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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2021

or

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from                      to                      .

Commission file number: 1-13105

Graphic

Arch Resources, Inc.

(Exact name of registrant as specified in its charter)

Delaware

    

43-0921172

(State or other jurisdiction

(I.R.S. Employer

of incorporation or organization)

Identification Number)

One CityPlace Drive

    

Suite 300

St. Louis

Missouri

63141

(Address of principal executive offices)

(Zip code)

Registrant’s telephone number, including area code: (314) 994-2700

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol

Name of each exchange on which registered

Common stock, $.01 par value

ARCH

New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes   No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes   No 

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes   No 

At April 19, 2021 there were 15,294,065 shares of the registrant’s common stock outstanding.

Table of Contents

TABLE OF CONTENTS

Page

Part I FINANCIAL INFORMATION

3

Item 1. Financial Statements

3

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

28

Item 3. Quantitative and Qualitative Disclosures About Market Risk

42

Item 4. Controls and Procedures

43

Part II OTHER INFORMATION

44

Item 1. Legal Proceedings

44

Item 1A. Risk Factors

45

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

45

Item 4. Mine Safety Disclosures

45

Item 6. Exhibits

46

Signatures

51

2

Table of Contents

Part I

FINANCIAL INFORMATION

Item 1.Financial Statements.

Arch Resources, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

    

    

Three Months Ended March 31, 

    

2021

    

2020

(Unaudited)

Revenues

$

357,543

$

405,232

Costs, expenses and other operating

 

 

  

 

Cost of sales (exclusive of items shown separately below)

 

309,906

 

374,999

 

Depreciation, depletion and amortization

 

25,797

 

31,308

 

Accretion on asset retirement obligations

 

5,437

 

5,006

 

Change in fair value of coal derivatives and coal trading activities, net

 

528

 

743

 

Selling, general and administrative expenses

 

21,480

 

22,745

 

Costs related to proposed joint venture with Peabody Energy

 

 

3,664

 

Asset impairment and restructuring

5,828

Gain on property insurance recovery related to Mountain Laurel longwall

 

 

(9,000)

 

Other operating income, net

 

(5,268)

 

(6,170)

 

 

357,880

 

429,123

 

Loss from operations

 

(337)

 

(23,891)

 

Interest expense, net

 

  

 

  

 

Interest expense

 

(4,128)

 

(3,388)

 

Interest and investment income

 

328

 

1,259

 

 

(3,800)

 

(2,129)

 

Loss before nonoperating expenses

 

(4,137)

 

(26,020)

 

Nonoperating (expenses) income

 

  

 

  

 

Non-service related pension and postretirement benefit costs

 

(1,527)

 

(1,096)

 

Reorganization items, net

 

 

26

 

 

(1,527)

 

(1,070)

 

Loss before income taxes

 

(5,664)

 

(27,090)

 

Provision for (benefit from) income taxes

 

378

 

(1,791)

 

Net loss

$

(6,042)

$

(25,299)

Net loss per common share

 

  

 

  

Basic loss per share

$

(0.40)

$

(1.67)

Diluted loss per share

$

(0.40)

$

(1.67)

Weighted average shares outstanding

 

  

 

  

Basic weighted average shares outstanding

 

15,283

 

15,139

Diluted weighted average shares outstanding

 

15,283

 

15,139

Dividends declared per common share

$

$

0.50

The accompanying notes are an integral part of the condensed consolidated financial statements.

3

Table of Contents

Arch Resources, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Loss

(in thousands)

    

    

Three Months Ended March 31, 

    

2021

    

2020

(Unaudited)

Net loss

$

(6,042)

$

(25,299)

Derivative instruments

 

  

 

  

 

Comprehensive income (loss) before tax

 

689

 

(2,669)

 

Income tax benefit (provision)

 

 

 

 

689

 

(2,669)

 

Pension, postretirement and other post-employment benefits

 

  

 

  

Comprehensive income (loss) before tax

 

547

 

(14,267)

 

Income tax benefit (provision)

 

 

 

 

547

 

(14,267)

 

Available-for-sale securities

 

  

 

  

 

Comprehensive income (loss) before tax

 

101

 

(467)

 

Income tax benefit (provision)

 

 

 

 

101

 

(467)

 

Total other comprehensive income (loss)

 

1,337

 

(17,403)

 

Total comprehensive loss

$

(4,705)

$

(42,702)

The accompanying notes are an integral part of the condensed consolidated financial statements.

