principal for each loan made under the Financing Agreement will be payable on a quarterly basis in an amount
equal to $375,000 per quarter, with all remaining unpaid principal and accrued and unpaid interest due on December 27, 2020. In
addition, we must make certain prepayments over the term of any loans outstanding, including: (i) the payment of 25% of Excess
Cash Flow (as that term is defined in the Financing Agreement) for each fiscal year, commencing with respect to the year ending
December 31, 2019, (ii) subject to certain exceptions, the payment of 100% of the net cash proceeds from the dispositions of certain
assets, the incurrence of certain indebtedness or receipts of cash outside of the ordinary course of business, and (iii) the payment
of the excess of the outstanding principal amount of term loans outstanding over the amount of the Collateral Coverage Amount
(as that term is defined in the Financing Agreement). In addition, the Lenders are entitled to (i) certain fees, including 1.50%
per annum of the unused Delayed Draw Term Loan Commitment for as long as such commitment exists, (ii) for the 12-month period
following the execution of the Financing Agreement, a make-whole amount equal to the interest and unused Delayed Draw Term Loan
Commitment fees that would have been payable but for the occurrence of certain events, including among others, bankruptcy proceedings
or the termination of the Financing Agreement by us, and (iii) audit and collateral monitoring fees and origination and exit fees.
The
Financing Agreement requires us to comply with several affirmative covenants at any time loans are outstanding, including, among
others: (i) the requirement to deliver monthly, quarterly and annual financial statements, (ii) the requirement to periodically
deliver certificates indicating, among other things, (a) compliance with terms of Financing Agreement and ancillary loan documents,
(b) inventory, accounts payable, sales and production numbers, (c) the calculation of the Collateral Coverage Amount (as that
term is defined in the Financing Agreement), (d) projections for the business and (e) coal reserve amounts; (iii) the requirement
to notify the Administrative Agent of certain events, including events of default under the Financing Agreement, dispositions,
entry into material contracts, (iv) the requirement to maintain insurance, obtain permits, and comply with environmental and reclamation
laws (v) the requirement to sell up to $5.0 million of shares in Mammoth Inc. and use the net proceeds therefrom to prepay outstanding
term loans and (vi) establish and maintain cash management services and establish a cash management account and deliver a control
agreement with respect to such account to the Collateral Agent. The Financing Agreement also contains negative covenants that
restrict our ability to, among other things: (i) incur liens or additional indebtedness or make investments or restricted payments,
(ii) liquidate or merge with another entity, or dispose of assets, (iii) change the nature of our respective businesses; (iv)
make capital expenditures in excess, or, with respect to maintenance capital expenditures, lower than, specified amounts, (v)
incur restrictions on the payment of dividends, (vi) prepay or modify the terms of other indebtedness, (vii) permit the Collateral
Coverage Amount to be less than the outstanding principal amount of the loans outstanding under the Financing Agreement or (viii)
permit the trailing six month Fixed Charge Coverage Ratio to be less than 1.20 to 1.00 commencing with the six-month period ending
June 30, 2018.
The
Financing Agreement contains customary events of default, following which the Collateral Agent may, at the request of lenders,
terminate or reduce all commitments and accelerate the maturity of all outstanding loans to become due and payable immediately
together with accrued and unpaid interest thereon and exercise any such other rights as specified under the Financing Agreement
and ancillary loan documents.
On
April 17, 2018, we amended our Financing Agreement to allow for certain activities, including a sale leaseback of certain pieces
of equipment, the extension of the due date for lease consents required under the Financing Agreement to June 30, 2018 and the
distribution to holders of the Series A preferred units of $6.0 million (accrued in the consolidated financial statements at December
31, 2017). Additionally, the amendments provided that the Partnership could sell additional shares of Mammoth Inc. stock and retain
50% of the proceeds with the other 50% used to reduce debt. The Partnership reduced its outstanding debt by $3.4 million with
proceeds from the sale of Mammoth Inc. stock in the second quarter of 2018.
On
July 27, 2018, we entered into a consent with our Lenders related to the Financing Agreement. The consent includes the lenders
agreement to make a $5 million loan from the Delayed Draw Term Loan Commitment; provided, however, that the loan is required to
be repaid in full by October 26, 2018. The consent also includes a waiver of the requirements relating to the use of proceeds
of any sale of the shares of Mammoth Inc. set forth in the consent to the Financing Agreement, dated as of April 17, 2018 and
also waived any Event of Default that arose or would otherwise arise under the Financing Agreement for failing to comply with
the Fixed Charge Coverage Ratio for the six months ended June 30, 2018.