4

Table of Contents

Arch Resources, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands, except per share data)

    

March 31, 2021

    

December 31, 2020

Assets

(Unaudited)

Current assets

 

  

 

  

Cash and cash equivalents

$

169,593

$

187,492

Short-term investments

 

67,483

 

96,765

Restricted cash

 

18,962

 

5,953

Trade accounts receivable (net of $0 allowance at March 31, 2021)

 

129,086

 

110,869

Other receivables

 

3,764

 

3,053

Inventories

 

154,395

 

126,008

Other current assets

 

39,917

 

58,000

Total current assets

 

583,200

 

588,140

Property, plant and equipment, net

 

1,058,942

 

1,007,303

Other assets

 

  

 

  

Equity investments

 

74,503

 

71,783

Other noncurrent assets

 

57,513

 

55,246

Total other assets

 

132,016

 

127,029

Total assets

$

1,774,158

$

1,722,472

Liabilities and Stockholders' Equity

 

  

 

  

Current Liabilities

 

  

 

  

Accounts payable

$

122,916

$

103,743

Accrued expenses and other current liabilities

 

150,167

 

155,256

Current maturities of debt

 

24,597

 

31,097

Total current liabilities

 

297,680

 

290,096

Long-term debt

 

519,357

 

477,215

Asset retirement obligations

 

224,615

 

230,732

Accrued pension benefits

 

2,088

 

2,879

Accrued postretirement benefits other than pension

 

95,936

 

94,388

Accrued workers’ compensation

 

249,133

 

244,695

Other noncurrent liabilities

 

103,906

 

98,906

Total liabilities

 

1,492,715

 

1,438,911

Stockholders' equity

 

  

 

  

Common stock, $0.01 par value, authorized 300,000 shares, issued 25,382 and 25,323 shares at March 31, 2021 and December 31, 2020, respectively

 

254

 

253

Paid-in capital

 

770,052

 

767,484

Retained earnings

 

372,882

 

378,906

Treasury stock, 10,088 shares at March 31, 2021 and December 31, 2020, respectively, at cost

 

(827,381)

 

(827,381)

Accumulated other comprehensive loss

 

(34,364)

 

(35,701)

Total stockholders’ equity

 

281,443

 

283,561

Total liabilities and stockholders’ equity

$

1,774,158

$

1,722,472

The accompanying notes are an integral part of the condensed consolidated financial statements.

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Arch Resources, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

Three Months Ended March 31, 

    

2021

    

2020

Operating activities

 

(Unaudited)

Net loss

$

(6,042)

$

(25,299)

Adjustments to reconcile to cash from operating activities:

 

  

 

  

Depreciation, depletion and amortization

 

25,797

 

31,308

Accretion on asset retirement obligations

 

5,437

 

5,006

Deferred income taxes

 

372

 

(605)

Employee stock-based compensation expense

 

3,885

 

3,962

Amortization relating to financing activities

 

1,326

 

971

Gain on property insurance recovery related to Mountain Laurel longwall

 

 

(9,000)

Gain on disposals and divestitures, net

 

(188)

 

(214)

Changes in:

 

 

Receivables

 

(18,929)

 

23,728

Inventories

 

(28,387)

 

(19,088)

Accounts payable, accrued expenses and other current liabilities

 

13,827

 

(39,201)

Income taxes, net

 

(33)

 

(1,073)

Other

 

8,621

 

17,470

Cash provided by (used in) operating activities

 

5,686

 

(12,035)

Investing activities

 

  

 

  

Capital expenditures

 

(76,758)

 

(87,690)

Minimum royalty payments

 

(62)

 

(62)

Proceeds from disposals and divestitures

 

188

 

233

Purchases of short-term investments

 

 

(17,196)

Proceeds from sales of short-term investments

 

34,981

 

23,221

Investments in and advances to affiliates, net

 

(1,114)

 

(739)

Proceeds from property insurance recovery related to Mountain Laurel longwall

7,353

Cash used in investing activities

 

(42,765)

 

(74,880)

Financing activities

 

  

 

  

Payments on term loan

 

(750)

 

(750)

Proceeds from equipment financing

53,611

Proceeds from tax exempt bonds

44,985

Net payments on other debt

 

(9,536)

 

(5,544)

Debt financing costs

 

(1,194)

 

(422)

Dividends paid

 

 

(7,645)

Payments for taxes related to net share settlement of equity awards

 

(1,316)

 

(198)

Cash provided by financing activities

 

32,189

 

39,052

Decrease in cash and cash equivalents, including restricted cash

 

(4,890)

 

(47,863)

Cash and cash equivalents, including restricted cash, beginning of period

$

193,445

$

153,020

Cash and cash equivalents, including restricted cash, end of period

$

188,555

$

105,157

Cash and cash equivalents, including restricted cash, end of period

Cash and cash equivalents

$

169,593

$

105,157

Restricted Cash

18,962

$

188,555

$

105,157

The accompanying notes are an integral part of the condensed consolidated financial statements.

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Arch Resources, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

    

    

    

    

    

Treasury

    

Accumulated Other

    

Common

Paid-In

Stock at

Comprehensive

Stock

Capital

Retained Earnings

Cost

Income (loss)

Total

(In thousands)

Balances, January 1, 2021

 

$

253

 

$

767,484

$

378,906

$

(827,381)

$

(35,701)

$

283,561

Total comprehensive income (loss)

 

 

 

(6,042)

 

 

1,337

 

(4,705)

Employee stock-based compensation

3,885

18

3,903

Issuance of 59,166 shares of common stock under long-term incentive plan

1

1

Common stock withheld related to net share settlement of equity awards

(1,317)

(1,317)

Balances at March 31, 2021

$

254

$

770,052

$

372,882

$

(827,381)

$

(34,364)

$

281,443

    

    

    

    

    

Treasury

    

Accumulated Other

    

Common

Paid-In

Stock at

Comprehensive

Stock

Capital

Retained Earnings

Cost

Income (loss)

Total

(In thousands)

Balances, January 1, 2020

    

$

252

    

$

730,551

    

$

731,425

    

$

(827,381)

    

$

5,689

    

$

640,536

Dividends on common shares ($0.50/share)

 

 

 

(7,834)

 

 

 

(7,834)

Total comprehensive income

 

 

 

(25,299)

 

 

(17,403)

 

(42,702)

Employee stock-based compensation

3,962

3,962

Common stock withheld related to net share settlement of equity awards

 

 

(198)

 

 

 

 

(198)

Balances at March 31, 2020

$

252

$

734,315

$

698,292

$

(827,381)

$

(11,714)

$

593,764

           

                            

                         

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Arch Resources, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(unaudited)

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of Arch Resources, Inc. (“Arch Resources”) and its subsidiaries (“Arch” or the “Company”). Unless the context indicates otherwise, the terms “Arch” and the “Company” are used interchangeably in this Quarterly Report on Form 10-Q. The Company’s primary business is the production of metallurgical and thermal coal from underground and surface mines located throughout the United States, for sale to steel producers, utility companies, and industrial accounts both in the United States and around the world. The Company currently operates mining complexes in West Virginia, Wyoming and Colorado. All subsidiaries are wholly owned. Intercompany transactions and accounts have been eliminated in consolidation.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial reporting and U.S. Securities and Exchange Commission regulations. In the opinion of management, all adjustments, consisting of normal, recurring accruals considered necessary for a fair presentation, have been included. Results of operations for the three months ended March 31, 2021 are not necessarily indicative of results to be expected for the year ending December 31, 2021. These financial statements should be read in conjunction with the audited financial statements and related notes as of and for the year ended December 31, 2020 included in the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission.

2. Accounting Policies

Recently Adopted Accounting Guidance

In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting." The amendments provide optional guidance for a limited time to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts and hedging relationships that reference the London interbank offered rate (“LIBOR”) or another reference rate expected to be discontinued due to reference rate reform. These amendments are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. We are currently evaluating our contracts and the optional expedients provided by the new standard.