At
June 30, 2018, $29.8 million was outstanding under the Financing Agreement at a variable interest rate of Libor plus 10.00% (11.97%
June 30, 2018).
Letter
of Credit Facility-PNC Bank
On
December 27, 2017, we entered into a master letter of credit facility, security agreement and reimbursement agreement (the “LoC
Facility Agreement”) with PNC Bank, National Association (“PNC”), pursuant to which PNC agreed to provide us
with a facility for the issuance of standby letters of credit used in the ordinary course of our business (the “LoC Facility”).
The LoC Facility Agreement provides that we pay a quarterly fee at a rate equal to 5% per annum calculated based on the daily
average of letters of credit outstanding under the LoC Facility, as well as administrative costs incurred by PNC and a $100,000
closing fee. The LoC Facility Agreement provides that we reimburse PNC for any drawing under a letter of credit by a specified
beneficiary as soon as possible after payment is made. Our obligations under the LoC Facility Agreement are secured by a first
lien security interest on a cash collateral account that is required to contain no less than 105% of the face value of the outstanding
letters of credit. In the event the amount in such cash collateral account is insufficient to satisfy our reimbursement obligations,
the amount outstanding bears interest at a rate per annum equal to the Base Rate (as that term is defined in the LoC Facility
Agreement) plus 2.0%. We will indemnify PNC for any losses which PNC may incur as a result of the issuance of a letter of credit
or PNC’s failure to honor any drawing under a letter of credit, subject in each case to certain exceptions. The LoC Facility
Agreement expires on December 31, 2018. We anticipate providing collateral with our counterparties prior to the expiration of
the LoC Facility on December 31, 2018.
Off-Balance
Sheet Arrangements
In
the normal course of business, we are a party to certain off-balance sheet arrangements. These arrangements include guarantees
and financial instruments with off-balance sheet risk, such as bank letters of credit and surety bonds. No liabilities related
to these arrangements are reflected in our consolidated balance sheet, and we do not expect any material adverse effects on our
financial condition, results of operations or cash flows to result from these off-balance sheet arrangements.
Federal
and state laws require us to secure certain long-term obligations related to mine closure and reclamation costs. We typically
secure these obligations by using surety bonds, an off-balance sheet instrument. The use of surety bonds is less expensive for
us than the alternative of posting a 100% cash bond or a bank letter of credit, either of which would require a greater use of
our liquidity. We then use bank letters of credit to secure our surety bonding obligations as a lower cost alternative than securing
those bonds with a committed bonding facility pursuant to which we are required to provide bank letters of credit as a percentage
of our aggregate bond liability. To the extent that surety bonds become unavailable, we would seek to secure our reclamation obligations
with letters of credit, cash deposits or other suitable forms of collateral.
As
of June 30, 2018, we had $3.0 million in letters of credit outstanding, all of which served as collateral for surety bonds.
Critical
Accounting Policies and Estimates
Our
financial statements are prepared in accordance with accounting principles that are generally accepted in the United States. The
preparation of these financial statements requires management to make estimates and judgments that affect the reported amount
of assets, liabilities, revenues and expenses as well as the disclosure of contingent assets and liabilities. Management evaluates
its estimates and judgments on an on-going basis. Management bases its estimates and judgments on historical experience and other
factors that are believed to be reasonable under the circumstances. Nevertheless, actual results may differ from the estimates
used and judgments made.
The
accounting policies and estimates that we have adopted and followed in the preparation of our consolidated financial statements
are fully described in our Annual Report on Form 10-K for the year ended December 31, 2017. We adopted ASU 2014-09, Topic 606
on January 1, 2018, using the modified retrospective method. The adoption of Topic 606 has no impact on revenue amounts recorded
in our financial statements. There have been no other significant changes in these policies and estimates as of June 30, 2018.
Recent
Accounting Pronouncements
Refer
to Part-I— Item 1. Financial Statements, Note 2 of the notes to the unaudited condensed consolidated financial statements
for a discussion of recent accounting pronouncements. There are no known future impacts or material changes or trends of new accounting
guidance beyond the disclosures provided in Note 2.