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes.” ASU 2019-12 eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The ASU is effective for public companies for fiscal years beginning after December 15, 2020, and interim periods therein with early adoption permitted. The Company adopted this ASU with minimal impact to the Company’s financial statements.

Recent Accounting Guidance Issued Not Yet Effective

In August 2020, the FASB issued ASU 2020-06Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity's Own Equity (Subtopic 815-40)—Accounting for Convertible Instruments and Contracts in an Entity's Own Equity.  ASU 2020-06 reduces the number of accounting models for convertible debt instruments and convertible preferred stock. For convertible instruments with conversion features that are not required to be accounted for as derivatives under Topic 815, Derivatives and Hedging, or that do not result in substantial premiums accounted for as paid-in capital, the embedded conversion features no longer are separated from

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the host contract.  ASU 2020-06 also removes certain conditions that should be considered in the derivatives scope exception evaluation under Subtopic 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity, and clarify the scope and certain requirements under Subtopic 815-40.  In addition, ASU 2020-06 improves the guidance related to the disclosures and earnings-per-share (EPS) for convertible instruments and contract in entity’s own equity.  ASU 2020-06 is effective for public business entities that meet the definition of a Securities and Exchange Commission (SEC) filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The FASB specified that an entity should adopt the guidance as of the beginning of its annual fiscal year.  The Company is currently evaluating the impact this ASU will have on its consolidated financial statements.

3. Joint Venture with Peabody Energy

The Company incurred expenses of $3.7 million for the three months ended March 31, 2020 associated with the regulatory approval process related to the proposed joint venture with Peabody that was terminated jointly by the parties due to the Federal Trade Commission blocking the joint venture during the third quarter of 2020. No amounts related to the joint venture were incurred for the three months ended March 31, 2021.

4. Gain on Property Insurance Recovery Related to Mountain Laurel Longwall

The Company recorded a $9.0 million gain related to a property insurance recovery at its Mountain Laurel operation during the three months ended March 31, 2020. As a result of geologic conditions in the final longwall panel, Mountain Laurel was unable to recover 123 of the longwall system’s 176 hydraulic shields.

5. Asset Impairment and Restructuring

The Company recorded $5.8 million of employee severance expense related to a voluntary separation plan that was accepted by 53 members of the corporate staff during the three months ended March 31, 2020.

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6. Accumulated Other Comprehensive Income (Loss)

The following items are included in accumulated other comprehensive income (loss) (“AOCI”), net of tax:

    

    

Pension,

    

 

Postretirement

Accumulated

and Other Post-

Other

Derivative

Employment

Available-for-

Comprehensive

Instruments

Benefits

Sale Securities

Income (loss)

 

(In thousands)

Balance at December 31, 2020

$

(3,891)

$

(31,459)

$

(351)

 

$

(35,701)

Unrealized losses

 

65

 

 

111

 

 

176

Amounts reclassified from accumulated other comprehensive income (loss)

 

624

 

547

 

(10)

 

 

1,161

Balance at March 31, 2021

$

(3,202)

$

(30,912)

$

(250)

 

$

(34,364)

The following amounts were reclassified out of AOCI:

Three Months Ended March 31, 

 

 

Line Item in the
Condensed Consolidated

Details About AOCI Components

    

2021

    

2020

  

  

Statements of Operations

Interest rate hedges

 

(624)

 

(216)

 

Interest expense

 

 

 

Provision for (benefit from) income taxes

$

(624)

$

(216)

 

Net of tax

Pension, postretirement and other post-employment benefits

Amortization of actuarial gains (losses), net 1

$

(591)

$

234

 

Non-service related pension and postretirement benefit (costs) credits

Amortization of prior service credits

44

27

Non-service related pension and postretirement benefit (costs) credits

Pension settlement

 

(4)

 

Non-service related pension and postretirement benefit (costs) credits

$

(547)

$

257

 

Total before tax

 

 

 

Provision for (benefit from) income taxes

$

(547)

$

257

 

Net of tax

Available-for-sale securities 2

$

10

$

(1)

 

Interest and investment income

 

 

 

Provision for (benefit from) income taxes

$

10

$

(1)

 

Net of tax

1 Production-related benefits and workers’ compensation costs are included in costs to produce coal.

2 The gains and losses on sales of available-for-sale-securities are determined on a specific identification basis.

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7. Inventories

Inventories consist of the following:

    

March 31, 

    

December 31, 

 

2021

 

2020

(In thousands)

Coal

$

74,344

$

49,436

Repair parts and supplies

 

80,051

 

76,572

$

154,395

$

126,008

The repair parts and supplies are stated net of an allowance for slow-moving and obsolete inventories of $0.6 million at March 31, 2021 and $0.6 million at December 31, 2020.

8. Investments in Available-for-Sale Securities

The Company has invested in marketable debt securities, primarily highly liquid U.S. Treasury securities and investment grade corporate bonds. These investments are held in the custody of a major financial institution. These securities are classified as available-for-sale securities and, accordingly, the unrealized gains and losses are recorded through other comprehensive income.

The Company’s investments in available-for-sale marketable securities are as follows:

March 31, 2021

Gross

Allowance

Unrealized

for Credit

Fair

    

Cost Basis

    

Gains

    

Losses

Losses

    

Value

(In thousands)

Available-for-sale:

 

  

 

  

 

  

 

  

U.S. government and agency securities

$

38,212

$

17

$

(67)

$

$

38,162

Corporate notes and bonds

 

29,521

 

 

(200)

 

 

29,321

Total Investments

$

67,733

$

17

$

(267)

$

$

67,483

December 31, 2020

Gross

Allowance

Unrealized

for Credit

Fair

    

Cost Basis

    

Gains

    

Losses

Losses

    

Value

 

(In thousands)

Available-for-sale:

U.S. government and agency securities

$

57,299

$

11

$

(86)

$

$

57,224

Corporate notes and bonds

 

39,817

 

1

 

(277)

 

 

39,541

Total Investments

$

97,116

$

12

$

(363)

$

$

96,765

The aggregate fair value of investments with unrealized losses that were owned for less than a year was $40.5 million and $45.3 million at March 31, 2021 and December 31, 2020, respectively. The aggregate fair value of investments with unrealized losses that were owned for over a year was $3.0 million and $8.1 million at March 31, 2021 and December 31, 2020, respectively. The unrealized losses in the Company’s portfolio at March 31, 2021 are the result of normal market fluctuations. The Company does not currently intend to sell these investments before recovery of their amortized cost base.

The debt securities outstanding at March 31, 2021 have maturity dates ranging from the second quarter of 2021 through the second quarter of 2022. The Company classifies its investments as current based on the nature of the investments and their availability to provide cash for use in current operations.

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Table of Contents

9. Derivatives

Interest rate risk management

The Company has entered into interest rate swaps to reduce the variability of cash outflows associated with interest payments on its variable rate term loan. These swaps have been designated as cash flow hedges. For additional information on these arrangements, see Note 11, “Debt and Financing Arrangements,” in the Condensed Consolidated Financial Statements.

Diesel fuel price risk management

The Company is exposed to price risk with respect to diesel fuel purchased for use in its operations. The Company anticipates purchasing approximately 30 to 35 million gallons of diesel fuel for use in its operations during 2021. To protect the Company’s cash flows from increases in the price of diesel fuel for its operations, the Company uses forward physical diesel purchase contracts and purchased heating oil call options. At March 31, 2021, the Company had no heating oil call options outstanding.

Coal price risk management positions

The Company may sell or purchase forward contracts, swaps and options in the over-the-counter coal market in order to manage its exposure to coal prices. The Company has exposure to the risk of fluctuating coal prices related to forecasted, index-priced sales or purchases of coal or to the risk of changes in the fair value of a fixed price physical sales contract. Certain derivative contracts may be designated as hedges of these risks.

At March 31, 2021, the Company held derivatives for risk management purposes that are expected to settle in the following years:

(Tons in thousands)

    

2021

Coal sales

 

320

Coal purchases

 

62

Coal trading positions

The Company may sell or purchase forward contracts, swaps and options in the over-the-counter coal market for trading purposes. The Company is exposed to the risk of changes in coal prices on the value of its coal trading portfolio. The unrecognized gains of $0.2 million in the trading portfolio are expected to be realized during the remainder of 2021.

Tabular derivatives disclosures

The Company has master netting agreements with all of its counterparties which allow for the settlement of contracts in an asset position with contracts in a liability position in the event of default or termination. Such netting arrangements reduce the Company’s credit exposure related to these counterparties. For classification purposes, the Company records the net fair value of all the positions with a given counterparty as a net asset or liability in the Condensed Consolidated Balance Sheets. The amounts shown in the table below represent the fair value position of individual contracts, and not the net position presented in the accompanying Condensed Consolidated Balance Sheets.

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Table of Contents

The fair value and location of derivatives reflected in the accompanying Condensed Consolidated Balance Sheets are as follows:

March 31, 2021

    

December 31, 2020

    

Fair Value of Derivatives

    

Asset

Liability

Asset

Liability

    

(In thousands)

Derivative

Derivative

Derivative

Derivative

Derivatives Designated as Hedging Instruments

 

  

 

  

 

  

 

  

 

  

 

  

Coal

$

$

 

  

$

$

 

  

Derivatives Not Designated as Hedging Instruments

 

  

 

  

 

  

 

  

 

  

 

  

Heating oil -- diesel purchases

 

 

 

  

 

237

 

 

  

Coal -- held for trading purposes

 

1,892

 

(1,653)

 

  

 

1,914

 

(1,595)

 

  

Coal -- risk management

 

998

 

(1,236)

 

  

 

1,094

 

(804)

 

  

Total

$

2,890

$

(2,889)

 

  

$

3,245

$

(2,399)

 

  

Total derivatives

$

2,890

$

(2,889)

 

  

$

3,245

$

(2,399)

 

  

Effect of counterparty netting

 

(2,419)

 

2,419

 

  

 

(2,392)

 

2,392

 

  

Net derivatives as classified in the balance sheets

$

471

$

(470)

$

1

$

853

$

(7)

$

846

    

    

    

March 31, 

    

December 31, 

2021

2020

Net derivatives as reflected on the balance sheets (in thousands)

 

  

 

  

 

  

Coal

 

Other current assets

$

471

$

853

Coal

 

Accrued expenses and other current liabilities

 

(470)

 

(7)

$

1

$

846

The Company had a current asset representing cash collateral posted to a margin account for derivative positions primarily related to coal derivatives of $2.6 million and $1.4 million at March 31, 2021 and December 31, 2020, respectively. These amounts are not included with the derivatives presented in the table above and are included in “other current assets” in the accompanying Condensed Consolidated Balance Sheets.

The effects of derivatives on measures of financial performance are as follows:

Derivatives used in Cash Flow Hedging Relationships (in thousands)

Three Months Ended March 31,

Gain (Loss) Recognized in Other Comprehensive Income

Gains (Losses) Reclassified from Other Comprehensive Income into Income

2021

2020

2021

2020

Coal sales

(1)

$

$

159

$

$

Coal purchases

(2)

 

 

(156)

 

 

Totals

$

$

3

$

$

At March 31, 2021, the Company did not have any derivative contracts designated as hedging instruments.

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Table of Contents

Derivatives Not Designated as Hedging Instruments (in thousands)

Three Months Ended March 31,

Gain (Loss) Recognized

2021

2020

Coal  trading — realized and unrealized

(3)

$

$

221

Coal risk management — unrealized

(3)

(528)

 

(1,040)

Natural gas  trading— realized and unrealized

(3)

 

76

Change in fair value of coal derivatives and coal trading activities, net total

  

$

(528)

$

(743)

Coal risk management— realized

(4)

$

138

$

1,601

Heating oil — diesel purchases

(4)

$

$

(1,033)

Location in statement of operations:

(1)— Revenues
(2)— Cost of sales
(3)— Change in fair value of coal derivatives and coal trading activities, net
(4)— Other operating (income) expense, net

10. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following:

    

March 31, 

    

December 31, 

2021

2020

(In thousands)

Payroll and employee benefits

$

37,677

$

39,443

Taxes other than income taxes

 

53,437

 

56,232

Interest

 

4,148

 

2,795

Workers’ compensation

 

12,621

 

15,259